§ Order of the Day for the Second Reading, read.
§ Moved, "That the Bill be now read 2a."—(The Earl of Rosebery.)
§ THE EARL OF FEVERSHAM
said, the noble Earl at the head of the Government the other night, on the introduction of the Bill, seemed to demur to the discussion of the Bill by their Lordships. Did the noble Earl really suppose that a measure fraught with so much injustice to the landed interest in this country could be so passed? Their Lordships' House had reason to complain of the change made of late in the former practice. Formerly the Budget was included in several Bills; it was now introduced as a single measure. The result had been that that House was precluded from objecting to one portion unless they rejected the whole. In his own recollection, up to 954 the year 1860 the Budget was introduced in several Bills. In 1853 Mr. Gladstone, then Chancellor of the Exchequer, introduced a Budget providing that the Income Tax should be gradually reduced, and should be altogether extinguished in 1860. But when that time arrived, Mr. Gladstone, again Chancellor of the Exchequer, so far from extinguishing the Income Tax actually doubled it. That Bill was brought up to their Lordships' House at the same time as the Bill for the Repeal of the Paper Duty, and they accepted the augmentation of the Income Tax but rejected the repeal of the Paper Duty—with very salutary results—for Mr. Gladstone was enabled in the following year to remit a portion of the Income Tax, and the Paper Duty Repeal Bill was sent up to their Lordships' House and passed. This Budget was founded upon a fallacy propounded by the Chancellor of the Exchequer when he introduced the Bill into the other House that the State had the right to share in the property of a deceased person. The right hon. Gentleman never adduced any authority in support of that statement, either financial or politico-economical He had always held the belief that the State had a right to expect that every property should contribute to the support of the State, but he had never heard before that the State was entitled to share in a man's property. That was simply a gospel of plunder; the foundation of this confiscatory Bill. The measure would do great injury to the landed interest of the country. Though the landowners would be the first to feel the injury it would tell through them upon all classes dependent upon the land. The landowner would no longer be able to give his tenantry the assistance he had been accustomed to render them; he would not be able to spend money on improvements necessary for their welfare and in the agricultural interest; he would not be able to employ the labouring classes. The laborers would be thrown out of employ. Having touched the three classes mainly dependent on the land—the owners, the occupiers, and the labourers—the trade of the country was next affected; and local tradesmen and the rural districts of the country would be materially injured by the Bill now before the House. It had been 955 said that the measure would benefit people who inherited small legacies; but even they would have to pay the Death Duty, not in accordance with the amount of legacies they received, but in regard to the amount of property left by those who bequeathed it. That was a distinct injustice to small legatees. Again, this measure proposed to equalize taxation on realty and personality. It might do so in regard to Imperial taxation, but it left unre-dressed the great inequality in local rating. While the burden on Personality was slight, after this Bill was passed the main burden would have to be borne by realty; and, therefore, so far from the inequality being removed it was increased by a still greater burden being imposed on real property. Then it had been said that the Bill would be of advantage to the general interests of the country in other ways. He begged altogether to dissent from that view. It was also urged that people would get into difficulties, and would sell their property. Well, what sort of Bill must it be which increased the sale of estates which had been in the hands of particular families for generations? The late Lord Cairns once spoke in that House with great effect of "the love which people had for the land." That sentiment never seemed to enter into the minds of Her Majesty's Government. There was a great amount of sentiment among those who had inherited landed property from generation to generation. They not only loved the land, but the people on the land, and they loved to do what they could to promote the welfare and interests of people there among whom they lived. This Bill ignored all the associations which had gathered round the landed interest of this country. One proposal made in the other House of Parliament was that possessors of land might take out insurance policies for the purpose of lessening the oppression of this Bill. That proposal had been rejected. It was difficult to see why, for by that means the collection of the Revenue would have been facilitated, and the proposal was made as much in the interests of the Exchequer as of those who had to pay Yet for no reason that he had heard or could discover the Government would not agree even to that moderate suggestion. From 956 all he could gather in this extraordinary procedure of Her Majesty's Government they had declined every proposal which would have tended to relieve the weight of this heavy burden in future upon the possessors of landed property. It really seemed, though he did not like to impute motives, as if the design was to injure the landed interest. He would not go into the details of the Bill, which were probably familiar to their Lordships at all events in outline. With its general features they were no doubt acquainted, and he would only say in conclusion that he had felt it his duty to raise his voice in protest against a measure which he believed to be fraught with injury and danger to the best interests of this country; and he hoped that under another Government by some future Chancellor of the Exchequer its severity would be mitigated and its injustice removed.
§ THE DUKE OF DEVONSHIRE
My Lords, I need hardly say that I do not rise to offer any opposition to the Second Reading of this Bill, nor with the intention of suggesting any Amendments which might be made in the measure. I admit that some Amendments have been accepted by the Government in the other House which have removed to a partial extent some of the apprehensions which we entertained of the measure when it was first introduced, and which so far are improvements in the Bill. But I believe that it would be impossible, even if it were within your Lordships' power constitutionally to amend this Bill, to introduce such Amendments as would, consistently with the main principles on which the Bill is founded, deprive it of those dangers and unfortunate consequences which some of us apprehend will result from it. Nor, my Lords, do I intend to enter on this occasion into any discussion of the constitutional question which was raised by the Prime Minister when he told us the other night that the House of Lords had nothing whatever to do with this Bill. That is a point which I daresay may be touched upon by others, but I have no doubt that it will be generally admitted by the great majority of your Lordships that, whatever may be the constitutional rights of this House, those constitutional rights 957 have not, in recent years at all events, been acted upon, and that, short of taking the enormous responsibility of rejecting the financial proposals made by the responsible Government for the wants of the public service in the current year, it is almost impossible for your Lordships to amend a measure of this description. Nor do I desire to say much on any of the principles which are contained in this Bill. It seems to me that the principle of graduation has been adopted with very little and certainly with inadequate consideration. It appears to me that that principle is fraught with very considerable danger, and I believe that in the opinion of many of the most eminent political economists the introduction of the principle of graduation into the taxation either of income or of capital must have a tendency to diminish the inducement for the accumulation or saving of wealth, must tend to reduce the capital of the country, and, therefore, must exercise a prejudicial influence upon all classes, and most of all upon the working classes. I have no doubt that a great many much more serious and much more grave instances might be adduced, but one example occurs to me which illustrates how it is possible that the principle of graduated taxation as introduced into this Bill may tend, to use a familiar expression, to kill the goose which lays the golden eggs. Take the case of collections of works of art or large libraries belonging to a great estate. This measure, in such cases, would double the heavy taxation already imposed upon them. It may, in many instances, become a question whether it will be possible to retain these collections. It may be necessary to sell them. They will be sold either in this country or to go abroad. If they are sold in this country and pass into estates of smaller amount, the State will lose any benefit which it expects to derive from the principle of graduation. If, on the other hand, they are sold, and, as is not improbable, they pass by sale out of the country altogether, then these properties, which at the present time at periodical intervals are yielding a certain income to the State, will cease to yield that income altogether, and the State will be a loser, and not a gainer, by the transaction. Again, another new principle of very great importance has been introduced 958 into this measure. It is proposed for the first time to levy these graduated duties in favor of the Crown, not on the property which is inherited by the successor, but on the amount which was possessed by the deceased person. That is a proposal which appears to be founded on the principle referred to by the noble Lord who has just sat down, that the property of the deceased person reverts absolutely to the State, and that no one has a right to dispose of his property after death until it has paid such toll as the State may demand. My Lords, this appears to be a principle which may be carried very far. It is only at the good pleasure and by the moderation of the Chancellor of the Exchequer that this toll is at present limited to 4, or 5, or 6, or 7, and in no case more that 8 per cent. But when once the principle is admitted that the State has the first claim upon property which passes by death, and that no one inherits except on condition of the payment of such toll as the State may arbitrarily demand, it is difficult to see why those limits are not capable of indefinite extension until they reach absolute confiscation; and I should be very glad to hear from some Member of Her Majesty's Government what natural point does, in their opinion, exist which will impose any reasonable limit to the taxation which, upon this principle, may be levied upon the property of a deceased person. But, as I have said, I do not desire to enter at any length into the discussion of this principle. I do not profess to possess either the financial or economical knowledge which would enable me to do so with advantage. My only object in rising on this occasion is to endeavor, if I can, to obtain from Members of Her Majesty's Government who are responsible for this Bill some further explanation and information as to the probable practical results which they anticipate will arise from it, and I think even after the long and protracted discussion in the other House of Parliament, there is some room for further information upon these points. Now, my Lords, it seems to me that one of the first and most important points on which we and the country ought to be able to form some clear idea is as to the class of persons who are to be mainly affected by this measure. It seems to me rather remarkable, and I do not think the point has been much 959 brought out or discussed in the House of Commons, that a great many, perhaps the majority, of the persons who will be most seriously affected by this measure will not be those who are directly affected, but those who are indirectly affected. The case has generally been argued, up to the present time, as if the measure affected only very rich men or men, less rich, but still possessed of a considerable amount of property. It has been defended upon the ground that it will bring