§ Motion made, and Question proposed, "That for the purpose of paying off any Exchequer Bonds issued under the Supplemental War Loan Acts of 1900, any sums not exceeding £10,000,000 be raised by the issue of Exchequer Bonds to be current, subject to the provisions for the redemption of the total issue, for a period of ten years, and that in each year of that period one-tenth part of the total issue of the new Bonds be drawn for repayment and redeemed by the application for the purpose of the requisite part of the new sinking fund, and that the permanent annual charge for the National Debt be increased so as to be £28,000,000."
§ "That any expenses incurred in connection with raising or paying off any such sums, and the principal of and interest of any such sums, be charged on the Consolidated Fund, and, as to the interest, be paid as part of the permanent annual charge for the National Debt."—(Mr. Austen Chamberlain.)
§ SIR H. CAMPBELL-BANNERMAN (Stirling Burghs)
I only desire to interpolate a few remarks at this stage, the first and almost principal of which is to 1069 express our congratulations to the right hon. Gentleman, not only upon the clearness and ability of his statement, but also upon its duration, because there is an impression in this quarter of the House that it is perhaps the shortest Budget speech that we have listened to for many years. That is the greatest praise that I can possibly offer. I wish to refer to an arrangement which I urged upon the Government last year in regard to the discussion of the Budget Resolutions—namely, that, apart from the general discussion that may take place to-night, there should be an opportunity on one or other of the other Resolutions for a general discussion to-morrow or on Wednesday. I think that last year it was arranged that a certain Resolution should be used for the purposes of a general discussion, and I trust that the same course will be followed on this occasion.
I pass now to the substance of the Budget; and again I have to congratulate the right hon. Gentleman. I congratulate him especially with regard to the Debt, which shows that he maintains this year the fortitude which he displayed in the same matter last year under even greater temptations than those that beset him now. I would also say that it will not be in this quarter of the House, where we have year by year supported Motions for the reduction of the tea duty, that any objection will be made to that proposal. Of course we cannot help but notice that there still remains a large amount of war taxation pressing hardly upon the people because of the expenditure on what we think the extravagant Estimates which the Government have put forward, which gives the right hon. Gentleman no margin with which to relieve these burdens. For instance, after all the consideration that has been given to the Army Estimates, after all the promises that have been made regarding them, if there had been upon them a reduction to something like the extent as on the Navy Estimates, the right hon. Gentleman could have given some further boon to the much-pressed taxpayers of the country in addition to the removal of the tea duty that he imposed last year, since the war was over.
§ THE PRIME MINISTER AND FIRST LORD OF THE TREASURY (Mr. A. J. BALFOUR, Manchester, E.)
It is quite in accordance with precedent that the right hon. Gentleman has refrained from making any criticism on the admirable statement which my right hon. friend has made. The chief purpose of his remarks was to inquire whether any arrangement could be come to between the two sides of the House with regard to the discussion of our financial arrangements. My right hon. friend, for reasons that he is quite willing to explain, thinks it is absolutely necessary to obtain the first Resolution in the course of this evening. On the other hand, we are of course sensible of the fact that the House has a right to discuss the Budget in its larger aspects at this stage. That can be done by arrangement on any Resolution. [An HON. MEMBER: The income-tax.] But I hope an arrangement will be made that will enable us to finish the proceedings on this stage on Wednesday night. Otherwise, it will be difficult to so arrange the business of the House that we may rise on Wednesday week for the holidays.
§ MR. LOUGH (Islington, W.)
said that, although it was impossible to give a full and measured criticism of the Chancellor of the Exchequer's proposals, the discussion immediately following the Budget statement was always extremely valuable, in that it gave Members an opportunity of expressing their views upon the general financial policy of the Government. He was glad to be in agreement with avid to congratulate the Chancellor of the Exchequer upon the main portion of the Budget; he thought the right hon. Gentleman had made an excellent use of the small amount at his disposal, and the popularity with which the announcement was received would have shown the right hon. Gentleman that he was wise in leaving the burden on the income-taxpayers untouched for the present, and in considering the greater sorrows of the classes he proposed to relieve. If he might make one remark about, tea, it would be that all the reasons which the right hon. Gentleman had adduced today for removing the burden were in existence last year, and one could not but regret the exigency which compelled the Chancellor of the Exchequer then 1071 to impose so heavy a burden which he felt bound to remove a year afterwards. Soma difficulty might arise, however, in consequence of the reduction not coming into operation until July 1st. That, he believed, was not in accordance with precedent, and the right hon. Gentleman would possibly find that the loss both to the Exchequer and to the trade would be less if the reduction came into force immediately. For clearances to be postponed and old stocks of tea in the 60,000 grocers' shops in the land to be used down to the last instead of there being free withdrawals from the Customs House would not be any better for the revenue than for the trade. But if there were indications of such a stagnation of business arising, the fact would doubtless be brought to the notice of the right hon. Gentleman, who might then, at a later period, reconsider the point.
He thanked the Chancellor of the Exchequer for the great attention he had given to the intricate and difficult matters connected with the stamp duty and warehouse charge, which for years past had pressed quite unfairly on the tea and other trades. The historic Chancellor of the Exchequer was always so busily engaged in dealing with millions of money that he had been unable to have any regard for the difficulties put in the way of some trades by the incidence of tax collection. The present Chancellor of the Exchequer, however, seemed to have grasped those difficulties, and his announcement with regard to the warehouse charge, the stamp or delivery orders, and the stamp on goods removed under bond would be greatly appreciated by the trade. From his interesting statement regarding the decrease in the wine, beer, and spirit duties, the right hon. Gentleman had omitted one very obvious cause, which, regarding the matter from the financial standpoint, ought not to be forgotten. The reason this particular branch of revenue was not so elastic as in previous years was that the taxation had been raised to a point not hitherto reached. The taxation was too high, and it was in consequence not producing so well. For instance, the duty on light wines was suddenly raised 25 per cent. and 1072 then another niggling change was made. The Chancellor of the Exchequer had really no business to preach little sermons on the way people enjoyed themselves at holiday times, when all experience should convince him that the undue raising of a tax inevitably diminished its yield, and that a better revenue was likely to be realised from a tax moderately fixed. He hoped the right hon. Gentleman would look into this point and seriously consider whether lower rates of duty might not, on the whole, be more productive.
He was amused at the attempt of the Chancellor of the Exchequer to throw upon his predecessors the blame for what he called "the deficiency in the collecting of the income-tax." That expression hardly covered the steps the right hon. Gentleman had been taking. An inquest was recently held at Holborn on a man who had committed suicide because he was unable to obtain the money to pay the income-tax. The Committee generally would probably agree that the right hon. Gentleman had taken too stringent measures this year in the matter of income-tax collection. The hon. Member for East Edinburgh was, he believed, the cause of the trouble, he having called attention to the earlier collection in Scotland. It was probably the fact that North of the Tweed the amount paid was so small that it could easily be raised, whereas down South it made considerable difference when the amount had to be paid a month or two earlier. He regretted that the Chancellor of the Exchequer saw no prospect of reducing the borrowings this year. It was really blameworthy on the part of the right hon. Gentleman that he should deliver small lectures on the necessity of paying expenditure out of revenue, and, at the same time, fail to take any steps in that direction himself. The proposal to issue immediately £10,000,000 bills to meet the Treasury bills due in December would have to be looked into very closely, as the proper way would seem to be to wait until the bills fell due, and then make the best arrangements possible. On the whole, the Chancellor of the Exchequer had made an excellent statement—a good conservative statement, using the word in its best and not 1073 its Party sense. The better provision for the reduction of Debt would be a solid contribution, towards the improvement of the finances of the country, and the right hon. Gentleman had acted wisely in dealing with his small surplus in the mild and restrained way he had adopted instead of fulfilling the somewhat high hopes which had been entertained in some quarters.
