HC Deb 01 June 1908 vol 189 cc1575-672

Order for Second Reading read.

Motion made and Question proposed, "That the Bill be now read a second time."

MR. LAURENCE HARDY (Kent, Ashford)

, in moving the following Amendment—"That in view of the growing liabilities of the nation for naval and military defence, old-age pensions, and education, and of the necessity for giving additional relief to ratepayers from the increasing charge for national services now thrown upon the rates, this House regrets that no attempt is made to increase the resources of the Exchequer by broadening the basis of taxation," said they ought to have had a clearer statement as to the manner in which the finances of the country were to be conducted during the coming year, and he thought it was rather remarkable that they should have embarked upon the discussion on the Second Reading of the Finance Bill without having had an opportunity of seeing the Old-Age Pensions Bill, although the central point of the whole Budget was the question of old-age pensions. They had endeavoured to obtain some information with regard to this amazing Budget, but they had so far failed. They had had no explanation whatever of the extraordinary change of front which the Prime Minister had shown as compared with his attitude when Chancellor of the Exchequer. Last year he gave them certain cardinal features by which the finances of the country were to be conducted, and no one could put them more plainly than the right hon. Gentleman, but apparently at this moment, if they took the statement of the present Chancellor of the Exchequer, those theories had been utterly upset. The last time they had a discussion on that point the present Chancellor of the Exchequer said how impossible it was for anybody to budget except for the year, but that was the very thing the Prime Minister said they ought to do. He said last year— It is an utter mistake to take the annual Budget as if it stood by itself, as it is, and ought to be, an integral part and a necessary link, in a coherent chain of policy. We cannot drift along the stream and treat each year as if were itself-contained. At that time the Prime Minister also said they had to observe two great axioms. They had, first and foremost, the obligation to reinstate the national credit, and he appealed for a large sum for the reduction of the National Debt. Had they reinstated the national credit already? Was the Government entirely satisfied with the position of the national funds and of first-class securities? Was this the moment when, after saying that their first object was to reinstate the national credit, the right hon. Gentleman should recommend a raid on the Sinking Fund? This was not the moment when such a thing should have been tolerated. Further, if it seemed good to the Members of this House to reduce the charge set apart for the reduction of the National Debt, he thought all would agree that any saving upon that head should go to the reduction of the income-tax, their second line of reserve in case of emergency, and ought not to be used for the purposes of social reform. Therefore, so far as any further reduction of this charge might be contemplated, he did not think it was wise for them to consider that it would be safe for them to carry out an extensive system of social reform by money taken out of the charge now applied to the National Debt, for the reinstatement of the credit of the nation. There were many contingencies which might not happen again. Last year, £1,500,000 was kept as a nest-egg for old-age pensions. Then there was the China Indemnity contribution, and surpluses had helped considerably. They had not yet heard from the right hon. Gentleman why he had taken the standard of twenty years ago instead of ten years ago as the amount for the reduction of Debt. Many supporters of the Government had expressed their dissatisfaction at the adoption of this course and in almost every speech the suggestion of a raid on the Sinking Fund had been received with considerable disapproval, especially by those hon. Members opposite who had some right to speak upon financial matters. The Chancellor of the Exchequer had said the other day in a somewhat light tone that he knew he had to find another £6,000,000 or £7,000,000 next year. This was almost the first Budget which left a little deficit of £6,000,000 or £7,000,000 to be supplied out of practically no funds whatsoever. The Chancellor of the Exchequer had spoken lightly of the prospects of further economies in our defensive forces. Was there anybody prepared to say that the Territorial scheme was likely to cost less than was suggested? It could only cost less if it was a failure, and that was what they heartily hoped it would not be. As far as the standing Army was concerned nobody thought that this was a moment when we could reduce our garrisons abroad. We had been obliged to strengthen the garrison in Egypt and the situation in India was such that we could not withdraw any of our military forces from that country. He did not see how there was going to be any great economy on the Army. As for the Navy all sides admitted that it was necessary to keep up the standard that had been set up, and that would involve expenditure not only on new ships, but also on stores, and new docks in order that they might have somewhere to dock these great ships which were now being built. With regard to the Civil Service Estimates the Chancellor of the Exchequer had admitted that their programme involved an increased expenditure of about £5,000,000 since the present Government took office. A glance at the Order Book would show how interwoven with expenditure was every suggestion of legislation. If they turned to education they would find a Bill which proposed £1,000,000 as a sop for its acceptance. There was another Bill estimated to cost £1,400,000, but after the statement made the other day announcing further terms to buy up certain interests the expenditure would not stop at the amount named. The Irish Universities would require more money, and the measure dealing with Scottish land would entail further expenditure. When all these schemes came to fruition what would be the consequences when the expenditure upon them had to be faced? There was still a much larger question which required considerable attention at their hands. What interested him most was the question of the relation between local and Imperial finance, which the Prime Minister put in the forefront of his Budget statement last year. He said on that occasion that he was going to sweep away all these old subventions, and effect a settlement on generous lines between Imperial and local finance. They expected some statement upon that subject in the present Budget, but they had been disappointed; there was nothing in the Finance Bill which encouraged them to believe that they were going to receive any further relief from the Government in connection with this matter. In fact there seemed some doubt as to whether they were going to receive quite as much relief under this heading as in the past. They had placed this matter before the Prime Minister, who had expressed some sympathy with them; but they could not rely upon sympathy alone, because if once they got involved in expenditure of this kind there would not be much money left to deal with the relations between local and Imperial finance. Last year the House passed a Bill dealing with the medical inspection of children, involving an expenditure of about £1,000,000. They had hoped that other matters might have engaged the attention of the Government. The right hon. Gentleman had expressed great sympathy in regard to the question of lunatic asylums, and the subject of the roads. Could there be a case which it was more necessary that the Government should acknowledge as a national service than the lunatic asylums? Practically the whole of the cost of management of lunatic asylums came, not from local but Imperial sources, and the county authorities were asked to finance matters over which they had very little control. Turning to the roads, this was a matter which caused him some anxiety. He would like an explanation of the position the Government had taken up in connection with the collection of licence and other duties. As far as he could see, the right hon. Gentleman, like the fisherman, had spread his net wide and gathered everything in, but when he looked at his catch he only took those which were worth having, and threw back to the local authorities the small fry of very little value. The game, the dog, and the carriage licences, which were not likely to be an increasing revenue, he had given back to the local authorities, and he had taken from them the sources of revenue from which they were most likely to gain, namely, the motor licences and the liquor licences. It was especially in connection with the use of motors that the great expense in connection with the repair of the roads had arisen, and any extra advantage from an increase or alteration in the charges for motor licences ought to be dedicated to the local authorities for the use of the road, or else they should be allowed an equivalent grant. It was incumbent upon the Government to do something in this direction, because the matter was very pressing and it was important that they should show their sympathy with this object in a substantial way. Then there was another burden of an even more formidable character, and that was in connection with old-age pensions. The present Chancellor of the Exchequer had said the other night that in this respect the Government intended to make a stupendous effort to redeem their promises. That was rather remarkable, because the Prime Minister himself had said they had made no promise in this direction. They were told that in this Budget they were providing a sum of £1,500,000 with which to start old-age pensions. Last year they earmarked a sum amounting to £1,500,000, but this year they were providing only £1,200,000 or £300,000 less than last year. Was that the colossal effort the Government were making to redeem their pledges? That could not be deemed a satisfactory manner of carrying out what the Prime Minister said was his second axiom in connection with national finance. He said— Having regard to the objection of taking away half the sugar duty and the practical conclusion to which I have come that I must not permanently impair my means of revenue in view of the future I do not propose to make any change in this duty. The right hon. Gentleman went on in even stronger words to say that, so far as he was concerned, he was not going to part with any substantial methods of taxation, until he had financed the new scheme which he indicated in last year's Budget, and which he had restated this year. The House must remember that though the words of the right hon. Gentleman did not pledge him to a contributory scheme of old-age pensions, he pledged himself to a scheme which would be contributed to through taxation by those who were going to enjoy it, but, so far as the scheme was concerned, it had been started on a non-contributory basis, and was not contributed to by those who were going to enjoy it. It had limitations which everybody knew could not be maintained. Some of them would disappear later on, and one or two in regard to married couples would vanish in the course of this session. It was a scheme which could not possibly be kept within the limits suggested by the Prime Minister, and even the Chancellor of the Exchequer did not think it was a complete scheme. Yet they had this scheme before them without any provision whatsoever—


There is nothing about old-age pensions in the Finance Bill.


said he had no desire to discuss the old-age pensions scheme in any sense, but he thought that in discussing the Finance Bill they were always allowed to refer to any matter contained in the Budget statement. Reference was made in the Budget statement to £6,000,000 for old-age pensions. They could not deal with the Budget as a whole, nor with the Finance Bill, without alluding to some extent to the money to be found for old-age pensions.


I think the hon. Gentleman would be entitled to refer from the financial side to the question of old-age pensions, but not to go into a detailed examination of it. There will be another opportunity on another Bill for discussion, and I do not think it would be at all convenient or proper to discuss the question now.


said he did not desire to dwell on it. He only alluded to it to show how extremely wide it was in its nature, and the manner in which it was to be carried out So far as his present argument was concerned, he only desired to direct attention to the fact that, in addition to the great liabilities to which he had previously alluded, this liability for old-age pensions was brought before them by the Government in the Budget, and yet the Finance Bill did not provide for the future financing of the scheme The consequence was that enormous weight would be thrown on the financial future of the country. Undoubtedly the question of expenditure did come very closely in contact with that of old-age pensions, and especially that part of the scheme which referred to limitations, because as soon as the limitations went more money would be required, and it was impossible for the Government to put forward as an excuse for these limitations the fact that they had removed a certain amount of taxation. If the Government insisted upon reducing the taxation upon sugar, the limits they had put on the old-age pension scheme were not limits which they ought to have made in the circumstances of the case, for in order to make the scheme perfect they might have used the money which they were going to remit, and thereby removed the objections which would naturally be taken to the scheme. The Government had £1,500,000 in last year's surplus. They had taken off part of the sugar duty and now they had only £1,200,000 for old-age pensions. When they found the revenue mortgaged up to the hilt, an enormous increase of liabilities, to some extent a falling off in revenue—at all events last year's figures were not likely to be repeated—and practically no balance at all, and when they found that the Government had failed to indicate any new source of taxation, then he thought the Opposition were justified in bringing forward their objections to the financial position placed before the House, and asking the House whether, considering the position as a whole, it was a convenient precedent to be followed in the future. It was the reckless dive of the gambler. [Laughter.] Hon. Members laughed, but they did not laugh at certain bye-elections. It was a gamble to meet a certain exigency and to afford a fruitful source of oratory on the platform when the other side of the question could not be brought forward. It was a political attempt rather than a financial one, and it was on that ground that he preferred rather to turn to the more sober statements of the Prime Minister as Chancellor of the Exchequer last year than to what was said when the right hon. Gentleman was rather exhilarated by the effects of recent bye-elections. If in the coming year we had to face all these great liabilities, then he thought it was necessary to indicate to some extent how the financial position was to be met. The Opposition had again and again asked the Government what was their inherent proposal of finance which was to carry them through these liabilities, and they had had no answer. The Government said that they had not come to the last word in connection with free trade finance. Well, it might not be the last word, but it was getting very near the last word. The next words, he thought, would come from the hon. Members below the gangway, and they would not be in any way likely to benefit the trade of the country. The proposals from below the gangway affecting capital and employment were hardly likely to lead to that commercial prosperity which hon. Members on both sides of the House had at heart. That prosperity was not to be found by falling into the vortex of finance suggested by the Labour Party. That was where the Government were being surely led, for they had thrown out no suggestions as to how they were going to meet those great future liabilities without taking from the programme of the hon. Gentlemen to whom he had alluded. He was glad to say that the Opposition had not come to the last word on the question either; they had only so far got to the very first word in connection with tariff reform. Though their proposals might be received grudgingly in the House, they were every day received with greater approbation in the country, and it was because they believed that any party in this House would eventually be driven to widen the basis of taxation instead of constantly narrowing it as the Government had been doing that he moved this Amendment. He and his friends believed that they might in this case take lessons from others who had been enabled to gain great advantage from widening the basis of taxation, and at the same time that they might not have that frightening and dwindling of capital which had resulted from the policy of the present Government. If they could encourage capital they knew that they could deal also with the much more difficult question of unemployment, which was a cause of serious concern. It was not for the Opposition at the present moment, and still less for a private Member, to suggest the taxes which should be imposed in order to widen the basis of taxation. Sufficient was it for him to say that those who sat around him joined him in believing that they had an alternative policy which was constantly gaining strength, and it was only by widening the basis of taxation, instead of constantly narrowing it as they had done by repealing the coal-tax and in other ways, that they could look to those great resources necessary for our Imperial and local finance. Believing in this, and believing that they had a most serious task before them in the great liabilities the Government had thrown upon the nation, it was greatly to be deplored that in giving this account of the national finance the Government had found no means of showing how they might find the funds which would be required. In his opinion the only way in which it could be done was by widening the basis of taxation. He-begged to move.

CAPTAIN MORRISON-BELL (Devonshire, Ashburton)

having claimed the indulgence of the House in addressing it for the first time, said he was in very hearty agreement with every word which had fallen from his hon. friend in moving the Amendment. They were starting a, very dangerous precedent—a precedent which, he thought, it was no exaggeration to say was very likely eventually, if they continued to act in the same manner, to be the means of breaking up the Empire. He considered that the whole scheme of finance, as outlined by the Prime Minister in his Budget Speech, was a mad gamble for votes. When the Budget was introduced they were told that the old-age pensions scheme was going to cost about £6,000,000, and very shortly afterwards there was a reshuffle, and the Chancellor of the Exchequer put the amount at £7,000,000. But he had very good reason to think that the sum would eventually be much more like £11,000,000. After the great increase which he thought every Member of the House would admit would be certainly necessary in the expenditure on the Navy, there was the new Education Bill, which, if it ever became law, would, with other expenses, still further increase the expenditure by about £8,000,000. It struck him that that was sufficiently formidable when they remembered that we were now in a year of falling trade Returns. All this was apart from the ultimate cost of the old-age pensions scheme, which at present only dealt with the fringe of the question. They had every right, and in fact it was a duty they owed to their constituents, to point out the foolhardy, if he might say so, endeavour to finance this great country in such Budgets as they had seen put before the House lately. But he wished more particularly to associate himself with that part of the Amendment which dealt with the increased charges for national services on the rates. He thought it would be generally admitted that the enormous increase in the rise of the rates, in spite of the fact that the rateable value had increased to a great extent, was becoming a very serious and pressing danger. It seemed to be often lost sight of that it was no use adding item after item to the charges on the rates, and then asking the ratepayers to be contented with small amounts from the Imperial Exchequer. When they saw that from 1889–90 to 1904–5 the charges on the local rates had risen 70 per cent. for poor relief, 50 per cent. for police, no less than 206 per cent. for education, and no less than 134 per cent. for main roads and bridges, it was high time that they asked the Government to do something to lessen the burden which the agricultural constituencies were feeling so heavily at the present moment. Yet, in spite of all these charges on the rates, Members on the Government benches brought in and voted for measures, and when they found that they were unable to squeeze the money required out of the Treasury, the extra charges created by the Bills were thrown in many instances on to the rates. Recent examples of that were the medical inspection of school children, the feeding of school children, and the expenses of the Small Holdings Act. He considered these increased burdens on the rates a very serious matter. In Devonshire the rise in the rates during the last seven years had been very marked, amounting to 124 per cent., although he admitted that that was greatly owing to the Education Act. The rise, however, had been very great indeed in the county and police rate, so that it could not be all put down to education. He believed it was a great deal more in Gloucestershire and in many other counties. These charges were bound to increase in the future, and he did not think that the Government realised the seriousness of the case or were dealing with it so as to benefit those who suffered. It had always been understood that the burden should fall on the shoulders of those best able to bear it, but that seemed to have been conveniently lost sight of in regard to rates, though it had not been ignored in regard to taxes. The Report of the Royal Commission on Local Taxation, published in 1901, pointed out the seriousness of the increasing charges on the rates, but here they were in 1908 and nothing had been done to relieve the burden. He confessed that the Unionist Party was not altogether free from blame. [MINISTERIAL cries of "Hear, hear."] Yes, but two blacks did not make a white; and they who represented agricultural constituencies were anxious to press on the House the fact that these burdens were increasing and were bound to increase enormously. He would give the instance of the rate for main roads and bridges. Very often those who paid that rate hardly used the main roads; they were used by people who came from the towns and had nothing to do with the payment of the rates. If the Government would only tackle that question he felt sure that they would have the gratitude, especially of the agricultural constituencies, more than they were likely to have by passing the Small Holdings Act or even by doing away with home-fed beef for His Majesty's troops. It was a very curious thing that whenever a Bill was brought in by the Government there was almost invariably a clause which created some other authority than the local authority with power to see that the provisions of that particular Bill were carried out. To employ an expression used by one of the Members of the present Government, why was it necessary that all the local councils required this amount of "gingering"? He knew that hon. Members opposite were very fond of saying that it was the fault of the wicked landlords who terrorised the local councils and brought their influence to bear upon them to prevent them from doing their duty. But these reasons came from Members who were interested in towns rather than in country districts. Might he suggest that the real reason and the more self-respecting reason—if he might say so—for the town councils, rural district councils, and parish councils taking that course was the fact that they were perfectly aware that the burden on the rates was already so excessive that they felt very reluctant indeed to add to it, and in many instances they would not move until forced to do so by some central authority which had no interest in the local conditions of that part of the country. It was for that reason and not because they did not wish to do their duty that many local councils were reluctant to apply their powers. He was very much afraid that they were not going to get much satisfaction from the Government on the question of local taxation; they had so many schemes to carry through, and to please so many other people who took no interest in the agricultural communities. If the Government were going to find the money they were asking for to finance the scheme of old-age pensions they would not be able to find the money urgently needed for relieving the burdens of local ratepayers unless they broadened the basis of taxation.

Amendment proposed— To leave out from the word 'that' to the end of the Question, in order to add the words 'in view of the growing liabilities of the nation for naval and military defence, old-age pensions, and education, and of the necessity for giving additional relief to ratepayers from the increasing charge for national services now thrown upon the rates, this House regrets that no attempt is made to increase the resources of the Exchequer by broadening the basis of taxation.

Question proposed, "That the words proposed to be left out stand part of the Question."


I have listened to the two speeches which have been delivered upon this Amendment and the thought that occurs to me most with regard to them is that they dealt with only one portion of the Amendment, namely, local taxation. The question of local taxation interests the minds of hon. Members very greatly. With regard to that I should like to say that although the Government have not been in a position to deal with this question as a whole broadly, they have made considerable advances in the direction hon. Members desire, namely, in the shape of the reform of the licensing duties and the diminution of local taxation. Last year my right hon. friend the Chancellor of the Exchequer disentangled and simplified the national accounts by having the whole national statement in one Budget—which was certainly an advantage, so far as the national finances are concerned. The hon. Member opposite said that the Chancellor of the Exchequer on that occasion took all the great fishes and left the small ones, but I do not think that was quite accurate, because last year my right hon. friend said that although he simplified the national taxes he did not interfere with local taxation at all.


