HC Deb 24 April 1907 vol 173 cc72-135

Motion made, and Question proposed,. "That Income Tax shall be charged for the year beginning the 6th day of April, 1907, at the rate of one shilling in the pound."—(Mr. Chancellor of the Exchequer.)

* MR. HICKS BEACH (Gloucestershire, Tewkesbury)

expressed regret that the Chancellor of the Exchequer had made no reference to the valuable evidence given before the Income-Tax Committee, which showed very clearly that the incidence of the estate duty now had a very considerable effect in differentiating between earned and unearned incomes. If the right hon. Gentleman was not satisfied with the differentiation which now existed, surely it would be a fair and simple plan, both from the point of view of the Board of Inland Revenue and from that of the taxpayer, to slightly readjust the estate duties. He could not help thinking that the proposal of the right hon. Gentleman would create very great irritation among certain classes of income-tax payers and that the loss the Exchequer would suffer in revenue would be very much more than the right hon. Gentleman anticipated at the present time. Undoubtedly there would be a very serious grievance felt by those people whose incomes were on the border of £2,000 a year. No doubt a great many of them would make perfectly honest returns, but there would be a last proportion who would do one of two things: either they would return the earned portion of their income but not the whole of the unearned portion, so as to bring the total below £2,000; and with the present staff it would be almost impossible for the Inland Revenue Authorities adequately to check the returns; or they would divide a certain portion of their capital among members of their family and thus bring their personal incomes under £2,000. In that manner they would escape the net of the Chancellor of the Exchequer in a perfectly legitimate way. There was another section of income-tax payers who would feel a sore grievance, and those were the men whose incomes were the result of hard work and thrift in early life and who had invested their savings to produce, say, £700 a year. They would feel that they were being penalised on their savings to the extent of 3d. in the £ for the purpose of granting old-age pensions to those who would make no provision for the future, and no doubt many of them would so frame their return as to avoid the tax in a way which had not been done before. Was it not better, instead of penalising the man who had made the savings, to penalise the person who succeeded to them? In his opinion it would be much fairer to everybody, and if the Chancellor of the Exchequer had considered more carefully the bearing of the death duties on the question of differentiation he surely would have slightly readjusted their scale rather than have adopted his present proposal. The right hon. Gentleman anticipated a loss of £1,250,000 on the income-tax, and he proposed to make it up by a change in the death duties. People who were not millionaires had little sympathy with those who were, and looked very calmly on any proposal to increase the taxation upon them. But he was very much surprised to hear the Chancellor of the Exchequer declare the other day that the predictions made at the time the death duties were instituted had been absolutely falsified, and that no country houses had been shut up in consequence of them. If the right hon. Gentleman took a tour of the country districts he would not find a single county in which some house had not been shut up simply because of the incidence of these duties, or cases where people whose families had lived in the same house for generations had been compelled to let it to strangers, and the servants employed about them had had to be turned adrift. He did not profess to possess expert financial knowledge, and would not therefore offer an opinion as to the extent that capital would be driven out of the country in consequence of the increased duties, but it seemed to him that in inflicting extra penalties on this class of people, they were imposing them on the persons most able to avoid them if they desired to do so. The question of raising death duties should also be examined from another point of view, and that was the bearing it would have on the receipts coming into the Exchequer. Since they had been instituted, many persons, in view of the burden that would be inflicted on their successors, had divided up their estate among their family during their lifetime and thus escaped the duty, and he ventured to think that the result of putting a further burden on the large estates would be to encourage that practice. The consequence of that would be that the Chancellor of the Exchequer would suffer the loss of a very considerable amount of revenue, and he very much doubted that he would be able to come down to the House on introducing his next Budget, and tell them that he had a large-sum at his disposal for old-age pensions and so forth. The President of the Board of Education had told them the other day that the Chancellor of the Exchequer had paid off more debt during the time he had been in office than any of his predecessors, while he had reduced taxation as well. Nobody quarrelled with the amount of debt which the Chancellor of the Exchequer had paid off, and he thought that all sides of the House recognised that the right hon. Gentleman had adopted a most courageous course in doing so; but as regarded the actual taxation which the Chancellor of the Exchequer had remitted he did not feel so much impressed with the excellence of his action as did the President of the Board of Education. Last year the Chancellor of the Exchequer took 1d. off the tea duty, which he persuaded the House would confer considerable benefit upon the poor consumer. Some of them had doubted that last year, and he was rather surprised to hear the Chancellor of the Exchequer say this year that he was perfectly satisfied that any further attempt to deal with the tea duty in the way of taking a further 1d. off would be of no real benefit to the consumer of tea. That was directly contrary to the right hon. Gentleman's argument last year, and he would like to know what material facts had arisen to induce him to change his view. The other tax which the right hon. Gentleman had remitted was the coal duty. He could not help thinking that the right hon. Gentleman as Chancellor of the Exchequer and not as Member for East Fife, must be looking about for sums of revenue for proposed social reforms, and that he must regret the loss of the coal tax, because the amount it had produced to the Exchequer had not been decreasing but increasing annually. The total export of coal from this country had increased from 58,405,000 tons in 1900 to 67,783,000 tons in 1906; while the proportion of the exports to the total produced had increased from 25 per cent. in 1900 to 30.per cent. in 1906. When they remembered that the direct result of the remission of the tax had been to raise the price of coal to the home consumer, he thought the Chancellor of the Exchequer must realise that in taking off this tax he had lost a very valuable source of revenue, and had conferred, not a benefit on the consumers of coal, but an additional burden, which he was not justified in imposing upon them. With regard to the other parts of the Chancellor of the Exchequer's speech, he thought that in doing away with the system of assigned revenue to the local taxation account the right hon. Gentleman had taken a wise step, and one which the county councils of the country would accept, provided that it was clearly understood that they would not suffer in any way by the action which the Chancellor of the Exchequer had taken. The right hon. Gentleman next year no doubt would be in a position, having control of the imposition of duties upon licences and upon motor cars, to take some steps for the raising of these various duties; but he very much doubted whether the brewing trade at the present moment was so flourishing that it could bear any material increase in taxation; though no doubt it might be possible to readjust some of their burdens in a more equitable manner. If the Chancellor of the Exchequer proposed next year to increase the tax on motor cars, he hoped he would remember that the people who really ought to derive some benefit from the increase were these country ratepayers who now had to pay so heavily towards the upkeep of the roads of the country. The right hon. Gentleman, in the early part of his speech, had claimed the support of former free trade Unionist Chancellors of the Exchequer for keeping up the cocoa duty, although slightly protective in character. Everyone of these free trade Unionists had predicted that owing to the increase of normal expenditure of the country it would be absolutely necessary to broaden in some way or other the basis of our taxation; and he very much doubted whether the Chancellor of the Exchequer would be able to find money for various social reforms without carrying out their prediction.

* MR. SNOWDEN (Blackburn)

said that no Budget had been looked forward to with so much expectation as that which was now before the Committee, and no Chancellor of the Exchequer had ever had such a magnificent opportunity as the present occupant of that office. From the point of view of these with whom he was associated, no Chancellor of the Exchequer had ever more dismally disappointed expectations; none had ever failed more miserably in using his opportunity. There was one statement made by the Chancellor of the Exchequer with which they fully agreed, that if ever a Government had been returned to office under the expectancy that it would deal with questions of social reform, it was this Government. The right hon. Gentleman had said that this Government was expected to find a way and to provide the means for carrying out schemes of social reform. It was quite true that the Chancellor of the Exchequer stated further that the words "social reform" seemed indefinite, but their idea of social reform was a more equitable distribution of national wealth. If they took the question of housing the poor, the condition of labour, the want of educational opportunities, indeed everything which they understood by the social problem, they recognised that the root-fault was in the unequal and unjust distribution of wealth. They did not say that by the Budget it was possible to deal completely with this question. The subject was not so simple as that, but they did believe that a courageous Chancellor of the Exchequer could do a great deal towards palliating consequences and conditions which could only be changed by legislation. In regard to social reform, what they required was that the Government should be determined to deal with the fact that 43 per cent. of the hardest working part of our population, however hard they might labour, however thrifty they might be, were not able to command incomes sufficient to provide themselves with the necessaries of decent subsistence. They saw every year the productive power of their labour increasing. The late Chancellor of the Exchequer told the House in his last Budget speech that the capital wealth of the country was increasing by about £200,000,000 a year. The income tax returns told the same tale. Was the condition of these who were producing that wealth improving? They were told from the Treasury Bench a few months ago that in each one of the five years before last year the wages of the workers had been going down, and in each of these five years the cost of living had been going up. He knew there were hon. Members opposite who would answer that statement by saying they were the consequences of the War. But they were not due to the War. The Board of Trade Return showed an increased production in each succeeding year. The income-tax returns showed increasing profits every year. Therefore, the social problem as it. presented itself from their point of view was that the House should devise some means by which this increasing wealth should not continue to go into the possession of a small section of the community, the section who, largely, did nothing whatever to produce it. The Legislature should devise some means on behalf of these who, by the sweat of their brow, or the ingenuity of their brains, contributed to this increasing aggregate wealth of the country. What had the Chancellor of the Exchequer done? The Government were to find the way and provide the means for redressing these unjust conditions between poverty and wealth. The mass of the people gained nothing whatever from any proposal put forward in the Budget. The only people who received consideration were these with incomes which raised them very considerably above the comfortable standard of living. £160 a year was at least sufficient to provide food enough, clothing enough, and decent shelter. But nearly one half of the working class population had not incomes which would provide; them with decent shelter, sufficient food, and warm clothing. There were 2,000.000 families in this country whose income was below £1 week, and the problem was how the husband, wife, and three or four children were to be kept on that amount. The cost of food for one person alone in the workhouse was 3s. a week, though the food was bought at wholesale prices; and if a family of five was to be maintained on the standard of the workhouse subsistence, of the £1, 15s. would have to be spent on food alone. That was a problem which the Chancellor of the Exchequer could not solve. Working class families had to do it, or at least they were trying to do it, but in fact they did not do it. They were living below the standard of workhouse subsistence, and that was why they were hearing so much about the physical deterioration of the people. The heavy taxation which that class had to bear aggravated their condition. And the way in which taxation was laid upon them made them largely unconscious of the fact that they were paying taxes. He was quite sure that if the mass of the people of this country were conscious of the amount they were paying in taxation they would present a demand to the Government, a demand stronger than the appeal to which the Chancellor of the Exchequer was open, namely, the piteous cry of the distressed income-tax payer. The Chancellor of the Exchequer had stated that there were £20,000,000 of war taxation remaining. He found that of this £20.000,000 of war taxation, £11,000,000 was derived from indirect taxation, and four-fifths, probably tenelevenths, of that indirect taxation was paid by the working classes, whose average income did not come, to 25s. a week. There was no redress in this Budget. The only thing that the Chancellor of the Exchequer offered to them was an indefinite promise of old-age pensions, but at their own expense. It was important to make that point clear. The Chancellor of the Exchequer had a surplus, and of that surplus £1,250,000 was to be devoted to relieving incomes over £160 per annum. The rest of the surplus was paid by poor people through indirect taxation. It was important to emphasise that fact, and the Government might depend upon it that they would use the opportunities they had outside the House to tell the people of the country that the remission of the taxation was on incomes of £40 a week, that the benefit was being given by this social reform Government to that class at the expense of families with incomes of less than £1 a week. The Chancellor of the Exchequer had said that every class of the community must pay for social reform. But the justification of old-age pensions was that these who were to receive them were too poor during their active life to provide their own old-age pensions. If it were not so, there would be no justification for advocating a scheme of old-age pensions. The Chancellor of the Exchequer, however, proposed to make the working people pay for their own old-age pensions, though the capacity of the mass of the people to bear taxation was less to-day that it had been at any time during the last six or seven years. But what of the capacity of the other class about whom the Chancellor of the Exchequer was so solicitous? He found from the income-tax return that in the first ten years of the twenty years preceding last year the amount of the income brought under review of the Commissioners of Inland Revenue, increased by £47,000,000 a year. He found that in the last ten years of the twenty years the increase was, not £47,000,000, but £235,000,000 a year. That was to say, that in the last ten years the wealth of the people to whom the Chancellor of the Exchequer referred as being liable to income-tax, had been increasing seven times more rapidly than in the preceding ten years. Yet that was the class who were to receive consideration at the hands of this social reform Government. They were not unfavourable to differentiation between earned and unearned income. They had repeatedly admitted that to tax at the same rate as unearned incomes these incomes which were arduously earned was a hardship upon these workers whose incomes were just above the taxable limit. A favourable opportunity presenting itself, they would heartily support the removal of such a hardship and injustice. But he submitted that this was not a favourable opportunity, and that that class could well afford to wait until the more urgent claims of the poorer people had been considered and dealt with. Then they had another complaint to make, he was going to say of the action, but rather the want of action on the part of the Chancellor of the Exchequer in leaving untouched incomes above £2,000 a year. That class of income was increasing, and the people with incomes of over £2,000 a year usually did not earn them. [" Oh! "J The Chancellor of the Exchequer had admitted that practically himself, namely, that incomes above £2,000 a year were unearned. These incomes would escape with the moderate tax of Is. in the £. If they looked at the question of the super-tax the same thing applied It depended on the point of view from which they looked at it. It was the wrong point of view to regard what was taken from a man by the tax. The point of view from which to look at it was to see what remained of the income. £6000 a year paid £300 a year in income tax. £300 looked a big sum, but there remained of the private income £5,700 — an income which in nine cases out of ten was not earned by the individual who had it, and who belonged to a class which was largely increasing and discharged no useful or necessary social service. And there was a social aspect as well as an economic aspect of this question. It was not good for an individual that he should have command of a large income like that without doing honest and useful work. Now, here was a vast field for the Chancellor of the Exchequer to exploit by means of a super-tax. He could have raised sufficient by a super-tax on incomes above £2,000 a year to have started an adequate scheme of old-age pensions. How far would £1,500,000 go to provide a scheme of old-age pensions? The Departmental Committee which inquired into the subject reported that £3,000,000 a year would be required to pay 5s. a week at the age of seventy-five years. £1,500,000 would provide l5d. a week at the age of seventy-five. Why, at the age of seventy-five poor people were not thinking about old-age pensions but funeral expenses. It was an insult to poverty and to the old folk of this country to suggest the beginning of a scheme of old-age pensions with so miserably inadequate a sum as £1,500,000. They were hearing a great, deal just now about making a beginning, no matter how moderate. He said that at a time like the present an appeal like that was a traitorous appeal. He would be perfectly willing to have a moderate beginning if that moderate beginning were the only thing they could do. But it was not so in this matter. The income of the community was increasing every year by a sum sufficient to give pensions of 5s. a week at sixty-five years of age to everybody ten times over. When they had a state of things like that, it was a traitorous appeal to ask them to be satisfied with a pension of 15d. a week at seventy-five years of age. The most painful thing to him in the statement of the Chancellor of the Exchequer was the indication of how little he appreciated the social reform spirit of the country. That spirit was not going to be satisfied with homœopathic doses of social reform. The people were beginning to recognise every day more clearly what was the cause of poverty. They were beginning to see the fact that a few people by the power of law were able to appropriate to themselves, without necessarily rendering any useful service whatever, this continual increase of the wealth of the country, and they were quite determined that a social reform Government of the future should deal with this question. They knew that money would be required, and they did not expect it, like the Israelitish manna, to fall from the heavens. But they knew that the money could be found. Earnest social reformers knew where the money could be found, and no Government would continue long to receive their support which was not determined in the most courageous manner to deal with these questions of poverty and social reform, and they were not going to be content to have the spectacle which appeared almost every day in the newspaper of men of whom they had never before heard dying and leaving fortunes amounting to millions of pounds. The Chancellor of the Exchequer by the death duties was going to raise a small sum a year. It was a curious fact that a moderate increase of the percentage on the death duties brought in a very small increase of revenue. They would have to put on a very much heavier percentage if they were going to increase the revenue by any considerable amount. Again he asked the House to look on that question from a practical point of view. If they took £300,000 from a fortune of £3,000,000, there still remained the sum of £2,700,000, a sum far more than necessary to keep these who had the good fortune to inherit it from any fear of the workhouse. Quite inadequately he had put before the House their idea of social reform, and they were going to be satisfied with nothing less. They knew where the money could be found, and he ventured to hope that before the tenure of office of this Government had run out it would take its courage into its two hands and determine to tackle this question boldly, and certain it was, that if the Government did not do this it would meet the fate of every preceding Liberal Government when it had next to appeal to the country.