actual relief to a large and deserving class of persons of very small incomes, persons belonging to the class just superior in point of income to the working class, which has been described by some one as the class "which has begun to wear a black coat." Now, however desirable it may be that relief should be given to this large and most deserving class, there is a still larger class of persons in a position of greater poverty than that class, to whom the consequences of this measure may be, not relief of their actual position, nor even some diminution of their present incomes, but to whom it may be the actual deprivation of their entire means of subsistence. That will be the case if this measure should have the consequences some of us anticipate from it. Our contention is that this Bill will impose upon rich men, and upon some men who are not rich, new burdens, which we do not say will ruin them, but which will necessarily impose on them the necessity of making some very considerable changes in the objects upon which their income has hitherto been spent, which will cause some great change in their mode of living, which will force them to resort to economies and retrenchments in many directions. And if your Lordships consider what are the objects upon which the incomes of most rich men are spent it will be clear that a large part of those incomes are spent directly in the payment of wages and of labor, and a still larger part is indirectly spent for the same purposes. A large portion of the expenditure of rich men consists in wages directly paid for labor, and another portion in the purchase of commodities produced by labor for which wages are paid, and if we are right in our anticipations the immediate and direct effect of this measure will be to produce a neces- 960 sity for great retrenchment and economies in many directions on the part of rich men. It seems to me to follow, as a matter of course, that the immediate effect of the Bill will be a great direct, and perhaps a still greater indirect, cessation of the employment of labor, and certainly a great dislocation of labor. Thus, the persons who will be most affected by the Bill will not be the rich, who will have actually to pay the tax, and to whom these changes may mean nothing but some alteration, more or less complete, in their present mode of life, and some deprivation of luxuries or means of enjoyment, but those who, owing to the operation of the measure, are deprived of their means of subsistence. While the wealthy classes, and especially the landowners, have been attacked and sneered at for their unwillingness to bear a fair share of the public burdens—for purposes of national defense and the maintenance of our Navy—nothing has been heard of the case of these men who are really far more directly affected by the proposed increases of taxation than those on whom they will directly fall. Two answers have been given to these contentions. In the first place, it is said that we greatly exaggerate the effect which will be produced, and in the next place we are told that even if our apprehensions are well founded it only shows that some classes of property have hitherto escaped their fair share of taxation, and that be the consequences what they may that injustice must be redressed. As to the first point, there is a great deal of difference even among the authors of this measure. Mr. Fowler dismisses lightly the case of the very rich men. He says when he is told that this is a measure that would scatter works of art abroad, and reduce the stately splendor of great houses, that he does not believe a word of it, but he admits that it will press very heavily upon landowners with moderate rentals. The Chancellor of the Exchequer, as far as I have been able to ascertain, has never admitted that this taxation will press heavily on anyone at all. These allegations, my Lords, cannot in my opinion be dismissed by a summary declaration that a Minister of the Crown does not believe a word of them. What Mr. Fowler and Sir W. Harcourt do not 961 appear to me to see is that this largely increased taxation is going to be levied on a great amount of property which brings in no income at all, and on a further amount of property which brings in a very small income. When Sir W. Harcourt speaks of a millionaire or of a man with £100,000 or £200,000 he appears always to assume that his capital is invested in the Funds, or some other security which produces an income of 3 or 4 per cent. on the total value of the capital. The Chancellor of the Exchequer actually spoke the other day of a man inheriting £100,000 as coming into an income of £4,000 or £5,000 a year. There may be such cases, and of such men it may be said that the tax is no very serious matter, and that, as Sir William Harcourt said, the amount that would be required to insure the estate of the successor against the incidence of the tax would not be more than he may lose on a racecourse in an afternoon, or than the cost of a moderate two-year-old. Such cases, however, are extremely rare. In most cases the estate will probably include a house which brings in no income, but, on the contrary, is an expense, and it will include furniture, plate, works of art, and other things, which produce no income. A very large proportion of assets which consists of personal property does not bring in anything. It is absolutely impossible to say what in such cases may be the income expected to be derived from such an estate, but it is quite certain that in all ordinary cases it will be very much less than 3 or 4 per cent. I am not attempting to argue that it is unfair that such estates should be subject to taxation; all I contend is that it is absurd to say that in the case of an ordinary inheritance, even if it consists chiefly of personal property, the exaction by the State of two, or three, or four years' income will not produce any change in the mode of life of the possessor. It must be remembered that Sir William Harcourt's millionaire is not a person who lives in lodging and accumulates his income. He is a person who, according to Sir William Harcourt's simile, lives in palaces and who frequents racecourses. This tax will necessitate a great change in the mode of life of such a man, and the amount of labor he can 962 employ and the amount he can spend in his immediate neighborhood. If that is the effect in the case of an estate mainly consisting of personal property, of course the effect of the measure will be immensely greater in the case of an estate which consists chiefly of real property. In that case the successor will not only have to pay the increased duties upon a large amount of property which does not bring him in any income at all, he will also have to pay enormously increased duties upon that portion of his capital which does produce an income, but in the case of land not more than 2 per cent., if it ever reaches that. In commenting upon the estimate which on one occasion I attempted to form of the surplus income which the owner of a landed estate, with a residence upon it, may be expected to receive, Sir William Harcourt said that I appeared to have in my mind something that might be described as "male pin-money." How did I arrive at the amount? I deducted the interest on mortgages and other debts, the cost of management, the amount of expenditure on the estate, including the cost of new buildings and repairs, allowances and remissions of rent to tenants, the maintenance of roads and fences, the cost of keeping up places of residence, and also local subscriptions and pensions. That which remains, and which is described by Sir W. Harcourt as "male pin-money," has to provide the household and establishment expenses of the owner, the maintenance of himself and his family, the provision he may make for his younger children, his private subscriptions, and, in fact, the whole of his personal expenditure. It is no exaggeration to say that in the case of almost every landed estate with a residence upon it the new Estate Duties which are to be levied will amount to at least five years, and in a great many cases to much more than five years, of any surplus income for fulfilling the functions to which I have referred. Human nature being what it is, is it likely that a man who is forced to reduce his expenditure largely and make great retrenchments will continue to pay his local subscriptions and to keep up a large house and an extensive place when perhaps nothing might be left for his family and himself to live on? Inevitably in 99 cases out of 100 he will 963 select for retrenchment that branch of his expenditure which least affects himself and those who belong to him, and in a great many cases it would not even be a matter of choice, but a matter of necessity to him. He will be compelled to stop all that outlay to which I have alluded and altogether to change his mode of life. This is not a matter of speculation, but of absolute certainty. Every one who has the smallest acquaintance with the country knows that in recent years, without the pressure of this new taxation and owing solely to the pressure of bad times, large numbers of persons have been compelled to close their country houses, to diminish their outlay upon their estates to the utmost possible extent, and to live either in London or abroad. It seems to me, therefore, that it is not a matter of speculation but of absolute certainty that the imposition of this new and certainly heavy burden must have the effect of greatly accelerating that process which has been going on in recent years. Some may say that these duties will lead to a greater distribution of the land, and that that will be an advantage. I doubt very much whether this will be the effect. No doubt this change will greatly increase the inducements to sell land, but at the same time it will greatly diminish the inducements to acquire land. However, whatever may be the effect in that respect, that is not the ground upon which the question has been argued. We are told that this measure is not going to have the effect of closing or accelerating the closing of country houses, and that our fears and apprehensions are groundless; but that assertion is not supported by a particle of proof as against the undoubted common-sense, I think, of the view I have presented to your Lordships. Mr. Morley, in a recent speech of his, said that if people were going to shut up their places because they would now have to bear their fair share of Imperial taxation it followed that in the past other people had been paying their subscriptions for them and aiding to keep up their places. Well, I do not admit that this measure is going to bring about equality of taxation as between land and personal property. Upon this point again there has been great difference of opinion between the authors of this measure. Sir W. Har- 964 court as far as I know has never admitted that land has anything to complain of in respect of the pressure of local taxation, but Mr. Fowler admitted the other day that land has borne and still bears an undue share of local burdens, and he explicitly promised an inquiry with a view to redressing grievances at some future time. This does not appear to be a very statesmanlike or just mode of procedure, but we have got now something in the nature of a promise. The opinion, then, appears to be that land does not pay enough Imperial taxation, but more than its fair share of local burdens, and you are going to establish equality by placing a full or excessive share of Imperial burdens upon land, and postponing for an indefinite time the redress of the grievance under which land suffers in respect of local taxation. I do not consider that a just or statesmanlike way of dealing with the question. But if you could prove—if it was possible to prove, which I do not think it is—that land does not bear its fair share of Imperial and local taxation, taking them together, still I think some way might have been discovered less oppressive, more gradual, more just than that which has been adopted. Let me for a moment examine what is the difference between the position of owners of personality and owners of real property. Speaking generally, it may be said that the possessor of personality is bound by no ties to any special locality or to any special mode of life. If you increase taxation upon the owner of personal property and reduce his income it is probably not very difficult for him to change in some degree his mode of life, to live in a smaller house, to maintain a smaller establishment, to