§ *SIR ALBERT ROLLIT (Islington, S.)
welcomed the change which had been promised in regard to the removal of the restrictions applying to the use of alcohol for business purposes. Not only had those restrictions given an unfair and a very great preference to foreign countries but they had caused certain forms of industrial employment to be absolutely banished from this country. Nothing could be more acceptable to commerce than that such impediments should be removed, or, at any rate, reduced. The appointment of a Committee to consider the question was in itself an excellent thing. He congratulated the Chancellor of the Exchequer upon other important commercial reforms as to minor customs restrictions, etc., which he had announced, and he hoped he would make further advances in a similar direction. They would certainly have been glad if some reduction could have been made in the income-tax and they looked forward with interest to the Report of the Committee which had been appointed to consider the question. He hoped the result would be that some consideration would be shown to precarious incomes as compared with those derived from realised profits. He hoped there would be progress in the direction indicated by Sir Stafford Northcote, that was in the direction of a more equitable graduation of the tax according to the means and abilities of those who had to pay. The Report of this Committee would be looked forward to with great interest. But whatever might be said in favour of a reduction of the income-tax, and he greatly regretted some reduction had not been made, and he thought this might have been done. he was sure that an article like tea, should receive the removal of that increase which had happily now proved to be merely temporary taxation. He was glad that that 1074 step had been taken, and he thought it would form a welcome portion of a most acceptable Budget.
§ *MR. McCRAE (Edinburgh, E.)
congratulated the Chancellor of the Exchequer upon his excellent speech. It had been most clear and deliberate, and his proposals were so well arranged that no one could have any difficulty in following them. He congratulated him upon his proposals generally, which, he thought, were financially sound and had rather taken the wind out of the sails of the Opposition. He was rather led to believe that this was a dissolution Budget, and the Government were entitled to all the credit they could get out of it.
He wished to analyse the financial position a little more closely, and he should have something to say about the proposal to increase the Sinking Fund and creating bonds for a currency of ten years. If they looked at the statement which the Chancellor of the Exchequer had given them and the revenue for the year which had passed, they would see that it practically balanced the Estimates, although in its details there was a very wide divergence. There had been a serious decline in Customs and Excise, following upon a decline that took place in the year 1903–4. While he agreed with the right hon. Gentleman that perhaps a great deal of this was due to the increased sobriety of the people, he thought a good deal of that shortage had been occasioned by depression in trade following the war, and to some extent it was also due to the unsettled condition of trade caused by the fiscal controversy. There had been a large deficiency in revenue from Customs and Excise, and the Chancellor of the Exchequer had only been able to balance his revenue by accelerating the collection of the income-tax. He was glad to notice that since the year 1901, according to the speech which had been delivered that day, that accelerated collection had boon taking place. He thought, however, that there had been an extra screw put on this year. He did not object to this, because he believed this method of collecting the tax as near as possible within the financial year was a sound one, because it would effect a saving of interest, and future Chancellors of the Exchequer 1075 would have to face the full consequences of any alteration. In the past this practice had caused serious dislocation in our finances. When the right hon. Gentleman the Member for Croydon reduced the income-tax by 4d. in the £ that should have meant a loss of £10,500,000, but on account of the way in which the tax was collected, he only lost the sum of £8,000,000, and the £2,500,000 had to be made good by his successor this year; and so, if this collection was carried on, it would produce an equilibrium in the income-tax imposed and recovered. The deficiency on Customs and Excise amounted to £1,250,000, and that was exactly the increased yield of the income-tax this year over the estimate. He could not help thinking that, whether the Chancellor of the Exchequer was to blame or not, it appeared that the amount of the shortage to be met in Customs and Excise exactly balanced that which had been raised by the accelerated collection of income-tax.
One interesting feature was that the surplus for the year went to strengthen the balances. The expenditure for the last year had been less by £1,125,000, but he should like to ask whether this was economy in expenditure and a real saving, or only an expedient to postpone necessary expenditure which would have to be met by his successor if the right hon. Gentleman was not in office next year. In the past the present Government had taken no thought for the morrow, and he would like a little more information as to how this economy had been brought about. Coming to the present year they found that the estimated expenditure was £141,032,000. He thought this expenditure was still very excessive. This year they had had an unexpected de crease in naval expenditure, and the declarations of the Secretary of State for War had given them good reason for hoping that there would also have been a considerable decrease in the Army Estimates. Instead of that, however, there had been a slight increase in the Army Estimates. He thought that if the Secretary of State for War would devote more attention to the internal organisation of the War Office and its adminis- 1076 tration, he would be able to save thousands and perhaps millions of pounds upon the wastage that was going on, and of which they had had ample evidence in regard to the stores scandals. How was this expenditure to be met? The Chancellor of the Exchequer had resisted a very great temptation in not taking a penny off the income-tax. He congratulated the Chancellor of the Exchequer upon having refrained from reducing the income-tax this year. It was very important to remember that the charge for Customs and Excise was a very serious one. Customs were estimated to produce £34,050,000, and Excise £30,200,000, making a total for the current year for Customs and Excise of £64,250,000. This was £14,250,000 in excess of the year before the war when it was £50,000,000, so that in the coming year they would have an addition to the direct taxpayer's burdens notwithstanding the relief he was getting upon the tea duty. He thought that was a very serious matter and completely justified the Chancellor of the Exchequer in coming to the relief of the indirect taxpayer.
The Chancellor of the Exchequer deserved their congratulations for his proposal to increase the Sinking Fund by £1,000,000 per annum. On his side of the House they had all along maintained that the Sinking Fund was not at all sufficient, considering the large increase in the Debt occasioned by the war, and the fact that no Sinking Fund had been provided for that war debt. What had been added to the annual charge of the National Debt hardly met the interest, and nothing was set aside for Sinking Fund for its redemption. While congratulating the Chancellor of the Exchequer on what he proposed to do this year, he could not help reminding him that last year even with a deficit of over £5,000,000 on the revenue we had only reduced by our own exertions our indebtedness by £850,000. Of the total reduction of £3,850,000 there came from the Transvaal £3,000,000. He hoped the right hon. Gentleman would be right in his anticipations that we should have at an early date payment of the first instalment of £10,000,000. In 1903 the right hon. Gentleman the Member for Croydon, who was then Chancellor 1077 of the Exchequer, estimates that with what we would receive in respect of that debt, there would be a reduction in the National Debt of £40,000,000—£30,000,000 from the Transvaal Loan, £4,000,000 additional from the Transvaal for money advanced, and £6,000,000 from the Chinese War indemnity. Up to the present time of this £40,000,000 we had only received something like £7,000,000. He was glad to think that the Chancellor of the Exchequer hoped to get the first instalment of £10,000,000, because personally he thought the Transvaal was liable to make good the £30,000,000 which was promised when we guaranteed the loan of £35,000,000.