* MR. S. T. EVANS (Glamorganshire, Mid.)

said the speech of the hon. Member who had just sat down was a lecture on social reform rather than a criticism of the Budget, and so it would be regarded by Members of the House. He had listened very carefully to the remarks of the hon. Member to see whether or not he had anything practical to suggest. He was quite sure that the hon. Member with the magnanimity which he possessed would confess that there was on the Ministerial side of the House as well as upon the other side below the gangway, a sincere desire for the better condition of the people. The hon. Member demanded that the Budget should bring about an even distribution of weal h. But so far as he understood it, the consideration of the Budget of the year dealt with the equitable adjustment of taxation, and was not the occasion to preach doctrines with regard to the equal division of wealth and of property. They were dealing now with taxes, and not with wealth; and the only part of the speech of the hon. Member which was of a practical character was that in which he suggested that a greater burden of taxation should be placed, as stated by his right hon. friend the President of the Board of Education, on the shoulders best able to bear that burden. General criticism was made by the hon. Member of the taxation of the food of the people—indirect taxation. He himself held the opinion, as the hon. Member did, that too much was being taken from the pockets of the people by means of indirect taxation, but at the same time they ought to remember that it was only by means of indirect taxation that the working classes contributed to the expenses of carrying on the affairs of the country. He thought it would be an evil day if such expenditure as was caused in reference to the war in South Africa could be incurred without being felt by the working classes. They knew perfectly well that the men for whom in a special sense the hon. Member assumed to speak were in large measure, in very large proportion, in favour of the war. For his own part, looking at the general interests of the country, looking to the import ance of the country's keeping at peace with the whole world, he thought it would be an evil day when a war could be lightly embarked upon without some of the consequences being directly felt by all classes in the nation. With regard to the taking away, as he supposed the hon. Member suggested, of some of the taxes now imposed, on tea and sugar—for he did not suppose that the hon. Member in his proposal of social reform meant to take away the taxes on beer, spirits, or articles of that kind—personally he would have been glad if the Chancellor of the Exchequer had seen his way to take a penny off the tea duty, and to diminish in some respects the tax on sugar. But, after all, they must in this matter give some confidence to these whose duty it was to look after the affairs of the country, and who made promises— not "indefinite promises," who made appeals—not "traitorous appeals," but who gave definite pledges that a large sum of money which would be got this year out of the increased taxes, together with n ore money which would be got next year, would be devoted towards a scheme for old-age pensions. The criticism of the hon. Member opposite, if he might without offence say so, would have been better if it had been less exaggerated and less venomous. After all it was really time for hon. Members opposite to cease thinking or saying that all the evil was to be found in the Liberal Party, and that all the good was in their own. Whatever good measures were passed were claimed as the work of the Independent Labour Party. The hon. Member for Leicester, at Cardiff on Sunday last, had boasted that the Trades Disputes Act of last session was, for sooth, the great achievement of the Independent Labour Party. To all these who were in the last Parliament as well as in this Parliament, such language as was used by the hon. Member with regard to the Liberal Party and their promises, their pledges, and performances seemed hardly compatible with the intelligence they knew the hon. Gentleman possessed. What was the use of saying to the Chancellor of the Exchequer, who had produced a courageous Budget, who had increased in some measure, not so far as the hon. Member wished or as he himself wished, the burden of these best able to bear it, that he was making a traitorous appeal, that the Budget was a dismal disappointment and a miserable failure? Let them come to close quarters and see what was done. First of all. Did the hon. Member object, to that portion of the Budget which dealt with what might be called paying their way? It was as important for a country to pay its way as for individuals. For his part he regarded it as part of social reform, and whenever he had the opportunity to speak to the working classes, he impressed upon them the importance of keeping free from debt. If they could get rid of the credit system in this country they would go a long way to improve the conditions of which the hon. Member complained. Did the hon. Member complain of that part of the Budget which raised new taxation so far as it went? The proposals of the Chancellor of the Exchequer followed in some important respects the recommendations of the Income-Tax Committee last year, before which the hon. Member for Blackburn gave interesting and valuable evidence. That Committee had been very successful and had achieved a great deal. It first of all prevailed on the officials of the Inland Revenue to modify their view, it was perfectly well known that the attitude of the Inland Revenue Department had been like a hard wall against which if was no use knocking their heads. The officials of the Inland Revenue Department had induced the former Government and Chancellor of the Exchequer when considering the question of the income-tax to refuse to bring within the purview of such a Committee the consideration in any form at all of the graduation or differentiation of the tax. One of the things which last year's Committee then succeeded in doing was to modify, if not completely to alter, the views of some of the head officials in that Department. They did more than that, they convinced their Chairman, who came to the Committee not at all convinced in favour of differentiation, and greatly doubting the practicability of graduation. They also convinced the President of the Board of Education, who came to the Committee as "hidebound" as am of the officials against the suggested changes. It was pleasant to hear his right hon. friend defend- ing the proposals of the Chancellor of the Exchequer, to many of which he certainly would not have agreed when the Committee began to sit. Moreover, the Committee in a short space of time carried conviction to the mind of the Chancellor of the Exchequer if that were necessary. How far had the Chancellor of the Exchequer gone in dealing with that question? The Committee should be reminded of the number of people with the smaller incomes who would be relieved by the proposals of the Chancellor of the Exchequer. With the income-tax standing at. Is. in the £ under the abatement system, an income of £200 a year paid. now at the rate of 2 ½d. in the £; £300. 5½ £400, 7½ £500, 8½ £600, 9½ £700, 10— 8 . or nearly 11d. in the £. Everything above £700 was Is. in the £. In respect of all these incomes which would be earned the tax would this year be again reduced to 25 per cent.; and of course above £700 and up to £2,000 all earned incomes would also have the tax reduced by 3d. in the £. He would give the figures of earned incomes up to £2,000 a year—the incomes affected by the new tax. As far as the Returns showed the incomes under £2,000 a year dealt with under Schedule D, (and it represented only earned incomes), numbered 453,351 separate assessments in Great Britain and 20,501 in Ireland. To that number must be added firms —he did not mean limited companies— and he reckoned that on an average which lie thought was very small then were 2 ½ members to each firm. In that way firms whose incomes were under £2,000 represented 113,647 taxpayers in Great Britain and 4,377 in Ireland. There were other firms whose income was over £2,000, but whose individual members had incomes under £2,000— who would be affected by this proposal of the Chancellor of the Exchequer. He reckoned these at about — 1,000. Then we had under Schedule E. which represented earned incomes derived from public offices and so forth under £2,000, in Great Britain, 370,477, and in Ireland, 14,875. The total of these figures showed that about 981,228 persons, or nearly a million of taxpayers who paid income— tax on earned incomes up to £2,000 would be relieved by the changes and reductions made by the Chancellor of the Exchequer. These interested in the reform of the income-tax would be glad to find that these on whom the burden had pressed most heavily were, relieved in such numbers as indicated. The £2,000 limit had been criticised by hon. Gentlemen opposite. His own opinion as a politician was that it was a fair figure, but he could have wished that for the purpose of the better working of the scheme there had been an easier gradation when the figure was approached than the one proposed by the Chancellor of the Exchequer. Cases might be put showing that under the scheme as proposed, hardship would arise by reason of the way in which the earned and unearned portions of incomes near the figure of £2,000 were to be dealt with. A man who earned £1,600 and who had an unearned income of £400 (representing a capital of £10,000) and whose income was therefore £2,000 a year, would pay £80 tax: whereas his neighbour who had an income of 2,000 guineas, all of which he earned, and who had no capital would pay £105 tax. He hoped that means would be devised to make the gradation more easy. The other day an hon. Gentleman opposite criticised the application of the principle of differentiation, as between earned and unearned incomes, and not as between precarious and permanent ones. The Chancellor of the Exchequer was perfectly right in saying that the Committee considered this matter very carefully from every point of view. The Committee had considered the question of permanent and precarious incomes, and they came to the conclusion that the best words to express their view and the best principle to be adopted were "earned" and "unearned." He agreed entirely that that was the proper distinction to make. He very much regretted, however, that the Government had stopped at differentiation; because the proposals of the Committee were quite as strongly in favour of graduation as of differentiation. He regretted that the Chancellor of the Exchequer had not been able this year to give effect to the recommendations of the Committee in that direction, but he noted the fact that the right hon. Gentleman had not shut the door against the principle of graduation. He did not know that the Chancellor of the Ex- chequer was as enthusiastically in favour of it as he should like, but he was in hope that next year the right hon. Gentleman would espouse the principle of graduation and place a very much heavier tax on the higher incomes. In order to enforce his observations, he would quote the following words of the Committee— Graduation of the income tax by an extension of the existing system of abatements is practicable. That had not been done. They stopped at £700. The Committee also said— If it be desired to levy a much higher rate of tax upon large incomes (say of £5,000 and upwards) than has hitherto been charged, a super-tax based on personal declaration would re a practical method. He did not think that the Chancellor of the Exchequer would meet such difficulties as were anticipated if he proposed to have the declaration made compulsory in the case of every individual. On this head the recommendation of the Committee was as follows— A compulsory personal declaration from each individual of total not, income in respect of which tax is payable is expedient, and would do much to prevent the evasion and avoidance of income— tax which at resent prevails. There might be some difficulty in arranging with the Inland Revenue officials for adapting the means now at their disposal to the compelling of personal declarations from everybody this year; but it could not be repeated too often that to demand from 800,000 people or more a personal declaration as they did now, and at the same time to exempt from the making of a personal declaration people who wore at the top of the scale, was a thing which could not be defended. Why should they call upon the two-thirds of the income-tax payers who were at the lower end of the scale to make a personal declaration and allow the other one-third at the upper end of the scale to go free? These people with small incomes had to make a declaration if they wanted an abatement. If it was right to extract from them by this kind of pressure a personal declaration it was equally right to compel everybody to declare his income. The Chancellor of the Exchequer was now going to compel all employers to make returns of the incomes of their employees. Everybody in receipt of a taxable salary would be included in the list the employer was bound to make. Why under these circumstances should the employer himself be exempted from revealing his income? He was so strong a believer in the principle of graduation of the income-tax that he would go into the lobby in favour of it, not for the purpose of creating a difficulty for the Government, but for the purpose of bringing some pressure to bear upon them to go forward. Large incomes between £2,000 and £50,000 a year were now taxed only at Is. in the £. It was unfair and was flying in the face of commonsense and justice to say that very high incomes should be only taxed on the same basis as smaller incomes. Graduation of the estate duties did not, he contended, sufficiently meet what he wanted by the graduation of the income-tax. Death duties only came in once in a generation; but a generation might count anything from five to thirty or more years, and they were fixed once and for all, whereas income-tax varied and might vary annually. What had the Chancellor of the Exchequer done in regard to the death duties? He regarded the Chancellor of the Exchequer as a courageous man, but in this matter he had either shown a great timidity or a supersensitive regard for the posthumous feelings of the millionaires. Why did the right hon. Gentleman not begin at a lower figure than £150,000? And why so mild with estates of over a million? The additional rate above £10 per cent. on estates of more than £1,000,000 only attached to the surplus above the million, so that only estates of £2,000,000 were taxed at the rate, of 11 per cent.; £2,500,000 estates at 11⅘ per cent.; £3,000,000 at 12⅔per cent.; £3,500,000 at 13 4/7 per cent.;, £4,000,000 at 13¾ per cent.; and £5,000,000 at 14 per cent. only. Let the Chancellor of the Exchequer get rid of his fears of the ghosts of departed millionaires and dig in this gold mine to alleviate the condition of the people and start old-age I pensions on a large scale. Subject to these criticisms he was in favour of the Budget, and he regarded the pledge of the Chancellor as a definite pledge in favour of old— age pensions, He looked upon the right hon. Gentleman's proposals as the minimum, and the Chancellor could not go further and faster forward in the direction in which he had started than he wished him to travel.