What I said was that in taking back this tax he rendered it impossible for local authorities in the future to bargain for further alterations. I am quite aware that the right hon. Gentleman promised us all that came down.


I do not see that there is any question of bargaining. Where it is a question of local interests and national interests the latter always go to the wall. I think that everyone admits that before you can deal with general local taxation in England, you must effect some reform as to assessments, and the Government have pledged themselves to bring in a Bill this session which will mark a considerable step in that direction. The Royal Commission on Local Taxation made practically three suggestions. They said that a certain portion of the burden of Poor Law relief ought to be borne by national resources; that some relief ought to be given in the matter of police, and that some alteration ought to be made in the proportions of the coat of education borne locally and by the State. The Government have already made a beginning with regard to two of these matters. The old-age pension scheme will to a certain extent relieve the Poor Law administration and certainly give some relief to the rates. We have also in a small way relieved the rates of the burden of the Unemployment Act and thrown that on the Exchequer, and if hon. Members of this House and the Members of another place will allow the Education Bill to go through that will be of great and immediate assistance to the relief of local rates. I was somewhat amused at the speeches just made and the anxiety of the hon. Members for these reforms. I would ask them if they were now so anxious to have these reforms carried out, why it was they did not urge their own friends during the ten years that they were carrying on the Government of the country to carry out something in this direction. During those ten years hon. and right hon. Gentlemen opposite carried only two measures of relief by way of doles, and they were so badly arranged that they reached the undeserving quite as much as the deserving. At the same time they raided the Sinking Fund and largely increased the expenditure both on the Army and on the Navy. I do not think, therefore, it is we who ought to be called upon to deal at an early stage with this difficult and complicated subject when hon. Members so long neglected it themselves. As I listened, and I listened attentively, to what the hon. Gentleman said of the Budget as a whole, I was unable to find out what he objected to. Does he object to old-age pensions? I believe with regard to that that we shall receive the general support of hon. Gentlemen opposite, as it is as subject largely outside party politics. Does he object to the reduction of the sugar tax or the large reduction, which is promised this year, of the Debt? Those are the three points the Chancellor of the Exchequer has provided for. The hon. Gentleman spoke of the last biscuit, and said there was nothing in the locker, and that the time had arrived for fresh taxation. That position has not yet arisen. The Chancellor of the Exchequer has made provision for all the burden that will fall upon him in reference to the scheme for old-age pensions. It is no part of the duty of the Chancellor of the Exchequer if he has £3,500,000 in hand, over and above his liabilities, to keep that money in his pocket and not to deal with taxation. It is his duty to allow that money, to use an old fiscal phrase, to fructify in the pockets of the people. It is much better that people should have taxation reduced if even it is only a temporary matter, which I do not think it will be. But in this matter hon. Members ought to look at the financial position as a whole during the three years in which my right hon. friend the Prime Minister was Chancellor of the Exchequer. Hon. Members the other night told us that in those three years we had done nothing except to add to expenditure and taxation, but in those three years the Government remitted a net amount of something like £8,000,000 of taxation, and they have also reduced the Debt by over £40,000,000, which in itself represents a saving of £1,500,000 in interest alone. Under these circumstances they do what the hon. Gentleman wants to do in another way, and if they then find that in order to carry out a great social reform they have to make some further call on the Sinking Fund, I think they will be fully justified in so acting. The hon. Member said— If you are going to raid the Sinking Fund, give the benefit to the income-taxpayers. That was what Mr. Goschen did, but if we are going to reduce the Sinking Fund I prefer to put the large surplus aside and earmark it for a large social reform like old-age pensions. The hon. Member then went on to what I hoped was going to be the really practical and interesting part of his speech, but just as I began to listen with great hope to the part when he commenced to speak of how hon. Gentlemen opposite proposed to broaden the basis of taxation he, like the mover of the Amendment, promptly sat down. I certainly hope before this debate ends we shall have some light and leading on that point from the Front Opposition Bench. Both hon. Members talked of broadening the basis of taxation, a phrase which, like "fiscal reform," begs the whole question. To broaden the basis of taxation you must impose additional taxation, and we are fully entitled in a matter of this sort to ask hon. Gentlemen opposite what are the proposals they have in their minds by which the basis of taxation can be broadened. It is not enough for them to say "You must wait until we are called upon." The whole of their policy depends not upon a great principle but upon details. Before taking this leap in the dark we are entitled to ask them the specific question how they propose to broaden the basis of taxation and what taxes they propose to impose. In the debate last year we were in the dark, and I defy anyone reading that debate to find out what the proposals of hon. and right hon. Gentlemen opposite were last year any more than it is possible to find out what their present proposals are. I am quite prepared to discuss the merits of any particular proposal for increasing the extent of taxation. Everybody admits that taxation is an evil—I am speaking now from the financial point of view—except those who propose a high tax on licences. But the real question to consider in taxation is whether a particular tax is likely to be more burdensome than the one you are going to supersede, or the one you are going to reduce. The Government have been brought up in that school which believes that under a system of simplifying taxation you can actually put on more taxation with a lesser burden to the country because the taxes are less irritating and more economically raised. Hon. Members opposite are propounding a policy which if it means anything at all means this, that they propose to impose a much larger number of taxes, to tax a much larger number of articles, and a much larger number of people. That must be less economical and more irritating than the policy we profess. The right hon. Gentleman the Leader of the Opposition has given us his view, on more than one occasion, as to the question of broadening the basis of taxation, though I do not know that we have always been able to discover what is his meaning. But he has made three or four statements of a fairly clear description which I should like to read to the House, because I think that in discussing this subject we want to know more or less what is the official view in regard to it. The first proposition which the right hon. Gentleman laid down last year was that revenue should be derived from duties small in amount, but on articles of which there is large consumption, and which will, therefore, yield a large revenue without any serious dislocation of trade. That is exactly the policy which was carried out by Sir Robert Peel and by Mr. Gladstone for many years; therefore, I am glad to that extent that we have the assent of the right hon. Gentleman. Then again the right hon. Gentleman said last May that he objected to any system which had for its object the diverting of the trade and commerce of the nation from its natural channels by artificial legislative means. That is the general proposition which he has laid down. I think that any proposals made by the right hon. Gentleman must be judged by those standards. Now we have before us, as far as we have been able to judge from the various speeches made both inside and outside of this House, practically three propositions for broadening the basis of taxation. The first is retaliation, the second is preference, and the third is so-called fiscal reform. As regards retaliation, it is quite obvious that it has no value whatever in reference to the broadening of taxation, because if it be successful—and the right hon. Gentleman says it will be successful—it cannot, in any case, produce revenue. And that brings us to a much more important question, that of Colonial preference. There again we are all agreed that raw material for manufacture shall be excluded from taxation. The Prime Minister has more than once stated that in his opinion the exemption of raw material made a system of preference almost impossible as between the various Colonies and the Mother Country, because the only articles which some of them send to us are almost wholly articles of raw material, to which it is not proposed that any preference should be given. If it be true that the only way, or the best way, of keeping the Empire together is to give preference, then I do not see how you are to give a substantial preference to all the various Colonies; I cannot see how that is possible. As regards preference itself, I take it that the proposal is to broaden taxation by putting taxes on a considerable number of articles which are at present free from them, and that it will substitute one tax for another. I confess I have never been able to see quite what advantage it would be to this country. I suppose that nobody would desire that for the liquor and tobacco taxes you should substitute taxes on corn, meat, and other articles of import. I do not believe that from the national point of view, or from the point of view of the consumers, it would do anything except make the consumer lose if he had to pay on corn and meat rather than on tea and sugar. We have reduced the sugar duty to the basis suggested by the right hon. Gentleman the Member for West Birmingham. We have taken a farthing off, and left it at a farthing per pound; but if, as I imagine, hon. Gentlemen on the other side do not desire any further reduction of the duty on sugar, then in regard to the broadening of taxation they must put that aside. That leaves us, of course, with the income-tax. I take it from various speeches we have heard, and from one we have heard just now, that the idea of producing this revenue is largely in order to diminish the income-tax. I do not think that this country intends to diminish the income-tax at the expense of the consumers of food. But the question is whether preference is going to produce revenue. It is one of the matters mentioned in the Amendment of last year as likely to assist the broadening of taxation. In the first place, the whole amount of the revenue could not be great, and will not be great; and I would also point out that the more successful preference is, the less will be the revenue. If this scheme is to be successful, foreign corn will have to be superseded by Colonial corn, so that it is obvious that if this is going to be a successful policy there will be no revenue left to broaden the basis of taxation. The only way in which you would be able to obtain any revenue to broaden the basis of taxation would be if your system of Colonial preference failed and did not divert the foreign corn from continued import. As to broadening the basis of taxation—we are not to call it "protection" but only "fiscal reform"—I would point out that it is really not a policy, which, if successful, would do much to broaden the basis of taxation, because the object of that policy, as we understand it, is largely to divert trade and enable employers to manufacture goods here rather than in foreign countries. But to divert trade from one industry to another, and from one country to another, will not broaden the basis of taxation, and even if you were successful in your object of reviving the trade in pearl buttons, jewellery and other articles, there would be precious little revenue left to broaden the basis of taxation. I would seriously ask hon. Gentlemen who propose to arrange this system of taxation what articles they intend to put duties upon, and how far they will be really successful in producing revenue and broadening the basis of taxation. That is, I think, a most material point. The Board of Trade Return which has been presented to us in regard to these matters is interesting reading. If you adopt the proposal that the raw material of manufacture is not to be taxed it really amounts to putting the tax on purely manufactured goods which come to this country, and the taxation would be of almost uniform amount. According to the Board of Trade Return there is not much more than £50,000,000 worth of wholly manufactured goods coming into this country, and a 10 per cent. duty would not produce more than £5,000,000, and that amount, if the system were successful, would gradually diminish. I am anxious that the Leader of the Opposition should show clearly whether he is in favour of a policy such as that. We have always been told that particular trades have gone away, or are going away, and that in order to keep them we must impose these duties on the products of foreign rivals. Therefore it is obvious that the chief advantage which it is thought will accrue from those duties is not the revenue that they will produce, but the fact that they will keep certain articles of manufacture in the country, and enable our own manufacturers to make them. If you have this preference, or what I call protection, you will really not have much left on which taxation can be imposed, nor will you have any great revenue for the purposes which hon. Members have at heart. As far as we are concerned the Chancellor of the Exchequer has done in this year all that can be expected. He has relieved taxation; he has paid off a large amount of Debt; he is covering his liabilities; he is meeting the claims upon him; and he hopes to end the year with a surplus. That is a position of which I think any Chancellor of the Exchequer may be proud. If it is found that the expenditure increases, and that fresh taxation is necessary, then I do not think it will be found that within free trade limits the resources of civilisation are entirely exhausted. But that is a question which has not yet arisen, though we are prepared, if necessary, to reimpose old taxation, or new taxation on the old lines. What I think we are entitled to ask hon. Gentlemen is this, not that they should make perorations on the broadening of taxation and then sit down, but that they should tell us exactly, in so many words, where they are going to broaden taxation, what articles they are going to tax, and how they are going to tax them. I say that without that knowledge it is impossible for us to know whether the proposal they make to us is a right and proper one for this country to adopt.

MR. AUSTEN CHAMBERLAIN (Worcestershire, E.)

I am sure the House has listened with interest to the speech of the Postmaster-General, but hon. Members cannot help feeling that he has not contributed much to the elucidation of the Budget which he rose to defend. In an illuminating passage of his speech he said that what he desired to know upon the questions with which he was dealing was the official view of the case. That is what we desire. The right hon. Gentleman forgets that he has crossed the floor of the House, and that it is for him and his colleagues to state the official view. What is the situation we have put before the House? Some of my hon. friends endeavoured to put it the other day on the income-tax Resolution, and we put it in more general terms immediately the Chancellor of the Exchequer finished his Budget speech, and what we said then has been reinforced by my two hon. friends who have spoken to-day. We say that if you survey, as the right hon. Gentleman asked us to do, the whole field of finance, not merely for one year but for two or three years, you can see that the situation with which we are faced is one of a great and rapidly growing expenditure. You see that in spite of the most definite pledges and the most lavish assurances that hon. Gentlemen opposite when they came into power would reduce expenditure, circumstances have been too strong for them, and instead of reducing it they have increased it. And let me say in passing that when the right hon. Gentleman claims credit for his Government for having remitted taxation, they are collecting more from the pockets of the people than they have ever collected before. They have only been able to remit taxation because of the very remarkable prosperity which the country has enjoyed and which even our present fiscal system has not prevented this country from sharing with the rest of the world, though in a less degree than our most conspicuous competitors. How the right hon. Gentleman makes out remission to be £8,000,000 passes my comprehension. He did not do the sum, and if he will add up the amount the Chancellor of the Exchequer has remitted, he will find that it does not amount to £8,000,000.


I was, of course, including this year.


A million on tea, less than £3,500,000 on sugar, £2,000,000 on coal—which was not paid by any citizen of this country—and still you have not got your £8,000,000. [Several HON. MEMBERS: The income-tax.] Then, say hon. Gentlemen, the income-tax. Yes; but when the late Chancellor of the Exchequer remitted a portion of the income-tax to a portion of the income-tax payers he demanded compensation which he took in death duties. There was no net reduction, and the Postmaster-General was talking only of net reduction.


There are other small taxes.


The net reduction is not £8,000,000. That is certain. And let me just say, as I had to allude to the increase of the death duties in this connection, that in fact the late Chancellor of the Exchequer got an extra £1,500,000 by what I may call a happy mistake. He estimated that, owing to the concessions he made to earned income-tax payers under certain conditions, he would lose £1,500,000, and he took £1,500,000 from the big estates in death duties. As a matter of fact he lost nothing by his concessions, because, as he boasted this year, he actually got more from the income-tax than he had ever received before. Instead of making a remission to the direct taxpayer, he has added to his burden to the tune of £1,500,000 a year. I say that the remissions which have been made have only been possible because of the exceptional prosperity which we have enjoyed in the last two or three years. But what about the future? The Chancellor of the Exchequer said across the Table the other night that there would be no further remission of taxation while he held office. Admittedly he will have to find fresh revenue from somewhere. Our present resources are not equal to the liabilities that have been incurred. I know that there are a great number of hon. Gentlemen opposite—I am not certain that the Chancellor of the Exchequer is not to be counted among them—who are prepared to make reductions in the Army and Navy Estimates coute que coute, no matter what happens. There are Gentlemen inside this House, and, I suppose, outside it, so foolish as that. But that is not the attitude of the Government, and, though the Chancellor of the Exchequer warmly commended the speech of the right hon. Member for the Rushcliffe Division the other day, and particularly regretted that so few of his colleagues had listened to it, as it was spoken to them quite as much as to the House at large, the Prime Minister has pledged himself to maintain the naval supremacy of this country, whatever the cost and whatever the efforts of rival nations to overtake us. At the same time nearly every social measure brought in throws a fresh charge on the State. A great many of them throw a charge on the local rates, but also some charge on the Imperial taxes. The particular measure associated with the introduction of the Budget, involves a new liability of at least £6,000,000, and probably, as the Chancellor of the Exchequer says, nearly £7,000,000, without any alteration in the Government scheme of our finances in the near future. In reviewing these liabilities the other day I said that they amounted at a moderate estimate to over £10,000,000 of fresh expenditure to be faced next year. I believe that to be a very moderate estimate, if any fair interpretation is to be attached to the Prime Minister's language in regard to the Navy. What we are entitled to ask the Government is that, when they invite us to undertake these vast new liabilities which overshadow our deliberations this year and will overweigh the Budget next year, they should tell us by what means they intend to raise the money to meet the expenditure they now ask us to sanction. The Prime Minister scoffs at that as a thoroughly unreasonable proposition, and the Chancellor of the Exchequer says that he is not going to say what his next year's Budget is to be. But the Postmaster-General said, not to the Government who are now voting expenditure, but to an Opposition who, according to hon. Gentlemen opposite, are not going to be in power for a long time, that he was fully entitled to ask what taxes the Opposition were going to put on. But if it is reasonable for a Government to ask that of an Opposition, surely it is much more reasonable for an Opposition to ask the Government as to its intentions.


After all, we are dealing with the Amendment, and the whole point of the Amendment is that this House regrets that no attempt is made to increase the resources of the Exchequer by broadening the basis of taxation. So far as the Government are concerned, they have dealt with the finances for three years, and their position is a clear one. The right hon. Gentleman proposes to broaden the basis of taxation. We want to know how he is going to do it.