The Chancellor of the Exchequer had referred to the necessity for upholding the public credit, and pointed to our indebtedness having had a detrimental effect on that credit. Consols which used to stand at 113 were now a little over ninety. The proposal of the Chancellor of the Exchequer to practically create a fund to wipe off £10,000,000 of the floating debt in ten years was an exceedingly good one, but he could not understand why the right hon. Gentleman did not take advantage of the present opportunity for dealing in a comprehensive way with the National Debt, considering that he could have reduced it by a large amount. There were terminable annuities falling out next year amounting in all to £3,000,000 per annum. It was the duty of the Chancellor of the Exchequer in his present Budget to have dealt with those annuities, following the example of Mr. Gladstone, who in 1881 proposed to deal with the annuities that were terminating in 1885. Although they were not dealt with in that year, two years later Mr. Childers, his Chancellor of the Exchequer, brought in a National Debt Bill dealing with those annuities which were to fall out two years afterwards. If the Chancellor of the Exchequer had at, present followed that example what would have been the result? Had he dealt with those falling due by creating now annuities he would have been able to have reduced the Funded Debt by £50,000,000 right off, and established an annuity to wipe off the new debt created in twenty years. There would have been a saving 1078 of £1,250,000 interest on the Funded Debt, and the new debt created, principal and interest, would have been wiped out in twenty years. If the right hon. Gentleman did not reduce the Funded Debt by cancelling Consols he should by some process have created a sinking fund which would have wiped off £50,000,000 of the floating debt. That would have been an exceedingly wise operation. What did Mr. Childers do in the Budget speech of 1883? He made these proposals, which were afterwards embodied in the National Debt Act. At that time the amount which by the Act of 1876 was annually applied to the reduction of debt was £28,000,000, exactly the same as that which the Chancellor of the Exchequer now proposed should be applied to that purpose. It did not seem, notwithstanding the large increase in our national wealth, that we had done very much, after all, to reduce our indebtedness. In 1883 effect was given to the proposal made by Mr. Gladstone in 1881, by cancelling Consols amounting to £40,000,000. Then the Chancellor of the Exchequer at that time dealt with the Savings Bank account, and by a similar operation £30,000,000 of Consols were cancelled. By that operation alone Mr. Childers in 1883 cancelled £70,000,000 of Consols, with the result that the charge made in respect of these cancellations was now going to lapse next year, and therefore, the Chancellor of the Exchequer had a very great opportunity of taking advantage of the termination of these annuities either by cancelling Consols by the amount of £50,000,000, or by performing a similar operation on the very large floating debt. He commended the Chancellor of the Exchequer for this proposal because it was very different from what the right hon. Gentleman the Member for West Bristol did in 1899, when he reduced the Sinking Fund by £2,000,000 a year. He thought it was very much to the credit of the right hon. Gentleman that he had not followed that very bad example.
The Chancellor of the Exchequer had also dealt with other capital liabilities of the State, and here, he was afraid, they could not offer him the same congratulation. The debt in respect of military and naval works and similar 1079 undertakings amounted in all to £41,664,000. Was he right in that statement?
§ *MR. McCRAE
said that was an increase over last year of £10,000,000 in round figures. What he would like to impress upon the Committee was that the similar charge in respect of these works in 1895 only amounted to £3,092,624. He wished to point out to the Committee that at the beginning of these things the House did not realise where they were going to lead when the Bill was brought in. Although £300,000 was only to be paid this year, on any particular item the total expenditure might be £3,000,000 or £4,000,000. The Public Accounts Committee had pointed out the serious effect this system had on our national expenditure. The fact of the matter was that a large sum was being borrowed year by year. He understood that the Chancellor of the Exchequer said that a sum of £9,000,000 was again to be borrowed this year for similar works. If that was so it meant that the Sinking Fund was quite misleading, because we were, paying off £7,000,000 or £8,000,000 for the redemption of the old debt, and re-creating about £9,000,000 of the new debt. The consequence was, if he followed the figures correctly——
§ *MR. AUSTEN CHAMBERLAIN
This is really a matter of some importance. It is necessary when considering the debt incurred for capital expenditure that it should be borne in mind that that debt has its own sinking fund—a quite abnormally high sinking fund—and that it does not trench in any way on the sinking fund of the National Debt. I know that the hon. Gentleman is aware of that.
§ *MR. McCRAE
said that was present to his mind, and the sum he had mentioned covered both sinking funds, but he did not wish to complicate his argument by referring to it. That was all very well, but they had to consider not only the debt that was incurred, but also the liability in respect of similar works which the House was already committed to. As far as he could gather, we had at least £20,000,000 1080 expenditure still to meet with regard to military works. That was a very serious condition of matters. It meant, of course, that our floating debt had been largely increased. The Chancellor of the Exchequer had mentioned that the floating debt now amounted to £77,500,000. With the £10,000,000 proposed to be liquidated in ten years, and the other £4,000,000 provided for, there would still be a floating debt of £63,000,000, which was far too large. It was a danger to the State, and he thought the Chancellor of the Exchequer ought to have taken this opportunity of dealing in the way he had suggested in a much more comprehensive fashion with the National Debt. In conclusion, he said that the House required much greater control over expenditure, because, after all, it was expenditure which produced this indebtedness. The expenditure last year on naval and military works was a little less than the estimate, and he thought the Chancellor of the Exchequer would do well if he would state the figure which he estimated for naval and military works not yet completed.
He wished to refer to the question of last year's deficit. They had some very interesting arguments last year as to how that deficit of £5,415,000 was to be provided for. They now found that it was to be provided for by borrowed money taken from the Exchequer balances, £2,880,000, unclaimed dividends £1,000,000, and the realised surplus which the Chancellor of the Exchequer had last year £1,410,000. That meant really that the whole had been paid out of borrowed money, because if the Exchequer balances had not required to be strengthened, the surplus of last year of £1,410,000 would have gone, according to constitutional practice, to the reduction of the National Debt. There had now been a period of ten years of reckless expenditure, questionable finance, and shifting policy. He must congratulate the Chancellor of the Exchequer, inasmuch as he thought the right hon. Gentleman had taken a step in another direction; and he deserved credit for all that. It was, however, needless to say that the expenditure had never before been equalled, and 1081 that the country had no idea of its magnitude; and he thought it characterised a want of grip on the part of the Government of the national expenditure. There had been a tendency on the part of the Government, in dealing with all questions of taxation, to give to their own friends all the benefit, such as the doles in the Agricultural Rating Act, the Licensing Act, and Church schools, resulting in putting on a very large share of taxation on the indirect taxpayers. He supposed that it was in furtherance of the policy enunciated by the noble Lord the Member for Ealing, that this Government sought to relieve the rich at the expense of the poorer classes and provide for their friends, not only now when they were in office, but against the day when they were out of office. He would point out that the very difficulty of the situation in regard to our indebtedness was the Chancellor of the Exchequer's opportunity. The keystone of Mr. Gladstone's finance was to take advantage of such a situation to deal with the National Debt in a comprehensive way. He thought the Chancellor of the Exchequer had dealt soundly with the revenue taxation and with the provision for expenditure; but the right hon. Gentleman ought to have gone a step further and done something in dealing in a comprehensive way with the National Debt; and if he did not see his way to recast our financial system, to broaden in reality the basis of taxation, so as, before the right hon. Gentleman or the Government went out of office, to have left a name for himself for having suited it to the changed conditions of our national expenditure.
§ SIR EDGAR VINCENT (Exeter)
said there were several points on which Members on both sides of the House had always insisted upon that the Chancellor of the Exchequer had accepted. There were several points which they had pressed which the right hon. Gentleman had not accepted; but there was one great improvement in the form of the financial statement laid before the Committee. They were now able to see in one comprehensive view the exact financial position of the year, and they could 1082 judge to what extent the necessary resources for the year were derived from revenue or from borrowed funds. Another point to which special attention had been given in the Budget Statement was the immense improvement in the national strength, and the restoration to a high level of the national credit. Although he could have wished that the Chancellor of the Exchequer had gone further than he had done in strengthening the Sinking Fund he willingly recognised that the step he had taken was a distinct improvement.