said that he would not follow the hon. Gentleman who had lectured the House on social reform or the hon. Gentleman who had lectured his predecessor not only on political policy but on Parliamentary decorum. He confessed that the account of the achievements of the Income-Tax Committee, which the hon. and learned Member for Monmouthshire had given, had filled him with a considerable amount of surprise and some amusement. The hon. and learned Gentleman claimed, amongst other things, that the Committee had succeeded in convincing the permanent officials of the Inland Revenue Department that a super-tax was desirable. That he could not understand when he found in the memorandum of Sir Henry Primrose on 23rd July last that that gentleman stated that— '' Having regard to all these objections —that was to the super— tax— it would seem clear that the super-tax ought not to be attempted unless it offered a prospect of an increase of revenue and a really substantial amount sufficient to out-weigh its many manifest drawbacks, I am unable myself to see any such prospect. Even if the Committee were to rid themselves of that memorandum which had been issued by Sir Henry Primrose, after having heard the other evidence he doubted whether the hon. Gentleman would find any substantial argument in favour of a graduation of the income-tax. One of the difficulties they had to meet all the way through that Select Committee was that, with the best intentions in the world, they were unable to attach the same identical meaning to similar expressions. For instance, at the commencement of the sittings there was considerable discussion as to whether it was practical and expedient that something should be done or as to whether there was any particular rooted objection to the proposal made. It was certainly in the former sense that hon. Members on that side of the House supported certain of the recommendations which were made by the right hon. Baronet the Member for Forest of Dean. The members of the Committee supported his proposals for reforms by using the word "practical" in a very limited sense. They never suggested that these changes were expedient in themselves or desirable from the point of view of the general taxpayer or of the Chancellor of the Exchequer himself. The hon. Gentleman had said that they had succeeded in convincing the Chairman of the Committee. Most certainly they owed a debt of gratitude to the Chairman for the trouble he took and for the courteous manner in which he conducted the whole affairs of the Committee. But so far as the Committee itself was concerned, the only point on which they were unanimously agreed was that they were unable to accept the (hairman's draft report; and if the right hon. Gentleman was subsequently convinced it was a form of conviction that he did not think would be particularly agreeable to any chairman. He did not rise for the purpose of criticising to any extent the actual proposals which had been made by the Chancellor of the Exchequer, but only to follow out the prospect which the Chancellor of the Exchequer had partially opened to the House and the country. The Chancellor of the Exchequer very clearly told them that ho had budgeted, not so much for the present year, as in contemplation of the changes which he might make next year and in the year following. He thought the prospect which they were permitted to see—and after all it was very little of a definite nature they were able to learn from the Chancellor of the Exchequer—was by no manner of means either a. satisfactory or a cheerful one. The more one looked at the prospect the more doubtful one became as. to the future. Where there was doubt there must be gloom. The Chancellor of the Exchequer had most clearly intimated to the country that the reserve which he was how proposing to deal with during the current year was not sufficient for him to make even a start with some of these social reforms to which, he had committed himself. The right hon. Gentleman in his arrangement of remissions and taxation generally had contemplated, not that he would be able to give further remissions, but rather that next year the expenditure of the country would be considerably increased. That was the only clear and definite matter as regarded the future that he was able to see. Thus, however much the Chancellor of the Exchequer was pledged to schemes of far-reaching social reform, he could not hold out any prospect whatever of any reduction of either indirect or direct taxation. But more than that, he had: certainly made some changes which would, in all probability, as time went on considerably reduce the income that he could hope to receive. He had estimated a net reduction of £50,000 for the dual operation of the income-tax and the death duties. Whatever the death duties might bring in in this future, he thought there was every prospect of the remission he had already made in the income-tax leading to considerable demands for remissions of other kinds. The moment they interfered with the very delicate machinery of the income-tax they opened up a very large field for operations, and it was impossible, if they attempted to draw arbitrary lines such as these proposed, to escape inflicting innumerable cases of hardship and difficulty. The right hon. Gentleman had certainly one of the qualifications, among many, for the post of Chancellor of the Exchequer. As a finance Minister, no one could accuse him of being tender-hearted, and he possessed as great a faculty as any of his predece sors for returning an emphatic "No" to the most pressing demands for expenditure. He believed that differentiation between the two classes of income would inevitably lead to demands for further differentiation. He thought that on the whole the prospect which the Chancellor of the Exchequer had opened out with regard to the income-tax would probably mean that the field would be increased and that we should have to look forward to a less revenue than was even now to be obtained from that source. The right hon. Gentleman had also held out the prospect that, by taking back the power over that money which was now intercepted and went to local authorities, he would be able to turn his attention to other sources of income. He would leave the criticism of anything he might do in respect to motor cars until the proposal was placed before the House. But there were other suggestions, he could hardly call them proposals, in regard to which he thought there was a certain amount of doubt in the minds of many of them as to what the right hon. Gentleman's intentions were. in considering the intentions of the Chancellor of the Exchequer one had also to take into view the policy of his supporters. On the first night of the Budget some of his supporters made extremely clear what they considered to be the duty and obligations of the Chancellor of the Exchequer as regarded the question of licensing reform. They were distinctly told that the impression had gone forth that the Government had dropped or did not intend to proceed with their licensing proposals this year. That was said to be a. matter of very great disappointment to many of the right hon. Gentlemen's supporters, and they strongly urged him that he should keep hold of his power over licences that he might by the imposition of heavy burdens be able to carry into effect, save for anything which might be done in another place, the vanishing proposals which would have for their effect the diminution of the; liquor traffic in this country. How far the imposition of duties for the purposes of carrying out licensing reform came within the strictest definition of a pure free trader he did not know, although he was justified in asking the question; but undoubtedly if the desires which the right hon. Gentleman's supporters pressed upon him were carried into effect it would mean that the Chancellor of the Exchequer would not be able to look forward to so large a revenue from the liquor traffic as he had been able to do in the past, and there would on that contemplated change at any rate be a still further drop in the income with which the right hon. Gentleman proposed to make a start in social reform. During the present session they were threatened, although they were not yet in possession of the nature of the proposals, with changes which would have a very considerable effect upon land, upon the government of Ireland, and upon the Army. Everyone of these proposals must, he imagined, operate so as certainly not to produce further income to the Chancellor of the Exchequer, but inevitably to entail further expenditure upon the Imperial Exchequer. Possibly it was not fair in some senses to press the right hon. Gentleman to disclose absolutely the financial proposals which would be contained in all these measures, but as the right hon. Gentleman had explained to them that he was unable to give estimates of taxation he hoped he would let them know what would really be the ultimate financial effect of some of these proposals. He asked the other day a question of the Secretary of State for War as to what would be the effect of the financial proposals contained in the Territorial Forces Bill. The right lion. Gentleman did not, however, deal with the amounts in question, and the points were clearly for the Chancellor of the Exchequer; but the House of Commons had a right to ask that when money was voted for a particular object there should be definitely and clearly laid down the form and method by which the House of Commons was to be asked to Vote the money. In addition to the proposals about the Army he might refer to a proposal made last year to set up a council for the administration of Welsh Education. So far as they were able to extract information that was to be financed by aid grants or block grants voted by the House without any very complete explanation of the purposes for which the money was required, and with very imperfect provision for Parliamentary control, and the audit of the; money when expended. The proposals contained in the Army Bill were open to similar objections. Large sums of money were to be voted by aid grants and block grants, which necessarily from the nature of the case could not be properly presented to the House of Commons in a particular form and therefore Parliamentary control would be reduced to a minimum. So far as he could understand the proposal, a sum of money would be needed for these county associations, and the only check which the Comptroller and Auditor-General would have would be the receipt from these officials that the money had been handed over. There was certainly a provision for audit, but it was not such an audit as was understood by the House. It might be termed a Committee audit. When the right hon. Gentleman was addressing weighty words to the House with reference to control and the demands made upon the Chancellor of the Exchequer by the House he could not help thinking that many of his remarks were strictly intended for the consumption of the Treasury Bench. He hoped the right hon. Gentleman would be able to bring to the mind of the Secretary of State for War the enormous importance of seeing that the control of the House over the administration of this new Army system should be as complete and thorough as possible. With regard to the interception of the money which went to the local authorities and which the right hon. Gentleman now proposed to take, he understood that some equivalent grants were to be made to the local authorities. As some doubt had arisen as to what exactly was meant by equivalent grants, he would like to know whether if the revenue from licences increased, an increased contribution would go to the local authorities, or whether the right hon. Gentleman proposed to make a grant equivalent to what they now received and retain the increase himself.


said that under the new system the local authorities would receive exactly the same sum as if the law had not been changed. But one of the objects of the change was to leave the way free to deal with licences. He had announced that this change was to come into effect at the beginning of the next financial year; but he found that there were some technical difficulties in the way, and when the Finance Bill was introduced it would be found that the change would apply to subsequent years only.


earnestly pressed the right hon. Gentleman to use all the influence he possessed with the Prime Minister to allow the Public Accounts Committee a day for the discussion of their Report. His right hon. friend the Leader of the Opposition when Leader of the House in the last Administration gladly gave a day. He did not ask it in order to glorify the Public Accounts Committee, but because it would undoubtedly be of great assistance to the Committee in the future if an opportunity was given to hive the work which they did to the best of their ability, and he hoped thoroughly, discussed by a Committee of the House.


thought it was most important that a day should be given every session for the discussion of the Report of the Public Accounts Committee. It was really remarkable that a business-like Assembly should hitherto have provided no opportunity for the consideration of the work of a, Committee that was rendering such invaluable service both to the taxpayers and to the Departments. He was sure the Prime Minister would agree that there could be no more important reform than regularly to devote a day to the consideration of that Report.

* MR. McCRAE (Edinburgh, E.)