I know that the right hon. Gentleman wants to know, but what is so exquisitely funny is that he does not see the humour of the situation. He, a responsible Minister, says that it is absurd for us to call on him for a disclosure of his plans, and in the next breath he turns round to ask the Opposition, who have no responsibility whatever, to disclose theirs. What is the right hon. Gentleman's excuse? It is that we are dealing with the Amendment. Well, Sir, I am dealing with the Budget, and really it would have been better if the right hon. Gentleman could have said a few words in defence of the Budget. I would not have asked much, but a few words would have been of interest. The right hon. Gentleman asks not merely what taxes in general we are going to put on, but for the details. I am more modest than he. Even in addressing a question to the Government I do not ask for the details of next year's Budget, but what are the general principles on which you are proceeding, and. the general intentions in your minds and the general lines along which you intend to proceed? What do I mean by general lines? I will illustrate it by two references to the speeches of the Prime Minister, and I will ask the Chancellor of the Exchequer to explain how the Government intend to carry out the policy the Prime Minister announced or why they have abandoned it. The Prime Minister last year, in contemplation of having to introduce an old-age pensions scheme, said— The practical conclusion to which I have come is that I must not permanently impair my sources of revenue in view of the future. And so much importance did he attach to that statement that he repeated the words twice over. Now we are a year closer to the liabilities that old-age pensions bring about. Then the right hon. Gentleman thought it necessary to reserve a nest-egg of what he estimated at £2,500,000 to start the scheme. Now he starts the scheme with the admitted liability of £6,000,000 or £7,000,000, and at the same moment he does impair, I suppose he must permanently impair, and diminish the revenue he actually enjoys by the remission of half the sugar duty and balances his Budget with an estimated surplus of only £200,000. What common principle underlies the action of the Prime Minister last year and that of this year when he introduces a Budget framed on totally different lines, and why has he forsaken the safe and proper course he took last year in maintaining all the resources he had available when he had such heavy liabilities coming on him in the future? The Postmaster-General gave in advance one answer to that question. He said that the right hon. Gentleman, having a surplus, would not have done his duty if he had not remitted taxation. But then he did not do his duty last year. Really, the Postmaster-General is not a very skilful defender of the Government when he does undertake to defend it. His defence for the action of this year is a condemnation of the action of last year, because if it is not right for the Chancellor of the Exchequer when he has a surplus to retain it to meet a known liability it cannot have been right for him to retain his surplus last year for the same purpose. That was the reason the Prime Minister gave. The right hon. Gentleman said he could not afford to impair his revenue by these new liabilities, and if they wanted all these reforms they could not expect remissions of taxation. He has chosen a remission of ¼d. per pound off the sugar tax after stating that it would be no earthly good to the consumer, although he made a frank admission of his change of opinion. The right hon. Gentleman has a singular facility for adapting his economic views to the objects which he desires to pursue at the moment. When he wants to take 1d. off tea that reduction goes straight to the consumer. When he does not want to take 1d. off tea the reduction does not go to the consumer. When he does not want to take anything off sugar he solemnly declares that the remission can be of no benefit to the consumer; and then, again, this year, when he wants to remit ¼d., he finds that the consumer will reap the whole benefit. We should like a little explanation of this changed attitude. I come to a later date, a speech of the Prime Minister's at Lancaster at the beginning of this year, in which he said that, so far as the money for a scheme of old-age pensions was drawn from taxation, it must be a scheme to which all classes of the community, including the working classes, make a just and adequate contribution. I think that those are proper lines on which such a scheme should be framed, but who can pretend that this Budget follows these lines? You impose for the benefit of the poorest classes an additional burden upon the Exchequer, and, therefore, upon the taxpayer, of at least £6,000,00 a year, and you choose that very moment to remit rather more than half of one of the few taxes that the poorest among us need pay. How can you say that, in bringing in this boon of old-age pensions and at the same time remitting part of the tax which is paid by the working classes, you are exacting a contribution from the working classes to the new expenditure? I asked the Chancellor of the Exchequer the other day a question intended to give us some guidance as to what was the contribution of members of the working classes to the national expenditure at the present time. I asked him what is the amount of indirect taxation which it is estimated will be collected per head of the population in the coming year. He says the amount is £1 6s. 11d. per head on the only taxes to which those who are not payers of income-tax contribute at all. Then I asked him to go a step further and say how much of this was due to a cohol and tobacco. The amount due to alcohol is 16s. 1d., and, therefore, any one who refrains from alcohol, as a great many do, from either choice or necessity, has his contribution at once reduced to 10s. 10d. And, if he be not a smoker—and I think not a few total abstainers from alcohol very likely are also abstainers from tobacco—his total contribution, estimated in this way, would be 4s. 7d. in the course of the year. That is the position to which the Prime Minister's Budget reduces the contribution of the working classes. Does the Prime Minister think that it would be a sound system of finance to confine the whole contribution of working men below the income-tax limit to taxes on alcohol and tobacco which many of them do not pay at all? The total amount to a man who does not drink alcohol or smoke tobacco is 4s. 7d. That you may take as the compulsory charge. Alcohol and tobacco form a voluntary charge which a man in some sort assesses upon himself. Instead of calling upon the working classes for a contribution to the new expenditure imposed by this Budget, as the right hon. Gentleman was understood to say that he would do at Lancaster, he has reversed his policy and contributes the boon free, and in addition remits a part of the contribution. [MINISTERIAL cheers.] And for my part, whether it is popular doctrine or not—and I see from the cheers of hon. Gentlemen opposite that they think it is not unpopular—I would go to my own constituents or to any other body of electors and justify my position that those who share all the rights of citizenship, those for whom a very large portion of this expenditure is incurred, those who have a controlling voice in our electoral system, ought to pay a substantial contribution according to their means towards the national expenditure. [An HON. MEMBER: They are doing.] To take up any other line is to reduce our politics to the lowest level of corruption, to issue an invitation to those prepared to embark in such a reckless scheme to out-bid one another, offering more and more, and to teach the people of this country, as none of the previous Liberal Ministers of Finance has cared to do, that they may call the tune while they leave others to pay the piper. We are entitled to press the Government, especially after the attitude taken up by the Postmaster-General, for an explanation of their attitude and intentions.

I am not going on behalf of the Opposition into an elaborate scheme of duties for a future Budget. I am not at all reluctant to discuss the merit of preference, or of a complete reform of our fiscal system. I have discussed it several times in this House, and hope to discuss it again. I was, however, glad to note that the Postmaster-General recognised what had always been denied by the Prime Minister, that by such a system we should get fresh contributories and not merely fresh taxes, not merely that we should tax more articles, but more people. It was an interesting admission from the Postmaster-General of the soundness of the argument that, if we charge a moderate toll for the advantage of using our markets, we shall be able to secure a reasonable contribution from the foreigners who come here to trade.


Not from the foreigner.


The right hon. Gentleman said we might get more people to pay taxes. At the present time every person in this country pays taxes. We have, therefore, to get some body from outside. I do not suppose the Postmaster-General saw the meaning of his remark, but it is an interesting admission that I wish to take note of.


It was no admission at all. I was saying that by a simple system of taxation you tax a few articles and the consumer pays upon a few things, but that if you broaden that, it would lead to great discomfort to the consumer. In so saying, I was not thinking of broadening the basis in order to include the foreigner.


I do not know what the right hon. Gentleman was thinking of, but I do know the words he used, and he will find in the official report these words— You will touch a much larger number of taxes and a much larger number of taxpayers. Well, everybody in this country contributes to the taxes now by consumption—at any rate everybody except paupers. Then the right hon. Gentleman thought that he had disposed of our solution of the question by saying that if we had such a tariff as was foreshadowed by my right hon. friend at Birmingham and on many other occasions, we might divert trade and correct the character of our trade to the advantage of our people, but that we could not at the same time raise revenue. If by a reformed tariff you secure increased employment here and the investment of fresh capital; if, in short, you regard the trade of the country as a whole, and do for it what it is the glory of the present Chancellor of the Exchequer to have done for a small part of it, you would find that these people, finding employment and earning good wages, would spend their money on some taxable articles which contribute to your indirect taxation, and the manufacturers of them would have to pay their share in income-tax. If you got nothing but what would produce those results the revenue would still be advantaged. But is it not sufficient to answer the Postmaster-General by inviting him to devote a couple of hours study to the course of the foreign trade of Germany and the United States, since they each adopted a very effective system of industrial protection? They have not reduced their exports, but they have not reduced their imports either; on the contrary, as their prosperity at home has increased, so their imports have increased, and they are enabled to demand those larger supplies from foreign countries because of their increased wealth and of the increased prosperity which industrial protection has brought. I say, therefore, that the establishment of such a system as my right hon. friend has suggested would bring a direct increase of revenue through the Customs duties and an indirect increase of revenue from the prosperity which would be brought to the industrial community at large. While we have indicated the way in which the increased revenue, which is admittedly required, can best be produced, the Government have given us no indication, and before this debate closes we ought to have some.

I must say a word before I sit down with special reference to local taxation. The right hon. Gentleman let his imagination stray more at large when he described what the Government had done to give relief to local taxation, and what the late Government had not done. He said the late Government had done nothing and, being met with a murmur of surprise, he said we had only succeeded in giving doles to the wrong people. Yes, we used to hear a great deal about that in the late Parliament. But even in the late Parliament Liberal Members for county constituencies with an agricultural vote were very shy of giving effective expression to it. The Government have been three years in power, and if we gave the doles to the wrong people they have had the opportunity of altering the system; without finding any money they might have given the doles to the right people. The fact of the matter is that that Act stands on a much more solid foundation than they would readily admit. While they pretty well pledged themselves to its repeal when in Opposition, they now attempt to carry it on from year to year in the Expiring Laws Continuance Bill, lest a worse fate should befall them. I think agricultural Members would have been very interested on behalf of their constituents to hear the considerable steps that the Postmaster-General says have been taken in relief of local taxation. Last year he said the Chancellor of the Exchequer simplified the national accounts. Pretty poor relief to a farmer who is paying rates! Then he says the Government have pledged themselves to introduce a Bill for the reform of assessment and valuation. Well, they have pledged themselves to introduce so many, and whether they will pass them or not is still in the lap of the gods. Then the third thing the Postmaster-General said the Government had done was to introduce a scheme of old-age pensions, and that would bring some relief. I venture to think that that is a mistaken idea. I am in favour of an old-age pensions scheme, but I have always held that we should save very little in poor relief from the adoption of any such proposal. Because, after all, the great expense of the Poor Law is, as regards the aged, for the infirm, who will have to continue to be treated in infirmaries because they cannot get suitable treatment in their own houses, and in the maintenance of the great buildings and establishments, the cost of which cannot be largely affected by any reduction that we are likely to see in the number of the inmates. The right hon. Gentleman's final step was that they were awaiting the Report of the Poor Law Commission and hoped to carry a Poor Law reform. That is a pretty poor record of anything accomplished in the course of the three years that they had been in office, and it postpones to an indefinite period any relief in the future. Meanwhile this problem is growing more urgent, and year by year this House puts additional burdens on the local authorities by the legislation which it carries, and inventions, improvements, and the changes of our civilisation themselves entail heavier cost upon them. It is an urgent question. It is another of those great liabilities which, every one admitting, the Government make no provision for; and it is because they are treating it as théy are treating the question of defence, old-age pensions, and the whole range of politics—postponing as long as possible all action, and when they take action postponing their liabilities as far as they can to future years—that I shall heartily support the Amendment of my hon. friend as the expression of an opinion that the basis of the Budget is unsound, and that its finance is not of the character that a wealthy nation of this kind ought to pursue; and that it is urgently necessary, in order that we may adequately meet the great demands that are falling upon us, that the taxation of the country should be reformed upon the lines that the Leader of the Opposition has proposed.

MR. BOTTOMLEY (Hackney, S.)

said that if the right hon. Gentleman the Member for East Worcestershire had given the words of the official Amendment the correct interpretation, he would have no hesitation in voting for it, if he would be good enough to adopt the words of the Amendment of which he himself had given notice in favour of the broadening of the basis of taxation within the limits of the present fiscal policy of the country. He wished to preface his remarks by saying that while he might be suspected of carping and ungenerous criticism, no one appreciated more than he did the difficulties under which this year's Budget had been produced. No one appreciated more than he did the strain and stress under which the right hon. Gentleman must have worked in the peculiar circumstances in which he had been placed That being so, he would modify to a considerable extent much of the criticism which otherwise he would have ventured to offer. He could not help thinking that the very fact that the Budget had been produced under strain and stress explained one or two features of it which otherwise would have been startling. On the occasion of last year's Budget they were certainly led to believe that this year at least the Government would have indicated new sources of revenue in the from of a considerably graduated income-tax. He had by his side the references in Hansard to the speeches of the right hon. Gentleman the Prime Minister, but he would not quote them unless challenged to do so by the right hon. Gentleman. What they were told then was that it was impossible contemporaneously with differentiation to undertake so great a strain as would be involved on the Departments in carrying out a scheme of graduation. The right hon. Gentleman said he would reserve his opinion as to the practicability of the scheme, and he ended up by saying that for that year at least they must be content with differentiation. Without going into the details of graduation, it was self-evident that a scientific, just, and equitable system of graduation of income-tax would inflict hardship on nobody, and by taxing people with enormous incomes under such a scheme he believed there would be an additional yield of the income-tax of £15,000,000 or £20,000,000 a year. There was another Budget statement last year, in respect to which they were certainly led to anticipate legislation. The then Chancellor of the Exchequer referred to what he termed the luxury of the motorcar, and he said it was one of those luxuries which tended to degenerate into a nuisance. They were certainly led to believe that this year something in the nature of new taxation on motor-cars would be imposed. He regretted that the Prime Minister, in the great stress under which he was working, had not time to introduce that necessary and just Amendment of our fiscal policy. He complained also that the House was led to expect last year that the Government had already set apart £1,500,000 for old-age pensions—not £1,200,000—quite apart from what was expected to be received from the arrears of income-tax. The House was led to expect last year that quite apart from the problematical £750,000 of arrears of income-tax, £1,500,000 had been ear-marked and set apart for old-age pensions. He asked the present Chancellor of the Exchequer what had become of that £1,500,000. Last year the Prime Minster, when dealing with his actual surplus for the current year, and having reduced it to £1,800,000, mentioned that he proposed to keep the £330,000 in hand for emergencies, the right hon. Gentleman used these words:— As regards the other £1,500,000 I propose to add it to a new Sinking Fund; I am not going to part with revenue; I shall leave this money for the future; I shall need it next year. In the meantime I make the best investment of it I know, by diminishing pro tanto our national obligations. Later on the right hon. Gentleman, speaking of the provision for old-age pensions, said— I shall have in hand next year free and ear-marked for that purpose, the £1,500,000 to which I have just referred. That was a specific undertaking to the House. He asked the question of the Chancellor of the Exchequer as to how the House was to deal with that sum, and he was told, with all seriousness, that the £1,500,000 had gone to the reduction of Debt; that what the Prime Minister had promised was not that that particular sum should be ear-marked for old-age pensions, but the produce of future taxation, and that alone. Every expectation, therefore, based on the Chancellor of the Exchequer's statement had been nullified; and this sum of £1,500,000 had disappeared into that vortex, the Sinking Fund, which was already over-burdened by contributions which might very well have been left to posterity. Last year the Prime Minister, when somebody asked how could he get back the £1,500,000 ear-marked for old-age pensions, and which had gone into the Sinking Fund, said "You can easily get it back by legislation." But there was not a word this year about legislation, and he hoped that the Government would redeem the expectation held out last year of recovering this £1,500,000 which was sorely needed at present. Dealing with the question of national expenditure, he started with the reflection that that expenditure had reached the enormous figures of £150,000,000. He could not help remembering that one ground on which he secured election to this House was embodied in a political handbill, a copy of which he still possessed, in which he pointed out that the expenditure of the country had risen within the past few years by £50,000,000, and that it would be one of the first duties of a Liberal Government to restore expenditure to its old level. He asked himself—laying aside the Army expenditure, which he hoped never to understand, and the Navy expenditure, remembering that we were only a tight little island and that our Navy should be equal not only to the two-Power standard, but to the all-world standard—what was the expenditure on the Civil Service? He found it amounted to £30,500,000. He implored the Government to check this enormous expenditure by personal visits to all the Departments, and see whether this £30,500,000 could not be reduced to sensible proportions. He maintained that every bit of work at present done by the Civil Service at a cost of £30,500,000 could be contracted for, and a saving of at least £10,000,000 a year effected. That was capable of being dealt with by a revision of the constitution and an extension of the powers of the Public Accounts Committee. That Committee should have power to check expenditure, to check the work of public servants, their hours of work, and the whole circumstances under which the Civil Service was conducted. With regard to revenue, he did not think, in view of the claims put forward in support of some of their legislative projects, that the Government had made sufficient allowance for the decrease of revenue that might be expected from the alcoholic group of taxes. No one had a more profound admiration than he for the financial genius of the late Chancellor of the Exchequer, but he had no faith that the right hon. Gentleman would by the Licensing Bill materially decrease drinking and at the same time increase his income from that source. Admittedly next year they would have, according to the present Chancellor of the Exchequer, to provide £7,000,000, and to the late Chancellor of the Exchequer £6,000,000 for old-age pensions. Then there was the possible large additional Naval expenditure amounting, with other items, to fully £10,000,000. The Chancellor of the Exchequer the other day said that they must not anticipate next year's Budget; but the late Chancellor of the Exchequer said, in the course of his Budget speech— The Chancellor of the Exchequer, in other words, ought to budget, not for one year only, but for several years. That statement was his justification for the inquiry as to how they were to get this additional £10,000,000. He was free from embarrassment on this point, nor did he look to fiscal reform. He was not concerned as to how far they might or might not remedy the evils of unemployment and improve home industry; he wished to confine himself to an outline of policy by which he would indicate where £50,000,000 additional revenue could be obtained without trouble or inconvenience, and without doing injustice to anyone. He hoped to have the effectual sympathy of the Chancellor of the Exchequer, whose sympathy was of such a character that if he saw a beggar eating a crust of bread he would cross the road and offer the beggar to share his crust with him. He would refer very briefly to the suggestion by which he hoped to get £50,000,000 without even involving the necessity of touching the Sinking Fund. He need not elaborate the fact, but simply say that by a supertax on enormous incomes it was possible to raise a very large revenue. Another proposal that he pressed on the Chancellor of the Exchequer was this. An old-age pension was merely a recognition that the old labourer, when unable to work, was entitled to have paid to him by the State some portion of the unpaid increment of his labour during the time that he was able to work. His suggestion, therefore, was that every employer of labour should pay 1d. per £ on the wages paid by him to his workpeople towards a fund earmarked for old-age pensions. Such a tax was easily collectable and would realise £4,000,000 or £5,000,000. There was no objection to this suggestion from an economic point of view; the money would cost little in the way of collection, and it would inflict no hardship on the employer. It might be said that that incidence would fall upon the workpeople, but that was a matter for discussion between the workmen through their organisations and the employers. He had another suggestion to offer to his right hon. friend. In this he might be told that he was inflicted with the bacillus of tariff reform, but he was convinced that without violating any true principle of free trade it was practicable, possible, right, and proper that his right hon. friend should place a heavy super-tax on all incomes derived from foreign investments. He was not going into economic statistics, but he would make himself responsible for the statement that while it might or might not be true that the imports of capital in the shape of commodities were, for commercial convenience, paid for in exports, the principle ceased to apply when they exported liquid capital. Let him put it in this form. A man sent £10,000 of his capital abroad for the building of docks. This export benefited the people abroad and deprived those at home of the advantage resulting from the expenditure of the money. But apart from that it was notorious among all persons connected with business in the City that in recent years there had grown up a system under which wealthy men who owned foreign investments sent their coupons abroad to be cleared] and altogether avoided the payment of income-tax. He was speaking the other day to a Member of the Upper House who gloated over the fact that any addition to the income-tax would not affect him, because he sent his coupons over to Paris, where his agents invested the money abroad, thereby avoiding the payment of income-tax on his foreign investments. He submitted that persons possessed of vast wealth, who claimed the protection of the State, lived under its laws, and shared its benefits, ought to contribute more liberally to the revenue of the country than those whose investments were all made at home. He saw opposite the junior Member for the City of London, who boasted in this House that he was the chairman of a trust company every penny of whose capital was invested abroad, and he could not help thinking that it was thus high time that this company should be made to pay some additional contribution to the expenses of the country for giving it the protection of its laws. That was his suggestion, and it was quite compatible with the interests of free trade. But he did not care whether it was compatible or not, because such a contribution as he had indicated would mean an income of £10,000,000 a year to this country. Again, what was to prevent the Chancellor of the Exchequer from adopting the principle followed in France and other countries of taxing advertisements and highly-priced theatre-tickets? We should copy some of France's wise institutions instead of trying to learn to speak bad French. Let the Chancellor of the Exchequer, therefore, follow the example of France and tax all entertainments, receiving by way of revenue what was known there as the "Toll for the poor." In that way he would obtain another £2,000,000 or £3,000,000 and no one would be a penny the worse. Then, again, why should the right hon. Gentleman shy at taxing the gambling instincts of the community? He taxed their drink, their playing cards, and their premium bonds, which the Postmaster-General said wore lottery bonds and would not allow to go through the post, but his right hon. friend shied at a tax on betting, on racing, and on bookmakers, because, he said, to tax these things meant the giving of a validity to betting. Did a tax on playing cards give a validity to baccarat? Did a tax on drink validate drinking. The moment a tax was placed upon those evils why not go the whole hog and tax them out of existence? One and a half millions of money obtained from these sources in Paris went to the benefit of the poor, and there was a big revenue to be obtained from them in this country. He was amazed also that another suggestion had not been adopted. There had grown up in this country a vast industry in joint stock companies. Why, then, not put a tax on every share certificate of a joint stock company? It was usually ultimately worthless, and in that respect, as a diminishing security, it was only copying Consols. But a small tax on share certificates would bring into the Exchequer £2,000,000 or £3,000,000 a year without inflicting hardship on anyone, and, like the premium bonds of the Chancellor of the Exchequer, give the holders of the stock an idea that there was really something behind it, and it would be easy of collection. He was so full of ideas that he hardly knew what to suggest next. He had already secured £40,000,000 or £50,000,000 for the Exchequer, and he would offer one other suggestion. At present there was in the possession of the banks of this country a sum of money so vast that no one had really any data to help him to fix the exact amount. This money was in the shape of "dormant balances," and they remained in the hands of the bankers. Many of the palatial buildings which decorated the City to-day had been built out of these "dormant balances," which, in a moral sense, were no more the property of the companies than of any other individual. He pressed upon the Chancellor of the Exchequer the importance of introducing a short Bill calling upon banking institutions to disgorge all balances lying dormant in their hands after a stated number of years. The I ublic Trustee had not much to do at present, and he might very well be made the legal custodian of all these funds. If this reform were carried out it would bring into the coffers of the State £100,000,000. ["Oh, oh."] He had some data for saying that £30,000,000, at any rate, could be got from London bankers alone, and he would be glad to give the Chancellor of the Exchequer the facts privately. £3,500,000 was in the hands of one well-known and highly respected bank alone, and there could be no doubt that the amount in the whole of the banks of the country would aggregate to £100,000,000. The right hon. Gentleman could at least intercept the interest of the money, and if the capital were ever claimed those who proved their right to it were much more likely to get it from the State than from those who quibbled and pleaded the Statute of Limitations. Indeed, there was plenty of money knocking about for a new Chancellor of the Exchequer. There was no need for him to trouble about suspending the Sinking Fund, or to ask the foreigner to pay our expenses, for he would never consent to do that. There were at least £50,000,000 to be obtained by the Chancellor of the Exchequer from various sources of taxation, and all easily capable of collection by stamp duties. In these circumstances he hoped that he would receive from his right hon. friend a less monotonous and less official reply than had been hitherto customary. He thanked the House for allowing him to throw out these suggestions and would conclude as he began by saying that he, personally, should be very grateful, whatever might be the merits or demerits of this particular Budget, that the Prime Minister and the present Government had had the courage to open the door of the National Treasury to those who by age, and age alone, were no longer able to contribute to their own welfare.