The Chancellor of the Exchequer had insisted upon the great distinction to he made between the dead-weight debt of the country and debt arising from various Works Acts. He ventured to maintain the view that there was really no generic difference whatever. Works Loan Acts' borrowings might be put in a different category if the operations were either productive or remunerative, or if the expenditure on them had in its nature anything in the direction of finance—if, for instance, making up for lost time in the past and putting our national defences once and for all on a good footing. But he saw in any charge on a Works Act no difference from expenditure on a national asset. [An HON. MEMBER: Uganda Railway.] That represented a very small fraction of the expenditure. A military harbour appeared to him to be no more a national asset than a battleship, or very little more, which was not charged upon Loan funds but upon Budget funds. One of the reasons why he praised so highly the change in the form of accounts was that he believed when the country understood the matter they would stop altogether those Works Loans Bills. He hoped that in the coining year the Chancellor of the Exchequer, if he were still in office, would be able very largely to reduce the amount of £9,000,000 which he proposed to borrow in the course of the present financial year. If one viewed the financial position according to what he believed to be the rules of strict ccounting, and if one set against the Sinking Fund the amount of new borrowing, the result of the year 1904, excluding the annuity for the repayment of the Works Loans Acts, would be an 1083 increase of debt of £628,000 as against an increase of the balances of £1,414,000, excluding the annuity, which amounted to the comparatively small figure of £1,000,000. The £1,000,000 did not appear clearly on the Paper, and ought to be shown with the other sinking fund. It had been said that the existence of a provision in the Votes for the repayment of borrowings under the Works Acts constituted a radical difference; but it was not as if the annuity was paid by some third party altogether independent of the country or the Treasury. It merely amounted to this, that in the annual Votes for the Army and Navy certain sums for the payment of the debt would be included in the future. The alteration was merely a promisory note drawn by a branch office and payable by the head office of a bank. It was not drawn by a third party with independent finances. In 1906, again excluding the annuity charges on the Votes which the Chancellor of the Exchequer said amounted to £1,000,000, we arrived at the fact that the new borrowing would be £9,000,000, as compared with a sinking fund, excluding the additional million, of £8,428,000. Therefore, there was a net increase of borrowing up to nearly £600,000, but even including the million we only got a net diminution of £400,000. Now his contention was, and he hoped it was not ungenerous, that the Committee should press for something even further than that. In the course of the last five years, owing to the South African War, the national indebtedness had increased by £155,000,000. He contended that in a year of fair prosperity, untroubled by warlike operations or extraordinary expenditure of any magnitude, a rich and powerful country like ours should do something more towards the reduction of indebtedness than a contribution of something under a million sterling.
With the proposal of the Chancellor of the Exchequer for the reduction of the floating debt he was in hearty agreement. He was also thoroughly in accord with him that the present moment would not be suitable for a large issue of Consols, and it was altogether out of the question to create a new form of National Loan. He did not believe any section of the 1084 community would view that with favour. He had heard with relief that the applications of the Treasury to the money market during the present year would not exceed £6,000,000 for the Irish land operations. They all hoped that the greatest parsimony would be exercised in the way of appeals for public subcription, and that the severity shown by the Treasury would find imitators among local bodies. If the measures proposed by the Chancellor of the Exchequer did not altogether fulfil their ideals, and if they were not absolutely heroic, he regarded them as thoroughly sound and practical. He was grateful to the right hon. Gentleman for having resisted all temptation to go in for a popular ad-captandum Budget and having dealt with the situation simply on its merits, and with a view to materially strengthening and re-enforcing the national finances.
§ MR. BUCHANAN (Perthshire, E.)
said that they had all welcomed the words which fell from the right hon. Gentleman upon the question of loans. It was practically what had been said in the previous year on both sides of the House, and was substantially that while it was legitimate on certain exceptional occasions of an urgent character to borrow money, it ought not to become a part of the continuous finance of this country. That was what it had really become for a number of years. For years past they had had biennial Naval and Military Works Bills, and what he understood the right hon. Gentleman to contemplate was a cessation of those Bills in the future. He gathered that in the future no new works would be put into a Bill, either naval or military. Of course there were a certain number of works that would have to be finished under the existing system, but after that no new works were to be put in. But one thing had bean lost sight of after Naval and Military Works Bills ceased to exist. There would be a lot of naval and military expenditure that was now borne on the Naval and Military Works Bills that would come back on to the Estimates, so they must look forward to a considerable increase in the Estimates of the future. The Chancellor of the Exchequer had said he could only give a rough estimate of the amount wanted for the 1085 ensuing year, which he stated would be subject to revision, and, he hoped, reduction. They all joined in that hope and, seeing the right hon. Gentleman had put it at £9,000,000 and that last year the right hon. Gentleman required £10,000,000, there was every ground for the hope of reduction being realised. If, as the right hon. Gentleman stated, he did not expect to issue Exchequer Bills as he had done in previous years, it would be interesting to know how he proposed to get the money for the current Naval and Military Loans Acts in the ensuing year. The right hon. Gentleman also spoke of the £4,000,000 he was going to get from the Transvaal that he proposed to apply to the extinction of debt. Would the right hon. Gentleman say whether that was an estimate or a realised asset?
§ *MR. AUSTEN CHAMBERLAIN
said the hon. Gentleman had misunderstood him. The £4,000,000 would be obtained partly from the sinking fund already available, and partly from the Transvaal. The repayment from the Transvaal came to £1,250,000, and it had already been completed, or if not completed, it would be completed in a few days.
§ MR. BUCHANAN
said he was afraid he had misunderstood the right hon. Gentleman. He was under the impression that the right hon. Gentleman stated that he was going to obtain this from the Transvaal. Another point which he would not labour was the Transvaal Loan of £30,000,000, because if it was possible to get something from the Transvaal on that account it need not now be considered, as the possibility was of a very remote character. They all welcomed the resolution that the Debt Charge was to be increased to £28,000,000. They had deplored the diminution that had taken place in the past. It had been a matter of regret that strenuous efforts had not been made by the Chancellor of the Exchequer on the return of peace times to embark in some scheme for the reduction of debt. He had always thought that the country would have been willing to allow a good deal of the increased taxation that was imposed during the period of the war to remain 1086 on its shoulders if it had been sure that by so doing it had a prospect of working off a great portion of the debt incurred for that war. Whilst they welcomed the general review the right hon. Gentleman took of the conditions of the Excise and Customs revenue, they noticed one feature the right hon. Gentleman had not referred to, which was that the falling off of the Excise and Customs seemed to have been much greater in the last quarter of the year just expired than it had been formerly.
There was another point upon which he would like some explanation. He thought he heard the right hon. Gentleman say that the estimated return of a penny in the £ on income-tax for the ensuing year was only £2,300,000. Hitherto the estimate had always been £2,500,000.
§ *MR. AUSTEN CHAMBERLAIN
No, not the estimated return; whit I said was that the amount I should lose by taking off a penny would be £2,300,000.
§ MR. BUCHANAN
said he must have misunderstood the right hon. Gentleman. He was sitting in the gallery and was afraid he must have misheard a very great deal of what the right hon. Gentleman said. Last year the right hon. Gentleman had taken £2,500,000 as the estimated yield of the income-tax, and that apparently was the high-water mark. because the income-tax tables for the past half-a-dozen years showed that the yield of a penny went on steadily increasing until about three years ago, when it touched £2,500,000. Since that time it had been stationary, and what he intended to ask was, had there been any verification of the figures since that time. He congratulated the Government on the fact that this was the first Budget for some years in which there had been any real at tempt to diminish expenditure, or at least to make a determined stand against the continuously increasing expenditure. They welcomed the fact that it had been possible to put a curb on the increase of our national expenditure, and also the fact that the Government were making use of some of their surplus for the diminution of the burden of debt which was on the shoulders of the people, 1087 and they hoped that this was the first step towards a more economical and reasonable system of finance.
*MR. GIBSON BOWLES (Lynn Regis)
said he thought it was perhaps more possible to express an off-hand opinion on this Budget than on almost any he had heard in this House, because it was so extremely simple. He had felt this year that the Chancellor of the Exchequer and the Government with which he had to act must choose between bringing in a popular Budget or a sound Budget, and he congratulated the right hon. Gentleman most heartily upon bringing in a sound Budget. Whether it would become more popular in consequence of the reduction of the tea duty he would not stop to inquire. His efforts had always been directed towards sound finance, which meant mainly the extinction of debt.