said he could not share the fears expressed by the ex- Secretary to the Treasury with regard to the proposals of the present Budget. These proposals to his mind were the beginning of a very great reform. The criticisms of hon. Gentlemen opposite had all through been reasonable, but ineffective. Even the right hon. Gentleman the Member for East Worcestershire when speaking on the last occasion must have felt he was beating the air, and the statement of the hon. Member for Blackburn was nothing but a travesty of what the proposals really were. To say that the right hon. Gentleman the Chancellor of the Exchequer had only made very indefinite proposals with regard to old-age pensions, and that he was providing for a pension of Is. 3d. a week was beyond the region of reasonable discussion, and he was astonished that the hon. Member should speak in such a way of serious proposals and in the face of the definite statement made by the Chancellor of the Exchequer. He shared the disappointment of the hon. Member as to the shape the Budget had taken. He had looked forward to this Budget as one which would give scope for great financial ability and great schemes. But if the right hon. Gentleman had refused to take advantage to the full of his opportunity it was because he intended next year to lay the foundation for a more ambitious structure. It was the Budget of a strong Chancellor of the Exchequer, conscious of his strength. and holding it in reserve; it was the Budget of a strong Government with no fear of dissolution before it; a Government which, having comparative fixity of tenure, could afford to look forward to laving before the House schemes of far-reaching reform. The right hon. Gentleman was favoured: by a combination of circumstances which rarely fell to the lot of a Chancellor of the Exchequer. He was favoured by an increasing revenue, and a decreasing I expenditure. It might be conceded that a stable and strong Government exercising economy in national finance was the sort of Government which made for national prosperity. The result of last year's finance was that although in the Estimates his right hon. friend had made provision for the largest contribution to the sinking fund for the redemption of Debt that had ever been made he had been better than his word. But it would be as well to; point out that while the right hon. Gentleman's surplus last year amounted to £5,300,000, that surplus was due to the accident of miscalculation. The Chancellor of the Exchequer last year somewhat adversely criticised the result of his predecessor's Budget, pointing out that both sides of the account had falsified the estimate to an unprecedented degree. His right hon. friend had broken the record and he would be the first to admit that that was not good finance. So far as expenditure was concerned the right hon. Gentleman was not wholly responsible for the Estimates, but where savings had been made by economy it was entirely to his credit. But the right hon. Gentleman was responsible for estimating revenue, and it had been pointed out by himself at the time that the estimate of the right hon. Gentleman was a very conservative one. He thought that events had justified him, and that Parliament had been very wise in putting it out of the power of any Chancellor of the Exchequer to gamble for a surplus, by saying that the realised surplus should go to the reduction of Debt. So far as the present Budget was concerned there was no difference in the incidence of taxation, and therefore the arguments used from that point of view were not fair. Neither was there any reduction in taxation in the gross, the remission under income-tax being practically balanced by increase in the death duties. As to the proposals with regard to income-tax, all these who sat upon the Committee must admit that his right hon. friend had made a fair proposal. He had given the maximum of relief with the minimum of cost to the revenue, and was to be commended for the courageous way in which he had gone against the views and traditions of his Department in this matter. The right hon. Baronet the Member for the Forest of Dean had adversely criticised the Chancellor of the Exchequer for bringing Mr. Gladstone to his aid in this matter. But Mr. Gladstone, although he was much impressed with the difficulties of differentiation, always conceded its justice. The matter was so important that he would venture to road an extract from Mr. Gladstone's great Budget speech of 1853 in which he said— What we understand to be the sentiment of the country, and what we ourselves are disposed to defer to and share in, is that under our present financial arrangements the income-tax bears, on the whole, too hard upon intelligence and skill, and not hard enough upon property as compared with intelligence and skill. Mr. Gladstone went further and indicated that if the income— tax was to be permanent it could only be maintained by removing the inequality which he had pointed out. It was only fair to say that a Conservative Chancellor of the Exchequer in a Budget introduced in 1852 proposed a differentiation of the income-tax. At that time the tax was 7d. in the £, and Mr. Disraeli proposed that earned or precarious incomes should have a rebate. The last Government which was always so sympathetic to the income-taxpayer had that opportunity. He remembered moving an Amendment to two of the Budgets introduced by the late Chancellor of the Exchequer to the effect that differentiation should be made exactly on the lines now proposed. He was confident that the present proposal would give considerable relief and that to the extent of £1,250,000 per annum to a class who were very hardly hit by war taxation. On the other hand, the Chancellor of the Exchequer proposed certain reforms in the machinery of collection. In the first place, he was going to insist upon compulsory returns from everybody served with a notice. He was sure that would produce a great increase in the yield of the income-tax. Then there was the reform of insisting upon employers furnishing a return of the salaries paid to their employees. In that connection he was amazed to hear the late Chancellor of the Exchequer practically defending the evasion of the income-tax. This was not a new proposal far an increased burden. All that was being done was simply to provide for a more efficient collection of the income-tax, and the only persons who would be hit by it were these who were dishonestly evading taxation at the present time. He thought the ex-Chancellor of the Exchequer should have been the last man in the House to invite any class of income-taxpayers to evade their responsibilities. The third proposal of the Chancellor of the Exchequer was a unification of the system of collection so as to assimilate the system in England to that in Scotland. A return of the collection of income-tax was issued last week, and it showed that by 28th February this year in Scotland practically the whole of the income-tax was paid, whilst in England there was outstanding at that time the large sum of £11,500,000 sterling. If his right hon. friend could accelerate the collection in this part of the country they would at once sec how much larger the yield would be; they would get within the financial year a larger sum, and there would be a considerable saving in interest. If these proposals were put into operation he was confident that the fear of the Chancellor of the Exchequer that his proposals with regard to differentiation would delay collection, and that he would lose this year £750,000, would not be justified by the result. He did not think there would be any loss to the revenue, and the efficiency of collection would almost counterbalance any remissions that had to be made. They had heard a great deal about a compulsory declaration of the whole income, but that was a reform which was bound to come. The old system was a survival in a most objectionable form of class legislation. Incomes at the present time of £700 and under were legally and justly entitled to pay at a lower rate. They exacted the declaration and a full detailed statement of income from all sources. At the present moment 700,000 income-taxpayers out of 1.100.000 actually made that declaration. That amounted to 65 per cent. of the whole, and therefore, where vas the hardship in asking tie remaining 35 per cent. to conform to the same system?He had failed to discover that there was any sanctity attaching to the rich man's income. The disclosure of details was quite as embarrassing to the struggling tradesman and the man of moderate means as it was to the rich man. It was only by a compulsory declaration of income that they could levy a fair and just income-tax. The right hon. Gentleman had not touched the principle of graduation, but after the ceremony which had taken place downstairs that day t he thought the example of our Colonies might give his right hon. friend a lead. The Chancellor of the Exchequer was proceeding on the step by step policy. He had not made any change inconsistent with, or which did not lend up to the larger policy, and for that all taxation reformers were very thankful. He was very grateful to the right hon. Gentleman for leaving the abatements at their present limit, and in this respect he flattered himself that the right hon. Gentleman was closely following the lines of his draft report to the Income-Tax Committee. His opinion was that the whole system of abatements ought to go. They ought to have a direct tax at a reduced rate on the whole income. The system of abatements was clumsy, complicated, and expensive, and if his right hon. friend had not followed the example of Mr. Gladstone in 1853 and taken a wide survey of the whole field of finance, it was only because he bad postponed taking action. The Chancellor of the Exchequer was looking forward to his Budget of next year, and looking to the estimates of an increasing revenue. The late Chancellor of the Exchequer was engaged in piling up debt, the present Chancellor of the Exchequer was piling up surpluses. The ex-Chancellor of the Exchequer would go down to history as the only Chancellor of the Exchequer who, in a year of peace, added to the National Debt. In two years he had added £14,000,000 to the † Parliamentary Luncheon to the Colonial Premiers, held in Westminster Hall Loan Capital Expenditure, and in 1905, after using up the Sinking Fund contribution, he made an actual addition to our aggregate liabilities of £2,000.000 sterling. He thought the Chancellor of the Exchequer would be commended upon all sides for considering that it was his first duty to provide for the reduction of our large indebtedness. If they looked to the Estimates of expenditure for the present year, and to the moderate estimates of revenue and reasonable economy in administration, he thought the right hon. Gentleman bade fair to start next year with a surplus of at least £7,000,000 for old— age pensions. While he had very great sympathy with these who complained that old-age pensions had not been started this year, he must say that anyone who looked into the question and took a reasonable view ought to see that there was wisdom in delay. The cost of starting a small scheme and its administration would be out of proportion to the relief given. He commended the Chancellor of the Exchequer for making in two years a net reduction of £23,250,000 in the National Debt. When the Chancellor of the Exchequer took office he had a very difficult task before him, because the National Debt stood at £796,000,000. The last Government swept away the savings of nearly forty years and brought back the National Debt to the figure it stood at in 1868. That was brought about by war expenditure which was the result of reckless diplomacy, and also by extravagant expenditure, on the ordinary services of the country which had increased the annual expenditure by £50,000,000 apart from war expenditure. That increase in the ordinary expenditure apart from war expenditure would have provided old-age pensions twice over. They were looking forward to a year of abounding revenue, of reduced expenditure, and a large surplus at the end of it which would enable his right hon. friend to produce the Budget which they were all looking forward to, and was well within his reach.

* MR. J. F. MASON (Windsor)

said he had no great fault to find with the Budget as a whole. He most heartily approved of the right hon. Gentleman's proposals for endeavouring to improve the national credit and also of the principle of differentiation between earned and unearned incomes, although he fully realised the difficulty with regard to limitation and Definition. If some form of differentiation had been carried into practice as between real and personal estates, he thought one of the principal objections to an increase in the death duties would have been met. The Chancellor of the Ex-chequer, in his Budget speech, had referred to the war taxes and described them as being taxes put on not simply to meet expenses during the operation of the war but to meet the extra burden put upon the country by waging the war. Consequently the war taxes still remained and amounted to something like £20,000,000 upon a war debt of £138,000,000. The interest on the war debt amounted to something like £4,000,000, leaving £16,000,000 of war taxes still in existence. He would like to know whether it was proposed that the whole of this £16,000,000 should be applied as a special sinking fund for the war debt irrespective of the ordinary finking fund. There was no suggestion of the kind, and therefore he held that a large proportion of these war taxes which still existed to the tune of £20,000,000 would not be applied in any way to reducing the debt, but to meeting the ordinary expenditure of the country, and therefore that the existence of the war debt was no adequate reason for maintaining these so-called war taxes. They had had a declaration from the Chancellor of the Ex-chequer that in his opinion the proportion of direct and indirect taxation should be maintained, and in a further statement that in his view the expenditure of the country could not be expected to be materially reduced in the immediate future. He did not think there would be any doubt upon that subject when they took into consideration the expenditure which would be necessary for carrying out the social reforms which had been promised. The right hon. Gentleman had told them that it was necessary to budget for the next two or three years, and in view of that statement he thought he would be justified in referring not only to this year but to subsequent years in regard to taxation. It was evident that no material saving could be effected in the existing system of expenditure with the exception of the items of defence, for the Army and the Navy. He did not think it had ever been suggested that any large saving could be effected except upon these two items. He did not think anyone would anticipate that any further large savings could be made in these items. It was also evident that the Civil Service expenditure could not be materially reduced; that education was tending towards greater expenditure; and they had a direct promise from the Chancellor of the Exchequer that next year he would introduce a scheme of old-age pensions. He thought it would be admitted that no scheme of old-age pensions would be satisfactory, or would satisfy the country, that was not a fairly comprehensive one, and he did not think that any scheme of that kind could be effected for less than £20,000,000 a, year. If he was correct in that estimate they were face to lace with the practical, certainty that during the lifetime of the present Government, unless it should prematurely commit suicide, they would reach a national expenditure of from £160,000,000 to £170,000,000 per annum. If that happened how, upon the present basis of taxation, would the Chancellor of the Exchequer meet that expenditure? They had a general admission that the proportion between direct and indirect taxation was to be maintained, and therefore he would like: to know how it would be possible to raise another £10,000,000 or £15,000,000 from each of these sources. With regard to direct taxation, he did not suppose that it would be proposed in time of peace to raise the income— tax higher than Is. in the £, and he doubted whether any possible increase in the death duties, or any scheme of graduation which could be proposed, would provide the £10,000,000 or the £15,000,000 required from the side of direct taxation. Even if that part of the sum were provided they would be still left with £10.000,000 or £15,000,000 to be raised by indirect taxation. What was there on the side of indirect taxation capable of producing that very great increase in the revenue? By the alterations which were proposed in regard to local taxation the Chancellor of the Exchequer might place himself in possession of some £200,000 a year derived from a tax upon motor-cars, and he might derive considerable sums from the licence trade; but he thought that if he was to derive anything like the enormous sum of money required to carry out an old-age pension scheme, there would be no escape whatever from enormously increasing the existing taxes on the food of the people, which were already higher than the food taxes of any other country in the world.

* MR. SEARS (Cheltenham)

asked for the indulgence of the Committee while for the first time he took a small part in the deliberations of the House. He desired to refer to the statements contained in the Budget speech which indicated that the Chancellor of the Exchequer intended to introduce very important changes, not merely in the incidence of taxation, but also in the machinery and the administration. He welcomed the statement that the right lion. Gentleman intended to level up the English machinery of assessment and collection so that it might equal in efficiency the admirable machinery at work in Scotland. That was a reform which had been long delayed, and which, he ventured to say, would have far reaching consequences. Not only would that reform make for economy and expedite the collection of revenue, but it would play an important part in the prevention of evasion and secure a far more satisfactory return of revenue. Most of the Scottish machinery for collection and assessments was undoubtedly modern and up to date, but there was still in it some of that old-fashioned type which ought to be scrapped. The system in Scotland still needed to be perfected, and the improved machinery ought to be extended to the whole country. In Scotland the work of collection and assessment was very largely done by trained responsible officers of the Crown. The collectors throughout Scotland were Government officials, and the assessors in twenty-five counties were also Government officials. In three counties, however, the parochial officials still remained, and in six counties two systems prevailed. He asked whether the new machinery to be set up in England was to be modelled on the machinery which was the rule in Scotland and not on that which was the exception. The success of the Scottish system was due to the fact that the irresponsible local official had been almost entirely eliminated. The system in use in England had been condemned again and again by the Board of Inland Revenue. That Board in one of its Reports said— It will be in your Lordships' recollection that we have, for many years, been urging the abolition of a system of collection and assessment of a branch of the revenue through persons unconnected with the executive Government. We have pointed out that, for the most part, they were utterly indifferent to the interests of the exchequer, that they have sometimes been openly opposed to its interests, and engaged in doing their best to defeat the intentions of legislation. As a friend of his own had said, these officials acted as a kind of buffer between the taxpayer and the exchequer. He wished to know whether the assessment and collection of taxes in England in the future would be placed in the hands of trained and responsible officers of the Crown, and whether that system if adopted would be uniform throughout the whole of the United Kingdom. There were other changes suggested which he welcomed. One was that the claim for exemption and abatements should be presented with the return of the income. Abatements ought to be dealt with at the time of assessment as part of the same transaction. If that were done they would get rid of the cumbersome system of repayment which now existed or at least reduce the repayments branch to reasonable dimensions. He was glad to see that the alarming increase in the staff of the estate duty office had been stopped, and that, on the other hand, there was a proposal to strengthen the outdoor staff, which was responsible for a satisfactory return of incomes. These reforms, whilst reducing expenditure, would have the effect of securing a better return of revenue. There was one other reform very urgently called for, namely, the re-organisation of the Inland Revenue Department upon sound business principles. They had before them in the Budget a great scheme, and he wished it success; but if complete success was to be secured he felt that the Chancellor of the Exchequer must be supported by men who had had practical experience, who were capable administrators, and who had organising abilities. It was important that the heads of departments should be in sympathetic touch with the out door staff. There was at the present moment a great deal of dissatisfaction and unrest throughout the Department. That was destructive of efficiency. If that unrest could be removed, the result would be that the Chancellor of the Exchequer would have loyal and whole-hearted co-operation from the highest to the humblest Member In his view this was a very great problem and he desired to see it settled. To the carrying out of these reforms then? would no doubt be considerable opposition, but he hoped that that opposition would be met in a way which would be satisfactory to the Inland Revenue service as a whole and to the public.