MR. BOWLES (Lambeth, Norwood)

said that he would not attempt to follow the hon. Member for South Hackney in his interesting and far-reaching proposals for increasing the national revenue. He would leave that to the Chancellor of the Exchequer. But he could not help feeling that the House had reason to be grateful to the hon. Member who moved the Amendment for the terms in which that Amendment was drawn, which enabled the general financial situation to be dealt with as a whole. The Postmaster-General had said that there were in his opinion three points which made the present Budget. There were old-age pensions, reduction of the sugar duty, and the proposals as regards the Debt. That was a natural and convenient line for a defender of the Budget to take. His own opinion, for what it was worth, was that the real and significant outstanding feature of the Budget was neither old-age pensions nor the reduction of the sugar duty. So far from these being the real outstanding features, they wore merely clouds which obscured the real outstanding features. The real outstanding feature of the Budget was that it showed to demonstration—they now had it in black and white—either that the Government had failed even to try to redeem their clear pledges and to make good their clear statements made before the election and during the last two years, or that, finally and once for all, they were to understand that retrenchment of the public expenditure was impossible. This was a matter on which they were entitled to a serious and considered explanation on the part of the Government, in view of the language which hon. and right hon. Gentlemen opposite had held, and the attacks they had made on the late Government and their supporters in regard to national expenditure. The hon. Member who had just sat down had told them that one of the main appeals which he made to the people of South Hackney was as to national expenditure. That was an appeal made from ten thousand platforms, by Gentlemen opposite, up and down the country, and repeated again and again by right hon. Gentlemen on the Treasury Bench. The statements then made were to the effect that the late Administration had shown a most profligate and wasteful disregard of the resources of the country, and that if hon. Gentlemen opposite were returned to office that disregard would cease, and there would be retrenchment and economy. That appeal and those statements were made to willing ears. No doubt in 1905 the people, who had been under the strain of the war, were very ready to hear and disposed to believe—and in the end Gentlemen opposite induced them to believe—that during the few years preceding 1905 expenditure had been wasteful, wanton, and profligate. The people looked back for ten years, and saw what was perfectly true, that in that period the cost of the Army bad increased from £20,000,000 to something like £33,000,000, or 60 per cent., while the cost of the Navy had gone up from £18,000,000 to no less than £38,000,000, or 110 per cent. in ten years. And they had been reminded from every platform in the country that concurrently with this enormous increase of expenditure on the Army and Navy, there was behind it all the great and growing total of the national liabilities of all descriptions. He was not concerned to say whether or not the fears and views of the majority of the people, certainly of Gentlemen opposite, were reasonable or proper. A great many people held the view that a great increase of national expenditure was inevitable But that was not the view held in 1905–6. Rightly or wrongly, the people then clearly expressed their dissatisfaction with the rate at which expenditure had increased, and they thought that there must be retrenchment and economy. On the 2nd March last, the Prime Minister, in reply to an hon. Member behind him, who complained of the growing expenditure, said— I quite agree that one of the heaviest counts in the indictment which many of us preferred against the late Administration is this: that during their term of office the expenditure on the Army and the Navy had enormously and unnecessarily increased. We are undoubtedly pledged to do everything in cur power to effect some mitigation of that expenditure. What had happened? It was not very easy to get at the exact figures of the cost of the Army or Navy, or of any Government service. If one wanted to find the real cost it was really very difficult to ascertain. But in this case the House was relieved from all doubt or difficulty, because on the 2nd March last, during the same debate to which he had referred, the Prime Minister gave to the House upon his own authority the figures relating to the growth of the real expenditure on the Army and Navy since 1904–5. Although he could not, for his part, make these figures quite tally in one or two particulars, yet he accepted them, and the House of course accepted them, at once. The right hon. Gentleman had told them, in set terms and in plain language, that during the two years for 1905–6 the expenditure on the Army and Navy had boon reduced by £9,700,000, and that in the following years, 1907–8 and 1908–9, the expenditure would be reduced by only £3,500,000. On the right hon. Gentleman's own showing the total reduction made in this expenditure by two years of rigid Liberal economy was only about one-third of what had been effected in the preceding two years on the Estimates of a Unionist administration. And who in that House did not know as well as possible, and could anyone doubt it, that in the Estimates of the present year, low water mark had been reached in so far as expenditure on the Army was concerned? They knew that the Territorial Army, if successful, would add enormously to the cost of administration. It had been admitted by the Prime Minister himself that the Navy had been living out of capital, such for instance as the three years stores; and the right hon. Gentleman had given a pledge that the two-Power standard was to be maintained at whatever cost. In view of these facts it seemed impossible for anyone to doubt that the low water mark of expenditure on armaments had been reached. But even if the expenditure on the Army and the Navy were to stand still, the cost of the Civil Service of the country went on piling up at the rate of about a million and a half to two millions a year. He admitted that the Debt had been reduced, and he thought the Government were entitled to credit for that. But one was bound to make this observation, that in the language they heard about the Debt hon. Gentlemen opposite based themselves mainly upon what was mere anticipation. They always included what they hoped to do during the current year, and what they hoped to do in the current year bore a very large proportion to what they had done before. But right hon. Gentlemen opposite were entitled to the credit of having reduced the Debt at an unexampled rate, and that was really all that could be said for them; for, great though the rate of reduction had been, it would affect expenditure very little. In view of what hon. Gentlemen opposite had said up and down the country, they now found that they were really unable, after having done their best, to make any real diminution of expenditure on the Army, Navy, Civil Service, or in any Department. The expenditure which hon. Gentlemen opposite had denounced a few years ago was that to which they were practically and substantially bound to-day. In these circumstances, one would have expected at least that the Government would have re-doubled their efforts to pay off Debt, and would in any case have kept clear of any avoidable new expenditure. But the Government had not done so, and they were face to face with an inevitable and enormous increase of expenditure. In the financial circumstances of the Government, he was bound to say that it was a discreditable proposal that, without any direct authority from the electors, and in face of all that they had said at the election, they should spend £7,000,000 which they had not got, and did not know how they were going to get, upon a scheme which was certainly not going to rest at £7,000,000, and which must effect an enormous change in the whole social life of this country. That was the situation in which they stood. Retrenchment was over and done with. That to him was the real outstanding feature of the situation. On the other hand, liabilities were growing faster and faster, and the right hon. Gentlemen opposite, after two years of full control and rigid economy, would be forced, so far from decreasing the burdens upon the people, largely to increase them by means of taxation. The recommendation of the Amendment was that this inevitable increase in expenditure was to be met by broadening the basis of taxation. He sometimes thought that almost all trouble in this world arose from the use of metaphorical expressions, and he could not help thinking that hon. Gentlemen on both sides of the House must often have re-echoed the anguished cry of the great Frenchman who said he prayed nightly to be delivered from the Evil One and from figurative language. He had done his best to understand precisely what the phrase "broaden the basis of taxation" connoted. There had been moments of gloom and depression in which the dark thought had sometimes occurred to him that perhaps it had no meaning at all. But those moods passed, and he had come to the conclusion that after all its meaning was simple enough, and that broadening the basis of taxation simply meant levying more taxes. It was an inevitable inference from the fact that what it meant was that it was proposed to levy more taxes. He was reading only the other day that during the Middle Ages they had an excellent system of dealing with recalcitrant taxpayers. If a man refused to pay the amount which had been assessed as his proper quota they put him in a press and applied weights to the top of the press progressively until he either paid or expired. He had no doubt that if figurative language had been as common and popular in those days as in these, and one had asked the mechanic who was applying the weights what he was doing, he would have said with great force and with literal accuracy that he was broadening the basis of taxation. But the question raised by the Amendment was what were the taxes, what was to be the form of the broadening, and on what principles was the broadening to proceed. He took the view that all taxes without exception wore evil and bad. Of course, some were worse than others, but whether they were good or bad, they all had this in common, first of all that they were all paid, in fact, not by goods or by interests, but by individuals; and secondly, that however the tax was raised, in whatever form it might be presented, and on whomever it might strike first of all, in the end, inevitably and always, it fell on the whole mass and body of the people. That, if it were so, was a comforting reflection. However great might be the unfairness or iniquity of the Government, however unequal, one-sided, or biassed might be the apparent incidence of the tax, however strong might be the efforts to limit its incidence to a particular class, so great was the ingenuity of the people, so great and so strong was the play of natural law, that in the end it tended to diffuse itself more and more, and percolate deeper and deeper, so deep that no economist had ever been able to follow it, and every tax if they gave it time rested upon the shoulders which alone always must bear it—the shoulders of the mass of people as a whole, and therefore in the main of the working classes. The hon. Member for Blackburn the other day formulated a scheme for broadening the basis of taxation. He said that money was wanted for social reform, and there was nothing but to tax the rich, and let the poor go free. The hon. Member was the financier of the Labour Party, and he had no doubt would be the first Chancellor of the Exchequer in the first Labour Administration. But the hon. Member never had and never could explain how he was going to induce the capital which he desired to tax to stop in the country and be destroyed. He could not explain low he was going to take huge sums from the rich man, and insure that no injury should result to those who depended upon him. All schemes of that sort were vitiated at the root because their authors had never realised that in inflcting injury upon the rich or upon any one class they were really inflicting a far greater injury upon the mass of the people, because they had not realised that in the end every tax, every demand to take money out of the pockets of the people broadened down and that the whole people paid their share in the end. While it was true that all people paid, it was equally true that in this country, owing to our present basis of taxation, the great majority of the persons who contributed to the revenue did not realise that they were paying—or at any rate how much they were paying. In this Budget they were faced with a total expenditure which was said to be £154,000,000. As a matter of fact the figures of Budget statements were always incomplete, and he wished the right hon. Gentleman would consider whether he could not make a real complete account in his next Budget of the national finances as they stood by including at least the appropriations in aid and the other large sums which were entirely excluded. They were faced with an expenditure which was at least £164,000,000, every half-penny of which would be raised and spent. All that was provided by the mass of the people. How much of it was paid by people who knew what they were paying? Less than the odd £64,000,000, £63,180,000alone of the whole total was represented by the income-tax, estate duties, stamp tax, land tax, house duty and the other direct taxes, and the remaining enormous sum of £100,000,000, every half-penny raised by customs, excise and non-tax revenue, was paid by persons who, as for the vast majority of them, did not realise, at any rate had no very strong temptation to realise, what they were paying. To his mind that really was becoming a serious danger. The people had the power to insist on great reforms and great changes and it was the people who paid for them. Frame taxes as they would, alter the basis as they chose, in the end it would be paid by those who had demanded it, and it was increasingly important that the present basis should be so altered, broadened if they liked to call it so, although in his belief the basis always remained the same—that those who demanded, at all costs and against all advice, schemes involving great expenditure, should feel that it was always upon themselves mainly that the burden of expense would fall. For his part, since the basis of taxation must be broadened, since new revenue must be found, he hoped the broadening would take place not in an increase of indirect but of direct taxation. There was no doubt that direct taxes stimulated as no others could a wholesome interest in political affairs, and would constitute a real incentive to prudent economy on the part of the electorate. Moreover, they left the activities and enterprise of the country free to develop, and only touched its resulting accumulations, which he believed to be the true principle. And, from the point of view of the revenue there was no question that they had an enormous advantage. He was told that the estate duty cost about 1 per cent. to collect, and the income-tax from 1 per cent. to 1½ per cent., while every £100 of customs duty cost £5 for collection. So that direct taxes being at least 4 per cent. cheaper to collect than indirect, if the money raised by indirect taxation in this very Budget could be raised, and he believed it could largely, by direct taxation, there would have been £2,500,000 clear saving to everybody concerned. It was said that the poor taxpayer was indisposed to take his part of the national burden unless it was concealed from him. He believed that was a gross libel upon the poor. If the rich man was ready to pay his share of the expenses of the country, it seemed to him to be monstrous to affect to believe that the poor man, who had more power in these days than the rich man, should be unwilling to do the same, and that was particularly so if, as was clearly the case, he would pay less rather than more under the system which he advocated. He admitted the difficulty of collecting, but he believed that that was difficulty which was not insuperable; and he earnestly commended these considerations to the Chancellor of the Exchequer. He wished to add one word more with regard to another scheme for widening the basis of taxation which had been referred to. He thought it would ill become him at that moment to refer in detail to this other scheme, which he knew found favour with many of his hon. friends around him. He was, however, bound to add that for his part he was one of those who was returned to this House bound and pledged to resist two things (1) the imposition of any duty upon corn or meat; and (2) the establishment in this country of a general tariff of a protective character upon the German or the American model. That being so, if he thought it could even colourably be argued that the acceptance of this Amendment involved a support of either of these things he would never support it; he might even feel bound by his election pledges to resist it. But he did not think this either could or would be argued. The situation as he saw it was that this Government of retrenchment and economy had chosen to give up both, and instead, had plunged the country into a sea of new expenditure the limits of which were utterly unknown. That expenditure had now to be faced and borne. Mainly, like all other expenditure, it would in fact be borne by the poorer classes of our people, who could least afford that strain. And it was in the hope that neither this nor any other Government would allow the people of this country to be deceived into the notion that they could foist off that strain either upon any particular class in this country, or upon any community of foreigners, but that the people would be allowed to face it honestly and bear it knowingly and with their eyes open, that he would support the Amendment of his hon. friend.

MR. WALSH (Lancashire, Ince)

said he rose with considerable diffidence to take part in this discussion because it took the form of what was so frequently described as a full dress debate, and those who sat on the Labour Benches were not in the habit of participating at any length in such debates. He thought, however, that they had a right to know what was the real meaning of the Amendment. The Opposition Leaders had never, since they adopted the phrase "broadening the basis of taxation," given to the public any clear idea of the meaning they attached to it. In Germany where the "scientific tariff" had been applied remorselessly, the wages of the miner had gone up seventy-three marks a year; but the cost of his food had increased by 136 marks a year. At the trade union conferences held abroad the workers of all opinions were agreed upon one thing, that "broadening the basis of taxation" meant abstractions from the wages fund, intensifying the monopoly, tightening the grip of the capitalist on labour, and placing the working people more and more under the heel of the great syndicates and combinations of capital. It was officially admitted in Prussia that in consequence of the tariff applied during the last half dozen years the cost of living had gone up so much that 8¾ millions would need to be paid to the people in order to bring them back to the conditions of living before the tariff was imposed. Wherever they looked the same thing applied. They were told to go to America for an illustration. It was admitted by papers of high repute like the Daily Telegraph and the Morning Post and by the officials on the other side of the Atlantic in the Labour Department at Washington, that in America there was a large number of unemployed, thus proving that protection did not give "a lower income-tax and work for all." In April last there were 4¾ million trade unionists out of employment throughout the United States. Wages had recently gone down by 10 or 15 per cent in the United States, and the cost of living had increased by 28 per cent. He could only interpret the proposal for broadening the basis of taxation as an attempt on the part of a party not long out of power, who never when in power touched any such problem as this, to trade upon the necessities and miseries of the people with a view to diverting their attention from the real causes of their troubles and to the firmer entrenchment of monopoly. He would quote to the House a short extract from Sydney Smith's speech upon the broad basis of taxation which existed in his time. He said:— Taxes upon even thing that is pleasant to see, hear, smell and taste. Taxes on heat, light and locomotion, taxes upon everything on the earth and the waters under the earth, on the brass nails of the coffin and the ribbons of the bride, at bed or at board, couchant or levant, we must pay. Taxes on the ermine which decorates the judge and the rope that hangs the criminal. The beardless youth manages his taxed horse with a taxed bridle upon a taxed road, and the dying Englishman pouting his medicine which has paid 20 per cent. out of a phial which has paid 40 per cent. expires in the arms of an apothecary who has paid £100 for the privilege of putting him to death. At that time there were taxes upon 1,800 articles. Since then it had been the almost continuous endeavour of every statesmen worthy of the name to give the people a free breakfast-table. The Labour Party were resolute in their determination to maintain and increase the present freedom of trade in this country, because they were absolutely convinced it was in the interest of the working classes. There were points in the Finance Bill which should receive a little more attention than they had hitherto. He would ask the Prime Minister where was the promise with regard to the firm foundations which the Government intended to lay this session for old-age pensions? He was a novice in this House, and not at all acquainted with the mysteries of high finance, but he would like to call the right hon. Gentleman's attention to the words which he used. He said— It is our intention before the close of the next session to lay firm the foundations of this urgent, long-delayed, and overdue reform. I shall have next year, free and earmarked for the purpose, a sum of £2,250,000 to provide the nucleus of a fund for the relief of necessitous old age. These words were very definite. They conveyed to the Labour Party the impression that this year there would be at least £2,250,000 as the nucleus of a fund to provide for the claims of the necessitous in old age. Having listened to the remarks of the Prime Minister a few weeks ago, it seemed to him that the £2,250,000 had mysteriously disappeared, and that only £1,200,000 would be available on 1st January next year. Even the most indulgent critic could hardly say that 1st January next year would be before the close of this session, unless the House was to sit for a very long time. Many hon. Members in all parts of the House really thought that there would be at least £2,250,000 to be the nucleus of the fund for providing old-age pensions. While they were thankful for the begining which had been made, and while the statesman who had made the start was worthy of very great credit indeed, he must say that the reasonable expec- tations they were led to indulge in last year had not been fulfilled. He wished to call attention to another point in connection with the sugar duty. Every Member of the Liberal Party voted against the continuance of the sugar duty last year. The Prime Minister last year used these words— Objectionable as I have always thought it as a tax both on food of the poor and upon the raw material of several important industries, it is a duty with which you cannot deal piecemeal. If you were to halve the duty I do not think you would do any good whatever to the great bulk of consumers in the country. You might benefit certain trades in which sugar is a raw material, but I do not believe you would benefit the working classes or the consuming part of the community unless you get rid of the tax altogether. Here again they were entitled to feel disappointed. They did not advance these objections in any churlish or captious spirit, but because before they came into this House they had been led to believe in the promises of statesmen. They were gradually undergoing the process of disillusionment, but still it ought to be placed to their credit that at one time they did believe in the good faith of statesmen. The right hon. Gentleman had done the very thing which he declared would be most objectionable.