effect economies in a great many directions without experiencing any great wrench in either his own existence or that of the people dependent upon him. The case of the owner of a landed estate is entirely different. He is bound to the estate, and to a certain scale of expenditure upon it, as long as he remains there. For him it is no question of certain minor economies; for him the question is whether he shall go or stay, whether he will stay as a pauper, unable to discharge the duties which he has hitherto fulfilled, or whether he will go and abandon altogether the occupations 965 to which he has been accustomed and the obligations which he has undertaken. That is the question for a person who is affected directly, and there is the same distinction among the persons indirectly affected. If a man has to reduce his expenditure he will keep fewer servants and horses, and will diminish his tradesmen's bills, the servants having to find other places, the tradesmen other customers. In the case of a man who is compelled by the operation of this measure to close his country place and to reduce his expenditure upon the estate, the immediate effect will be the absolute cessation of the employment of a large number of people who probably will not readily find employment anywhere else, and the deprivation for hundreds of families of, at all events, their present means of subsistence. My Lords, there is another point to which I desire to call your attention. The other day the Chancellor of the Exchequer laid great stress upon the power of life assurance as affording sufficient and adequate protection to the owner of an estate and his successor against the effect of these duties. Sir W. Harcourt, however, did not explain how the man in the unfortunate position of being over 50 or 60 years of age can protect himself satisfactorily by assurance, and he did not tell us what would be the position of an estate which happened to pass by two or three successions to persons of a certain age who were not able to insure. But, whatever this argument may be worth, it seems to point to the fact that the power to protect an estate against the effect of these duties depends very much upon the age of the possessor at the time when he comes into possession; in other words, it is a question of his life interest in the estate, and the deduction which seems to follow is that it would be more just to levy these duties as they are levied now in the case of land, upon the life interest of the owners, and not upon the capital value of the estate. Justice and equity suggest that this principle should be applied to the case of personal property as well as real, rather than that the principle which now applies to personal property should be unjustly applied to land. No doubt I shall be told that, if this method of levying duty were adopted, the necessary provision for the public service 966 would not be obtained, and that is probably quite true; but what then becomes of the declarations as to the justice and equity of this readjustment, which was to be the final settlement of a difficult and complicated question? It falls from that lofty position to a mere expedient for meeting the pecuniary necessities of the moment. It becomes nothing but a mere temporary makeshift, which will have at some future time to be redressed and put on a more equitable basis. My Lords, I think it might be possible to have adopted some mode of making this transition more gradual. Would it not have been possible to equalize taxation under the old conditions without adding to equalization the accumulated horrors of aggregation and graduation? If this is an act of justice, I confess it seems to me in many respects much more an act of injustice. It has been done in a manner most oppressive and most unstatesmanlike, and with the smallest possible amount of regard to the interests of any of those either directly or indirectly concerned. I know, my Lords, that in making these observations, and those I have made in other places on the same subject, I am exposing myself to a certain amount of misconception and misrepresentation. It is said that I and others who speak in this sense are thinking only of our own interest. I attempted in those observations to show that, in my judgment, it is not the owners of property on whom this taxation will fall who will be the only, or even the chief, sufferers. I do not know whether changes which will be forced upon many owners of property will be in all cases distasteful to them. I am not at all sure that anyone is necessarily much happier for having a great many places to look after and keep up than if he only had one, or perhaps none. I am not at all sure that to a great many country squires, especially young ones, the exchange of the routine of country life and the duties of country life for residence in London, even in a lodging, with all the attractions of the London clubs and London places of entertainment, and all the other attractions of London life, or even the change to a residence abroad and foreign travel, would be in all cases a distasteful change. It is not on those who will be directly 967 affected that the chief burden will fall. It will be borne by those who will have no such option, for whom it will not merely mean a change in their former manner of existence, but perhaps, for the present at all events, the absolute deprivation of the means that have hitherto been their support. I do not believe that this measure is going to be in any sense a final settlement of the question. I believe that the hardships both direct and indirect which it entails will will make it odious to many who may view it with approval or with indifference. I believe that its oppressive character will necessarily lead to attempts, and probably successful attempts, at evasion, and I believe the Revenue will not reap the benefit expected from it, and that at no distant time both those who are the subjects and those who are the recipients of this taxation will have to recognize the necessity of revising it again from its very foundation and placing it on a more equitable and a fairer basis.
§ LORD FARRER
said he felt unwilling, not having been long a Member of the House, to address their Lordships on so extremely important a subject. He had, however, devoted some attention to it, and he would like to say a few words upon one or two points in the speech of the noble Duke, to whom he always listened with almost more attention and respect than any other Member of the House. The noble Duke cast some contempt on the notion of treating such a subject as a matter of expediency in raising money. But the fact that a large sum had to be raised for the public expenditure really lay at the bottom of the whole question. A larger sum was now demanded for naval purposes than hitherto, and the question was, how was that demand to be met? It was not a question of expediency, but of absolute necessity. He would not go into Sir William Harcourt's difficulties. They had been very great. He had succeeded to four very lean years after four very fat years. He had had to meet a new demand for naval expenditure, and in addition to pay off a debt of £6,000,000 charged upon him by the late Government. The right hon. Gentleman had 968 met those difficulties by various expedients, which had not been mentioned in this Debate, and had taken the opportunity of revising our whole system of taxation and of making certain changes in answer to loud complaints which had been made with reiterated force from time to time. The most important feature in the whole scheme was the acceptance and acknowledgment once for all of the system of graduated taxation. It was not a new thing. It had been introduced by Sir Stafford Northcote in connection with the Income Tax, and had been extended by Mr. Goschen in various ways. The principle that accumulated wealth should pay not only in arithmetical proportion to its amount, but in greater proportion as it became larger, was, he believed, a just principle, because the sacrifice was less to the rich man than to the poor man. The noble Duke said it would prevent saving, but would it prevent saving more than an Income Tax or taxes on articles of consumption? The taxes on the luxuries of the poor man—tobacco and alcohol—were already as high as they could be, and therefore, if the taxation of articles of consumption was to be carried any further, it would have to be extended to the food of the poor and the raw material used in our industries. We had no other resources. Why was a tax upon the rich man's accumulated wealth a greater hindrance to saving and industry than a tax upon articles of consumption or upon income? The noble Duke gave some instances to show how it would work—among others, in the dispersion of art collections. But, if so, the money would not be lost to the State for the purposes of taxation, because the works of art would not be sold for nothing, and it would only be the form in which the property was held that would be changed. The noble Duke said that if this principle were once begun there would be no end to it. That was their old friend "the thin end of the wedge" again, and that argument might be applied to almost everything. What was the answer to it? That Englishmen possessed a certain amount of common sense and were not going to commit suicide. Then the noble Duke said that by taxing the very rich man they would prevent him from giving employment to others. There 969 might be a diversion of money in such a case, but the money would still be spent on labor, and there would be just as much labor employed, whether in dockyards or in other fields of industry. It would not be lost to industry at all, but would be merely an alteration from the spending of the money on country residences, gardens, race-horses, and other pleasures perhaps innocent enough. For his own part, he was not sure that such expenditure was not preferable to building ironclads. The noble Duke expatiated on the hardships which would be inflicted on owners of land by the alteration in their habits and by the difficulties in maintaining their country places which would follow additional taxation on land. The noble Duke said that landed estates produced scarcely any income after making all deductions. No doubt there was a great deal of land in the country that was producing nothing at all, because it was occupied for pleasure and as a luxury; but its selling value was enormous. Was the fact that it was not producing income any reason why it should not be taxed? The rent or income derived from land was no test of its real value. It was one of the great complaints outside that ground values were not taxed according to their real worth. He deeply sympathized with an heir who came into an estate with nothing but his rents to depend upon, and admitted that it would have been well if the change in taxation could have been proposed at a time when the landed interest suffered less than at present. But were there no other persons suffering too—persons whose incomes were diminishing through the shrinkage in the value of investments? The answer to the complaint of the landowners was this: "You are in a peculiar situation. Your property is exempt from taxation to which other property is subject. At the same time, you have given a vote to every householder and workman. Do you think these men will look quietly upon large accumulations of property which remain untaxed?" Socialistic doctrines were abroad, and, although the good sense of our fellow-countrymen would reject them, they acquired considerable strength from their alliance with the cause of labor. Was this a time at which landowners could 970 afford to maintain exemptions from general taxation which had been long and bitterly complained of? Was it not a matter of extreme danger that these complaints should continue? Was it not unwise, on the part of landowners, to give the people power and not take upon themselves a full share of the burdens of the people? Was it not wiser to meet the people half-way? He felt strongly upon this subject because of what he had heard in another place, where he had witnessed the result of these new modes of thought. In the London County Council you could not mention the subject of taxing ground values without raising a cheer, which was very significant indeed, and he did not believe there was any way in which you could meet those manifestations of a possible danger so safely as by accepting willingly and loyally alterations in taxation which were just in themselves.