He thought the wave of sobriety which the Chancellor of the Exchequer had stated was passing over the country had touched His Majesty's Government. There were indications of it in various directions, but in none had it given him more satisfaction than with regard to Supplementary Estimates. From the time the present Government came into office down to the present year, the Supplementary Estimates had practically never been less than £2,000,000, and last year they actually amounted to £4,600,000. This year, however, they amounted to only £700,000, which in itself was a proof that the Government had felt that "wave of sobriety" to which the right hon. Gentleman referred. Another proof was to be found in the Paper issued by the Chancellor of the Exchequer that afternoon, in which for the first time were to be found the items "Estimated payments out of revenue assigned to Local Taxation Accounts," "Estimated expenditure chargeable against Capital," "Revenue assigned to Local Taxation Accounts," and "Borrowings to meet Expenditure chargeable against Capital." The giving of those items constituted a sound departure in the Budget Statement. Personally, he wished the right hon. Gentleman had gone a little further, and set forth also the Appropriations-in-Aid as well as the 1088 intercepted sum for the Local Taxation Account. But too much must not be expected at once. The Chancellor of the Exchequer had entered upon the path of true accountancy; he hoped the right hon. Gentleman would pursue it to the end, and that next year there would be a further account showing what were the estimated Appropriations-in-Aid. The National Accounts ought to be both complete, true, and intelligible; at present they were neither. In order to be all three they must include on the one side all receipts whatever, whether from taxes, from intercepted taxes, or from Appropriations-in-Aid, and on the other all outgoings whatever; for our account was a receipt and issue account. Besides this there should be a Debt account, and to both ample explanations might be added. He understood that the question was to be referred to the Public Accounts Committee. That was a most proper course, and he hoped that that body would be able to make suggestions which would tend to improve the accounts and to make them at once true and intelligible. But even with the inclusion of the items to which he had referred, the statement of the national finances would still be incomplete without the items of local expenditure, now amounting to £164,000,000 a year, and local debt, which had reached the appalling total of £469,000,000. What he would like to have on Budget night or soon after was a Statement from either the Chancellor of the Exchequer or the President of the Local Government Board of the year's local expenditure and local debt. The House would then have a complete conspectus of the national finances, but without these further items it was impossible to form a proper estimate of the true financial position of the country.
The "wave of sobriety" was apparent also in the fact that a certain amount of retrenchment was promised this year—a matter of £1,800,000. The field of retrenchment, properly worked, would yield not £1,800,000, but ten times that sum without any detriment to the public service. He deeply regretted therefore, that the right hon. Gentleman had not gone further. Still, it was a good beginning, it was a heading, for the 1089 first time in the history of the present Government, in the right instead of the wrong direction, and he congratulated the Chancellor of the Exchequer upon it. With regard to the estimates, however, he was afraid the mistakes made last year had never been equalled. According to the right hon. Gentleman's statement, there were mistakes of £500,000 on Customs, £750,000 on Excise, £650,000 on estate duties, and £1,250,000 on property and income-tax. It was true that these mistakes were not all one side; they were to a certain extent compensatory, but still they were all mistakes, amounting in the aggregate to over £4,000,000. That was a very unusual error for public Departments to make. With regard to the estate duties, the right hon. Gentleman had established a new system of collection which excluded the public from the office, a system which was destined to diminish and which had already diminished the receipts year by year, and it was to be hoped that when he again looked into the accounts he would see the advisability of restoring the old system. One of the mistakes to which he had referred was, he believed, the creation of the right hon. Gentleman himself, through his "hustling" of the income-tax payer. He did not sympathise with the income-tax payer for having to pay his tax at the right moment, but it would certainly be found that by the amount the right hon. Gentleman had "hustled" this year his receipts next year would be diminished, because a number of income-tax payers would, as a matter of fact, have paid two years tax in one year.
The most serious part of the Budget was the Debt; with that the right hon. Gentleman had dealt courageously and, on the whole, satisfactorily. What the right hon. Gentleman was pleased to call the "dead-weight debt" or the Funded Debt was really the least objectionable portion. The capital liabilities, which were equally ''dead," were a much more objectionable form of debt. He had never been able to ascertain why they were called "capital liabilities," as they were no more a charge on capital than any other debt. The Funded Debt last year amounted to £762,629,000, and the 1090 capital liabilities to £31,868,000, or a total of £794,497,000. This year the Funded Debt had gone down to £755,072,000, but capital liabilities had gone up to £41,564,000, making a total of £796,636,000, or an increase of £2,139,000. There were, in addition, other serious liabilities, such as the contingent liabilities of the State, including the Saving Banks liability, and the guaranteed loans, in all which there had been immense recent increases. But, large as had been the increase in these and in the Funded Debt, there had been a far larger proportionate increase in the Unfunded Debt, and these irregular forms of debt were the most objectionable. Taking interest and allowances, the Unfunded Debt cost the country 3.29 per cent per annum. That was a very serious matter. The Unfunded Debt had increased by £4,000,000 during the year, but the right hon. Gentleman was going to pay off £4,000,000, partly out of his realised surplus, and partly out of payments due from the Transvaal, on which the right hon. Gentleman thought he could surely count.
*MR. GIBSON BOWLES
said in that case he would have to find fault with the right hon. Gentleman for arresting the surplus on its way to the New Sinking Fund for the extinction of debt.
§ *MR. AUSTEN CHAMBERLAIN
The realised surplus is the Old Sinking Fund, and one of the purposes to which that fund may be put, under the Act of 1875, is the strengthening of the balances, and I propose to apply the realised surplus to that purpose. With the New Sinking Fund and the Transvaal repayment I propose to extinguish £4,000,000 of the £14,000,000 Exchequer Bonds.
*MR. GIBSON BOWLES
said that, in view of the statement the Chancellor of the Exchequer had just made, he had no great quarrel with the right hon. Gentleman. It would be extremely improper to apply the surplus through the balances to purposes of expenditure, but since it was going to reduce the Unfunded 1091 Debt, that was one of the most proper uses to which it could be put.
Then the right hon. Gentleman had made a provision of a somewhat novel character to pay off £10,000,000 of Unfunded Debt, and this was one of the most important features of the Budget. It was an entirely new order of provision, and seemed to be of the same nature as was sometimes made for the payment of Funded Debt by means of terminable annuities. This £10,000,000 would extinguish itself one-tenth in each year, and therefore more quickly than the ordinary terminable annuities. They were making a provision for the extinction of the Unfunded Debt under circumstances which absolutely secured that that particular sinking fund, which the £10,000,000 carried, could not be dealt with by any Chancellor of the Exchequer in the future, however nefarious he might be. He thought, while avowing that he did not yet profess completely to understand the full nature of the new proposals or how the £10,000,000 was to be issued, that was satisfactory. There was one other point which he wished to suggest. As the right hon. Gentleman had instituted quite a new method of dealing with the Unfunded Debt, he would suggest to him that he should consider the revival of the Exchequer Bill, which was formerly used with great advantage not only to the Exchequer itself but also to the outside public. At the present time they had no Exchequer Bill, and it had become extinct. Many of them had long advocated an increase in the fixed permanent charge, and he attached more importance to that increase which was now to be effected, making a permanent addition to the fixed charge of £1,000,000, and thus raising the charge itself to £28,000,000, than to any other feature in the Budget. His belief was that the House had now so roused itself and that the country had become so fully aware of the importance of guarding the Sinking Fund, that he did not think any future Chancellor of the Exchequer would be allowed to tamper with that charge. The addition of £1,000,000 to the fixed charge was an act of courage and propriety and was the soundest finance.
1092 With regard to the reduction of the tea duty, he hoped that it would be popular, although he did not think it would have been so popular as a reduction of the income-tax. For his own part, he would as soon see the reduction made in the tea duty as upon the income-tax. This proposal gave an advantage of £1,500,000 to the drinkers of tea, and he took this action on the part of the Chancellor of the Exchequer, who said that it would give relief to every household in the Kingdom, as a proof that he at least did not believe that the foreigner paid that money, but that it was paid by the consumers of tea in this country. It was a most satisfactory Budget, and he congratulated the Chancellor of the Exchequer upon having resisted the temptation of making his office a means of acquiring popularity for the Government, and upon having instituted a system of very sound and very wholesome finance.