* MR. BOWLES (Lambeth, Norwood)

said that hon. Members who had taken part in the debate had confined their remarks almost entirely to the very important proposals of the Chancellor of the Exchequer in regard to the income tax. But, after all, these proposals were only part of a very comprehensive and far-reaching scheme. He desired to deal with the Budget as a whole, beginning with a few words as to the year that was past. He was rather surprised to hear the Chancellor of the Exchequer's statement that the revenue figures for the year did not exhibit any great elasticity, and that in some respects they were distinctly disappointing. He did not know on what ground the right hon. Gentleman based that opinion, because this much was certain, that however much last year's revenue might have fallen below the private estimate of the right hon. Gentleman, it had exceeded by over £2,000,000 the Budget estimate which he had himself given to the House. He thought himself that the variations of the revenue from the Budget of the previous year were of a very striking character. Far the greatest variation was that in the death duties, which showed an increase of £1,430,000 over 1905–6. The revenue from that source was over £1,000,000 beyond what the right hon. Gentleman had anticipated. That was an enormous addition to the revenue, and a striking testimony to the fact that in this country a few rich men did as a matter of fact contribute large sums in relief of the burdens of their poorer countrymen. He hoped that would give hon. Gentlemen on both sides of the House, and particularly hon. Gentlemen below the gangway, cause to reflect that if, as they appeared to consider, a rich man was always and necessarily a public enemy when alive, he was, at any rate, always and necessarily a public benefactor when he was dead. That which was very striking about the revenue last year was the extraordinary way in which the revenue from Customs and Excise yielded up to and above the Budget estimates. The cessation during part of the year of the coal tax, and the reduction of the tea duty, led the right hon. Gentleman to estimate that from Customs and Excise there would be a reduction of £2,275,000. The actual decrease was only £1,425,000, showing that in spite of the dullness of the Stock Exchange, and so forth, the purchasing power of the people of this country—he supposed that after all that was the final test by which to judge our material prosperity—had been not only maintained, but even increased beyond anything that the Inland Revenue had expected. As to the expenditure of the year, the right hon. Gentleman had a surplus of £3,386,000. There were two things which ought to be said in regard to that. The right hon. Gentleman had told them most truly that any congratulation which might have been directed to him in respect of that surplus was really entirely misplaced. That was very true. For, financially speaking, a surplus was not only an error but, as the Committee was aware, a more serious error than a deficit. In the case of a deficit, the attention of Parliament was called to it at once by the necessity for a new grant, and Parliament could then deal with the matter as it chose. But, in the case of a surplus like the present, over £3,000,000 had been withdrawn from the people without necessity, Parliament and the country had been misled to that large extent and no remedy existed. And, secondly, it ought to be pointed out that all these Budget statements of past expenditure were entirely unreal and illusory. The right hon. Gentleman told the Committee he had spent £139,500,000; but that was not really the whole expenditure on the national services. A further £20,000,000 had been spent which had never got into the Exchequer, but had been intercepted on its way, and did not come within the purview of the statement. It was true that the right hon. Gentleman had appended to his printed financial statement a note purporting to show the entire expenditure for which the State was responsible in 1906— 7; and had here mentioned the £10,222,000, intercepted for the Local Taxation Account. But the even larger sum of £10,468,861 intercepted and spent during the year as Appropriations— in— Aid was nowhere referred to. He hoped that next year the latter sum would be included. If the right hon. Gentleman would do that, he would be really informing the House what the entire expenditure was. As to the proposals for this year, he thought the main principles of the right hon. Gentleman's Budget were absolutely sound. For much the right hon. Gentleman had done he would receive the gratitude of this House and the country. But he was even more grateful for what the Budget did not do than for what it did. It did not commit the House or the country to old-age pensions, and it did not ease up one halfpenny of revenue at the expense of the Debt. Everyone would admit that the right hon. Gentleman had done well in placing £1500,000 to the Debt. That was a very great advance made on any previous payment made in one year to the re-establishment of our national credit, and everyone must admit that the right hon. Gentleman had done well in that respect. Though that repayment was large, it was by no means too large. If this matter was considered from the point of view of hon. Gentlemen opposite who were continually urging the adoption of business principles, it appeared to him that it was the minimum which the House had a right to expect in a time of profound peace. The National Debt at 31st March last was: funded £631,929,000, and unfunded £143,347,210, making together £775,276,210. In addition there were contingent liabilities amounting to £570,000,000, making the national liabilities of all kinds £1,345,276,210. Let him examine the situation in the light of the most elementary business principles. The total income of the country was at least £1,800,000,000 a year. The total expenditure at the outside lumping everything together, was £170,000,000. The country had therefore in hand, after paying the whole expense of Government every year, at least £1,630,000,000. What would be thought of an individual who, with an income of £1,800, a necessary expenditure of £170, liabilities of £1,345 and an absolute debt of £775, should pay off only £15 of that debt in one year? It was only about 2 per cent. of the absolute Debt; and he took leave to say that if the credit of the country was to be established in that position it ought to be, it should be regarded as a rule that, at least in times of peace, not less than 2 per cent of the Debt should be paid off annually. The right hon. Gentleman added £1,500,000 to the new Sinking Fund, so that the total fixed charge now amounted to £29.500,000. But the right hon. Gentleman regarded that £1,500,000 as an investment only; it was earmarked for old-age pensions. He did not understand what exactly the right hon. Gentleman meant by that. If this money was to be added to the fixed charge for debt, how was it to be free and ear— marked for old-age pensions?


For this year only.


said that then this money was ear-marked not for old-age pensions, but for the reduction of Debt. He thought that everyone must agree with the Chancellor of the Exchequer's proposal in regard to sweeping away root and branch the system by which the proceeds of certain duties were intercepted on their way to the Exchequer. From his youth upwards he had been taught to dislike and to distrust the whole system of interception; and he was glad to see any portion of it swept away, not because, as the right hon. Gentleman said, its abolition would free his hands, but because, so far as £10,000,000 were concerned, the hands of Parliament would be freed, and the control of the House would be reassumed. The right hon. Gentleman had said he was going to make equivalent grants to the local authorities. There were a great many charges on this fund. There were the agricultural rates. He did not know whether the right hon. Gentleman was going to deal with them when he said that he was going to put the local authorities in the same position as they were now in, and he wished to ask the right hon. Gentleman whether the equivalent grant was to be made for this year, or for the future. The Local Taxation Account, however, did not represent the whole of the money which was intercepted. As he had shown, a larger sum was annually intercepted in the form of appropriations-in-aid. These large sums were granted not by the House of Commons but by the Treasury; and the House of Commons could not touch, reduce, or even discuss them. If interception was wrong in one case it was wrong in the other; and he earnestly pressed on the right hon. Gentleman the desirability and necessity of making a clean sweep of the whole of this obnoxious system, and of reverting to the great and simple rule of Mr. Gladstone's Act of 1866, that all public moneys should be instantly sent to the Exchequer, and that all issues for public services should be made through the Exchequer and not otherwise. So far he entirely agreed with the proposals of the right hon. Gentleman; but he came now to the right hon. Gentleman's modification of existing taxes. Therein he thought the right hon. Gentleman had shown extremely doubtful wisdom. The income-tax, with all its faults, was the most admirable instrument of extortion ever designed. The right hon. Gentleman told them that the income-tax "must now be regarded as an integral and permanent part of our financial system." It might be regarded as anything they pleased; but he ventured to think that the right hon. Gentleman's proposal would inevitably force him or his successors, to abandon either the present proposals or the tax altogether. The right hon. Gentleman proposed to set up a system of differentiation, and he founded himself on the Report of the Select Committee. He did not know whether the right lion. Gentleman's studies had led him to the Appendices of the Report of that Select Committee, in which it was shown that thee existed at this moment differentiation amounting to 100 per cent. in favour of earned incomes as compared with unearned incomes. To that the right hon. Gentleman added another 25 per cent., on the lower incomes; so that an; advantage of 125 per cent was given to the man who, instead of saving and providing for the future, spent his earnings. That was inconsistent with sound policy. It seemed to him that this distinction attempted to be drawn between earned and unearned incomes could not in practice be maintained. There were hundreds of thousands of men in this country who after a life of long labour had saved enough to live on. How could it be said that the income of such men was unearned? His belief was that the proposal of the right hon. Gentleman would involve a quarrel between the Inland Revenue and these whose income was under £2,000, who constituted the bulk of the people who paid income-tax. The system involved a direct and full assessment of all these whose incomes were under £2,000. Hitherto a full disclosure of their exact financial position was only demanded from men whose income was under £700; but they were now going to include also men with incomes between £700 and £2,000. He represented as many of these persons as any Member in this House, and he was assured that they were the very people who would most resent the proposal to compel: them to make a full disclosure of their financial position. The tax would no: longer be an income-tax, but a notion— tax. What would be taxed henceforward would be not income at all, but the notion as to the character of that income held by the right hon. Gentleman and his officials. The provision for a compulsory return which amounted to forcing everybody to give a legal opinion on a point of extreme difficulty, viz., what was not his real but his statutory income would provoke extraordinary dislike and resistance. So also with the increased penalties, the lengthened time in which proceedings would be taken, and the compulsory return which employers must make of the incomes of their employees. And what did the right hon. Gentleman expect to get in return? Did he expect to receive the gratitude or affection of what were called the middle classes by his proposals? The middle classes were not for sale, and if they were their price would be a good deal higher than the right hon. Gentleman was willing or able to offer. The right hon. Gentleman would not get their gratitude, and he would lose £2,000,000 of revenue. He thought the income-tax proposals of the right hon. Gentlemen were really foolish proposals, which would defeat themselves, and might go far to smash the tax altogether. The death duties were an admirable form of duty if they were equitably applied, but to increase the unjust and foolish graduation of the Act of 1894 was a very great blunder which, in his opinion, would result not in an increase of revenue, but in an increase of evasion. Taking all the estate duties together, there was on some estates a possible tax of 19 per cent. Now there would be a possible tax of over 20 per cent. A few weeks ago a large estate passed twice within six weeks, and under the right hon. Gentleman's proposals, such an estate might be nearly halved in that short time. Such duties offered an enormous temptation to evasion and to the very persons most able to evade them. He did not think the right lion. Gentleman would, by means of his new proposals, obtain £1,200,000 a year. He felt, however, that they all owed a debt of gratitude to the right hon. Gentleman for adopting the main lines upon which he had proceeded, but he thought that in his genuine desire to meet what were felt to be injustices and grievances in regard to the income-tax, the Chancellor of the Exchequer had merely introduced new and more obvious injustices and grievances which, without any conceivable advantage to the revenue, might go far to smash the tax altogether. The income-tax and estate duty proposals were dangerous and quite unnecssary blemishes on an otherwise sound and courageous budget.

* MR. CHIOZZA MONEY (Paddington, N.)

said the hon. Member for Norwood had drawn a lurid and terrifying picture of the financial position of the nation, and he should really like to reassure him. The hon. Member had said that our expenditure was £170,000,000, but he had included in that sum the whole of the £17,000,000 which represented the outgoings of the Post Office, which, of course, were counterbalanced by revenue on the other side, to say nothing of £5,000,000 profit into the bargain." If his hon. friend would go into the figures he would find that our expenditure was £125,000,000, and even if he added the local taxation account lie could not make it up to more than £135,000,000. Then the hon. Member had said that the liabilities of the country were £1.345,000,000. Where did the hon. Gentleman get that figure? He got it by adding to the National Debt, properly so called, which represented the money sunk in past wars, and which had not against it any tangible assets whatever, the hundreds of millions of pounds more which were borrowed by municipalities, and which were represented at this moment by tangible assets, such as waterworks, gasworks, and many other valuable undertakings. In the case of Warrington it was stated at a council meeting the other day that Warrington's undertakings could be sold out for something like 26s. 8d. in the £of the borrowed capital. What was true of Warrington was true of many other places, and if municipal undertakings were in the market there was not the slightest doubt that they would be at once bid for by company promoters at many times the figure which the hon. Gentleman had been good enough to add to our National Debt.


said the question of whether a good or bad use was made of borrowed money did not alter the fact that it had been borrowed.