THE EARL OF DUNRAVEN
dealt with an aspect of the Bill not yet touched upon. However strongly he might feel upon the question of the effect the Bill would have upon the landed interests and the millions of people dependent upon them he would not refer to it, that question having been exhaustively dealt with by the noble Duke, beyond asking one question. The noble Lord who had just sat down appeared to think that it mattered comparatively little that a number of agricultural laborers were thrown out of employment because money would be spent in other occupations; but what was to become of the agricultural laborers before they were converted into artizans or dockyard workmen? If the noble Lord had explained that, his arguments would have had greater force. He wished to obtain from the Government a little information as to the effect the Bill would have upon the liberties of Her Majesty's subjects in the self-governing colonies, and upon the relations existing between the Colonies and the Mother Country. It would probably not be disputed that although the Imperial Parliament could in its wisdom or un-wisdom impose any taxation it pleased, and to any amount, upon property in the United Kingdom, whose Representatives 971 sat in the House of Commons, Imperial Parliament had no right to tax property in the self-governing colonies not represented there, but which had Legislatures of their own. The Bill as it stood must practically have the effect of determining and dictating the character and extent of taxation in the colonies. Beyond question, as it was introduced it would have had the effect of interfering with the rights and privileges of self-governing colonies, and a very powerful and dignified protest was made by the High Commissioner of Canada, and by the Agents General of all the Colonies. In doing so they asked the very pertinent question—how was it possible that such an interference as was contemplated in this Bill could be made by the Imperial Parliament without first suspending the respective Constitutions of the various colonies? That question was answered by certain modifications being made in the Bill. Those modifications were, however, insufficient, and as they were somewhat difficult to understand, perhaps Her Majesty's Government would give some further information about them. As regarded the effect of the Bill in the British Possessions, Section 20 of the Bill provided against the duty being paid twice over: that where the Death Duty was charged upon property situate in a colony, Estate Duty should not be charged also upon it—that the amount of the Death Duty levied there should be deducted from the amount of the Estate Duty. But what must be the inevitable effect of that? It was idle to suppose that any colony was going to allow its taxation to go into our Exchequer; and it was obvious that that would force the colonies, in self-defense, to adjust their Death Duties to the amount of our Estate Duty, whatever it might be. We were thus dictating to the colonies the character of their taxation whereby they were to raise revenue, and not only its character but its amount. He doubted very much whether that would tend to increase the feelings of affection with which the colonies regarded the Mother Country. The Minister in charge of the finances of the colony would be compelled to proceed upon the action taken by the Imperial Parliament in regard to the Death Duties imposed in the colony. Sub-section 2 of Clause 20 provided that— 972Nothing in this Act shall be held to create a charge for Estate Duty on any property situate in a British possession, while so situate, or to authorise the Commissioners to take any proceedings in a British possession for the recovery of any Estate Duty.At first sight that seemed perfectly sufficient, but it was clear the Estate Duty would be assessed over the whole of the property situate in the colony, and would be recoverable upon any property possessed by the deceased person in this country. The Estate Duty was to be assessed upon all a man's property wherever situate, and could be levied on his property in this country. He failed to see a concession of any kind in that—it was a mere subterfuge. Did it appear a wise thing to their Lordships or a just thing to so levy duties on property situated in the colonies? Take the case of Australian, Canadian, or other colonists coming over to this country, residing and becoming domiciled here. Though deriving large incomes from property mainly situate in the colonies, it was absurd to suppose they would not acquire a certain amount of property in this country, and their property here would be attachable for the payment of the Estate Duty. A colonist might live for a great number of years Here Domiciled in this country, his whole property had been made in the colony, and was situated there; his heirs were born and domiciled in the colony, and probably never left the colony, and yet in such a case they would have to pay the Estate Duty, and it would come into the Exchequer of this country. That did not appear to him to be just. And was it a wise thing to discourage, as the Bill must, colonial gentlemen, native-born in the colonies, who had amassed fortunes, coming to spend the autum of their days in this country? Of course, there were many other inconveniences incidental to this portion of the Bill. There was the immense amount of litigation which was almost certain to take place in determining whether a man was or was not domiciled in this country, because immense issues would depend upon that, and then it would be exceedingly difficult to get men to act as executors in such complicated cases. But these were all 973 comparatively small matters. What he protested against, and objected to in the Bill, was the introduction of a principle which, however it might be viewed in theory in practice limited the rights of the self-governing colonies to use the whole field of taxation open to them for the purposes of their own revenue. He objected to that, and he objected to the Parliament of the United Kingdom dictating in practice—as by this Bill it did—to the self-governing colonies the manner in which they were to raise the taxation and the amount of that taxation. The principle was a thoroughly bad one. It was through the adoption of a similar principle that Great Britain lost the vast Empire which had now developed into the United States. We lost that by an act of the most culpable imbecility, and it would be a most lamentable thing if anything of the same kind should in any degree weaken the ties which bound the Mother Country and the colonies together. He had always held—and whenever he had had the opportunity he had always stated—that in his humble opinion the whole future of the country and the welfare and very existence of the teeming millions of our industrial population depended on the maintenance of the Empire, of the unity of the Empire, and upon its growth and development. Whatever might happen in the future, whatever might be done in the way of closer fiscal arrangement or of legislative union—whatever might be done in those ways, one thing was quite certain: that the one binding tie which would hold the Colonies to the Mother Country and the Mother Country to them was the sentimental tie of absolute confidence in each other, and of affection and trust. He deprecated as strongly as he could anything which would have a tendency to weaken that tie. The effect of the Bill, or of the part of it of which he was speaking, might not be immediately very large. That, to his mind, made very little difference. It certainly had caused a feeling of uneasiness; it certainly was creating a feeling of distrust, and he did not think he should exaggerate if he said that it had engendered some feeling of indignation. Whether it had a large effect or whether it had a small effect was a matter of 974 comparatively small importance. What he objected to and what he protested against was what he should have thought impossible, and what he did not believe any sane man a few months ago would have thought possible had happened—that the Government of this country had introduced into a Bill the principle that Parliament here had the power to interfere in any way, directly or indirectly, with the absolute rights and privileges of the self-governing colonies to arrange the amount and nature of their taxation themselves.
§ THE DUKE OF RUTLAND
said, seeing that no Member of Her Majesty's Government was prepared to take part in the Debate at this moment, he ventured to intrude himself for a few moments on the part of the subject which had not yet been discussed. The speech of the noble Duke who spoke second in the Debate (the Duke of Devonshire) presented so clear and cogent and crushing a criticism of the principles and main provisions of the measure that he did not think it in the least degree necessary to deal with that part of the question. Budgets might come and Budgets might go, but Chancellors of the Exchequer were not necessarily permanently fixed in their seats of office, and doubtless there would be opportunities in the future to mitigate, if not altogether to remove, the iniquities and injustice of the present measure. The principles, however, which underlay their Lordships' action, and the traditions which they represented, had a permanent interest, and he hoped they would not be subjected to any kind of derogation in the course of these discussions. Now, in the opening of these Debates he must say he took exception to the language in which the rights and privileges of the House of Lords in this matter were spoken of by the Prime Minister, the official guardian of them, and by the noble Earl the Foreign Secretary. He knew not whether it was the intention of either of the noble Earls to speak in the course of the Debate. If so, perhaps they would give some explanation of the language they used, which, it seemed to him, was open to criticism and hostile comment. The Prime Minister had said— 975I do not think that it is necessary, for the purpose of passing the Bill, that your Lordships should make yourselves masters of it; because I deprecate the idea that the House of Lords has anything to do with Money Bills.Taken strictly, that would imply that their Lordships ought not to assent to this measure, because it was impossible to conceive passing a Bill to mean having nothing to do with it. They, however, understood what the noble Lord meant. He wished, no doubt, to close the month of the noble Duke and of every other Peer in the House who might wish to express a hostile opinion of the principles and provisions of the Bill. But the noble Earl the Foreign Secretary went further. The noble Earl the Prime Minister simply deprecated discussion. The noble Earl the Foreign Secretary was kind enough to tell them what rights the House of Lords had with respect to these Bills. He said—I should like to know whether it is intended by the noble Marquess to affirm that this House has exercised the privilege of amending any Money Bills. I have always heard that this House could exercise the power of rejecting a Money Bill as a whole; but I have also always heard that amendment of a Money Bill, whatever may be the abstract right of this House, has long been refrained from. If it is about to be introduced on this occasion, I only hope that the noble Marquess will give us notice of any Amendment before he moves it.Now, he wished to answer such doctrine, not in any language of his own or in the language of any Tory Peer, but in the language of Mr. Gladstone. It was a curious fact that the Foreign Secretary's statement, already referred to, reproduced almost literally a statement made in 1861 by Mr. Newdigate. Mr. Newdigate was the authority for the statement that the House of Lords had the power to reject but not to amend a Money Bill. And here was the language in which Mr. Gladstone, then Chancellor of the Exchequer and Leader of the House of Commons, answered Mr. Newdigate—The hon. Member has again fallen into an error which I hoped would have been avoided after the discussions we have had. He said that the House of Lords may not alter a Money