§ *MR. ASHTON (Bedfordshire, Luton)
congratulated the Chancellor of the Exchequer upon the addition he had made to the Sinking Fund. He did not, however, like the way in which the Chancellor of the Exchequer proposed to deal with the floating debt. He entirely agreed that that debt was a great deal too large, but his dislike to it was more in regard to the formation of another form of debt. They had sufficient forms of debt already, and if he could have merged this new proposal into a debt which already existed it would have bean much better than the creation of a new form of debt. The Chancellor of the Exchequer was not creating Exchequer Bonds but a terminable annuity which might be drawn at anytime. That was a novelty, and it did not get rid of one very great disadvantage, which was that it remained practically part of the floating debt that could not be taken up by the ordinary investor. It was perfectly true that they were tying up debt for a certain time, but if it was to be drawn at any time it would not be the kind of investment which ordinary people cared for, and it would not go into the hands of the ordinary investor, but would be taken up like the rest of the floating debt, principally in the city of London, depressing the money market there, and 1093 thereby raising the rate of interest against the interests of the whole community.
He was very glad that the Chancellor of the Exchequer had seen his way to take twopence off tea. He came down to the House that day rather expecting that it would be necessary for him to denounce the right hon. Gentleman for relieving the direct taxpayer instead of the indirect taxpayer. He noticed that the Chancellor of the Exchequer had stated that he did not consider that the income-tax should be left in time of peace at 1s. in the £. At the same time he did not think that indirect taxation ought to be left at the height it was at present in time of peace. The direct taxpayers had benefited to the extent of £5,000,000 not long ago, and while the indirect taxpayers were still charged £4,500,000 since the war taxation more than the direct taxpayers, they were still in the debt of the country, and indirect taxes even beyond those upon tea ought to be taken off before the income-tax was reduced. He admitted that that was not the popular view in the House, bat he believed that it was sound, and it was only fair and just to the poorer classes of the community. It would also be in the general interests of the country, because he was sure that the amount of indirect taxation, more especially that portion of it upon food, was at present depressing the whole trade of the country, and in his opinion it was the main cause of trade depression at the present moment.
The Chancellor of the Exchequer had pointed out that Customs were £500,000 less, and Excise £750,000 less. He did not think there was any surer proof that the trade of the country was bad than these figures. The right hon. Gentleman had stated that the reduction in Excise was mainly owing to the more temperate habits of the people of this country, but he was afraid that this was rather an exaggeration, and he thought the Chancellor of the Exchequer would find in the coming year that the amount of liquor consumed would increase again. At the present moment he thought that this decrease was a sign of bad trade. Undoubtedly the fiscal controversy had produced a certain amount of bad trade, although he believed that the 1094 people were beginning to regain confidence. The present high rate of interest upon money was detrimental to trade both mercantile and industrial, and this again brought them back to the main reason for the bad home trade, namely, the very heavy taxation upon the country. They could not put 4d. upon the income-tax, increase the sugar duty, place a duty upon coal, and corn, and increase the duties on beer, spirits, tobacco, and tea without seriously interfering with the prosperity of the people. The fact was that at the present time people had not got so much money to spend, and therefore they could not buy the articles they required, and trade suffered in consequence in all directions. Last year the Chancellor of the Exchequer gave them some figures to show how the wealth of the country had increased at a greater rate than the expenditure. He took forty years from 1864 to 1904, and he stated that whilst in the year 1864–5 the national income was £700,000,000, in 1904 it had risen to £1,750,000,000 or 150 per cent. He further stated that the expenditure in the same period had only risen by 125 per cent., snowing that the wealth of the country had grown more rapidly than the expenditure. Although the Chancellor of the Exchequer was no doubt right in those figures, he did not think he would have got so satisfactory a result if he had taken the period before the war. He had been reading an article by Lord Welby which showed that up to that time the wealth of the country had been increasing at a greater ratio than the population, and showing that since the war the taxable capacity of the people had almost ceased to have an increasing ratio at all. The people were practically being taxed up to the point where the fertility of the resources of the country had almost ceased to increase. Lord Welby took the period from 1894–5 and 1897–8, and he pointed out that in the three years just before the war the natural increase of the taxes, making allowance for all new taxation, was £8,500,000, whilst the increase of population was 1 per cent., and therefore this would only have been something under £3,000,000 at the same rate. Then he took the last seven years and he found that the natural increase in the growth of taxation was £7,000,000 or £1,000,000 a 1095 year, but the natural increase in ratio to the growth of population would have been only £6,000,000, so the net result had only been an increase of £100,000, while it had been £2,000,000 in the previous period. The taxable capacity of the people had ceased to be fertile and had ceased to grow, and he believed that that was owing to the vast taxation which the war had necessitated.
He was very glad to hear what had been said about capital expenditure, and there was no doubt that the attention of the country was being directed to this question. This was most important, because hitherto the expenditure had increased very much in this direction, and the growth in the last fifteen years had been portentous. They had spent £52,000,000 upon these loans, and the worst of it was that the sinking fund and the interest that had accrued had not been paid out of the Consolidated Fund, but had been buried away in the Estimates, and this fact had not been fully recognised by the public. In the past, Parliament had lost control over this expenditure, and the Public Accounts Committee had condemned by Resolution the growth of this system. This was getting a very serious matter indeed. Obviously when these Estimates were not laid before Parliament there was great extravagance on the part of officials. It might be said that these works were all of a permanent character, and that it was not fair to charge the whole on the present taxpayers. It was a great deal more unfair to charge it on the future. The Chancellor of the Exchequer had stated that the sinking funds were very severe, and that the debt was being rapidly paid off. The hon. Member said he had occasion to apply to the Secretary to the Treasury the other day for information, and he asked what sinking fund there was in respect of the Pacific Cable. He was informed that the Pacific Cable loan annuities were running for fifty years. He did not think there was a cable fifty years in existence. His impression was that the first American cable which was laid had not been used for some years, and it was impossible to conceive that a cable should last for fifty years. The claim put forward that it was sound finance to 1096 set up these annuities to reduce the debt in a short period was not borne out by the annuities of the Pacific Cable. It was said that this was exceptional expenditure. If it was exceptional something could be said for it, but so far from its being exceptional it had been growing year by year. These items ought year by year to come on the Estimates.
§ SIK GEORGE BARTLEY (Islington, N.)
said it seemed to him that this Budget marked a new departure, and the House might congratulate itself. He had always advocated that we should do much more than we were doing to pay off debt. It seemed to him that a nation such as this with its revenue of 1,700 or 1,800 millions a year did not spend much on the reduction of debt. He thought we should increase the permanent sinking fund, and he was delighted that the Chancellor of the Exchequer had been able to resist the temptation to secure popularity by a greater reduction of taxation and had devoted a large part of his surplus to the reduction of the stupendous debt we now owed. He did not mind telling the right hon. Gentleman candidly that he should have preferred if he had applied the whole of the surplus to paying off debt. He should have preferred if the Chancellor of the Exchequer had not reduced the duty on tea. It had to be remembered that we were living in serious times. He did not agree with the hon. Member for the Luton Division that the taxable power of the nation was very nearly at an end in many directions. This nation, though highly taxed, was not so highly taxed as many European countries. It seemed to him, considering that our Imperial and local taxation was going up by such leaps and bounds, our children or grandchildren would enormously suffer for it. He thought, therefore, the one and only practical way of reducing expenditure was to increase the Sinking Fund to pay off the Debt. It might seem rather an anomaly to increase the Sinking Fund to pay off debt. His idea, of course, was that the real cause of our increased expenditure was the House of Commons itself. There was no doubt whatever that they were continually demanding increased expenditure on everything. Hon Members 1097 on one side or the other had each a particular fancy, and advocated an extension of expenditure in that respect. He was delighted that the Chancellor of the Exchequer had been bold enough to give £1,000,000 more to the repayment of this debt. Although the Chancellor of the Exchequer had done a good work, after all we were only setting aside the same amount as Sir Stafford Northcote did when he first instituted the fund. Consols at that time paid a higher rate of interest than now. While he was extremely glad that this was being done, he would urge the right hon. Gentleman to consider whether our expenditure had not so largely increased that something more even should not be done now to repay the Debt. When one came to think of it £10,000,000 a year was not, after all, a very large sum to set aside for paying off our debt. The reduction of debt seemed to him to be a most important preparation for the future. It would tend to the improvement of the money market and the position of the finances of this country.