I showed in my speech that the actual reduction which had been made has given relief to the consumers.


said that so far as he had been able to ascertain the benefit was not going to the consumers at present. [An HON. MEMBER: Yes.] Of course, that was a matter of opinion, and other people's experience might be different from his own. He wished to direct attention to the fact that the sugar tax was wholly paid by the consumer, and that it was admitted by the Chancellor of the Exchequer to be objectionable. The portion of it which was still left amounted to £2,600,000 a year, or more than twice the amount which was to be devoted on 1st January next to the payment of old-age pensions. He thought that was a matter in which the right hon. Gentleman might have been a little more courageous. He might have taken his courage in both his hands and dispensed with the tax altogether. He and his friends thought the right hon. Gentleman had been a little too lenient in his treatment of those who possessed large estates, and that he had been by no means so generous as he ought to have been in his treatment of those who possessed little or nothing of this world's goods. The granting of old-age pensions to people at seventy years of age would only be felt by a most inconsiderable portion of the community. It was suggested that if they taxed very large incomes, they would break down the fund from which labour derived its source. The right hon. Gentleman in his Budget speech last year, speaking of the case of a man who left £1,000,000, said— I do not know what you would do with such a man. Those who were wealthy beyond the dreams of avarice, and beyond all human needs, ought to be taxed in order to meet the great, growing, and dire needs of the large bulk of the people. The payment of old-age pensions ought to begin five years earlier. Another point was that there was practically no provision made for the needs of unemployment. There was no increase of the grant of £200,000, though the percentage of unemployed was growing day by day. Among trade union members there was in April this year a percentage of unemployment of 7.5, a figure which had only once been exceeded in the last twelve years, namely in December, 1904, when it was 7.6. He and his friends believed that ampler provision ought to have been made for the unemployed. Without broadening the basis of taxation by putting greater burdens on the common people, those who had large incomes ought to be called upon to contribute in greater proportion to the overwhelming needs of the country. They had a courageous Chancellor of the Exchequer, and he might very well tackle the subject of the taxation of land values. It was too late to do it this session, but they threw it out as a hint worthy the consideration of the right hon. Gentleman. There was a great deal to be done with the taxation of land values. Figures had been supplied showing that the ground values in London alone had grown by over 200 per cent. during the last forty years. The same thing was taking place in every great centre of industry throughout the country. The taxation of land values had been upon the Liberal programme within his knowledge for eighteen years, and ha thought it was about time they began to do business. They believed that without any broadening of the basis of taxation on the lines suggested by the Opposition, and without placing any additional burdens upon the common people—which, if he know anything of the temper of the common people, they would resist to the death—they might, by tapping unearned incomes, and by placing a larger share of taxation upon these vast fortunes to which he had alluded, give greater attention and financial help to the unemployed, and so shape their Budget as to carry a message of hope to the people. Upon those lines the Labour Party were determined. They had, therefore, been compelled to disagree with the Budget as laid before the House, for they felt that upon those lines, and those lines only, was the true solution of pressing problems to be found.

MR. HEMMERDE (Denbighshire, E.)

said he could not hope to emulate the simplicity of the Member for Norwood in seeing no possible trace of fiscal reform in the Amendment, nor the financial ability of the hon. Member for Hackney in suggesting new sources of revenue out of which could be met the increasing expenditure; but he had been struck by the fact that until the last speaker, not a single word had been said about the taxation of monopolies, which was one of the cardinal planks in the Liberal Party's programme at the last election. It seemed to him that this question had had a most remarkable history in the programme of the Liberal Party. They came into office some three years ago, pledged, if ever they were pledged to anything, to the taxation of land values, which was certainly a, ready means of broadening the basis of taxation. If the Amendment referred, as it clearly might do, to the taxation of land values, he for one should be prepared to vote for it; but one must take the Amendment according to the sense in which it was really intended, and he was therefore not prepared to support it, because it clearly referred to nothing of the sort. When they came into office they were faced with this question, and they were told a Land Valuation Bill was necessary before they could tackle it. That seemed to be a reason why in the first session they should have had a Land Valuation Bill, but they had not one. They expected one in the second session, but they never had it. To-day they were at last assured that a Bill for the valuation of the land of England would be produced within a very short time. Many of them were devoutly thankful for that assurance, but they had got to regard the matter from the point of view of practical politics, and, seeing what had happened to a previous measure leading up to the taxation of land values in Scotland, and knowing what was likely to happen in the House of Lords if an English Bill were passed through the House of Commons he wanted to consider for a moment if it were not possible through the Budget itself, without a preliminary valuation Bill, to tax land values. During the debate on the Licensing Bill they heard that, if that measure were thrown out, the Chancellor of the Exchequer might upon another occasion find himself able to proceed by way of high licences, and thus to get indirectly the remedy he was unable to get directly. If that were possible in one case, it might be possible in another. Under certain circumstances they at present, for instance, valued land at its selling price for the purpose of death duties; and, if they were faced with the House of Lords throwing out a Land Valuation Bill, he hoped they would use the powers they possessed. There was hardly a single item in the Government's programme that was not intimately connected with this reform. Last year, when the Small Holdings Bill was brought in, it was pointed out again and again how important the question of the valuation of land was in this connection. It would be the same with the Housing Bill, and all through the Government's programme of social reform. This great question of land values underlay everything. He did not want to quote the Chancellor of the Exchequer, who had made many speeches, in Wales and elsewhere, upon this subject, and in which he had developed the taxation of land values as few other people had done, but he wished to quote the words of one who was always held to be a most moderate Member of the Liberal Party. The Secretary of State for Foreign Affairs had said— I am sure that the party which first masters, that question (the taxation of land values), which first makes it its own, which can show that it is really capable of dealing with it, and is not going to let itself be hampered by rested interests from exercising its intelligence upon it freely—that party will have a great and solid ground upon which to appeal to the country. If they at once took action without suggesting Land Valuation Bills they would be on great and solid ground in which they might appeal to the people. It was upon the taxation of monopolies that they went to the country at the last election, and upon the taxation of monopolies the Government ought at any rate do something in accordance with their pledges. The hon. Member for Norwood had pointed out with some truth that-one party was proposing to tax the rich and let the poor go free; and he pointed out the danger of taxing wealth so as to drive it out of the country and that in taxing wealth they taxed industry. If those were the hon. Member's views, he ought to be able to claim him as an adherent to his suggestion, because such objection did not apply to the taxation of monopolies. No one could take his land out of the country, and no economist of any repute would suggest that a tax upon land values would have the effect of actually raising rents in the country. In the taxation of land values they had a tax which would remain where they imposed it and which would not filter through the rich down to the poor. The right hon. Gentleman the Member for East Worcester had told them that it was quite impossible to find out how much the working class family now paid in taxation. That might possibly be the case. He gave certain figures pointing out how taxes affected the poor at the present time. He remembered the right hon. Gentleman the Member for West Birmingham, when he first tried to find out how much the ordinary man with £1 a week paid to taxation, gave them the figure of 1s. 7d. He did not know whether the process of broadening the basis of taxation had for its object the increasing of that to some higher sum; but surely the man with. £1 per week only ought to pay considerably less than 1s., and the taxation ought to be put on the shoulders of those who could afford it. Though to-day some of his supporters seemed to be a little timid, the foundation upon which the right hon. Gentleman proposed to stand was indirect taxation, beginning, at least, with a 5 per cent. tax on all food and a 10 per cent. tax on all manufactured articles. Whether he was likely to increase the 1s. 7d. paid by the man in receipt of £1 per week to 2s. or nearly 3s., it was perfectly obvious they were going to begin, not to put taxes on the rich and let the poor go free, but to put most of the taxes on the poor and let the rich go free. The indirect taxation, on which protection was based, would not have the effect of increasing industry so that the poor could get any indirect advantage oat of the system. They were, of course, told that, although they would increase the taxes upon them, they would give them more employment and more wages; but, as a matter of fact, the right hon. Gentleman put forward a refutation of the argument himself at once, because he pointed out that, if they gave a man 1s. per week more by taxing him less, they would at once raise the amount of employment in the country and develop industry. If they so altered their taxes as to take them off food, it was obvious they were going to do a great deal for the development of the industries of the country. Mr. Carnegie said not long ago that, if they altered their taxation so as to give the majority of the people £1 a year more to spend, they would do more to develop industry than by any other method. They were faced with three alternatives. They had either to increase the taxes upon the poor, which was protection; or increase the present taxes upon the rich, which, although it might have a very lawful object and excellent effect, must to some extent be a penalisation of industry, or they could put taxes upon monopolies and the wealth of the people without in doing so penalising industry. By the last alternative they would put their taxes upon the wealth created by the people and get back for the people the wealth they had created. Of course, they were told there were certain difficulties. That was, no doubt, a reason why they should proceed cautiously at first, but it was no reason why there should not be at least a small revenue tax, or why taxation should not be so devised that it would absorb all future land values or why a land tax should not be put on all unoccupied land. If a start was made there a great deal would be done for the revenue and to stimulate industry. People said it was unfair to tax a monopoly, but was it not equally unfair to leave in private hands what ought to belong to the public? That point was very well put by a well-known writer, who recently said— Until the State has resumed what it never had the right to give away to any individual, its right to the fund created by its own existence and its own endeavour, it must do what is devoid of any moral sanction, deprive individual citizens of the result of their own individual labour. What was the position to-day? A man could not be made rich unless he was a producer, without making others poorer, and to-day we were allowing these people to become rich. They were thriving on the needs and libour of the people. The Government did not seem to be giving to this question the attention it deserved. The Liberal Party had won many seats on this question. It had been fought all over the country, and in bringing this matter into prominence they had had the support of the Government and had quoted many of the speeches of right hon. Gentlemen who sat on the front bench. He thought that Government owed it to the party to take up this question seriously. They owed it to the party because many of them did not wish to have their pledges thrown in their faces, but they also owed it to the nation when they were face to face with this great expenditure. Of the three courses lying to their hand, there were only two that they could follow. They could tax earned of they could tax the unearned wealth, a thing which he suggested the Government had already shown a desire to do, by the differentiation in the income-tax between earned and unearned incomes. One hon. Member had said that he would support an old-age pension scheme from a fund contributed to by all. What better fund could there be than that provided by land values? When they came face to face with this great expenditure for social needs (and he did not think it was too great—he thought that twice and thrice as much could be afforded for old-age pensions), they had to find some sources of revenue which were capable of great development. He appealed to the House in the eloquent words of the right hon. Gentleman the Member for West Birmingham— There is a trade untouched in your midst which would bring back to the wealth of England £250,000,000 per annum, and that trade you might win, not by colonising South African deserts, not by forcing civilisation upon unwilling people at the point of the bayonet, but by r claiming the land of England from the trammels of a bygone age. £250,000,000 might be a large estimate. The hon. Member for North Paddington thought it was too much, but here was a huge value created by the public and growing daily, and yet it was left by the Opposition for a gamble of a farthing or a halfpenny on the food of the people. That seemed to him a paltry thing, and he preferred to stand by the words of the right hon. Gentleman the Member for West Birmingham, who was preaching then the same cause as he (Mr. Hemmerde) and those who thought with him were preaching to-day. He hoped the Government would be able to give this matter the attention it deserved and do something to assuage the bitter disappointment of the land reformers in this House. He asked the Government, in considering the question of the broadening of the basis of taxation, to do what they could to put Liberal finance on a suitable basis, on a basis that was easily understood, and one that could be put before business men and set against the attractions of fiscal reform. He asked for a lead in this matter and that the Government should, in refusing to tax the poor, at the same time come down to this great revenue that was made by the poor. Let them base all these schemes of social reform for the benefit of the poor on the wealth that the poor created, and in that way, and that way alone, let the poor make their contribution. The Liberal Party was pledged to take off not the half but the whole of the sugar tax, and to reduce the tea tax, if not to abolish it. They were not justified in keeping up these taxes when they had a huge revenue capable of being appropriated to their removal. He appealed to the Government to do what they could by their finance, not only to take the tax off production but in every other way they could, by other taxes, to assist production by giving not only free trade to this country, but freedom to produce under a careful system of land reform, which he believed could be obtained ultimately, if not directly, by the Budget.

MR. COURTHOPE (Sussex, Rye)

said he would not attempt to follow the hon. and learned Gentleman who had just sat down nor would he attempt to argue with him the question of land values, but he would point out that the hon. and learned Member had overlooked the fact that both Mr. Gladstone and Sir William Harcourt were among those who held the firm conviction that the taxation of land values ultimately and invariably fell upon the tenant. He desired to confine his remarks to that part of the Amendment which referred to local taxation. The Postmaster-General had commented upon the fact that Members of the Opposition had suddenly become very keen about this question of local taxation, but if the right hon. Gentleman or any other member of the Government would take the trouble to inquire into the matter he would find that this was not a party matter, but that there was a very large movement in the country, and great interest taken in this question; that the agricultural classes and other ratepayers were determined to bring their grievances into public notice, and they would not rest satisfied until those grievances were redressed. The right hon. Gentleman further said that two things had been done in the last two years which would benefit local authorities and reduce the burden of local taxation. With regard to one of them, namely, the arrangement made last year with respect to licences, no one in the rural districts considered that any benefit was being conferred upon their localities by that arrangement. The arrangement was made in order that the Chancellor of the Exchequer might benefit by any increase of the duties, and the increased amount of duty paid must on the whole tend to a certain extent to decrease the number of licences taken out. The local rates would, therefore, lose rather than gain by the arrangement. The burden of local rates had not been relieved in this way, but, although they had not been increased up to the present, there was a tendency that they might be increased in future. The Postmaster-General was not, therefore, entitled to claim that as a relief to local taxation. It was no doubt originally intended that the incidence of local taxation should fall according to ability to pay. It was equally certain that it did not now so fall, and necessarily there was bound to be a certain amount of inequality and injustice, so long as personal property was exempted from rating. He was not suggesting so large a change as that personal property should come under the rates to-day; but the result of this inequality was that some trades and professions had been rated at a very much higher rate than others, and that the occupiers of agricultural land had been rated at a much higher rate than any other trade or profession in the country. They were paying rates not only on their premises, but on their stock in trade, on their raw material, on everything they had. If anyone took the trouble to go into the figures, he would find that out of every £100 of gress income the farmer was paying an enormous amount more for rates than any other class of the community. This in justice was recognised some twelve years ago, with the result that the Agricultural Rates Act was passed. A recommendation had been made by a Royal Commission that agricultural land should be rated at only one-fourth of the rateable value, but the Act did not go so far as that. It exempted agricultural land from half the rates, and the agricultural rates grant was then made to compensate local rating areas for their loss of income owing to the Act. At that time the average rate in the rural districts was 2s. 2d. To the best of his recollection that average was arrived at by taking the rateable value of all agricultural property, and dividing that by the total amount spent in the agricultural area. The grant was accordingly fixed at 1s. 1d. In the year 1896–7, the amount of the agricultural rates grant paid to the local spending authorities was £1,330,031. From the discussion at the time, it was clearly the expectation of the Government that 2s. 2d. would remain more or less the average rate for a long time, and that the agricultural rates grant would continue to make up the loss incurred by the local spending authorities. What had really happened in the last eleven years was that the rateable value of agricultural land had doubled, being now more than 4s. in the £, while the agricultural rates grant was less than it was in the first year owing to a decrease in the rateable value, so that there was a deficiency of £1,500,000 a year. That had added enormously to the burdens of the rural districts. How was it that rates had risen to 4s. in the £? It was very largely because the local rates were used to such a tremendous extent for national services. He would confine his observations to the five services which the recent Royal Commission on Local Taxation expressly declared to be national, viz., the police, the cost of which was paid up to 61 per cent. out of local rates; lunatics and asylums, paid out of local rates to the extent of 75 per cent.; education, to the extent of 48 per cent; roads and bridges, 86 per cent.; Poor Law relief, 91 per cent. He had taken the figures for 1904–5 which were in the latest Blue-book on the subject, and in round figures the local rates paid £40,000,000 towards the £56,000,000 which was expended altogether on these five national services. Was there any justification for this large preponderance of cost falling on the localities rather than on the whole community? He did not think there was. The police were now largely under Imperial control; at all events they had to be kept up to the standard laid down by the Imperial Parliament, and to that extent they were not under local control. Lunatics and asylums, he thought, on every ground were a national matter. Education, again, was a national matter. The Imperial Parliament laid down the conditions of education, and there was very little beyond local administration left in local hands. Another point was that in the rural schools the children were given an education which fitted them in the large majority of cases, not for the rural community, but for the towns, with the result that a very large proportion of the children, after they had received their education paid for by the agricultural community, eventually left their districts for the towns, and were lost to the areas which had educated them. Therefore, he contended, education should be on a national basis as far as expenditure was concerned, or, at all events, great relief should be given to the local rates. Then as to the roads and bridges. Time was when they were very largely a local affair. But now they were very largely a national affair, and they were becoming of an increasingly national nature, because the most serious user of the roads was by very fast travelling vehicles and heavy motors. coming, it might be, from hundreds of miles away, and which, therefore, did not contribute in any sense whatever to the upkeep of the roads which they destroyed. He did not intend to ask the Government to do anything definitely to-day with reference to roads and bridges, for it was generally expected that before very long increased taxation of motor cars would be proposed, and that would be the most fitting time to propose an increased contribution towards the roads. He did not think the roads could be taken entirely away from the local rates, because there was bound to be a certain amount of local control, and wherever there was local control there ought to be a local burden.