Bill, but may reject it. I should like to know where it is that the hon. Member has learned that the House of Lords are possessed of a power of rejecting in any sense in which they are not possessed of a power of alteration. No doubt you may quote the dicta of important persons in the House of Lords; but the dictum a Member of the House of Lords does not 976 bind the House of Lords; and by no proceeding has that House ever surrendered, as far as I know, the right of altering a Bill, even though it touch a matter of finance. If I might say, for my own part, though anxious to vindicate the privileges of this House against the House of Lords where need may arise, yet I think that the House of Lords is right and wise in avoiding any formal surrender of the power even of amendment in cases where it might think it justifiable even to amend a Bill relating to finance.Now, people had expressed some surprise that Mr. Gladstone in 1861, during his great conflict with the House of Lords on the subject of the Paper Duty Repeal Bill, should have thus gone out of his way to vindicate the right of the House of Lords, not only to reject, but to amend a Money Bill. He (the Duke of Rutland) was not so much surprised himself, because he could remember the year 1853, when Mr. Gladstone was Chancellor of the Exchequer and played a very distinguished part in the Coalition Government. If he remembered rightly, it was called "the Government of all the talents," and it did, certainly, combine a very unusual amount of political and statesmanlike wisdom. In 1853 Mr. Gladstone for the first time sent a Money Bill up to the House of Lords imposing a Succession Duty. The Bill was contested. Lord Derby moved an Amendment in Committee, and Lord Aberdeen, than Prime Minister, replying to him in his courtly and stately way, littered some words of warning to the effect that the House of Lords had better not put itself into conflict with the House of Commons on such a subject. The Debate went on. Strong speeches were made protesting against the line which it was supposed Lord Aberdeen had taken in derogation of the rights and privileges of the House of Lords. What happened? A very distinguished Member of the House, the late Earl Granville, after quoting the opinion of Lord Chatham "that gift and grant is of the Commons alone," said—He believed he stated the opinion of all his colleagues when he said that they did not agree with the doctrine there laid down—that they did not agree with the doctrine of non-interference on the part of their Lordships' House, nor did they deny the right of their Lordships if they thought proper to interfere with or make alterations in a Money Bill.In making that statement, Earl Granville was speaking, not for himself only, 977 but the Government, including Lord Palmerston, Lord John Russell, Sir James Graham, Mr. Gladstone, and he knew not how many more of the most distinguished men of the day. The Debate went on. The Government debated the question exactly as it would debate any other question in the House of Lords. A Division was taken, and the Coalition Government having then a majority in the House of Lords defeated the Amendment of the Earl of Derby, but there was no attempt after that speech of Earl Granville to suggest that the House of Lords was debarred from debating and dividing on that or any other Amendment to the Bill for the imposition of a Succession Duty. He had said so much because he wished, if he could, to extract from some Member of Her Majesty's Government an expression of opinion as to the old constitutional doctrines to which he had referred. It might be said that, with the exception of the Amendment moved by Lord Derby in 1853, there had been no case in which the House of Lords had amended a Money Bill in anything like recent times. That was not so. In the course of that very Debate Lord Derby quoted a case that had been mentioned to him by Lord Monteagle—who had been Chancellor of the Exchequer as Mr. Spring Rice—in which the House of Lords, in the case of the Stamps Bill, amended it and sent it down to the House of Commons. Mr. Spring Rice gave an account of what happened. The old form was had recourse to. The Commons laid aside the Bill, and then immediately afterwards introduced a new Bill incorporating the Amendment of the House of Lords. That Bill was sent back to the House of Lords, and it became the law of the land. That was the practice, no doubt, in the old days, and it was adopted as he now mentioned during the Chancellor of the Exchequership of Mr. Spring Rice, not so very long ago. Many of their Lordships remembered Mr. Spring Rice. He did. Mr. Spring Rice was an extremely able and ingenious man, and if he had seen his way to rejecting the Amendment of the House of Lords to the Stamps Bill, he would have done so. But he accepted it, and the Bill became law as amended in the House of Lords. He had quoted these facts because he felt that it was of importance 978 that their Lordships should take a firm stand against the attempt which had been made, perhaps unconsciously, by the two noble Lords opposite to minimize, discredit, and possibly destroy their Lordships' undoubted privileges. He would conclude by reminding the House of the Resolution which it passed in 1671 to the effect that the right to reject or to alter and amend a Money Bill was an inherent and fundamental element of their Lordships' House.
THE DUKE OF ARGYLL
I confess that I did not take so seriously as the noble Duke behind me the off-hand statement of the Prime Minister, the other night, that this House had nothing to do with the Finance Bill. I interpreted it, and I think that later circumstances have confirmed the interpretation, that the Prime Minister and his colleagues in this House are as little anxious to speak on the Bill and defend it as some of us on this side of the House, and wish to maintain a discreet silence. That is all I understand him to mean. But, my Lords, I believe that I am the only Member of the House now living who was a Member of the "Paper Duty Cabinet" of 1860—unless the noble Earl opposite (the Earl of Kimberley) was a Member—was he?
THE DUKE OF ARGYLL
Yes; I believe I am the only Member of the House now surviving who was a Member of that Cabinet, and I wish to say a few words on the matter which I believe to be of some importance to the honor, credit, and historical truth of the records of the proceedings of this House. The present Bill may be called an omnibus Bill, embracing the whole of the financial arrangements of the year, and not merely a Bill for the establishment of the Estate Duty or the alteration of the Income Tax, and so on, but embracing the whole field of the Budget of the Government. That form is due to the course which your Lordships' House took in 1860. I am very reluctant to say anything at the present moment which may seem to revive personal discussions with my right hon. Friend who was lately at the head 979 of the Government, and has now retired practically, I am sorry to say, under personal suffering into private life. At the same time, it is my duty to state the facts to this House, because not very long ago at Glasgow he made a considerable attack on this House, and he said that the House of Lords had in a very offhand and assuming manner rejected a Money Bill; that as a punishment he had determined that in future all the financial arrangements of the year should be embodied in one measure, so that there should be no opportunity of amending, and their Lordships would have no alternative but total rejection or total acceptance. Now I wish the House and the country to understand what the facts of that case were. In 1860 Mr. Gladstone proposed one of his great Budgets, and I look back with pleasure and pride to the fact that, both in the Cabinet and out of the Cabinet, I was a warm supporter of all Mr. Gladstone's great Budgets. That Budget, part of which was the repeal of the Paper Duty, was carried in the month of April by a large majority—the full majority which the Government had at the time, and that was no inconsiderable one. It was not a majority of 2, such as the noble Earl opposite says he would be satisfied with, nor 20, nor even 40; but, if I remember aright, it was 50 at least. Very soon afterwards the China War broke out, and before many months had passed Parliament and the country became aware that very heavy charges had been incurred and that, new taxes would be required to meet the expenditure of the war. In these circumstances a reaction of feeling, with regard to the Paper Duties, took place, not only in the House of Lords, but in the House of Commons. Lord Palmerston, I think, made no secret of his dislike of the repeal of the Paper Duty, not on its merits but as sacrificing a large amount of Revenue at a dangerous moment, and when the public did not know what might be the substituted taxation. Under these circumstances, when Mr. Gladstone brought in his Bill his majority dwindled from 50 to 8. This showed a great reaction in the opinion of the House of Commons. The Bill was carried notoriously against the feeling of the House by a majority which did not cover the actual official Members of the 980 Government. It was in these circumstances that the Bill came to your Lordships' House. I was a Member of the House then, and I spoke strongly against the course your Lordships took. I did not think it was a wise or prudent exercise of power, but no one doubted for a moment that it was in the right of the House of Lords to give effect to that opinion. What I want to point out is this: that that was the last occasion, so far as I know, on which the House of Lords has ever exercised the power either of amending or rejecting. Rejecting has never been disputed. We have a right to reject. But the House of Commons has said "If you amend we throw out." That is how it came about. It is not that we have ever acknowledged the limitation of our right. It is that if we amend, the House of Commons rejects, or will not go on with a Bill, and, therefore, there is no alternative between total rejection and total acceptance. What I complain of in the speech of Mr. Gladstone at Glasgow is that the House of Lords acted in a defiant manner towards rights and privileges of the House of Commons. The action of the House of Lords was due to reaction in the House of Commons. The Commons repented of its earlier vote, and undoubtedly, and it was quite clear that in its vote on that occasion this House was under the impression that it was giving effect to the opinion that then prevailed in the House of Commons. I now come to the events of 1861, for which I no doubt was fairly responsible, and I did not like them at the time. I have had the curiosity to look back at Mr. Gladstone's speech on the Second Reading of the Bill of 1861, and there I find he distinctly admits that there were serious objections in the previous year, but those objections had disappeared, and his words implied that the House of Lords could not be seriously blamed. He said—This is the important fact: that the repeal of this duty received the sanction of a large majority of this House last year, and that the majority dwindled on the subsequent occasion in face of the fact that new demands for public purposes had come into view, and because it had become obvious that some new fiscal measure must be passed to meet the wants of the Exchequer. Such being the case, we are of opinion that we are now under altered and happier circumstances, and are making proposals that will not only receive the 981 acquiescence but the approval of the House of Commons.These words implied not great censure on what was done by the House of Lords, but rather an admission that the House of Lords had merely acquiesced in the course taken before, and that now they would approve of the Bill. Mr. Gladstone then took the course, which he has since boasted of as an invention of his own, of putting all the financial arrangements of the year into one Bill, so that the House of Lords would not have an opportunity of considering the different items of the Budget, even with the view of slight alteration or objection. I wish now