There was nothing which, in his opinion, would have a greater effect on the money market than the step the right hon. Gentleman had taken. During the past ten years an enormous increase in the expenditure of the country had taken place. He would not discuss why the war took place; the fact remained that, owing to the large amount of debt which had been repaid, we were able to raise £100,000,000 for that war without much fear of the effect of it, and without feeling the pressure at the moment. Therefore, we were practically bound, considering that we got the benefit of the transaction, to go on increasing the repayment of the Debt in proportion to the wealth and development of the country. The country had increased in riches to an enormous extent. There was, indeed, a great amount of poverty, but when they looked at the condition of the income-tax which, after all, was one of the best tests there was of national progress, there was no doubt whatever, that the wealth of the country during the past fifty years had enormously increased. During the next twenty or thirty years we might hope for peace throughout the world owing to the awful example of the war 1098 which was now going on, and that was one reason why we should make a great effort to reduce the Debt.
The right hon. Gentleman referred to the subject of the taxes on alcohol, and pointed out that there had been a considerable reduction. Nobody would rejoice more than himself if this reduction were brought about by an improvement in the condition of the people through a desire not to drink alcohol to the extent they did. He did not wish to be pessimistic. It was probable that part of the reduction was due to that cause, but he could not think that it was to a very great extent a matter they could congratulate themselves upon at present. Statistics showed that even now we spent very nearly £20 a family on alcohol per annum. That was a very large expenditure, although it was less than it used to be. He had no hesitation in saying that a nation that could spend within a few pence of £20 a family per annum on alcohol could afford to pay off a good deal more than £10,000,000 a year of debt. He should be glad if by any possible means they could divert a good deal of this money to the payment of debt. He was not a fanatic on the temperance question, but it could hardly be said that the people were overtaxed when they voluntarily took upon themselves this enormous incubus. The people would be healthier and better off if they drank less. He understood the Chancellor of the Exchequer's position and there was a great deal to be said for it. Although twopence per pound was a nice reduction on the tea duty, he would point out that as the poorer classes bought tea by the ounce and half-ounce they would not get much benefit out of the reduction. He was convinced that these remissions of taxes did not reach the consumer who was in a small way He thought the tea dealer and the great flourishing companies which in the past had been making large sums would continue to make larger sums. Those who bought by the pound would get a benefit, but the buyers of ounces and half ounces would not get very much benefit. What happened in the case of the reduction of the tobacco duty would be repeated. Those who bought tobacco 1099 by the ounce and half-ounce got no benefit at all.
He thought the right hon. Gentleman was not fair in his reference to the difference in relief to the direct and indirect taxpayer. It was not unreasonable to say that the direct taxpayer had received greater benefit than the indirect. It must be borne in mind that the death duties might be called a direct payment because they came from the descendants of those who left estates. There was no doubt that the direct taxpayer did pay an enormous sum for taxation. Hon. Gentlemen opposite should remember that the income-tax was not a rich man's tax. There was a popular delusion that it was a rich man's tax. No doubt many of those who paid the tax were rich, but the great burden of the tax fell upon the classes who were the most heavily taxed in the country. These people paid their full share of indirect taxes, and in addition paid a very large proportion of the direct taxation, and especially the income-tax. It must be remembered also that they paid a very large proportion of the death duties. It was true that a large portion of the death duties came from millionaires, and no doubt the Chancellor of the Exchequer regretted that he had not more of them this year. But, after all, the great bulk of the death duties came from the smaller estates which were distributed among small people. The result was that those who received small legacies of £2,000 or £3 000, if the matter was worked out on the annuity system, would be found to be paying considerably on receiving these estates. He thought himself that the income-tax payers in having to pay 1s. in the £ were taxed extremely high. It was an exorbitant rate which twenty, thirty, or forty years ago would never have been dreamt of. This enormous tax was due to the general spirit which prevailed that the State should do so many things more now than in former times. They were running to a great extreme, and demanding from the State many things they ought not to demand. He had always been an advocate of individual effort and self-reliance, and he believed that the many things which were now being done at the expense of the state were tending rather to take away 1100 the self-reliance of the people than to encourage them to do what they ought to do for themselves.
On the question of the floating debt he fully agreed with what had been said. He regarded this debt as a great danger to the community. It had caused a great deal of trouble in the money market and in the business world. It was a thing which ought never to have been allowed to grow as it had done. He was one of those who believed that before very long we should get the first instalment of £10,000,000 from the Transvaal. When received, he hoped it would go at once to the reduction of the floating debt. Although the right hon. Gentleman the Member for West Birmingham was over sanguine as to the date when it would be paid, the hon. Member was satisfied that it would be paid. He was delighted that an effort had been made in the direction of the payment of debt because he believed nothing would strengthen this country more in the eyes of the world than the reduction of our debt. A wise Chancellor of the Exchequer did not look for popularity in taking off taxes, but tried to do the best he could for the country by devoting a large sum to the getting rid of debt which, if the day should come when we should not be so well off, would be a heavy millstone hanging round our necks.
§ *SIR WILLIAM HOLLAND (Yorkshire, W.R., Rotherham)
said the Chancellor of the Exchequer appeared to have taken the line of least resistance. He noticed that when the details of the Budget were being unfolded there were several "old hands" within these four walls; and he was not sure that any of these "old hands" could have done better in the circumstances than the present Chancellor of the Exchequer. Indeed, some of his proposals seemed to have been devised by an "old hand.'' No doubt the strengthening of the Sinking Fund would improve the credit of the Government in the City, and the reduction of the duty on tea, which was so largely consumed as an article of food by the poor, did in effect disarm criticism very largely from the Opposition side of the House. That reduction was not a very substantial one in itself—amounting to 1101 only £1,500,000, but they had to be thankful for comparatively very small mercies. It might be described as a mercy of microscopic dimensions but when they recalled the fact that the tea duty and the sugar duty were war taxes they had a right to expect, now that the war was over, there should be a reduction in these duties. He hoped they would be removed before long, and that the coal duty, which was handicapping a very important trade of the country, would also be removed. The coal tax, it was agreed, was a daily, hourly, handicap to a very important trade in the country, and some who said when the tax was introduced that the coal supply of this country would not last very long, must have had their fears allayed by the Report of the Royal Commission, and therefore they might now reasonably expect the support of those hon. Members in demanding the early repeal of the coal tax. If it could be shown that employment had diminished in consequence of that tax, its removal could not be a matter of indifference to an enlightened and sympathetic Government. Indeed, he knew that the Government were interested in removing hindrances to the employment of the people, or they would not have agreed to the appointment of the Industrial Alcohol Committee. The Report of that Committee was on the point of being presented, and although it was not open to him to say anything about its details, yet as a member of the Committee he could say that the Committee was animated in its preparation by a sincere desire to remove shackles from industry where they could be proved to exist.
He was glad to hear the Chancellor of the Exchequer say that things, on the whole, had turned out better last year than they expected at the beginning of the year. That proved that trade had not been so bad as had been contended on so many platforms. He expected that the Budget would be criticised, not so much because of the methods proposed for raising money as because of the large amounts contemplated to be raised. Although they had paid more than ever they still owed more than ever. It almost seemed as if they had been paying twice over. It was like a man who had been drinking whiskey and wanted another glass; and the 1102 publican said his customer might have another glass if he paid for the last. "But," said the toper to the publican, "have you paid for it yourself?" "Yes," replied the publican. "Well," answered the toper, "there, is no need to pay for the same thing twice over." This country had been paying or would have to pay not only twice, but many times over in the shape of extra taxation or accumulated indebtedness. It was needless to say that our great National Debts was a heavy burden on the nation. The United States, simultaneously with a great increase of wealth, had bean substantially reducing their national debt; whereas ours had been growing all the while. Of two rival nations, if one added to its burdens by piling up debt and another diminished its burdens by paying off debt, it was easy to see, other things being equal, which one would come out victor in the end. They had heard a great deal about reduction of armaments. They prided themselves, and very justly, on their improved foreign relations at the present time; and on the Anglo-French Agreement. He hoped matters would not end there; but that the same statesmanship which had concluded that and other agreements would render a further service to humanity by inducing the leading nations to reduce pro rata their armaments. If that could be accomplished, it was clear that the safety of our Empire would not be imperilled in any way, for it would remain relatively the same, while the comfort and happiness of our people would, owing to their diminished burdens, be enormously increased.