said that it was equally true that joint stock companies borrowed their capital. Would the right hon. Gentleman on that account add the railway capitals to our National Debt? However, he would not pursue the point further at that late period of the debate, but would address himself to the actual proposals of the Budget. He congratulated his right hon. friend as heartily and fully as the hon. Gentleman had done on his reduction of the National Debt, and there was only one caveat that he wanted to enter 'in regard to it. He had for years, in speaking to working-class audiences, represented to them that it was to their interest that the real debt resting on the people of this country should be paid off as soon as possible I but, when we were raising the money which was to pay off that debt, ought we not to have regard to the means o: these who paid the money? The mean; of the taxpayer entered fully as much into every million we raised to pay of debt as it did in regard to every million we used for any other purpose and, it seemed to him that, while many excellent and sound principles were recognised in the Budget, and while they were grateful to the right hon. Gentleman for what he had done, still he thought the Budget did not take sufficient account of the arguments he was advancing, and of the Resolution which was unanimously accepted by the House before the Easter recess to the effect that, having regard to the wealth and the distribution of the wealth of the United Kingdom, it was their duty to readjust taxation in order to provide for necessary social reforms. What he had to say was chiefly directed to that head, to which he would address himself very briefly. According to his calculations—he would not give the details there, but would go over them, in private with any hon. Member who would have the patience to hear what he had to say— according to the figures lie had got out, when they had reckoned up the whole of the various sums paid in the way of taxation by various classes of this country, the people with incomes of over £5,000 a year paid, treating it all as income-tax, a tax but a few pence higher than the tax which was paid by the manual labourer. The manual labourer paid, if all taxes were reduced to an income-tax, an average of Is. 5d. in the £, while rich people of over £5,000 a year income paid Is. 7d., or say only 2d. more. His right hon. friend had not, he thought, paid sufficient, attention to that, and he did not think he sufficiently recognised the fact that not only the manual labourers but the black coated working men were paying too much, especially if regard was paid to the case of the average clerk with a small salary, the average traveller, the average journalist, the average shopkeeper, or the average schoolmaster. The last— named, for instance, began at £70 to £80, and if he reached his maximum, he only got £200 a year. That was a class of income-tax payer to which this Budget did not do sufficient justice. Why was that? Because his right hon. friend had had regard to the minor and not to the major injustice. That was to say, as to the man who had earned £200 and the man who received £200 which he had not earned, it was obviously unjust to tax them alike. Then again, to tax a man with £200 a year income earned or unearned and the man with £5,000 a year at the same rate was to do a great injustice. His right hon. friend had had regard to one injustice but not to the other, and if regard had been had to the main injustice the middle classes would have had more relief than they had received. Under the present proposals a man with £200 a year would gain relief to the extent of 10s. a year, but supposing the sugar duty had been repealed he would have gained 16s. a year. He would therefore have gained more by the repeal of the sugar duty than he did by the reduction of the income-tax on incomes below £2,000. Again, when they examined the details of the Budget proposals and asked themselves who were the people who, after all, gained most, they found that the nearer a man approached towards the top of that arbitrary line of £2,000 the greater advantage he got. By the reduction in the income-tax the man with £2,000 a year gained £25 while the man with £200 a year gained only 10s. That he was sure his right hon. friend would agree did not leave the incidence of our taxation in a satisfactory position. He was glad to hear that his right hon. friend had no intention of permanently continuing the sugar tax. By his remarks in introducing the Budget some people thought that the sugar tax was to be kept and that a part or the whole of it was to be devoted to old-age pensions, a proposition which should be resisted. Reverting to the income-tax he pointed out that most extraordinary injustice was created by the £2,000 a year limit. The man with £2,000 a year paid £75, while the man with £2,200 paid £110, or a difference of £35. That was the natural result of drawing arbitrary lines. He would be the last to criticise the Budget merely on hard cases, but he pointed out that so long as arbitrary lines were drawn they would have these hard cases arising. He thought the way out of it would ultimately be found to lie in a properly graduated income-tax, graduated by sufficient steps to enable justice to be done between man and man, while it would not induce people to make false declarations to get under a large step in the scale. Let them take the step as between £700 and £2,000 a year. It was obvious, human nature being what it was, the man with £2,200 would be sorely tempted to declare his income at £2,000 a year in order to get within that step. They all thought the ex-Chancellor of the Exchequer made a false point when he said that it would be a hardship upon the working men, who had so far evaded the income-tax, if new regulations were made which would bring them within it. He was the first to agree that such working men who had the good fortune to earn over £160 a year ought to be brought within it, and he knew a number of them who paid income-tax. Why did they pay it? Because they were in the employ of limited liability companies who had to make a return of the wages of their employees; but how unfair it was that a man in such an employ should have to pay income-tax, while the man who worked for a private employer did not. The right hon. Gentleman opposite had only just missed making a very good point in that connection. He said that without intention of discourtesy. If a man had a mixed income (an income from a business returned under Schedule D. and an income from Consols or other securities) amounting to £10,000 a year, he had not to declare his whole income. That of course prevented him being taxed justly. But that man was to sit down and disclose the secrets of his employees and say that Tom Smith received £300 a year and John Jones £500, and so on. That point entirely disposed of the argument frequently used against personal declaration of all incomes—the argument that they only obtained disclosure of incomes by offering the abatements as art advantage. No advantage was offered, because the employers would have to sit down and declare the total income of their employees. But what they had to do for their employees they had not to do for themselves. Nearly 1000,000 out of 1,100,000 income-taxpayers had to declare their income in one way or another, while the other 100,000, the rich, were to be left out of account. The question of a graduated income-tax was surely settled as to its practical applicability by the example of Prussia. Prussia had a population about equal to the population of this country, though its wealth was not so great. It was a great industrial country and had its great landlords and great industrial corporations and possessors of incomes from many sources just as we had. Prussia found it necessary to take its income-tax down to incomes as low as £45 a year. That was because the standard of living was not so high and the wages and profits were lower. But on the other hand they carried their graduation up to incomes of £5,000, an income analagous to £10,000 a year in this country. It followed that if we adopted the same principle of graduation of income-tax as that in force in Prussia we should graduate up to incomes of £10,000 or £15,000, in which case the ends of justice would be substantially served. If such a system were adopted there would also be an end of the silly talk about a "shilling "or "ninepenny" income-tax which in practice did not exist. Few people had been paying a "shilling" at all, but a "shilling" tax was felt as though it existed. It must be borne in mind that in politics sentimental grievances were quite as important and had just as much to be taken into account as real grievances. By adopting a graduated income-tax not only would real grievances but also purely imaginary ones be remedied. The income-tax in this country was Is. in the £ or 5 per cent. In Prussia it was 5 per cent., in addition to which there was a property tax of 1¼per cent. which gave 6¼per cent. for Imperial purposes; he commended that to hon. Gentlemen opposite who said that if we had Protection we should have no income-tax. In Prussia a limited company was allowed to deduct 3½per cent. from its profits, and then had to pay income-tax upon the remainder, and when these profits were distributed the individuals who received them had to pay income-tax all over again. Did hon. Gentlemen who talked about capital being driven out of this country by Is. income-tax suggest that capital was being driven out of Germany by these taxes? If so, where did that capital go? All the experience of death duties and the high income-tax during the war went to show that reasonable taxation such as was proposed by the Chancellor of the Exchequer, did not drive capital out of the country. If we adopted a system of graduation a form for personal declaration might be adopted as simple as that in force in Prussia. With regard to the increased death duties he appealed to his right hon. friend to revise the scale which he had set up. The right hon. Gentleman had said that a fortune of £2,000,000 would pay 10 per cent. on the first £1,000,000 and 12 per cent. on the second. That was 11 percent, on the whole, then why not say so, or better still why not raise the duty to the higher of the two percentages and say that a fortune of £2,000,000 should pay 11 per cent. and a fortune of £3,000,000 and over 12 per cent. and so on. He now came to the "nucleus" for old-age pensions. In the first place that nucleus was a problematical sum which could only be realised if good trade continued into the financial year ending 31st March, 1909. They must not forget that. Against that, on the other hand, they must remember that, if trade held good, the nucleus might be much larger. Undoubtedly the administrative income tax reforms were likely to yield much new revenue. He would not be surprised to find 100,000 more income-tax payers brought to light by these proposals. Therefore the nucleus might be much larger than £2,000,000.At the same time he ventured to urge that the sugar tax must go. It was not for them to come to the House to support proposals for the continuation of the sugar tax, and they wanted a definite statement from the Government that it was not to be made permanent. The Board of Trade returns shewed that the consumption of sugar before this tax came into operation was 90 lbs. per head of the population, and that in 1905 it was only 76 lbs. per head. That was a very serious fact. It might to some extent be attributable to lowlwages, but it could not be denied that it was also attributable to this tax. Then again they were to have old-age pensions: he wished to know what sort of pensions they were to be, and who were the people to have them. He did not think they ought to be satisfied to lay down their work in the House and go to the country unless they granted pensions to persons of sixty-five years of age and upwards and not seventy years. The lower age would involve a very large sum of money. How were they to get? Hon. Gentlemen opposite, sought to get it by taxing our imports, raising the price of the food of the people, and endangering the supply of raw materials. But the revenue could not be raised by such means without endangering the very sources of our prosperity. He submitted that the only sensible solution was to be found in a graduated income-tax. In view of the fact that this country had, above the income-tax line, an income, which probably reached about £1,000,000,000, in 1907 we certainly ought not to deny succour to the aged poor merely because it would cost £20,000,000 or £25,000,000. Our means were ample. There was something even more important than old-age pensions, and that was the care of the child, which had been so eloquently referred to by the Chancellor of the Exchequer. He submitted that if we spent more on the education and nurture of the child there would be less need for old-age pensions. In conclusion he ventured to disagree with his right hon. friend when he uttered that mournful epigram that he believed in the right of every man to make less than the best of himself. Surely if evasion of taxation was denounced in that House, evasion of work should be warmly condemned. The man who refused to contribute to the national dividend made other men work for him.

SIR WILLIAM BULL (Hammersmith)

said he had no intention of occupying the time of the Committee at any length. He desired to put one question to the Chancellor of the Exchequer with regard to the exemption and abatement on incomes of married persons. He thought the time had come when some relief from income-tax should be given to married persons who each had a small income. A man and a woman with incomes of £400 a year got a rebate of £160 each when single, but if these two married, their incomes were put together and they were not allowed to claim any abatement. Yet two sisters or two brothers who had similar incomes and lived together could each claim abate- ment. If the right hon. Gentleman could not see his way to admit the principle of giving the whole abatement in such cases he might have allowed three-fourths. So strongly did he feel on the subject that he moved as an Amendment, that a further penny be taken off the income-tax.

Amendment proposed— To leave out the words 'one shilling,' and insert the words' eleven pence,"—(Sir William Bull.)

Question proposed, "That the words 'one shilling' stand part of the proposed Resolution."


hoped the hon. Gentleman would not insist on the Amendment, at any rate at this stage. He thought himself that it would be the height of absurdity to reduce the income-tax by a penny for the whole population in order to deal with what, after all, could only be a grievance in the case of a very limited class. If married people were entitled to exemptions the matter could be dealt with quite well in Committee on the Bill. The Government could not possibly accept the Amendment. He would be prepared to discuss the Amendment with the hon. Gentleman when the fit occasion arose, but the loss to the revenue would be far greater than he probably had any conception of. It had been considered by successive Chancellors of the Exchequer and rejected on that ground. On the other hand, a large concession was made a few years ago by which when the joint earned incomes did not exceed £500 they could be treated as separate.

MR. JESSE COLLINGS (Birmingham, Bordesley)

said he desired to deal with one point which had been referred to by the hon. Member for North Paddington. The only consolation given by the hon. Member to the House was that we had a national income of £1,000,000,000, per annum. The hon. Member seemed to regard that fact as satisfactory without having regard to the distribution of that income. He did not explain how in the face of this flourishing state of things there was such wide-spread destitution in the country, not among the very poorest classes only, but among the labouring classes as well, through lack of employment. The one point which he wished to deal with was the statement in which the hon. Member ridiculed the assertion that capital was being driven out of of the country. He would like to put one concrete and deplorable case—that of a firm of manufacturers in Birmingham, who dealt in goods connected with the trade in weighing machines, who a few months ago were reluctantly compelled to transfer a large section of their works to the United States because so high a tariff had been raised against their goods. The Chairman in a most affecting speech said the shareholders would not suffer, that their dividends would probably be increased, because they would be able to supply not only America but England as well; but what concerned him more than he could say was the fact that they would be obliged to dismiss large numbers of men who had worked for the company for many years and employ American labour. He asked the hon. Member and the Chancellor of the Exchequer whether that was not taking capital out of the country. It could not be denied, nor could it be denied that that was a typical case of what had been going on for years. He saw before him hon. Members who knew of numbers of firms who had had to transfer, or partially transfer, their trading concerns to other countries. In all cases the shareholders got an increase in their incomes from the same concern. When capital was transferred

in this manner to foreign countries each case meant the discharge of a large number of workmen. Therefore, he hoped it would not be asserted again that there was no transfer of capital from this country on account of the system which the Chancellor of the Exchequer, in spite of everything, would call free trade. The right hon. Gentleman knew as well as he did that we had not got and never had had such a thing as free trade Whilst this country had been giving every facility foreign countries had been closing their markets to us, and if the right hon. Gentleman called that free trade he had a very peculiar idea of what free trade meant. He seemed to be

MR. BOTTOMLEY (Hackney, S.)

upon a point of order, asked whether the Amendment of the hon. Member for Hammersmith was still before the Chair, or had it been withdrawn.


The Amendment has not been withdrawn, and the discussion raised by the right hon. Gentleman the Member for Bordesley is not really in order on the Amendment, so it would be better to divide on the Amendment and dispose of it.

Question put.

The Committee divided:—Ayes, 314; Noes, 81. (Division List, No. 141.)