to say that I repent, and have always repented, of having been a party to that course. I do not think it a right or statesmanlike course to dodge or trick either House of Parliament out of its undoubted rights and privileges. I did not think it at the time I was a party to it, but I think now, and have long thought, that the course then taken was unworthy of the Government of the day. That, then, is the reason of this omnibus Bill. After the speech of the noble Duke opposite, in which I almost entirely concur—indeed I do entirely concur with it, though, of course, in a Bill of this immense importance there are, naturally, points of detail on which our criticisms would vary—it is not my intention to enter into any elaborate argument against the Bill, and I will only say that it is a Bill which taxes capital as opposed to income. I do not mean to say that the existing law does not tax capital, or that the principle of taxing capital within moderate limits is not in itself a legitimate thing; but everyone who has read anything of political economy knows that the masters of political economy have dwelt upon the danger that such a policy involves, because capital is the great source of employment of the poorer classes. This Bill attacks and taxes capital to an extravagant degree, and especially the capital in connection with land, although agriculture in this country is now in the greatest distress and requires a large outlay to cope with its difficulties. My noble Friend, the noble Duke said that the new tax will, in many cases, amount to four or five years' rent, but I think my noble Friend has really understated the 982 case. I have no doubt about it. I do not think the public generally—I do not think those Members of your Lordships' House, who are not yourselves landowners on a considerable scale—understand the enormous outlays necessary in the management of landed property. I am not speaking of those charitable and public-spirited obligations to, which my noble Friend alluded in his speech at Buxton and again this evening. They are theoretically more or less optional, although practically they are obligatory. I speak of the outlay necessary in the management of property to maintain the rents and improve the habitations of the labouring classes and the tenantry. On an estate of my own on which there is no residence or luxurious expenditure of any kind, but which is purely an agricultural estate, I find that in the last 20 years the absolutely necessary outlay has amounted to 33 per cent. It is a gross fallacy to say that you are treating the two classes of property—realty and personalty—with equality, when you levy the same tax on a man who has £100,000 in the funds and one who has £100,000 invested in land, subject to all these burdens. It is not equalisation; it is throwing an unjust and especial burden on a particular class of property. I am glad to say that the Bill admits a difference between realty and personalty. A concession was made to realty. It allows, I think, 5 per cent. for management, but so far as I can make out it allows nothing for repairs or improvements. In the clauses affecting the the Income Tax it allows a reduction of ⅛, or 12 per cent., but that is utterly inadequate to meet the expenditure on landed property at the present time, remembering what must be the enormous amount of rural labour represented by anything like 33 per cent. on the land in this country. Schedule A of the Income Tax represents £197,000,000 according to the last Return, and if we calculate 33 per cent. of that great sum we shall see what an enormous amount of employment we are touching, and touching to a dangerous extent. Now, I am not very fond of abstract principles which have been laid down by political economists about taxation; they all seem to me to be plausible in expression, but untranslatable into practice. There is, for instance, the 983 service rendered by the State. It is said, and very plausibly, that the State renders larger services to the man whose succession is £500,000 as compared with the man whose succession is only £10,000. My Lords, I am not sure of that doctrine. I hold that the service the State renders to the working classes in securing them peace and liberty and security of property is even greater than that which it renders to the rich. The rich and powerful can often defend themselves, but the poor cannot. And if you touch capital, which is the source of employment, and above all if you touch the spirit of enterprise, which commands capital and lays it out, you withdraw a great service that the State ought to render to the working classes. Then the doctrine of "equal sacrifice"! How to you translate that? As far as I can see, it means that you are to take away from the rich everything but a small modicum of income. That is the outcome of the principle and is what many are aiming at. Could there be a greater folly committed? Is it not certain that the increase of wealth and the multiplicity of human desires—the ambition of men to live in fine houses, to have fine furniture, and fine gardens, and fine flowers—is it not true that all these desires are the sources of employment to the people? Is it not your object to increase wealth in order that you may increase and multiply the desires of men? That is the object of all civilised Governments. To direct the attention of the people, as the noble Lord opposite has done to-night, in an individious sense, to large pieces of land that are kept for luxury is to misdirect their attention altogether as regards the real question. A good course of taxation is that nobody shall be oppressed, and that, if possible, the taxation of the country shall be so levied that nobody shall be conscious of an exceedingly heavy and oppressive burden. That would be the ne plus ultra to be desired in taxation. One of the sub-sections of the Bill fully admits that there is danger of oppressive taxation or oppressive results from the Bill—the 9th sub-section of Clause 8. It says—Where the Commissioners are satisfied that the Estate Duty leviable in respect of any property cannot without excessive security be raised at once, they may allow payment to be 984 postponed for such period and to such extent as the Commissioners may think fit.What does "excessive security" there mean? It does not mean the amount of the tax, but something is to be the loss of the person assessed. That is to say, that the subject who pays the tax is to pay more than the estate gives. That is the worst description you can give of your tax. Relief is in the discretion of the Commissioners. That is, if they are hard-hearted they may refuse a remedy. Those who are assessed may go to the Commissioners and say, "I cannot sell my property without great loss," and the Commissioners then have power to give some relief. I do not say that the tax will always act oppressively, but it is liable to do so; and that is a strong argument against it. But I look at the whole spirit of the Bill more than at its details. It is intended, I think, to direct the attention of the people to the increasing taxation upon capital—in my opinion a most mischievous thing in regard to the welfare of the world. What are we suffering from now? Universal depression. I will not go into the question whether currency has anything to do with it—I do not believe it is the principal cause—but everyone attributes it to want of enterprise, due to want of confidence in the remuneration of employment and in all the conditions of society. Every measure, however little in its scope, which adopts new and violent principles, tends still more to unsettle opinion and to discourage the industry of the world. That is my great objection to the Bill, though I feel that in the position in which we are placed we can do no more than protest against the dangers of this class of legislation.
§ THE LORD CHANCELLOR (Lord HERSCHELL)
I can assure the noble Duke that it is from no doubt or hesitation as to the principles on which this measure is founded, and from no unreadiness to defend it, that no Member of the Government has up to the present moment intervened in this Debate. In fact, I myself was on the point of intervening in answer to the noble Duke (the Duke of Rutland) when my noble Friend the noble Duke who has just spoken was beforehand with me. I have not now to express my views without having heard 985 his, as I otherwise should have been obliged to do. I will first deal, in only a word or two, with the two questions that have been raised that do not affect the main principles of the Bill. The first is the constitutional question of the position of the House of Lords with regard to Money Bills. I do not suppose it can be doubted that this House could reject a Money Bill, or could refuse to read it a third time. Whether, having regard to a practice which has prevailed now for a couple of centuries, it would be a constitutional or proper thing to do, and whether the consequences might not be more serious to the House itself than to the Bill rejected, is a matter for consideration; but as to the abstract right to reject the Bill there cannot be a doubt. As regards the amending of a Money Bill, the case is as stated by the noble Duke. The House of Commons does not recognise the right of this House to amend a Money Bill, and if this House amends a Bill of that kind the other House sets the Amendment aside as an encroachment upon its own privileges, and the Bill drops, so that the insertion of the Amendment is equivalent to a rejection of the measure—that is to say, the rejection of the Bill is brought about by the action of this House. The question of the amendment of a Money Bill was considered a few years ago by a Committee of the Privy Council, at which Members of the Judicial Committee were present. The question was submitted in connection with the action of the two Houses forming the Legislature of one of our Australian Colonies. The Committee of the Privy Council was asked whether it was the constitutional right of the Upper of the two Chambers to amend a Money Bill, and the answer was that, as the two Houses appeared to have been established upon the same basis as regards their mutual relations as the House of Lords and the House of Commons, it would be unconstitutional in the Upper Chamber to amend a Money Bill. I now must refer to the speech of Lord Dunraven, who seems to be under the strange misapprehension that this Bill contains an assertion of the right to tax the colonies. There is nothing in the Bill that can be viewed as a provision for taxing the colonies in any way. If this be taxing the colonies, they have been taxed for I do not know how long in pre- 986 cisely the same way. Just as this Estate Duty will now be charged upon the property in the colonies of persons domiciled here, so have Legacy Duty and Succession Duty always been charged upon such property since their creation. If the property in the colonies of persons domiciled here were exempted from this taxation, anyone who wished to escape the Estate Duty would only have to invest his money in the colonies. To speak of this Bill being a taxation of the colonies because you tax all men domiciled here in the same way, wherever they invest their money, seems to me to be a delusion. Regard cannot be paid to the particular form in which a man has chosen to invest his property. But to meet the complaint that people might be unwilling to invest in certain colonial securities, and in order not to discourage such investments, a provision has been inserted in the Bill to the effect that when there is a similar tax in the colony an allowance in respect of that tax shall be made in this country to the successor to the property. A man, therefore, has just as much inducement to invest his money in the colonies as he ever had, and it is very wide of the mark to call everything in this Bill a taxation of the colonies. I now pass to other parts of the Bill. Taxation, of course, is never pleasant to the subject of the tax. We none of us like to be taxed. We all of us would be glad to be rid of the burden, and when any addition to taxation is proposed it is not an agreeable