§ *SIR HOWARD VINCENT (Sheffield, Central)
said he had heard nineteen Budgets, but never one which had been received with such approval as that just introduced by his right hon. friend. He must congratulate the right, hon. Gentleman very much on his having had the courage to reduce the tea duty by one-fourth. He looked upon that reduction with special pleasure. It would encourage production of tea almost entirely within the British Empire, because the tendency more and more was to consume British-grown rather than China tea. Therefore, it would be received with as much favour in India 1103 as in this country. He wished to draw attention to the splendid results of the investment in 1875, by this country, in Suez Canal shares. We held 176,602 shares and Lord Beaconsfield paid for them £22 15s. per share, and they were now worth £185. In other words, that for which we paid £4,000,000 was now worth nearly £33,000,000 sterling, on which we were receiving £1,040,000 a year or 26 per cent. How was that large dividend earned? Mainly by British ships. Of the forty principal steamship companies whose vessels made passages through the canal, all but fifteen were British; and of the 11,000,000 tons of shipping using the Canal no less than 6,500,000 were British. He wished to ask the Chancellor of the Exchequer if he did not consider that some part of the enormous dividend of 26 per cent., or had been, which reimbursed three times over the original investment, should not be devoted to lightening the burden on the ships which earned the income? He understood that it had been accepted some time ago that the Canal dividend should not exceed 25 per cent., and that all profit over that should go to the benefit of the shipping using the canal. The Suez Canal Company conducted the business most admirably. They had reduced the time of passage to an average of seventeen hours, and had increased the pilots and the passage accommodation. But it was a sore point with British shipowners that the Canal rules provided for the inclusion in the taxable tonnage of a ship all spaces available for the carriage of cargo, stores, or passengers, irrespective of the fact whether such were actually carried on any particular voyage. Although the British Government was represented by three directors, and the British shipowners by seven directors, there was great difficulty in reducing the tax on deck erections and the ordinary tax of 8 francs per ton. The income of the canal was no less than £4,500,000 last year, and the working expenses only 25 per cent., and he thought that part of the 26 per cent, dividend received by the British public should go to the relief of the shipowners using the Canal. It was perfectly easy to do it if some of the dividend were applied to relieve some of the charges which pressed so heavily upon British shipping, such as the light 1104 dues. It would be a very great advantage to the British seafaring community, and would only be a legitimate return for the enormous sums earned for the nation by the British traffic through the canal. He also thought something should be done to increase the voting power of this country in the affairs of the canal. We owned 176,000 shares, which was about two-fifths of the whole, and we had ten directors on the board out of thirty-two, but we only had a voting power of 250 shares, which was far less than we were entitled to.
§ MR. WHITTAKER (Yorkshire, W.R., Spen Valley)
said he congratulated the right hon. Gentleman on his Budget, not because it was a satisfactory Budget, but because it was less unsatisfactory than those of previous years. It was so far satisfactory because it showed a tendency in the right direction, and also that in so far as it had provided for the expenditure of the year it had done so in a sound and satisfactory way. He did not think the Chancellor of the Exchequer would find that the Exchequer Bonds he was going to issue for the repayment of the £10,000,000 of floating debt would be so popular with the public as he anticipated. People did not like these investments that were always being taken up. The Committee must not run away either with the idea that there was a large reduction of expenditure this year. They must remember that the expenditure last year was not up to the Estimate, and that therefore the actual reduction this year was less by that amount. Her did not agree with those who accused the right hon. Gentleman of hustling up the payment of the income-tax. It ought to be paid sooner than it was now paid. It was not now paid until the fourth quarter of the year, and the Committee owed their thanks to the right hon. Gentleman and the Inland Revenue Department for hurrying these people up. He had not an atom of sympathy with those who, having taken as it were nine months credit, complained, when the time came that they had to pay, that they were being hustled. It was unfair and unjust to those who did pay their taxes when they were due. He was sorry the right hon. Gentleman had not seen his way to 1105 making some difference in the income-tax charges on the various classes of income. There was no difficulty whatever in having a different rate of taxation upon incomes earned to that on incomes derived from investments. He thought incomes from investments should pay a higher rate of taxation altogether than those earned.
They were all glad to hear from the right hon. Gentleman of the more sober habits of the community and the consequent decrease in the consumption of beer and spirits, but he did not think that the lower consumption was due so much to the greater sobriety of the people as to their smaller spending capacity. He had noticed that the revenue from the consumption of liquor had always risen or fallen with the increase or decrease of trade, although we were growing more sober, as was proved by the fact that for the last thirty years when trade increased the corresponding increase of this revenue had not been so great as in the previous years. He quite agreed with the right hon. Gentleman that the decrease in the revenue from drink this year was not due in any way to legislation, for nobody could say that the so-called temperance measure of the Government was anything of the kind. The right hon. Gentleman appeared to be a little anxious about the gap that in the future would be created in the revenue by the diminution of the consumption of liquor, but he need have no fear, because when the people, gave up wasting their money in this way they would be 15s. in the £ better off, and would provide a larger revenue in other ways. He thought at one time, when the right hon. Gentleman referred to the Gentleman who paid nothing in taxation until the tax was put upon sugar, that he had discovered a way of taxing the teetotaler who, he quite admitted, was in a favoured position, especially if he did not smoke, but he had been disappointed. The difficulty was to find something that that class did consume which other people did not that could be taxed, and that had defied the ingenuity of every Chancellor of the Exchequer up to the present time.
He regretted that the right hon. Gentleman had said nothing in condemnation of the large expenditure of the country. The 1106 right hon. Gentleman the Member for West Bristol had usually treated them generally to a strong expression of his opinion as to the serious danger attending the great increase of the national expenditure which, although it might not have had the effect he desired upon the House, gave them an indication of the opinion of the Chancellor of the Exchequor of the day. He could not understand why, since 1897–8, there should have been an increase of £30,000,000 in our naval and military expenditure. He was glad something was going to be done to deal with the Unfunded Debt of £77,000,000, because a floating debt was a very serious burden on the trade of the country. This country had held its position in the trade of the world owing to the control of finance which enabled it to finance large foreign contracts, and now that other countries, especially Germany and the United States of America, could also put finance behind their contracts, competition was much more keen, and it became far more necessary for us to have command of that loose capital which had really been the means of securing these large contracts in the past. It was not to duties and that kind of folly to which we must look to improve our trade. Our exports were greater now than ever they had been. The weakness was at home in the too heavy expenditure of the country. That was what was diminishing the spending capacity of the people and the power of the manufacturer to keep his works up to the standard of efficiency to enable him to meet this competition. Putting in new and up-to-date machinery meant paying out capital, and the higher the rate of interest was the more difficult it was for the manufacturer to lay down new plant and machinery.
He thought it came badly from the Government to reproach the local authorities for their expenditure, when it was borne in mind that much of that expenditure had been made on remunerative undertakings which would benefit the municipalities, and that it was the present Government and its predecessors who had encouraged the extravagance of the local authorities 1107 by granting them subsidies, which were always an encouragement of extravagance. The Financial Secretary had told the Committee that one reason for the expenditure had been that everyone pressed for more expenditure. That had always been so, and it was the duty of the Chancellor of the Exchequer to sit like a watch-dog on the national purse and refuse to concede those demands. It was because the Government in power was weak that they had not resisted the pressure put upon them, and that the expenditure which this Budget showed so little tendency to rebuke had so enormously increased.
And, it being half-past Seven of the clock, the Chairman left the Chair to make his Report to the House.
§ Committee report Progress; to sit again this evening.