Attention called to the fact that forty Members were not present. House counted; and, forty Members being found present—


, continuing his observations, said he had enumerated the five services which cast so heavy a burden upon the local rates. There was a tendency, particularly noticeable in the last two years of legislative proposals, largely to increase the burden on the local rates for national purposes. There was certainly a generally accepted belief in the rural districts that if the present Education Bill was passed in its present form it would throw an increased burden on the local rates. The Small Holdings Act had thrown an extra burden upon them, and the Housing Bill would certainly impofe a very heavy burden. Then there were such Bills as those for the feeding and medical inspection of school children, and others of that nature, which tended to increase the burdens on the local ratepayers, though the services were essentially national. He thought the time had come when the local ratepayers could no longer stand this increased burden. The subject which he thought constituted the strongest case of all, and with regard to which the Government might reasonably be asked to do something at once, was that of lunatics and asylums. There was no doubt whatever that, if the Government took over the whole of the administration as well as the cost of the pauper lunatics and asylums, the gain to the community would be very great. It was in 1846, he thought, that the Government took over the prisons, the conveyance of prisoners, and so forth, and the result had been a great saving to the community at large. Of course, slightly more had to be found in the shape of taxes, but the relief of rates was much greater than the increase of taxes. The reason was obvious in the case of prisons. In the old days every prison had to provide accommodation for every class of prisoner. Now the management was much more economical because certain prisons were arranged for certain classes of prisoners, So it would be in the case of asylums and pauper lunatics. At present each county had to provide for every type of lunatic—and there were a great many types which required different treatment and even a great variety of premises, and there was not the slightest doubt that a very large saving might be made, probably as much as a third of the total cost, if the whole administration of pauper lunatics and asylums was taken over by the central authority. He urged the Government to give this matter their real consideration, because it would undoubtedly be a great relief to the local spending authorities and the ratepayer, and at the same time a real economy for the community at large. One objection usually raised was that this could not be done without a Valuation Bill. He could not, however, see what a Valuation Bill had to do with the control of lunatics. The central authority could take over the whole affair. The local authority did not want to keep the control of the asylums. He did not know of a single case where a county would mind parting with the control and losing the burden of their lunatics. Where a Valuation Bill came in passed his comprehension. Even if the Government felt they could not entirely take over the administration, a certain amount of that could be done locally, and it would be very easy to make a contribution per head of the lunatics. That did not require a Valuation Bill. He really thought that that argument was a very poor reason for shelving the difficulty and causing delay. In the Report of the Royal Commission on Local Taxation it was stated that roughly there were 100,000 pauper lunatics in county and borough asylums, and the numbers were increasing annually, and they recommended that efficient management should be carried out by a central authority at an additional cost of £1,500,000 to the Exchequer, while the saving to the rates would be nearly £2,500,000 for exactly the same service, which at the same time would probably be managed more efficiently centrally than locally. He considered the matter to be of the greatest possible importance. It was to the supreme interest of the country at large that injustice of this kind should not continue, and that the life of those who lived and were taxed locally in the rural districts should be made as easy as possible. The increase of rates had been a very large item in the causes which had driven the yeoman farmer off the land, and anything that reduced this burden, and helped to get a useful class of the community back where they ought to be, would be a decided stop in the right direction. He urged this sincerely and not captiously in any way, and he hoped the Government would be able to hold out some promise of help in the future.


said he found himself in general agreement with the main lines of the Finance Bill, and in absolute disagreement with the object of the Amendment. He did not think those who piled up Debt to so extraordinary a degree in bygone years were in a very strong position in attacking the finance of an Administration which had paid off Debt at such an unparalleled rate, and at the same time afforded considerable relief in ordinary taxation. He agreed that some sources of taxation were already heavily burdened, but others were not, and though the provisions of this Finance Bill must increase the burden of taxation before very long, there were sources of taxation on the existing basis from which a considerable amount of additional revenue might be raised. He was aware of the risk of driving capital out of the country, but it was obvious that the contribution of many of the largest incomes was not equivalent to that of many of the more moderate incomes, and, therefore, from the largest incomes a considerable amount of revenue might yet be fairly raised upon the principle of taxation according to ability to pay. Again, the services conducted by local authorities, many of which were mainly national, and very largely onerous in their character, entailed an undue burden upon realty, and personalty gave an insufficient contribution. He did not believe it was impossible to make personalty contribute fairly to local taxation, and a great deal was shown by the minority Report on the incidence of local taxation—that of Lord Balfour of Burleigh and the Secretaries to the Treasury—as to how that burden ought to be lightened. At one time in his own country there were counties in which rates were levied on income, whether it was personalty or realty, and he had never been satisfied that, although that system dropped out, in some respects it might not have been maintained. Again the cost of the administration of the liquor traffic entailed a considerable additional burden upon local administration, and the monopoly value, the profits of the retail trade conferred by the monopoly, had been allowed hitherto to go into private hands. Ultimately a very large revenue might be derived from that source, while there were other forms of wealth, which might be more immediately rated, although at first they might not make so large a return as was sometimes supposed. Land values and mining royalties had been referred to, and there was certainly fair ground for consideration whether wealth in that and in some other forms made its fair contribution to public burdens. He did not think it did; and from these sources they should look for some addition to the revenue, although he expected in the matter of land values the local authorities, and not the Treasury, would be most likely to get anything that came out of it. For some works he believed they would have to use loans, and loans could not be altogether barred in making provision for some of the public requirements. Yet, however, sanguine they might be as to increased returns from these and other sources, and the increased returns on existing taxation which would accrue from increased national wealth under a free trade system, and our national wealth was, happily, rapidly increasing, we had to reckon in the immediate future with a vast increase in public expenditure. The doubt that crossed one's mind was whether these liabilities had been sufficiently discounted in the present Budget. They were grouped under several heads—old-age pensions, defence, the relief of local taxation or contributions by the State to local taxation, public works, and social legislation. As regarded old-age pensions they found themselves confronted with the very moderate figure of some £6,000,000. It had been estimated to go as high as £7,000,000, but it seemed likely to involve them ultimately in perhaps three or four times that sum. No Government could resist reasonable pressure to reduce the age-limit. Really a seventy years old-age pension was almost a mockery of an old-age pension scheme. Many of them, even in that House, were pretty well worn out before they got to the age of seventy, and he thought sixty-five would not be an excessive limit. For many of the working classes sixty would not be an excessive age at which to provide against old age. The question was how to get the best results from this expenditure. What was incumbent upon them was to consider whether this scheme had been introduced with due safeguards against imposition, waste, and thriftlessness. He would support a lower age-limit, and he hoped the Government would devise a more stringent qualification. As the scheme developed he trusted they would be able to engraft upon it some form of contribution, and that it would be accompanied also by Poor Law reforms and by a stipulation that the drunkard and other classes of that description would be eliminated. Under those circumstances only would the old-age pensions scheme be a sound financial investment. What they had to fear was that by tinkering, patching, and muddling through, although they might escape disaster in the field, they might yet incur disaster in their domestic administration. Many of them had been alarmed by the recent utterance of the Chancellor of the Exchequer which implied that they might be able to reduce their armaments, but the uneasiness created by that disquieting impression had been soothed by the recollection of the firm promises and declarations made by the Prime Minister and the Foreign Secretary with so much emphasis. It was clear that a largely increased expenditure would have to be incurred immediately to secure naval pre-eminence. Unless the Territorial Army scheme failed there would be less economy in the Army, because the Territorial Associations would need more money. Their main requirements at the present time was the transference of the main naval base to the North Sea, which involved the completion of the works at Rosyth. He could not imagine any greater misfortune than that this country should be forced into war without a naval base in the North Sea ready, more especially in view of the activity now being displayed in deepening the harbours and channels on the opposite coast of the North Sea. He did not altogether approve of the policy of the total abstention form loans in the carrying out of works in which the national security was involved, and by means of a loan the millions required for Rosyth could be raised at once. He agreed that it was well to do without loans where it was possible, but in view of the enormous liabilities which the next Budget must disclose, the question was whether they could face the cost of these vast works out of revenue within the time in which the works should be completed in order to render the country secure. Then there was the cost of the social programme. The expenditure upon education and physical fitness was a good investment, and the Government could not cry "Halt" in those outlays which were Involving a great burden upon the ratepayers, and were becoming a growing liability upon the State. The questions of the incidence of local taxation and grants-in-aid from the Treasury were becoming pressing. New departures were being inaugurated in the form of national undertakings, the burden of which would come upon the Exchequer. The means of communication were to come under public control, and Irish land settlement would have to follow upon Irish land purchase. Then there were undertakings such as afforestation, He was inclined to think that hardly enough revenue was being raised for all these undertakings. Committee after committee had urged the liability for afforestation upon the State, and the Government would ultimately be obliged to act in this and other matters which would entail a considerable burden upon their resources. He was making those objections in no pessimistic spirit. So long as they aimed at strengthening individual character and resource, so long as we had security for peace with our neighbours, and the prosperity for ourselves which free trade afforded, we were in the strongest position of any nation in the world to meet our national responsibilities and requirements. It was in regard to defence that he had some concern. This country would never again go lightly into war, and still less would we take the initiative in making war. Nevertheless, the nation would be sure to make short work of any Ministry which was unprepared for war, because any national misfortune would be crushing and irreparable. A naval scare would be the most costly and dangerous of all possible contingencies, and he urged the Government to face boldly the inevitable and not unduly delay a prudent provision for the immediate future in matters of defence, more especially as regarded the naval base in the North Sea. The greatest service the Government could render to the State was to make it comprehend the true financial situation, so as never to allow the country to imagine for a moment that the conditions in regard to safety were more favourable than the acutal facts warranted.

MR. BEALE (Ayrshire, S.)

said he would be glad to see the basis of taxation broadened in a true sense, but before he could support that proposition in the sense of the meaning which had been attached to that phrase throughout the country he would like to be satisfied that it was not going to benefit particular trades, because protection to his mind would bring about a disastrous condition of trusts and coalitions in the commercial world. If the basis of taxation was to be broadened in order really to benefit those who were brought into the scope of the taxation by the broadening, then it was quite another thing. If they eliminated all those ideas of restoring prosperity to certain trades which were not making as much profit as the capitalists desired, if they left off mixing up this phrase, which had been interpreted in the country as meaning a promise of protective duties to manufacturers, if they would eliminate all the absurd notions of making the foreigners pay our taxes, and the idea that they could increase the total volume of trade of this country by a process of protective duties, then he was quite willing to consider the subject. He was not in favour of a contributory scheme of old-age pensions, because that had been explained as meaning a scheme of insurance as an absolute condition for getting a pension. He agreed very much with the previous speaker's description of the present scheme as paltry and unsatisfactory. It. might, however, eventually grow into one of a larger and more comprehensive character, and he welcomed it for the benefit it would confer in substituting a pension scheme for the present method of maintaining the aged poor. He hoped that eventually an attempt would be made to bring about a broad national scheme of old-age pensions. They knew what was meant by hon. Gentlemen opposite, and by many people throughout the country, when they spoke of the broadening of the basis of taxation; they meant duties on the articles consumed by the community. He would not rule out such duties if they were imposed for the purpose of providing old-age pensions, if the money could not be obtained otherwise, but he did not wish to express approval of the retention of such a duty as the sugar duty. He did not approve of any taxation the burden of which was relative to the number of little mouths which the taxpayer had to feed. He was glad to hear from the hon. Member for South Hackney that there were many methods of taxation which could be tried before they had recourse to an expedient of that kind. Some people were in the habit of discussing the question of old-age pensions as if only the very poor who could not bear more taxation were to get the benefit of them. Under a large and comprehensive national scheme an enormous number of people belonging not only to the lower, but the middle classes and even the well-to-do would benefit. He did not agree with the previous speaker that as time went on there should be more definitions, restrictions, and conditions. If a poor person received 5s. a week he would be able to live with his friends, and it would be far more economical for the State to pay that sum than to spend 14s. a week in keeping that person in a workhouse. He was ready to face any broadening of the basis of taxation which might be found necessary in order to raise money, provided it did not indirectly involve protection.

VISCOUNT HELMSLEY (Yorkshire, N.R., Thirsk)

said he did not intend to go into the whole question of the Budget, nor to follow his hon. friend into a theoretical discussion as to the true meaning of broadening the basis of taxation. It seemed to him that one could push theory on the question of taxation a good deal too far. While one might hold that taxation was mainly—as of course it was—for the purpose of providing revenue, yet he failed to see why they should not use taxation where they could in order to get some indirect benefit out of it. If taxation were so adjusted that they could get some benefit from it it would be better than a system which was merely disagreeable to the person on whom it fell. Those countries which adopted a system of taxation which they considered suited their needs had something which we had not. No one could say that in Germany there was not far less inclination to kick at the amount of taxation imposed than there was in this country. The Germans would probably be more willing to spend a large part of their revenue upon their Navy than even we should on our Navy, although the Navy was of more paramount importance to us than it was to the Germans. He was profoundly disappointed with the Budget because it did not deal in any way with local taxation. Last year the Prime Minister led the House to expect that he would in the near future do something more definite to put local taxation on a sound footing. He was afraid as Governments went on, each Government put off dealing with this important and crucial subject. This Parliament was now in its third year, but this subject seemed very likely to meet with the same fate as others and not be dealt with at all. The Postmaster-General had said that the late Government did nothing in his direction. That fact did not really affect the argument, because the late Government during the whole time they were in office dealt with War Budgets. It was in this Budget, when the Chancellor of the Exchequer had a boom year and a large surplus, that they expected something would be done to put the question of local taxation on an equitable footing. As representing an agricultural constituency he urged the Government to recognise this as a reform which should be carried out as soon as possible. The burden of rates was increasing year by year, and no one could say that the increase was entirely due to the local authority. It was due to duties imposed by Acts of Parliament. No doubt some of the local authorities might be extravagant, but that accusation could not be levelled against all of them. A large part of the increase was due to education, added to which now was the medical inspection of children, and various requirements, owing to improved standard of living made by the central authorities such as their requirements with regard to lunatic asylums and the regulation of the police and so on. The rates in 1879–80 were 15s. 6d. per head of population, but in 1904–5 they had increased to. 28s. per head in spite of the fact that the rateable value had increased by about 40 per cent. It had increased from £116,000,000 to £163,000,000 and, therefore they might have expected that taxation would have gone down in consequence, During the whole of that time the Exchequer contributions had not increased in the same degree as the burden on the ratepayers. The Exchequer contributions had only increased by £2,197,000, and consequently a large proportion of the additional burdens thrown upon the local authorities had fallen entirely upon the ratepayers. There were several grievances which the ratepayers had to endure as against those endured by taxpayers. The ratepayers contributed 82 per cent. of local taxation while the owners of other forms of property contributed in a very trivial degree. Then there was a grievance which the agricultural ratepayers had as against the urban ratepayers, but he did not propose to deal with that particular grievance on this occasion. When he said that the ratepayers contributed 82 per cent. of the expenditure required in local districts by the local authorities, it had to be recognised that it was not entirely for local purposes, but that a considerable proportion of it was for services which in reality were more national than local. Why should one form of property contribute almost entirely to this taxation for the expenditure of the local authorities? They all knew that that state of affairs had arisen purely by a series of accidents. It was intended originally that all the money required for local purposes should be raised according to the means of the people of the locality paying for Imperial taxes. Gradually personalty escaped local taxation; local taxation was raised alone from rateable property, and there it remained. The position was at present burdensome, but it was becoming more burdensome owing to the increasing requirements of the central authorities. Those services to which the ratepayers were obliged to contribute were not always local in character. They had been over and over again described as national services. The Report of the Royal Commission on Local Taxation stated that education, main roads, police, lunatic asylums, and Poor Law were services which should be regarded as national. That was a wise recommendation which nobody could dispute. No better defini- tion of what the local authorities should be required to contribute to had ever been made than that given by the late Sir Massey Lopes in this House. He said that the Exchequer ought to relieve the ratepayers of expenditure which was not dependent upon local control. As regarded education, one might say that it depended on local control but it was at a standard fixed by the central authority. In regard to poor relief, it might be said that local control was reduced to a minimum, and the same was especially true with regard to the police service and lunatic asylums. That being the case, it seemed to him absurd that a large proportion of these services should be paid for out of this local taxation which was raised so unjustly, and not from the national funds. The Postmaster-General had admitted that there was a grievance with regard to local taxation, but said that it could not be removed without a Valuation Bill. They had heard talk of a Valuation Bill for a long time, but it had never come off. It did not seem to him necessary to have a Valuation Bill in order to remedy these particular grievances. National services at present paid for by local authorities could be put on the Imperial Exchequer without a Valuation Bill at all. To remedy the grievance of the agricultural ratepayers as against the urban ratepayers a Valuation Bill might be necessary, but for the other grievances a Valuation Bill was not necessary at all. Lord St. Aldwyn, whose authority on finance hon. Gentlemen opposite would be ready to admit, criticising some proposal that had been made in the agricultural interest for the benefit of local taxation, went so far as to say that in his opinion a good many of those services should be borne entirely by the national Exchequer, such as lunatic asylums, workhouses, and the police. That was the minimum for which he would ask; and that was the ground on which they could make a beginning in the way of relief of local taxation. It had already been done with regard to prisons, and there was no reason why it should not be done now in regard to lunatic asylums, Poor Law relief, police, and main roads. Main roads were every day becoming mare and more national and less local. In old days they were the main arteries of communication, and then they were paid for by the people who used them by toll bars, which he thought was an admirable method. But when the roads became of more use to the parishioners than to anybody else, the upkeep of them was charged to the parish or local authority. Now they were going back to the old system and the main roads were becoming again the main means of communication, and it seemed to him reasonable that they should be paid for out of the national Exchequer and that all that the local authorities should be called upon to do was to pay for the district roads. He had mentioned the general lines on which local taxation reform might proceed immediately without any special effort on the part of the Government. It did not require any heroic measure of valuation or anything else to carry the reforms recommended by the Royal Commission on Local Taxation, which were long overdue. These services should be put on the national Exchequer. There was in regard to this matter throughout the country a great feeling which the House hardly recognised. It was the only thing which stood in the way of all progress in carrying out the wishes of that House in regard to local legislation. The fear of increasing the rates stood in the way of the advance of secondary education and other reforms, and until something was done to relieve the ratepayers of the unjust burden which fell upon them he was afraid that the local authorities in the rural districts would be very chary of spending money on necessary services. He entreated the Chancellor of the Exchequer in next year's Budget—it was too late for this year's—to make a beginning by putting some of those services on the Imperial Exchequer, and so relieving the local authorities of the amount they cost at present.