topic to any one of us, and it is impossible to make any addition to taxation without causing here and there, and possibly in many directions, not a little hardship. If a tax is to be pronounced a bad or unjust one because a number of cases can be pointed out where it would operate hardly and severely, no tax has been invented, or ever could be invented, which would not come under condemnation. In the speech of the noble Duke (the Duke of Devonshire) one fact was ignored throughout—namely, that if the burden of taxation upon those whose views he expressed had been made lighter, the burden of taxation upon some other class of persons must have been heavier. That would have been absolutely inevitable. Nobody doubts that a large sum of money had to be raised, and had to be raised by taxation, and it is not enough 987 to show that, as regards particular persons who would be made subject to these duties, hardship would result, unless you can show that if the burden had been shunted on to other shoulders there would be less hardship and more justice. Unless you show that, it does not seem to me that you have taken a single step towards proving your case. What is the first principle that underlies this measure? It is that real property and personal property should be taxed alike. I know it is said that there are reasons why the distinction should be made which is now made. I think I can show that if such cases exist they are exceptional; but let me put to your Lordships a case which is typical of the great bulk of real property which will be affected by the Bill. Let me remind you of this: that agricultural property forms less than half the property that will be taxed, and that urban property forms considerably more than half. Take the case of London. There are in London a vast number of leaseholders who have, many of them, paid a considerable sum of money for their leases, and when one of them dies his successor is taxed substantially in respect of his succession to the lease; but when the freeholder dies only 1 per cent. is paid in respect of the property, and in the case of the freehold the property increases in value, while in the other case the value is vanishing. Why should there be this distinction? It is manifestly unjust. As regards urban property such as this, the change effected by this Bill is undoubtedly right, for it readjusts a burden which fell unfairly and improperly upon one person instead of another. Let me give another illustration. In many parts of the country, particularly in Lancashire, there are considerable portions of land held on leases for 999 years. Between this tenure and freehold tenure there is practically no difference, yet these leaseholds are in the eye of the law personalty, and Probate Duty has to be paid upon them, whilst freehold land is not subject to that duty. Why should there be this distinction between cases only differentiated by the accident of tenure? You might have two properties equal in value, the one paying many pounds in the form of Death Duties and the other paying nothing. Now I come to the question of real property. It is said that it is unjust to 988 deal with real property in the game way as personal property because of the local rates real property has to bear. Now, my Lords, let me put this case: A man leaves to his two sons an equal amount of money. The one invests his money in Consols, and the other in the purchase of an estate. The one who puts his money into Consols is heavily taxed; but the one who puts his money into an estate escapes taxation—not altogether, of course, for there is 1 per cent. Estate Duty. I am speaking now only of the Probate Duty, which, of course, is a great deal more. On what principle, under these circumstances, should one pay a large contribution to taxation and the other pay nothing at all? I think it would be impossible to justify it. I know to the intelligent foreigner it would be impossible to understand it without a considerable dive into the history of the past. Let me invite your Lordships' consideration to this point when the burden of rates is spoken of. Suppose the person on whose death the taxation is to be imposed had purchased the property. He would have given so much less for the property on account of his having to bear the burden of the rates, and to treat it as property to be subjected to less taxation because it is rated, when he got it for less money because it was rated, obviously would be unjust and, I should almost say, absurd. If he succeeded to the property, and did not purchase it, he succeeded to it subject to the burden of the rates, and therefore, in the one case as in the other, you are not taxing the owner of the real property in any way unfairly as compared with the owner of personal property if you tax them alike. It may be said that the taxation borne by agricultural property is much greater than it was, and consequently that the land is bearing an increased burden in that way. But I believe that, as regards agricultural land, the facts show that there has been no such increase of burden. The subventions which have been made in aid of local taxation have resulted in this—that there is now no greater burden on agricultural land than there was 40 years ago. Of course, there may be exceptional cases; but the statistics show, if you take the country generally, that that is so. Therefore, the very foundation for an exemption to some extent in 989 favour of agricultural property as compared with personalty is taken away; and if we are to take the taxation off realty and put heavier burdens upon personalty, it seems to me that we shall only be adding to the injustice which, I think, has in many directions been committed in the past. I have no doubt that this new taxation will fall in certain cases hardly upon the successors to owners of land, and no one could desire less than myself that any such hardship should be felt by anyone. I do not view this Bill with any greater enthusiasm if it be the fact, as the noble Duke has said, that the results of it will be those which he described; but what we have to consider is this—if this burden is not to be borne by owners of real estate, who are to bear it? Somebody must bear it. Where is the money to come from? The noble Duke has pointed out objections to increased taxation on capital. But what is the alternative? More indirect taxation? If so, in what direction will you go for it? In this Bill there is an additional tax put upon the only source of revenue which it is apparently easy to tax—or rather, which it was thought easy to tax nowadays—but experience has shown that it is not so easy to tax it, for there seems to be an objection to further taxation on alcoholic liquors in any form. If, then, you are not to tax alcohol, where are you going to find your indirect taxation to fill up the gap which will arise if you tax real property less heavily? No suggestion has been made as to where it is to be found; and I cannot but express the fear that the last course which has been taken with regard to the imposition of duties on alcohol will render it extremely difficult to find any sort of property to tax but accumulated capital or income. Then, if it is impossible to have any further indirect taxation, where is the money to come from? Would you put a further tax upon income, or an additional tax upon personalty? As far as I can see, there is only the one or the other of these alternatives. There can be no doubt that on many the Income Tax presses very hardly and will press hardly, even with the changes that have been made in this Bill; and I would remind your Lordships that there is a cry, which many admit the justice of—even though they see the difficulty of giving effect to it—that the 990 Income Tax at present operates very hardly on those whose incomes are derived from personal exertions and personal efforts as compared with incomes derived from accumulated property. I do not think it is possible for anybody to doubt that the weight of the burden is more severely felt in the one case than in the other, and I think your Lordships will hesitate before insisting that realty ought to be relieved at the expense of a further burden upon incomes. The man who is struggling to earn for himself and his family support by the exercise of his faculties is, after all, earning a very precarious income. His health may give way and the income cease; while the man whose income is derived from accumulations of the past is subject to no such precariousness. Therefore, there would be very grave objections to shifting the incidence of taxation from real property to income. Then ought the extra burden to be made to fall on personalty? We have heard to-night rather the views of those who are possessed of realty; but I fancy if we were to listen to the views of the owners of personalty, if it was suggested to shift these burdens on to their shoulders, we should hear a pretty strong case made out of hardship. The truth is, that taxation of this kind without inflicting hardships here and there is absolutely impossible. The noble Duke who spoke early in the Debate pointed out—and no doubt it may be true—that the result of passing a measure of this sort may in particular cases lead to a cessation of employment of those who have hither to been employed. But if the burdens are shifted on to other shoulders, these persons who would have to pay would have so much less to spend upon labour of every kind. The truth is, the result would be precisely the same in either case—though it is an open question as to which class would spend the money more advantageously for labour—and to say that you get rid of a source of payment for labour by taxation of this description appears to me a complete fallacy. I cannot help thinking that, in spite of what the noble Duke has said, the effect of this measure on the amount likely to be payable by owners of real property has been considerably over-estimated. I quite agree that where there are a 991 number of places to be kept up, it may be difficult to say precisely what will be the effect of the Bill; but even in those cases I think the results have been greatly overestimated. As regards agricultural land, we can form a very tolerable estimate because the method of calculation is plainly laid down in the Bill. You are to take the assessment of the Income Tax, you are to deduct 5 per cent. for management, you are to deduct all the outgoings which are allowed to be deducted under the Succession Duty Acts, and then, when you have arrived at that net result, it is to be no more than 25 years' purchase. I have calculated what that would be in the case of the highest tax of 8 per cent., supposing an agricultural property to be over £1,000,000 in value, and I find that the calculation I have made precisely agrees with that of others. It would amount to something like two years' income. Now, with regard to graduation, allusion has been made to the question whether it is a just and sound principle. No doubt any principle of graduation at all, when once it is admitted, carries with it a certain danger. No one can deny that, because when once you begin a system of graduation there are perils to be encountered. But this Bill does not introduce for the first time the principle of graduation. It has been admitted and has become part of our fiscal system prior to this Bill being introduced. In this Bill, it is true, graduation is made more systematic, but cannot be said to be a new departure in point of principle, when you have had graduation already as regards Income Tax, Inhabited House Duty, and Estate Duty. The only question, then, is—Is it excessively applied, or unreasonably applied in this Bill? That is a matter on which I can well understand different views being taken. I daresay there are many of us who would rather not have increased taxation imposed in the form of graduation. After all, we must bear in mind the situation in which we are placed. I thoroughly concur with Lord Farrer, that if you do not reasonably adjust our fiscal burdens in some such fashion as this Bill proposes to do, you may reach a point at which you will be driven to unjust