Abraham, William (Rhondda) Bethell, Sir, J.H.(Essex, Romf'rd Cameron, Robert
Agnew, George William Bethell, T. R. (Essex, Maldon) Causton, Rt. Hn. Richard Knight
Allen, A. Acland (Christchurch) Billson, Alfred Channing, Sir Francis Allston
Ambrose, Robert Birrell, Rt. Hon. Augustine Cheetham, John Frederick
Armitage, R. Boland, John Clarke, C. Goddard (Peckham)
Ashton, Thomas Gair Bottomley, Horatio Cleland, J. W.
Asquith, Rt. Hon. Herbert Henry Bowerman, C. W. Clough, William
Astbury, John Meir Brace, William Coats, Sir T. Glen(Renfrew, W.)
Atherley-Jones, L. Bramsdon, T. A. Cobbold, Felix Thornley
Baker, Joseph A.(Finsbury, E.) Branch, James Collins, Stephen (Lambeth)
Balfour, Robert (Lanark) Brigg, John Collins, Sir Wm. J.(S. Pancras, W
Baring, Godfrey (Isle of Wight) Brodie, H. C. Condon, Thomas Joseph
Barker, John Brooke, Stopford Corbett, C.H.(Sussex, E. Grinst'd
Barlow. John Emott (Somerset Brunner, J. F. L. (Lanes., Leigh Cornwall, Sir Edwin A.
Barlow, Percy (Bedford) Brunner, Rt. Hn Sir J.T(Chesh. Cotton, Sir H. J. S.
Barnes, G. N. Bryce, J. Annan Cox, Harold
Barry, E. (Cork, S.) Buckmaster, Stanley O. Crean, Eugene
Beauchamp, E. Burns, Rt. Hon. John Cremer, William Randal
Beck, A. Cecil Burnyeat, W. J. D. Crosfield, A. H.
Bell, Richard Burt, Rt. Hon. Thomas Davies, David (Montgomery Co
Bellairs, Carlyon Buxton, Rt. Hn. Sydney Charles Davies, M. Vaughan (Cardigan
Benn, W.(T'w'r Hamlets, S. Geo. Byles, William Pollard Davies, Timothy (Fulham)
Berridge, T. H. D. Cairns, Thomas Delany, William
Devlin, Joseph Jowett, F. W. O'Malley, William
Dickinson, W.H.(St. Pancras, N Joyce, Michael O'Shauhgnessy, P. J.
Dickson-Poynder, Sir John P. Kearley, Hudson E. O'Shee, James John
Dillon, John Kekewich, Sir George Parker, James (Halifax)
Duffy, William J. Kelley, George D. Partington, Oswald
Duncan, C. (Barrow-in-Furness Kennedy, Vincent Paul Pearce, Robert (Staffs. Leek)
Duncan, J. H. (York, Otley) Kettle, Thomas Michael Pearce, William (Limehouse)
Dunne, Major E. Martin (Walsall King, Alfred John (Knutsford) Pearson, W.H.M.(Suffolk, Eye)
Edwards, Clement (Denbigh) Kitson, Rt. Hon. Sir James Philipps, Owen C. (Pembroke)
Edwards, Enoch (Hanley) Laidlaw, Robert Pollard, Dr.
Elibank, Master of Lamb, Edmund G. (Leominster Power, Patrick Joseph
Erskine, David C. Lamb, Ernest H. (Rochester) Price, C.E. (Edinb'gh, Central)
Essex, R. W. Lambert, George Price, Robert John (Norfolk, E.)
Evans, Samuel T. Lament, Norman Pullar, Sir Robert
Everett, R. Lacey Langley, Batty Radford, G. H.
Faber, C. H. (Boston) Layland-Barratt, Francis Rainy, A. Rolland
Farrell, James Patrick Leese. Sir Joseph F. (Accrington Raphael, Herbert H.
Fenwick, Charles Lehmann, R. C. Rea, Russell (Gloucester)
Findlay, Alexander Lever, A. Levy (Essex. Harwich Rea, Walter Russell (Scarboro'
Flynn, James Christopher Levy, Maurice Reddy, M.
Foster, Rt. Hon. Sir Walter Lewis, John Herbert Redmond, John E. (Waterford)
Freeman-Thomas, Freeman Lough, Thomas Redmond, William (Clare)
Fuller, John Michael F. Lundon, W. Rees, J. D.
Fullerton, Hugh Lupton, Arnold Rendall, Athelstan
Gilhooly, James Luttrell, Hugh Fownes Renton, Major Leslie
Gill, A. H. Lyell, Charles Henry Richards, Thomas (W.Monm'th
Glover, Thomas Lynch, H. B. Richards, T.F.(Wolverh'mpt'n
Gooch, George Peabody Macdonald, J. R. (Leicester) Richardson, A.
Grant, Corrie Macdonald, J.M.(Falkirk B'ghs) Roberts, G. H. (Norwich)
Greenwood, G. (Peterborough) Macnamara, Dr. Thomas J. Roberts, John H. (Denbighs.)
Greenwood, Hamar (York) Macpherson, J. T. Robertson, J. M. (Tyneside)
Gulland, John W. MacVeagh Jeremiah (Down,S.) Robinson, S.
Gurdon, Sir W. Brampton MacVeigh, Charles (Donegal, E. Robson, Sir William Snowdon
Gwynn, Stephen Lucius M'Callum, John M. Roche, John (Galway, East)
Haldane, Rt. Hon. Richard B. M'Crae, George Rogers, F. E. Newman
Hall, Frederick M'Hugh, Patrick A. Runciman. Walter
Halpin, J. M'Kean, John Russell. T. W.
Hardy, George A. (Suffolk) M'Kenna, Rt. Hon. Reginald Rutherford, V. H. (Brentford)
Harmsworth, Cecil B. (Worc.) M'Laren, Sir C. B. (Leicester) Samuel, Herbert L. (Cleveland)
Hart-Davies, T. M'Laren, H. D. (Stafford, W.) Scarisbrick. T. T. L.
Harvey, W. E. (Derbyshire, N. E. M'Micking, Major G. Schwann, C. Duncan (Hyde)
Harwood, George Maddison, Frederick Scott, A.H.(Ashton under Lyne
Hayden, John Patrick Mansfield, H. Rendall (Lincoln) Sears, J. E.
Hazel, Dr. A. E. Markham, Arthur Basil Seaverns, J. H.
Hazelton, Richard Marks, G. Croydon (Launceston) Shackleton. David James
Helme, Norval Watson Massie, J. Shaw, Charles Edw. (Stafford)
Hemmerde, Edward George Masterman, C. F. G. Sheehan, Daniel Daniel
Henderson, Arthur (Durham) Meagher, Michael Sheehy, David
Henderson, J.M.(Aberdeen, W.) Menzies, Walter Sherwell, Arthur James
Henry, Charles S. Micklem, Nathaniel Shipman, Dr. John G.
Herbert, Colonel Ivor (Mon., S. Molteno, Percy Alport Smeaton, Donald Mackenzie
Herbert, T. Arnold (Wycombe) Mond, A. Smyth, Thomas F.(Leitrim, S.)
Higham, John Sharp Money, L. G. Chiozza Snowden, P.
Hobart, Sir Robert Montagu, E. S. Spicer, Sir Albert
Hobhouse, Charles E. H. Mooney. J. J. Steadman, W. C.
Hodge, John Morell,' Philip Stewart, Halley (Greenock)
Hogan, Michael Merton, Alpheus Cleophas Stewart-Smith, D. (Kendal)
Holland, Sir William Henry Murnaghan, George Strachey, Sir Edward
Hope, John Deans (Fife, West) Murphy, John Straus, B. S. (Mile End)
Hope, W. Bateman(Somerset, N. Murray, James Strauss. E. A. (Abingdon)
Horniman, Emslie John Myer, Horatio Stuart, James: (Sunderland)
Horridge, Thomas Gardner Napier, T. B. Summerbell, T.
Hudson, Walter Newnes, F. (Notts, Bassetlaw) Taylor, John W. (Durham)
Hyde, Clarendon Nichols, George Tennant, H. J. (Berwickshire)
Idris, T. H. W. Nicholson, Charles N.(Doncast'r Thomas, Sir A.(Glamorgan, E.)
Illingworth, Percy H. Nolan. Joseph Thomas. David Alfred (Merthyr
Isaacs, Rufus Daniel Nugent, Sir Walter Richard Tillett, Louis John
Jackson, R. S. Nuttall, Harry Tomkinson. James
Jacoby, Sir James Alfred O'Brien, Patrick (Kilkenny) Torrance, Sir A. M.
Jenkins, J. O'Connor, John (Kildare, N.) Ure, Alexander
Johnson, W. (Nuneaton) O'Grady, J. Vivian, Henry
Jones, Leif (Appleby) O'Hare Patrick Walsh, Stephen
Jones, William (Carnarvonshire O'Kelly. James (Roscommon. N. Walton. Sir John L. (Leeds, S.)
Ward, John (Stoke upon Trent) White, Luke (York, E. R.) Wilson. J. H. (Middlesbrough)
Ward, W. Dudley (Southampton White, Patrick (Meath, North) Wilson, P. W. (St. Pandas, S.)
Waring, Walter Whitehead, Rowland Wood, T. M'Kinnon
Warner, Thomas Courtenay T. Whitley, John Henry (Halifax) Young, Samuel
Wason, Eugene (Clackmannan) Whittaker, Sir Thomas Palmer Yoxall, James Henry
Wason, John Cathcart (Orkney) Wiles, Thomas
Watt, Henry A. Wilkie, Alexander TELLERS FOR THE AYES—
Wedgwood, Josiah C Williams. J. (Glamorgan) Mr. Whiteley and Mr. J. A.
Weir, James Galloway Williams, Osmond (Merioneth) Pease
White, J. D. (Dumbartonshire) Wilson, John (Durham, Mid)
Anson, Sir William Reynell Dixon-Hartland. Sir Fred Dixon Nield, Herbert
Aubrey-Fletcher. Rt. Hn. Sir H. Douglas, Rt. Hon. A. Akers O'Niell, Hon. Robert Torrens
Balcarres, Lord Faber, George Denison (York Pease. Herbort Pike (Darlingt'n
Balfour. Rt. Hn. A. J. (City Lond. Faber, Capt. W V. (Hants, W.) Percy, Earl
Banbury, Sir Frederick George Fardell, Sir T. George Ratcliff, Major R. F.
Banner, John S. Harmwood- Fell, Arthur Rawlinson, John Frederick Peel
Baring. Capt. Hn. G. (Winchester Finch, Rt. Hon. George H. Roberts. S. (Sheffield, Ecclesall)
Barrie, H. T. (Londonderry, N. Fletcher, J. S. Rothschild, Hon. Lionel Walter
Beach, Hn. Michael Hugh Hicks Haddock, George R. Rutherford, John (Lancashire)
Beckett, Hon. Gervase Hamilton, Marquess of Salter, Arthur Clavell
Bignold, Sir Arthur Harrison-Broadley, H. B. Scott, Sir S. (Marylebone, W.)
Boyle, Sir Edward Hay, Hon. Claude George Smith, F.E. (Liverpool, Walton)
Bridgeman, W. Clive Hunt, Rowland Starkey, John R.
Brotherton, Edward Allen Kennaway, Rt. Hn. Sir John H. Staveley-Hill, Henry (Staff'sh.)
Bull, Sir William James Kenyon-Slaney. Rt. Hn. Col. W. Talbot, Lord E. (Chichester)
Butcher, Samuel Henry Lambton, Hon. Frederick Win. Thomson, W. Mitchell- (Lanark)
Carson, Rt. Hon. Sir Edw. H. Liddell, Henry Thornton, Percy M.
Cavendish, Rt. Hn. Victor C.W. Lockwood, Rt. Hn. Lt.- Col A.R. Walker. Col. W. H. (Lancashire)
Cecil, Evelyn (Aston Manor) Long, Rt. Hn. Walter (Dublin,S. Walrond, Hon. Lionel
Cecil, Lord John P. Joicey- Lonsdale, John Brownlee Warde, Col. C. E. (Kent, Mid.)
Chamberlain, Rt. Hn. J.A. (Wor. Lowe, Sir Francis William Wortley. Rt. Hon. C. B.(Stuart-
Clark, George Smith (Belfast, N. Magnus, Sir Philip Wyndham, Rt. Hon. George
Cochran-Hon. Thos. H. A. E. Mason, James F. (Windsor) Younger, George
Collings, Rt. Hn. J. (Birmingh'm Meyscy-Thompson, E. C.
Corbett, T. I,. (Down, North) Middlemore, John Throgmorton TELLERS FOR THE NOES—
Craig. Charles Curtis (Antrim.S. Mildmay, Francis Bingham Sir Alexander Acland-Hood and
Craig, Captain James (Down,E. Morpeth, Viscount Viscount Valentia.
Cross, Alexander Muntz, Sir Philip A.
Dalrymple, Viscount Nicholson, Wm. G. (Petersfield)

Question put. and agreed to.

Original Question again proposed.