MR. CHIOZZA MONEY (Paddington, N.)

said that there was very general agreement with part of the observations which fell from the noble Lord. Undoubtedly the time was long overdue for a readjustment of the financial relations between the Imperial and local authorities. But the noble Lord would forgive him if he dealt with the even more important considerations raised by the Amendment before the House. A good deal had been said in the debate about broadening or widening the basis of taxation. He could not help expressing surprise that no one had defined what was meant by the "basis of taxation." What was the basis of taxation in this or any other country? It was the sum of the productions of the labour—mental and manual—exercised by the people of the country. That and that alone was the basis of taxation. In other words, the national dividend was the basis of taxation. They could make it no wider or bigger by taxation, but he asserted that if they were not very careful in their methods of taxation they might very easily make it narrower. That was the first point. He would like to advance this proposition: that they could not by means of import duties increase the national dividend—increase the product of the country. There was one observation which fell from the right hon. Gentleman opposite, the Chancellor of the Exchequer in the late Government—he almost regarded it as a gleam of humour—to the effect (interpreting or misinterpreting something that fell from the Postmaster-General) that we could levy a market toll, and so bring in as taxpayers other people outside these realms, including presumably British Colonists, and make them contribute to the revenue of this country. He could hardly think that suggestion serious. If it was really believed that the foreigner could be persuaded to pay a portion of our taxes, why was such nice discrimination made between different articles? Why were raw materials always excluded? Why not levy a market toll on raw materials and give us old-age pensions at thirty-five years of age? Hon. Gentlemen opposite must make up their minds as to which leg they would stand upon, whether they wanted tariff reform for the purpose of revenue or for the purpose of protection. If they wanted it for the purposes of revenue, to lower the income-tax by broadening the basis of taxation, if they wished to put a greater burden on the poor and less upon the rich, where did the protective effect come in? If, on the other hand, the intention was to decrease the imports of this country let them give up the revenue tax. They could not ride both horses. He passed to more general considerations. The general charge made against the Budget was that it increased expenditure at the same time that it decreased revenue. He would have been inclined to sympathise with that charge if this were not a free trade country admitted to have passed through a considerable period of prosperity, compared even with other periods which were nothing less than prosperous. This country had within its borders an amount of accumulated wealth and national income which compared more than favourably with any other country in the world. It had been stated that our war reserve had been greatly trenched upon. That was a gross exaggeration. The war reserve was the taxable capacity of the country, which was not gravely altered by a degree of taxation such as we had at present. Our expenditure had been stated as £154,000,000. If they brought under consideration things which were left out in the ordinary financial statement the amount was said to be as much as £160,000,000. But taking it at £154,000,000 could such a statement be justified? If they deducted £18,000,000 or £19,000,000 relating to Post Office business, which should not appear as national expenditure at all, the amount was reduced to £136,000,000. Of that £136,000,000 the National Debt Service absorbed £28,000,000, reducing the expenditure for 44,000,000 people to £108,000,000. Of that £108,000,000, there were absorbed for the purposes of defence, £60,000,000, leaving about £40,000,000 for Imperial expenditure on the Civil Service. Could that be said to be too great an expenditure when compared with the national income, which now amounted to something like £1,800,000,000? When that comparison was made, as it ought to be made, it was an exaggeration to say that we had greatly trenched on our resources by our expenditure. It was not enough to go back five, ten, or fifteen years and hold up our hands in horror because our expenditure had increased by £5,000,000, £10,000,000 or £20,000,000. When it was possible for German visitors to come to this country, as they did recently, and express their pity for the condition of children in a school in Clerkenwell, did it not make hon. Members think, not whether we were spending too much, but whether we were spending enough? If such considerations were taken into account, it would be realised that it was not possible to reduce the national expenditure.

SIR F. BANBURY (City of London)

It is a pity you did not say that two and a half years ago.


said he was not responsible for anything he had not said. What he did say to his electors was not that we were spending too much but that we were raising money in the wrong way and spending it on the wrong things. Looking at the Budget as a whole, it seemed to him to show a want of confidence in the wealth of the country. When he considered the old-age pension scheme with its limitations as to age, as to pauperism, and as to penalising married couples, he asked himself did the Prime Minister, in framing his scheme, want to make these limitations—did he desire to do these ungrateful and ungracious things? No. The origin of them appeared to be a want of confidence in the taxable capacity of the country. Having said that, he would like to add that whatever the limitations, it would remain to the credit of the Government and of the Prime Minister that they had made old-age pensions an actual reality. He did not believe that the proper means of redistributing the income of the country was by taxation. The proper means was to change the distribution of the product of labour at the source. As to taxation, the present distribution of income came in in this way. When it had been decided how much it was wise to spend, then it was for the Government to look at incomes as they existed, and to adjust their taxation accordingly. But he should denounce any idea that it was possible greatly to ameliorate social conditions by means of taxation. Having said that, however, he was entitled to call attention to one or two striking facts with regard to the present social conditions. In this country about 700,000 persons died every year. Only 82,000 left property worth the attention of Somerset House, and they left £300,000,000, and of that amount £200,000,000 were left by only 4,000 people. That was no extraordinary case in 1907—it was only the ordinary case. It happened every year with even greater precision than the seasons. What was the fact with regard to the distribution of income? Various estimates had been made, and one could only advance what were the general probabilities of the case; but he thought, within a margin of error which did not matter, the following facts might be taken as giving a correct view and a proper sense of proportion. They had an annual income of about £1,800,000,000. About £600,000,000 to £650,000,000 of that was taken by 1,250,000 people, about one-thirtieth of the whole; another 3,750,000 took about £250,000,000 or £300,000,000; and the balance, about one-half, was taken by nearly the whole mass of the population of people below the income-tax line. It seemed to him high time that a Chancellor of the Exchequer made a Budget having regard to these extraordinary facts. How could taxes be fitted to the shoulders of the people, how could they be so levied as to do justice all round, if these facts were not taken into consideration? He earnestly hoped the time would soon come when a Chancellor of the Exchequre would have at his disposal, as he ought to have, a Census bureau, thoroughly equipped and able to supply all these facts and information impartially to the House, so that they could base their taxes and proposals upon them. In 1897 the income brought under the review of the Inland Revenue Commissioners was £700,000,000; the late Chancellor of the Exchequer told them in his remarkable Budget speech that in the last financial year, ending this March, £980,000,000 was brought under their review. That was an increase of nearly £300,000,000 in eleven years. And it was of interest and importance to note how the increased gross figure of £980,000,000 for 1907–8-was arrived at. The Prime Minister told them that the- remarkable increase last year arose from the differentiation introduced in the income-tax, and by the fact that if persons with incomes under £2,000 wanted the rebate off the nominal rate they had to make a declaration. By that process over £30,000,000 more income was reviewed last year than the year before. The Prime Minister called that a great moral and financial reform. So it was, but it was something else. Could it be called entirely a moral reform when it was brought about, after all, by what was a very large fine? If a man with £1,500 a year did not make a declaration, he would have to pay £75 income-tax; if he did, he would get off with £56 5s., a saving of £18 15s. That was not exactly a moral consideration; it was a fine. He thought also that the statement of the Prime Minister was a further argument in favour of a graduated income-tax and universal declarations. If declarations-on incomes up to £2,000 had brought to-light £35,000,000 more income, how much more income would be brought to light if they demanded declarations from the remaining taxpayers—those who enjoyed the lion's share of the national income? At the present time so great was their dislike to inquisitorial methods, so impressed were they with the belief that the English people were not of a kind who would submit to inquisition, that they went to their employers and asked: "How much do you pay to John Smith?" The employer wrote down that John Smith got a modest £300 per year. Then the Inland Revenue Commissioners sent Smith an assessment form. That, forsooth, was not inquisitorial; it was the method which suited the freedom-loving Briton. Of course, it was much more inquisitorial than anything done in any other country. They had inquisitorial methods with regard to-the poorer taxpayers, but, with regard to the rich taxpayers, they never asked them to make declarations except in the case of a man whose business was his only source of income. They only got a. declaration of total income from people up to £2,000 who earned their incomes. He noticed that an hon. friend dissented, but he assured him the fact was as he had stated. He himself last year moved an Amendment to compel rich taxpayers to declare their incomes, and the Government would not accept it. If they had that declaration from all taxpayers, they would know the nature of the basis of taxation, which, as he had said, was the national income. But how was that income divided amongst the people? At present we only had the estimates of unofficial industrious persons like himself. People who opposed a graduated income-tax denied those unofficial estimates, but they would not give them an official estimate. He appealed to the Chancellor of the Exchequer to inform himself with regard to the distribution of the income of the nation. What reasons were there against the proposal? Some people said it was not worth while, because there was not much income at the top of the scale. Whatever doubts there might be, however, there was no doubt whatever that a tremendous amount of income in this country lay over £2,000 or £3,000 a year, and even £5,000 and £10,000 a year. Corroboration of that could be got by inference from the death duties figures. One had only to look at the graduated list of estates brought to light by the graduated death duties to see how wise Sir William Harcourt was not to stop his graduation at a low point. Did he say: "Here are only a few rich people in this country; shall I irritate them by graduated death duties? Shall I cause them to fly to foreign countries?" He wisely brushed aside those considerations. He attached proper weight to them, and graduated the death duties up to £1,000,000, The Prime Minister, agreeing with him, and not being content with even the Harcourt scab, carried the graduation further and graduated even millionaires by means of a sort of super-tax. If that was a right process to apply to death duties, surely it was proper to apply it to the income-tax. If they graduated death duties up to 8 per cent. and then beyond 8 per cent. by a super-tax to 11 or 12 per cent., he argued that they should treat incomes in precisely the same way in effect if not in method. What would be the effect upon the average taxpayer of the receipt of a paper demanding to know his income, if they had a proper graduated scale which had regard to his position in society and the amount of his income? Let them suppose a man with £500 a year received such a paper. He would see he was taxed at 4d. or 5d., that the man with £2,000 was taxed at say 11d. or 1s. and the man with £5,000 at say 1s. 3d. The man with £500, under those conditions; might grumble a little bit, but he would feel a pure joy that other people were paying more. Could it be said that those above him would be very bitterly discontented if they were asked to pay their just contribution? He did not personally think the number of grumblers would be-very great. There were threatenings in advance, but there were threatenings in the case of the death duties, and they knew now exactly how much importance to attach to them. He did not believe in the term super-tax; it was not the right expression to apply. He did not think there should be any suggestion that the rich should be taxed more because they were rich. He would have a plain graduated scale, which would be so arranged as to do justice between one man and another. That was how it was done in Prussia, and he did not see why it should not be done here. The term "super-tax" would not then be necessary, and there would be no suggestion that the rich man was being taxed because he was rich. The suggestion was entirely unnecessary. There was only one more point he desired to deal with. A good deal had been said about direct and indirect taxation. Somebody had said all taxes were bad. He remembered that Mr. Gladstone did not express that opinion about direct and indirect taxation. In a very famous Budget speech, Mr. Gladstone led forth two blushing damsels, one a blonde and the other a brunette, one direct and the other indirect taxation. He b3gged to submit, however, that there was really another lady in the case. He referred to revenue-producing State businesses. This country was at considerable disadvantage by being dependent almost entirely upon direct and indirect taxation. It was not the case with Prussia. The Prussian railways in 1905 made a net profit of £33,500,000. He would suggest to the Chancellor of the Exchequer that that example furnished another means of meeting the growing expenditure of the country. The country would be severely handicapped if it did not set itself to control the revenue-producing monopolies of the country. The hon. Member for Dulwich the other day directed attention to the fact that German taxation per head was lower than in England; but they had the Prussian railways paying not only the interest on the railway debt, but the whole of the interest on the National Debt of Prussia, and furnishing in addition £9,000,000 or £10,000,000 in relief of ordinary taxation every year. This country, therefore, was very greatly handicapped as compared with Prussia in raising its revenue. In addition, of course, they possessed their State forests, about 20 per cent. of the mines of Prussia, and the Prussian Government had their hands reaching out to the control of the whole of the mining interests of Prussia. He believed that not only the railways of the country, but also the coal, which in the twentieth century was the very life of industry, should be in the possession of the State. If we did not set our hands to the policy of national organisation, which would not only benefit the trade of the country directly, but would also furnish increasing revenue to the State from time to time, we should feel an increasing handicap in competition with other countries.

MR. J. F. MASON (Windsor)

said the hon. Member who had just sat down made one remark with which he heartily agreed, viz., that we were raising money in the wrong way and spending it in the wrong way. His reason for agreeing with that remark would become apparent later, but he desired first to refer to the part of the Amendment dealing with the proporton of local to Imperial taxation. In looking at this matter they ought, of course, to bear in mind that in the existing system of taxation local and Imperial taxation was borne by the same people, although in varying proportions, and in endeavouring to reduce in any way the respective burdens of those different classes of taxation, it would appear desirable to examine each class with a view of noting not only its yield and its incidence, but also the collateral effect either for good or evil which was exercised by that class of taxes. Local taxation was raised on land and buildings in proportion to their value, so that any man who was able either to improve his land or erect extra good buildings was always faced by the discouragement of having to pay higher rates. This had had a bad effect on all schemes for housing and improvements, and to that extent was evil in its collateral effects. Coming to Imperial taxation, when the State took a part of income which would otherwise be spent by the individual it did no harm to the community except in so far as it reduced the spending capacity of the community and reduced the reserve taxable capacity of the nation. But when the State took income which would otherwise be capitalised, it did something more, because it restricted the capitalisation which was necessary to make good the waste of capital which was taking place in other directions. To that extent the income-tax had a bad effect. But the death duties appeared to him to be wholly bad, because they took existing capital, which had already been produced and built up, not for the purpose of keeping it as capital, but for the purposes of the current expenditure of the State. Unless that was counteracted by some means of replacing that destroyed capital, it was quite evident that to that extent they reduced the capital of the country on which the whole prosperity of the nation depended. He thought nobody would offer any argument in favour of the destruction of capital. He could quite understand that reasonable arguments might be put forward in favour of transferring capital from the individual to the State. He did not agree. He believed the argument could be demolished, but he understood that it could be put forward logically. But he thought no logical argument could be put forward for the ruthless destruction of capital which already existed. In doing that they were not only reducing the amount of capital necessary for the nation, but they were also killing the goose that laid the income-tax egg. Five-sixths of indirect taxation was raised on alcohol and tobacco and the remaining sixth, amounting to 4s. 7d. per head of the population, was raised entirely on articles of general consumption, food and tea, articles which we could not produce in this country, and on which there was no question whatever that the consumer paid the whole of the tax. The evil of this form of taxation was that this was throwing the burden on the cost of living, a burden of 4s. 7d. a head, which was equivalent to about half the total import duties of Germany, including their manufactured goods. It seemed to him that all those existing forms of taxation certainty had their disadvantages, and none of them appeared to have any corresponding advantages sufficient to justify a transfer on any large scale from one class to the other. But had we got to the end of our tether? Not if we removed a portion of the burden from our own shoulders to those of the foreigner. That remark always caused considerable hilarity among Gentlemen opposite, but if the idea was so supremely ridiculous why was it that we should object to the tariffs imposed by other nations when we wanted to send our goods into those countries? Was it not evident to every manufacturer in this country that the tariffs of other nations did stand in our way because we had to pay a portion of them? If the consumer paid the whole of the tax what would it matter to us whether they had tariff walls or not? The gospel of the free trader was that the consumer paid the whole of the tax on the necessaries of life and of industry unless they could substantially make good the supply from domestic sources. That was the gospel as laid down by the Prime Minister. Given a preferential system under which foreign imports came into this country and were taxed, and Colonial imports came in free, thus widening the word "domestic" in the sense used by the Prime Minister into the word "Imperial," he should like to ask whether there were any articles and if so whether there were many which could not be substantially made good from within the British Empire. The consumer did not pay the whole of the tax even when they could not substantially make good the whole of the requirements of the nation. They were all agreed that the whole of the tobacco duty, for instance, fell upon the consumer. They were all equally agreed that if there were an import duty on coal, the quantity of coal coming into this country being very small, the duty would have no effect whatever on the price. That small quantity of coal, if there were an import duty of 2s. a ton would probably continue to come in, but it would be sold at the price of our domestic supply, and the duty would be paid by the foreigner who would either send it in and pay the duty or keep his coal, but if the duty were small, it would not be sufficient to stop him sending it in. But if it was granted that a tax on a very small quantity would not alter the price and would therefore be paid by the foreigner, might he assume that the foreigner would pay the tax if, say, 1 per cent. of our total requirements of coal were imported? He thought probably a good many hon. Gentlemen opposite would grant that with 1 per cent. of our total requirements imported, the price would not be affected, and that 1 per cent. would pay the small duty imposed upon it. According to the definition laid down by the Prime Minister there was a particular point—a small quantity of any given article which could be imported into this country without affecting the price, and the duty on which therefore was paid by the foreigner and not by the consumer. When they got beyond that point and outside the limit laid down by the definition of the Prime Minister, then by implication he said the consumer paid the tax. Was it suggested that in passing over this little point of limitation the tax suddenly jumped from the shoulders of the importer to the shoulders of the consumer? Was it not evident that, between the extreme case of tobacco or tea at one end where they all agreed that the consumer paid the tax, and of coal at the other extreme where they all agreed that if there were a tax the foreign importer would pay it, the quantity being so small, there was a large range of articles of which we produced in this country a considerable proportion and on which the duty would be divided between the consumer and the producer? This would be a very different result from that laid down in the definition which he had quoted. The fact was that the foreign importer would pay the tax in proportion as he needed our market and we did not need his goods. The more home production was fostered the less was the tendency for prices to rise. It made no difference to price so long as the amount was the same and it was produced equally cheaply, but it made a great deal of difference to the producer and to his country whether the work was done in his own country or by the foreigner. It had been urged that they could not impose a tariff from which they could derive revenue and at the same time foster industry. If they could make the foreign importer pay any part of the tax, this country would still gain by the relief to the taxpayer, or by fostering Imperial production and Imperial competition would tend to lower prices. Hon. Gentlemen opposite held strongly the view that by no means could any portion of the burden of taxation be thrown upon the foreigner. We brought food from a good many sources of supply and the cost of transit was different in each. Yet the goods were sold at an equal price. The cost of transit for grain from Buenos Ayres was, he was told, 19 cents. a bushel higher than from Winnipeg. Who paid the 19 cents? Was it suggested that the whole of the wheat supply at home and elsewhere was raised in price by 19 cents.? No one suggested that the consumer paid the 19 cents. All that happened was that the Argentine merchant pocketed 19 cents. less profit, a course which he would continue to follow as long as any profit was left to him. If, then, the Argentine corn merchant pocketed less profit than his Canadian rival in order to secure access to our market, why should he not pay a similar burden when imposed under the form of a tax? If he was ready to pay the one burden, he would be willing to pay the other, and the consumer would not pay. What difference would it make to the Argentine farmer whether he paid to the owner of the ship or to the Chancellor of the Exchequer? Hon. Members objected to the preferential system, and yet they supported the most flagrantly preferential system that had teen devised—the system by which the foreigner was given a preference in our home market without having to pay one penny towards the upkeep of the country's defence and administration. The people of this country had to pay for the upkeep of their markets, and yet they allowed foreigners to compete with them without paying their fair share. When the traders of this country went into foreign markets they had to pay a toll towards their standing charges, and yet the foreigners were allowed to come into our markets without paying anything towards our standing charges. If any hon. Member kept a shop, would he allow a stranger to come in and sell goods across his counter without paying something towards the upkeep of that shop? If he did, he ventured to think that that business would not be a financial success. It was only a question of choice between one preferential system and another. Hon. Members opposite preferred to give a preference to the foreigner in our markets, but the Opposition believed that preference, like charity, should begin at home.