and unfair legislation. Of course, I am not saying that you should admit a principle that you see is leading to an evil end; but when once 992 the principle of graduation has been admitted, it seems to me that a reasonable use and adaptation of it is a wise thing, a judicious thing, and a conservative thing, and is not really a source of danger. It is of no use shutting our eyes and turning deaf ears to what we know is going on around us. There are put before the people many theories of taxation, which, I believe, would lead to disastrous results. It is proved by experience that it is far safer to take timely steps in the direction desired, so far as it can be done justly, than to bide one's time, and take no step until you have to take a step far longer than is agreeable. I have heard no argument to show that this taxation, graduated up to 8 per cent., is either unfair or likely to be oppressive. All the arguments we have heard have had relation to the effects the taxation would have upon the owners of real property. I believe very little has been heard from the owners of accumulated wealth when it takes the form of personalty; though, no doubt, the taxation is not agreeable, yet no unwillingness to bear the burden has been displayed. I admit that in some respects, owing to social conditions, the Bill will press more hardly in the case of realty than in that of personalty; but this is one of those accidents which it is impossible to avoid when you are dealing with questions of taxation; and it appears to me that every effort has been made in the Bill to mitigate the effects of this pressure. Noble Lords have said that the danger of this taxation is that it will prevent the accumulation of capital. But in that argument there lurks a great fallacy. The accumulation of capital in this country does not consist in the fortunes of a few wealthy men; it consists, in the main, of the savings of men of limited wealth and men but moderately well-to-do. The aggregation of the small amounts of wealth possessed by these classes is enormous when compared with the capital which is possessed by or attributed to the millionaires or the semi-millionaires. This is shown by returns relating to the Death Duties, which indicate how accumulations diminish when you get above the line of £300,000. The true inference is that taxation of this description is not likely to lead men to accumulate less than they did before. Some, I daresay, will do so; but if by 993 accumulating less they spend more, the result will be that other men will receive more, spend more, and accumulate more than they did before, and by that means if accumulations diminish in one direction they will grow in another direction. Of course, individuals differ. It is not every one who might do so who accumulates now; whilst there are men, with no one to accumulate for, who nevertheless accumulate very largely. Others accumulate from habit or for the sake of their children; and this desire and this habit will not cease on the passing of this Bill. I do not believe that its operation will touch the accumulation of capital. I do not believe that it will injuriously affect the industries of the country. Of course, there may be some displacements in the employment of labour; but it will not lead to a single man less being employed, or a penny less being paid in wages. Whilst I regret, and all must regret, that any hardship should be inflicted by the Bill; whilst I cannot help feeling sympathy with any who may suffer owing to the passing of the Bill; yet I think that, if it be judged, not by individual classes but as a whole; if it be judged, not according to the views of those who may be interested this way or that, but according to the impartial judgment which posterity will pass upon it, its provisions will be found impregnably just.
§ LORD HALSBURY
At last the silence of the Ministerial Benches has been broken, and a Minister has explained to some extent the defence of this measure. And what is the defence of this measure? It comes to two propositions: The first proposition advanced in support of the Bill is that we must have money, and we do not know where else it is to be had; and, secondly, it is assumed—and this, in principle, is the whole question of the Debate—that realty has not been taxed in the same proportion and to the same extent as personalty. That proposition has been assumed throughout the whole of the Debate; but it is a proposition in dispute, and upon that subject I have not heard much from the noble Lord on the Woolsack. Upon the preliminary question, I do not think that it is very important to address your Lordships. I cannot agree that we have no power to reject or to amend this Bill, and that, there- 994 fore, it is to be assumed we have nothing to do with it. We are not yet completely accustomed to government by machinery; we do not assume that, because there is a certain majority in the House of Commons or in the House of Lords, we have got rid of discussion altogether. There is something in intelligently appealing to the common sense of the country, even if you cannot alter the judgment of one House or the other; and it appears to me that it would be an abnegation of one of the great functions of Parliament—whence its name—if we were to abandon the notion of discussing a matter because we rightly or wrongly assumed that we have no power to do what is so practically manifest at the end of July—namely, to reject a Bill intended to provide for the finance of the year. It may be quite true that you must have an income and that it must be got in some way; but one would have expected something to be said in defence of the particular manner in which the Bill proposes to raise it, some argument that a special form of levying a tax is just and will operate fairly as between different classes of the community. If you want us to accept your financial proposals, it is not enough to say boldly—"We must have the money, and we can't get it anywhere else." Something has been said about the danger of refusing to pass this measure because Socialism is abroad. That argument is a very old friend; we have heard it on almost every subject upon which this House was likely to take a different view from that of the other House. Surely it is a desirable thing we should know whether it is true that land does not bear its fair proportion of taxation at present. I understood that a Member of the Government had promised an inquiry upon this subject, and it was said that if it should turn out that, land was unduly taxed the injustice should be remedied. But I am afraid from the language of the Lord Chancellor that it is a predetermined issue, and that we are going into this inquiry fettered by the declaration of a Minister that land is not unjustly taxed. Are not local improvements paid for out of rates, and are not rates levied on the land? It may be true, as Lord Farrer said, that the occupier pays; but is it always true that the land that pays finds the money? I wish the noble Lord had heard a speech I recently 995 heard by a tenant farmer who, speaking upon this measure to his own class, said—"You know what it is to have a successor to an estate who has not got much money. You know the difference between a landlord who is able to help you and an impecunious landlord." He added that the effect of this Bill would be to make nine-tenths of the landlords impecunious for three or four years after their succession, the very time when they most wanted money to spend on their estates. This Bill is supposed to be a bid for the agricultural vote; it is supposed that the cry "Tax the rich and let go the poor" is a popular cry; but I suspect the friends of the Bill will themselves be very much disappointed by the result. The question has been debated by the noble Lord on the Woolsack whether land does or does not pay more in proportion than personalty. The right hon. Member for Midlothian stated the reason why land was exempted from taxation in this form, and it was because land has burdens to bear which personalty has not in the way of rates and charges. Now, I have always understood that the right hon. Member for Midlothian was one of the great authorities on finance. What has happened since he made that statement? Has anything been taken off the land? The noble Lord says there have been subventions. Yes, there have; but ask any person who is acquainted with agriculture and with the incidence of rating and the pressure of rates, whether these subventions have supplied the means for carrying on the agricultural industry to any profitable extent, and you will get but one answer, and that in the negative. The truth is, this Bill is intended to satisfy a cry raised by the London County Council, and caught up in other parts of the country, and supposed to be a popular cry. That appears to be the defence, if defence it can be called, of this measure. There are a variety of things in this Bill which really are not things applicable to the Budget at all, and it is impossible not to see that you are endeavouring in this Bill not merely to impose a temporary charge on land, but that you are endeavouring to alter the law for all time. I observed that once or twice the noble and learned Lord on the Woolsack referred to the Bill as if it were a thing of a year. In one sense that is true; but 996 do not noble Lords contemplate that this is to be the relation between personalty and realty hereafter in all Budget Bills? Or is it true that there is to be an enhancement of those duties—a further driving in of the thin end of the wedge? My Lords, I congratulate the noble Lord that he has not done that which was done elsewhere—namely, bring out the fanciful theory that the State has a right to take anything it pleases upon the succession to property. That appears to have been an argument that was treated with great respect in the House of Commons. I am glad we have not heard that argument here. I do not know distinctly what it means. I suppose that as a mere platitude it is true, because the law permits it. But our system of law is founded on our constitutional system; you have no more right to prevent the disposition of a man's property after his death than during his life. Admitting that all are to be taxed equally, you have no right to demand more from one man than another, and it seems to me that, because property is turned from money into land, you have no more right to tax it excessively in the one case than in the other. It seems to me the Bill is to be a hostile demonstration against the owners of land. Let me take one clause which is grossly unjust, but it is rather as indicating the spirit which has dictated the Bill than that the thing is of cardinal importance. You have objects of art, family portraits which are of value because they are portraits of the ancestors. Some of them are of great commercial value. They are to be part of the property liable for taxation, and although they go as heirlooms, and are settled, you may sell them if you cannot otherwise pay the duties. They may, therefore, be scattered. The noble Lord says the things will remain in England, although they are sold. Will they? Are you sure that the best market for family pictures by some of the great artists of the last century is in England? I should have thought the experience of everybody would have told him that the exact contrary is the fact. That is an illustration of the hostile spirit towards the landed aristocracy which runs through the Bill. It is supposed to be a popular cry. I believe the supposition to be a mistake. It is not a popular cry; but whether it be or not, those who want to defend this Budget 997 must not assume as a fact the question in debate—namely, whether there is an equal taxation of realty and personalty. The question which we contend and which you have not even affected to disprove is that land at this moment, under the present law, and without reference to this Bill at all, bears a taxation disproportionate to its value, and that you have no right to increase it.
§ Motion agreed to; Bill read 2a accordingly, and committed to a Committee of the Whole House To-morrow.