* MR. SMEATON (Stirlingshire)

said he wished to raise a question which while of comparatively small importance to the Treasury was of great importance to a large and very deserving body of His Majesty's subjects, namely pensioners. He did not refer only to Government pensioners, but to all who drew pensions from whatever source, public or private. The question was raised by the late Chancellor of the Exchequer the Member for East Worcestershire, who asked what the position of a pensioner would be under the scheme of differentiation between "earned" and "unearned" incomes. The right hon. Gentleman replied that he had an open mind on the subject, and would be glad to hear the argument on both sides. He (Mr. Smeaton) desired briefly to state the case for the pensioners, and, in doing so, thought he could not do better than quote the words of the Chancellor of the Exchequer in contresting the condition of two classes of income-tax payers, represented by A and B. He would call the attention of the Committee to the following quotation. The right hon. Gentleman on Thursday last said— The income-tax is really a two-fold tax, it is a tax on property and a tax on earnings. I start with this proposition, and a most important proposition it is, that it must now be regarded as an integral and permanent part of our financial system. It that proposition is once enunciated and admitted, it makes it impossible to justify, if there be any practical way of escape, the present incidence of the income tax. After you have reached the limit of abatement, which is now £700, the State taxes all incomes at the same rate, whatever may be their character or source. Just compare two cases. You have here A, a man who derives, we will say, £1,000 a year from a perfectly safe investment in the funds, perhaps accumulated and left to him by his father; on the other hand you have B, a man making the same nominal sum by personal labour in the pursuit of some arduous and perhaps precarious profession or some form of business. The one is under no necessity to make provision either for his children or for old age—the income will go on being automatically received as long as the investment remains; the other, if a man of ordinary prudence, is bound, his work being carried on subject to risks to health and all the other vicissitudes of fortune, year by year to deduct from his nominal income and set aside a sufficient sum to make provision for contingencies in the future. To say that these two people are, from the point of view of the State, to be taxed in the same way is, to my mind, flying in the face of justice and common sense. He considered, and believed the Committee would agree with him, that the case of B was exactly the case of the pensioner. Pensions, whether in business or in Government service, were all on the same footing. They wore simply the balance of salary for work done— paid to the worker when his busy life was over, and when, as so often happened, he had a very short time left to enjoy it. The Committee knew how precarious was the life of men who came home after a long term of service abroad, and how urgent was the necessity imposed on them to stint and save from their pension for the sake of their families. Pensions were of two kinds, contributory and non-contributory. Non-contributory pensions were simple deferred pay. Contributory pensions were doubly deferred pay. Now to return to the Chancellor's illustration of A and B. The investments of A remained after his death, while the pension of the pensioner vanished at his death. It seemed to him that the case of the contributory pension was even stronger than that of the non-contributory pension; because at the death of the pensioners not only did the pension vanish, but also the entire contribution of a lifetime. He hoped the right hon. Gentleman would, when he came to define "earned" incomes for the purposes of differentiation include in "earned" incomes all pensions, whether contributory or otherwise.

* MR. HUNT (Shropshire, Ludlow)

said that an hon. Member below the (Tang way on the other side had said that it was very difficult to drive capital out of this country, and the Chancellor of the Exchequer had claimed this as one of the advantages of free trade, but they had the authority of the present secretary of the Cobden Club for the statement that during the last fifty years the capital and plant of this country had been steadily flowing abroad, so that we now owned thousands of manufactures in all parts of the world. Would the Chancellor of the Exchequer say that this was another of the advantages of free trade? In his Budget speech the right hon. Gentleman said— We are a free trade Government in a free trade country. Were we? He did not think we were even a bad imitation of a free trade country. At all events some of the necessaries and most of the luxuries of the working classes were heavily taxed, and so were our exports by which the working classes got their work and wages. He could not see where freedom of trade came in in our case. The Chancellor of the Exchequer prided himself that all the money produced by the present import taxes on the necessaries and luxuries of the poor went straight into the exchequer, but he quite forgot to state also that all the money on these necessaries and luxuries of the poor came straight out of the pockets of the poor, because there was no competition with an un-taxed supply. We appeared to be ruled to a great extent by catch words in this country, and the word "free-trade" was one of them. We had not got anything approaching free-trade in this country. If it were not for the word "free" which was stuck in very wrongly in regard to our trade, he did not believe that the working classes would be taken in by the present absurd system of taxation. He did not believe that they would believe it very long. The Chancellor of the Exchequer in his Budget speech told the House that free trade was the breath of life to us. With all due respect he hardly thought that anybody except an English Cobdenite lawyer could have made such an absurd statement. On the 1st of March last the Minister of the Interior in the German Parliament said he would like to know who invented the fairy tale that Great Britain was a free trade, country. He (the German Minister) said that he found as the result of careful calculation that he had established the fact that the import duties per head of the population in Great Britain were 16s. 8½d.; in America, 14s. 11½ and in Germany only 10s. 6d. Moreover that this was not all, for while in Great Britain the duties were imposed mainly on the necessaries of the poor, in Germany they were levied to a very great extent on manufactured goods which were not in any sense necessaries of life to the poor. In 1894, the Chancellor of the Exchequer had stated that English trade in these days carried on its operations under great formidable and increasing difficulties and that the tariff walls which excluded us from foreign market; were every day getting higher. Another great authority, the Secretary for India, in a speech at Manchester in 1903 stated that it was a matter of life and death to us to persuade other nation. to rally to the free trade flag and com: round to the open door. If it was a matter of life and death to us we had not been doing very well lately, because other nations had been getting further and further away from what the right hon. Gentleman called the free trade flag. Though the Chancellor of the Exchequer called this a free trade country he imposed a 30 per cent. tax on sugar which he said was a necessity and food for working people; he imposed 25 per cent. on coffee, Id. on raw cocoa, 2d. practically on manufactured cocoa, and 75 per cent. on tea, all these things being really necessities of the poor. Besides, there was the heavy taxation on beer and tobacco. Yet the wonderful Liberal Party were allowed to go about the country shouting that a possible tax of part of half a farthing on the four-pound loaf would bring starvation on the people. It seemed to him that this system of taxation was so arranged that the poor paid all the taxes on the things which they used and that they paid all in the increased prices because there was no competition with the untaxed supplies. That was what hon. Gentlemen opposite called free trade. Our system of taxation was so framed that it taxed the poor very heavily, while to a great extent it prevented the working classes of the country from earning the wages which they ought to earn in manufacturing the luxuries which rich people used in this country. The right hon. Gentleman the Chancellor of the Exchequer had said that he could not tax motor-cars. He did not think, however, that it would have required a very desperate effort to have put about 12 per cent. on foreign motor-cars. That would have been about equal to the rates and taxes which the manufacturers paid in this country for the motor-cars they made, and the right hon. Gentleman might have had all the money he got from it for old-age pensions.


asked how much this would come to.


said that the importation last year was about £4,000,000 worth, and he left it to the right hon. Gentleman to reckon up what the yield of the tax would be, as he was no doubt better at arithmetic It seemed to him that as long as the right hon. Gentleman stuck to the system which he was pleased to call free trade and refused to tax the luxuries of the rich and the manufactured goods which we could make in this country it was; perfectly absurd for him to pretend that he would be able to give old-age pensions to the working people of the country. It appeared to him that they were ruled by a Ministry of lawyers, and that their ideas of economy and their policy were ending in the driving out of home and work thousands of honest working men at Woolwich and other places who for many years had served their country well, while on the other hand they received with open arms all the diseased and indigent riff-raff of the Continent.


What the hon. Member is now saying has no reference to the question before Committee.


said he was sorry if he was out of order, but he thought the fact that aliens came in here did affect the question of taxation. It appeared that hon and right hon. and earned Gentlemen on the front Government Bench were full of old-fashioned out-of-date Cobdenite theories which were repudiated by all the rest of the civilised nations of the world. [An HON. MEMBER: Except Turkey.] He did not know that Turkey was counted. They were so full, too, of legalities and technicalities that their undoubtedly great Drams had no room for even a little bit of ordinary common sense. He was only sorry that he could not tell them in the House of Commons in downright strong Anglo-Saxon what he thought of the absurdity and even cruelty of their policy toward the working classes of the country.

* MR. THEODORE TAYLOR (Lancashire, Radcliffe)

hoped the Chancellor of the Exchequer had fully considered the difficulties of distinguishing between earned and unearned income in business. He would take the case of three brothers in partnership earning, say, £1.000 a year each. For purposes of their own they turned their business into a limited liability company. If they took £1,000 a year each as salary their income was earned. If they took £200 a year in salary they had to pay on £800 a year as unearned income. It seemed to him that there was need for very careful; study of this matter. No doubt the Chancellor of the Exchequer, in spite of the criticisms of the hon. Member for Ludlow, had a little room left in his brain to think out this problem. It was not so easy as it looked. The hon. Member for the Spen Valley Division had said that firms who formed themselves into limited liability companies ought to pay on their dividends as unearned income. That depended, of course, upon the motives which these firms had in forming themselves into limited liability companies. It was to the interest of the community to encourage employers to give shares out of profits to their employees. He had gone in for that plan and had found it was a good one for both sides. It was not a motive contrary to: but in favour of the public interest. He would take his own company. That company at its formation paid toll to the State on its capital. Was it right and was it in the public interest that these of its members with incomes between £160 and £2,000 a year should be further fined because the concern had been made a company? He thought that some consideration should be given to firms whose motive, at all events, were quite clearly in line with public, interest in forming their concerns into limited liability companies. He hoped it would be his lot to be always above the sum that would not have any advantage. It had not always been so in the past. But there were several men in his concern which this matter would affect, and it was in the public interest, he maintained, to encourage employers, not only to give a share of their profits to their employees, but to go further, and, as was done in some cases in France, and as he did himself, give that share of profits in the shape of shares in the company itself. They ought to increase the motive that would cause employers to do this kind of thing and not diminish it. He wished to congratulate the Chancellor of the Exchequer on the Budget. He had never hoard before such a doctrine as that expressed by the late Chancellor of the Exchequer when he condemned the present Chancellor for demanding from employers a list of salaries paid to their employees, and approved of the evasion of the tax that had been practised in the past. If they had laws let them carry them out. He was glad to say his firm — though not compelled to give particulars—had done so in the past, because neither his firm nor the employees desired to evade what he believed was the most just tax in principle, though it did not always work out to be the most equitable tax in practice. As to the sugar tax he did not agree with the Chancellor that it could not have conveniently been halved. He was very sorry it was not at least reduced. The only excuse for leaving it on was the near prospect of old age pensions. He congratulated the Chancellor of the Exchequer on carrying still further the death duties, and he would ask these who represented labour not to be too suspicious of the Government, because, after all, they could catch more flies with treacle than with vinegar. He believed in the genuineness of this Government's promises to the House of Commons that they would make a real beginning with old-age pensions. He looked upon them with trust and hope and a firm conviction that they meant what they said, and that they believed they would do far better to wait a little until they could make a real substantial beginning. He did not believe in individuals or in Governments that made too many promises; but he did believe that this Budget was a stop towards a great advantage to the aged poor next year; and for that reason he supported it.

MR. MARKHAM (Nottinghamshire, Mansfield)

said lie wanted to show that the tax was evaded in the case of foreign bonds and coupons the interest on which was paid in New York, Paris or London.


said that it was absolutely necessary that this Resolution

Where the Principal Value of the Estate Estate Duty shall be payable at the rate per cent. of Instead of
£ £
150,000 and does not exceed 250,000 Seven pounds Six pounds ten shillings
250,000 and does not exceed 500,000 Eight pounds Seven pounds
500,000 and does not exceed 750,000 Nine pounds Seven pounds ten shillings
750,000 and does not exceed 1,000,000 Ten pounds Seven pounds ten shillings
1000,000 and does not exceed 1,500,000 Ten pounds on one million and eleven pounds on the remainder Eight pounds
1 500,000 and does not exceed 2,000,000 Ten pounds on one million and twelve pounds on the remainder Eight pounds
2,000,000 and does not exceed 2,500,000 Ten pounds on one million and thirteen pounds on the remainder Eight pounds
2,500,000 and does not exceed 3,000,000 Ten pounds on one million and fourteen pounds on the remainder Eight pounds
3,000,000 Ten pounds on one million and fifteen pounds on the remainder Eight pounds
—(Mr. Chancellor of the Exchequer.)

Income-tax(Inclusion of all Offices and Employments in Schedule E).

3. Resolved, That the income-tax charged on offices or employments of profit, whether public or not, be charged

should be carried to-night, and he asked if the hon. Gentleman would be good enough to postpone his observations.

Estate Duty.

2. Resolved, That in the ease of persons dying on or after the nineteenth day of April, nineteen hundred and seven, the rates of estate duty under section seventeen of the Finance Act, 1894. be amended so that—

under Schedule E in the Income-tax Act, 1853.—(Mr. Chancellor of the Exchequer.)

Income—tax (Limitation on the Aggregate Amount of Deductions or Repayments for Wear and Tear).

4. Resolved, That no deduction or re payment be allowed in any year in respect of the diminished value, by reason of wear and tear, of any machinery or plant which, when added to the deductions or repayments allowed on that account in previous years, will make the aggregate amount of the deductions or repayments exceed the actual cost of the machinery or plant.—(Mr. Chancellor of the Exchequer.)

Income-tax (Abolition of Repayments in respect of Assessment on Average Income).

5. Resolved, That any abatement, relief, or repayment of income-tax under section one hundred and thirty-three of the Income-tax Act, 1842, as amended by section six of the Revenue Act, 1865, shall cease.—(Mr. Chancellor of the Exchequer.)

Income Tax (Assessment on Trades, etc., recently commenced).

6. Resolved, That income-tax charged under Schedule D in the Income-tax Act, 1853. on professions, trades, or vocations shall, in the case of professions, trades, or vocations which have been set up or commenced within the three years on which the average income is to be computed under the Income-tax Acts or within the year of assessment, be charged with reference to the actual profits or gains arising in the year of assessment.— (Mr. Chancellor of the Exchequer.)

Resolutions to be reported To-morrow. Committee to sit again To-morrow.