I congratulate the hon. Member who has just sat down on being the first Member who has had the courage to speak to the Amendment. He is the only man who has elucidated the doctrine of that Amendment, though I observe that he very carefully chose an opportunity when his Leader was not present before he started on that elucidation. However, I am not sure that I do not owe him a debt of gratitude. He finds me embarrassed with a very considerable deficit, which grows with each subsequent speaker, and he is going to relieve me of my troubles. He tells me that it is no use my taxing any commodity at home; somebody has got to pay that, and it is injurious to industry. But, he says: "I have got a way; you should tax the foreigner." How very odd that that has never occurred to anyone before. I rather wonder why Germany, which has been trying it on for years—and the Germans are not without ingenuity; they are of a very scientific turn of mind, and could produce even a scientific tariff if it were possible—has got to borrow money this year when they could so easily raise it by taxing the foreigner. The hon. Member has been kinder to me than the right hon. Gentleman opposite, the late Chancellor of the Exchequer. He rather laughed to scorn the notion that he should be called upon to provide details. It was quite enough for him to talk largely and generally about broadening the basis of taxation, but details—he laughed at the idea that he should be asked for them. The hon. Member has been kinder to me, for he has told me that I can tax the foreign coal that comes to this country. He gives that as an illustration, and I am not sure that it is not rather a good illustration of the sort of thing that you can do in the way of raising revenue by taxing a foreign commodity. I find that last year we imported £20,000 worth of foreign eoal—18,000 tons. I think the hon. Gentleman suggested that I should place a tax of 2s. a ton on foreign coal, so that I get towards my £6,000,000 for old-age pensions—


I merely used the case of coal as an example of the way the foreign importer would undoubtedly pay the tax if there were one imposed.


I said so, and I am taking the only illustration that the hon. Member was good enough to supply me with. I get £2,000 towards this gigantic deficit I have to face. But that is not all. This is an illustration, in another respect, of the utter futility of this sort of taxation, because it is not reliable. In 1905, when the right hon. Gentleman opposite was Chancellor of the Exchequer, the coal which was imported was £40,000. This year it has gone down by half. You cannot depend on it, and that is an illustration of the sort of thing that happens if you begin taxing these commodities and expect to raise a revenue from them—they are uncertain, they fluctuate. That is not the way to raise revenue when you have got a big deficit to raise. That is the sort of illustration that Germany, who has got to borrow £50,000,000, has followed, and has found herself in financial difficulties. Does any one deny that she is in financial difficulties?

MR. BONAR LAW (Camberwell, Dulwich)



I shall be able to give the facts to the hon. Gentleman. Of course, he does not think it is a difficulty, because he belonged to a Government that always borrowed. "Oh," they said, "you need not pay your debts." There are many men of that kind. They never find it difficult; they go to the first man that will lend them money. It is much easier than taxation—borrow and let your successor pay. [OPPOSITION Cheers.] I am glad to think there is so much appreciation of the services of my light hon. friend in paying off £40,000,000 of the debt created by hon. Gentlemen opposite. The discussion has touched upon everything except the Bill of which we are asking a Second Reading, Hon. Gentlemen have criticised our system of local taxation; they have criticised our fiscal system; they have criticised expenditure; but they have never criticised the one Bill we are asking the House to consider. There are two propositions in the Budget. One is the abolition of the sugar duty.


Not the abolition.


A very considerable reduction of the sugar duty. Has anybody criticised that? The other is a provision, at any rate, for the only old-age pensions that will become due during the current year. There has been no criticism of either of the two main features of the Budget; but an Amendment has been put down which seems to cover the whole ground of finance and three or four propositions have been advanced, all leading up to one conclusion—that it is necessary to broaden the basis of taxation. I note that the very part of the Amendment about which we have heard nothing is how that is to be brought about. My right hon. friend, speaking earlier in the discussion, asked for some particulars. He asked for a statement of what is proposed. We have not had an answer, with the exception of that of the last speaker. We have not had an explanation of the Amendment, which is, I understand, the official Amendment of the Opposition. The hon. Member for Norwood, who made a singularly able speech, said he thought it was a free trade Amendment. I wonder whether that is the view of the hon. Member for Dulwich. Does he accept that interpretation of the Amendment?


indicated dissent.


Then the Opposition are not quite agreed as to the meaning of the Amendment, and yet they ask the Hou3e of Commons to accept it. In the debate, as far as it has gone, the real issue has been shirked. And no one has any doubt at all that it has been shirked at the instance of the L3ader of the Opposition. A very wily strategist, he knows that these fiscal debates are not very useful from a propagandist point of view. They are a great disadvantage from that point of view, for in this House every argument is answered, every statement and figure is tested. It is so much better to leave those things to the gramophone. There is another tactical disadvantage in urging these proposals on the floor of the House. If you go to a constituency you can talk of taxing the particular article which is manufactured in that constituency; but if you go to other constituencies you will find probably that that particular article is the raw material of the manufacture carried on there. But in the House of Commons all constituencies are represented, and we have to consider all industries, and once you begin specifying detailed taxes, you find disagreement—you find that what you would tax for the benefit of one constituency would be to the disadvantage of other constituencies. Therefore, it is far better to relegate this kind of discussion to outside the House of Commons, and that appears to be the strategy of the right hon. Gentleman the Leader of the Opposition. I will reply to some of the speeches made in the course of the debate. However inconsistent their proposals may be, I have got to take them more or less one by one. Several speakers have pressed upon the Government the reconsideration of local taxation. There have been various suggestions made to the Government on that head and with regard to some further grants-in-aid. Some hon. Members have suggested that certain services should be taken over by the nation, and others have urged the taxation of land values. I can only deal generally with the whole of these, because they are not strictly relevant to the Budget of the year. Local taxation is a very large and a very urgent question, and one which, I think, will have to be dealt with and dealt with effectively at the earliest possible moment. I have always thought so; but I do not agree with the hon. Gentleman opposite that the Government have done nothing. I agree that there has been an enormous increase in the financial demands of local authorities and in local taxation within the last few years. I was very much struck by the observation of the noble Lord the Member for the Thirsk Division, that since the Agricultural Eating Act the local rates had almost doubled. But I may be permitted to point out—and I am not making this point merely as a tu quoque—that the hon. Gentle- man admitted that much the largest increase of all was attributable to the Education Act of 1902. The placing of the voluntary schools on the rates involved an increase of £3,000,000. The mere fact of putting all the education of the country on the rates was, on the whole, the best part of that Bill, but it has undoubtedly been in the main the cause of the enormous increase of local taxation in the country. There has also-been a very great increase in the burden of maintaining the main roads. That is very largely attributable, probably, to the motor traffic. [An HON. MEMBER on the OPPOSITION Benches: "'No."] During the last five years, more especially, the increase has gone up by leaps and bounds, and during the last ten years the cost of maintaining the roads has increased by something like £20 a mile. That is attributable partly to the fact that the roads are in better condition and much better looked after than they were, but also to a very large extent to the fact that the motor traffic tears them up. However, whatever the cause may be, there has been an enormous increase in the burden of local taxation, and the Government are fully alive to it and to the fact that it has got to be dealt with. Now we propose to do something this year if right hon. and learned Gentlemen opposite will allow us to proceed with our Bill. There is a very considerable relief to local taxation in the Education Bill—considerably over £1,000,000 at any rate, and that is very substantial relief to local taxation.


(on the OPPOSITION Benches): How much will the rates have to pay?


I say that a very considerable proportion of that sum would go in relief of rates, and I do not doubt that the simplification or rather the unification of our school system will work economically in our educational management. After all, I am not so sure that there is not very great waste at present, and probably the dual system is very largely responsible for that. If you have two schools in a small community, with two staffs, two head teachers, and two assistant teachers, you are practically doubling the expense of the education of that community.

LORD R. CECIL (Marylebone, E.)

The right hon. Gentleman forgets the enormous amount saved to the rates by the non-provided schools.


I should agree with the noble Lord if he had said that during the debate on the Bill of 1902. The saving at the present moment is not considerable, and I am certain that it is not equal to the amount wasted through doubling the staffs and doubling the expenditure in all these districts. But I only made that observation in passing, and perhaps I went a little beyond the point raised by the hon. Gentleman opposite. I only point out the extent to which the education rate and the main roads rate are responsible for the increase in local taxation, more especially in the last five or ten years. In order to redress an evil of this kind you have to proceed very carefully, otherwise you cause a greater inequality to one section of the community in trying to redress the balance. The Agricultural Rating Act is a very good example of what has occurred. What the noble Lord the Member for Thirsk has said proves the danger of partial legislation of that kind. He said that since that Act the local burdens have almost doubled, more especially in rural districts. But on whom do the burdens now fall? By the Agricultural Rating Act land has only to bear half its burdens, so that when you double the burdens the other ratepayers in the district bear a far greater proportion of these burdens than they did before. The local tradesmen, the local manufacturer—and it is very important to encourage these rural manufactories, and in that respect Germany beats us—are hit very hard by an operation of that kind. It is very dangerous to deal piecemeal with the problem of local taxation, because if you do you are bound to cast an unfair burden on some section of the community in relieving another for the moment. That is why the Government are proceeding scientifically in a matter of this kind. Scientific local taxation is a very good principle. Our idea, and it was the idea of the late Government as well, is that the first step in dealing with the problem of local taxation is revaluation upon a proper basis—to start with a Valuation Bill for England and Wales. That Bill, I hope, will be introduced in the course of the next few weeks. I have already given an Undertaking that it will be introduced in the course of the present session. That is the first step to be taken, and until we get a proper valuation it will be quite impossible to deal with the problem of local taxation. It is not merely the problem of the farmer. It is very largely also the problem of; the tradesman. The in justice is that local rates do not always fall upon-persons according to their means. Here you are taxing all the raw material of a man's industry. Take the ordinary case of a tradesman. He may be paying at the rate of £200 or £300 a year for the premises in which he conducts his business. He may not be making more than £300 or £400 out of those premises—I am taking now a little provincial town. There may be next door a man with a income of £1,500 a year, living in a house rated at £150 or £200. The man who is only making £300 or £400 out of his trade has to pay more than the man in receipt of an income of £1,500 a year. The letter ought to bear more in proportion to his means. I think that is a very fair proposition. I agree that it is very difficult to apply, and up to the present it has only been applied by means of redressing the balance through grants-in-aid. These are questions which will have to be considered very carefully when you come eventually to setting up your system of local taxation. I will not say anything further as to local taxation at the present moment. Now I come again to the broadening of the basis of taxation. I observe that, as we proceed, all this new taxation, which is to be raised by broadening the basis, is applied to an increasing variety of purposes. It is to be applied to abolishing the sugar duty and the tea duty. It is to be applied for old-age pensions. To-day in the debate the new taxation suggested by hon. and right hon. Gentlemen opposite is to be applied also to relieving local taxation. I think it will be perfectly obvious that no tax that can possibly be raised will cover the whole of these purposes, and hon. Gentlemen will have to elect which of these purposes they will choose to take. But I wonder whether they consider really what will be the effect of such a scheme as that. We have had no scheme. The proposition is simply a nebulous, vague proposal which is called "broadening the basis of taxation." We have only had certain hints that it means the taxing of manufactured goods, and I suppose, of wheat, although we have not heard anything about it during this debate. It has been most carefully shunned. But the German example has been quoted over and over again. The hon. Gentleman the Member for Dulwich rather challenged a statement which I made that Germany was finding herself in financial difficulties. I wonder whether his attention has been called to a resolution passed by a group of members who support the present Government in Germany, by members of the Bloc, not by opponents of the Government. Now this is the resolution which they have just passed— The unfavourable state of the finances of the Empire, which, in spite of repeated efforts to reform the financial system, still exists, is to be attributed to the policy of protection and prohibition which renders all commodities dear. This resolution, as I have said, has been passed by a group supporting the Government— So long as Germany adheres to such a policy it cannot be expected that a lasting improvement will be experienced in her financial situation. These are the very suggestions which are made to us in order to effect an improvement in our financial position. The resolution is so very important, and so very germane to the controversy of the hour here, that I will read the whole of it— Meanwhile, in the interests of Germany, both political and commercial, it is necessary speedily to provide for the financial necessities of the Empire. I really would, if I might, invite the Leader of the Opposition to follow this.

MR. A. J. BALFOUR (City of London)

How many was it passed by?


It was passed by one of the groups.


Which group?


It is the Radical group. Well, it is a group supporting the Government. It is one of the Bloc. ["How many?"] The Resolution goes on— To achieve this end the first step should be a far-reaching scheme of taxation upon the moneyed class. They demand an Imperial income and property tax, the extension of the death duties, a reform of the spirit tax, and it is said that with the increase of the revenue a decrease of expenditure must also be brought about, not only by means of general economy, but also by a simplification and improvement of the entire administration, and more especially the reduction of the financial burden of the German Army in such a manner as will not endanger the national position of the German Empire. Well, that is our policy. Talking about the German position, I should like to say another word. The Prime Minister suggested that next year, after paying about £41,000,000 of Debt, the Sinking Fund might be raided to a certain extent. But in Germany the Sinking Fund has been suspended—and not for social reform, but to meet the current expenditure of the year. That is the difference between a protective country and a free-trade country in the matter of raising revenue. Although we propose to increase by means of this Budget our commitments very considerably, still there is no suggestion that the Sinking Fund should be suspended. So much for German finance. So much for protectionist finance. I repeat, however, the question put by my right hon. friend the Postmaster-General. I think we are entitled to ask for a few more particulars. This is not our proposition; we are simply meeting a proposition which comes from the Opposition. We are told, "You are not raising the revenue in the proper way; you should do it by means of broadening the basis of taxation." We ask hon. Gentlemen opposite would they mind telling us how. 'What do they mean by it? A tax on manufactured goods is not a productive one for revenue purposes, and the higher you make it the less productive it is; so that the more protective it is the less productive it is. Therefore, you cannot depend upon that for revenue purposes. If you want to raise a revenue by this means you must tax commodities that people must consume. Now what are these? We tax tea, coffee, sugar, beer, and tobacco now. Therefore, if you are to broaden there are only wheat, meat, and dairy produce left. Do hon. Gentlemen propose to tax these in order to broaden the basis? You cannot do it in any other way. I think we are entitled to ask and I specifically ask the hon. Member for Dulwich; he does not as a rule shirk these things. I do not think he does, he has been a perfectly straightforward protectionist all through; it is more than I can say for most of his colleagues—I think I am entitled to ask him for an answer to this question. Is it his idea of broadening the basis of taxation that you should tax wheat and meat and dairy produce?


This is not relevant.


The right hon. Gentleman says it is not relevant. If it is not relevant what does broadening the basis of taxation mean? If the right hon. Gentleman will say now that he does not mean that I will drop that argument at once. But he dare not say that he does not mean that. It is really not fair to the people of this country. At any rate, if their bread and their meat and their dairy produce are to be taxed I think they ought to be told about it. I do not think it is fair to go on from year to year shirking it, not saying a word about it, organising a conspiracy of silence on your side, telling them "You can talk at large about broadening the basis of taxation, but never mention wheat; laugh at particulars when they are demanded;" and then when you come in to bring in a stiff duty on the whole lot. It is not fair, it is not straightforward; and therefore I ask again—because this is your Amendment—what does it mean? A tax on wheat is the very worst of all taxes; it is worse than tea or sugar, and certainly worse than tobacco, for the simple reason that it is a tax on the very poorest. It hits them much harder than it does the rich. Now Germany, up till recently, was able to produce quite enough wheat to supply her own market; but now year by year they are increasing their imports. And what is the result? Germany raised last year out of the foreign wheat which it imported £6,750,000 of revenue. That was added on to the price plus 9d. of trade profit. But that is not all. They imported 50,000,000 cwt. of wheat; they consumed another 64,000,000. What was the result? The 64,000,000 cost exactly the same as the foreign meal plus the duty, so that the German poor were taxed, not £6,750,000, but £15,000,000. Out of that £6,750,000 went to the revenue and about £9,000,000 went into somebody else's pocket. It went into the pockets of the manipulator, the landowner, the mortgagee; it certainly did not go into the pocket of the agricultural labourer who is much worse paid than in this country. The worst of a tax of this kind is that you are really taxing the community £16,000,000, and only £10,000,000 of it goes to the revenue. Taxes on tea, sugar, and tobacco, on the other hand, go straight to the Exchequer, and the country gets the benefit according to the way it is spent. I found a very interesting document in the Exchequer, prepared by one of the ablest masters of political economy, and he points out that when Germany was, comparatively speaking, a free-trade country, living there was practically 3s. as against our 5s. Taking the year when that document was prepared, I think 1903, living in Germany was 6s. as against our 5s. Since then living has gone up higher in Germany, and it is now much nearer 6s. 6d. or 7s. to our 5s., because they have increased their duty on bread and on meat, so much so that there has been a meat famine in some districts. The country where living was cheaper than in this country suddenly becomes in a few years, by means of these protective duties, dearer than in this country. And this is what they call broadening the basis of taxation in order to benefit the poor of this country. Let me point out another thing with regard to Germany. They are proposing to increase their official salaries there. Why? Because the cost of living has gone up so much that the families of the officials do not have enough to make both ends meet. That is the problem they have got to meet. I should have thought that with these examples before us we should have taken good care to shelve the example of Germany with regard to her protective tariff. I think I have dealt with most of the suggestions which have been made in the course of the debate. I have had a good many proposals laid before me as to how to raise revenue for next year. The hon. Member for Hackney was exceedingly liberal. He was going to raise a revenue of £50,000,000 a year and evidently thought he had found £100,000,000 lurking somewhere which we could use for the purpose of reducing the National Debt. I will beat the hon. Member's suggestions in mind. Then the Member for Padding-ton's virile brain was full of resources. All these hints and suggestions are exceedingly valuable. I will pigeon-hole them very carefully with a view to considering what can be done in the next Budget. There was one suggestion which was common to both sides of the House, and that was the suggestion of economy. Hon. Members on the other side of the House thought we were spending too much and hon. Members on this side of the House agreed with them. But there was no agreement as to the direction in which economies could be effected. I am not sure that that is not the dividing line between the two Parties—the dividing line as to the suggestions for increased taxation. Hon. Members on the other side said: "You must increase taxation"; but they said "You must increase it by taxing the bread of the poor; and we object to your taking the sugar tax off, because the poor contribute to it." That is their suggestion. We say on the other hand: Tax people according to their means. That is the dividing line in taxation. We will come to the dividing line in expenditure. Hon. Members on the other side say: "You are increasing expenditure. The feeding of children, the appointment of Commissioners for planting the people on the soil, housing, old-age pensions—all these items of expenditure you are suggesting result in your spending too much. Pinch and starve in those directions. That is the direction in which you should save." Hon. Members on this side say: "What about the burden of armaments; the Christian communities of the world are spending this year £400,000,000 on the hideous mechanism of human slaughter. If you must economise, that is the direction in which you should seek economy." I am quite willing to take this Budget upon those two principles. If you economise, do not economise at the expense of the provision which Parliament made with fair unanimity for improving the condition of the poorer classes. If you want to increase taxation, place the burden, not upon the bread and meat of the poor, but upon the shoulders of those who are rich enough to bear it.

Motion made, and Question, "That the debate be now adjourned,"—(Mr. Bonar Law,)—put, and agreed to.

Debate to be resumed To-morrow.