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Finance Bill

Volume 95: debated on Monday 2 July 1917

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Considered in Commitee.

[Mr. Whitley in the Chair.]

Clause 1—(Continuance Of Customs Duties Imposed Under 5 & 6 Geo 5, C 89)

The following duties of Customs, imposed by Part I. of the Finance (No. 2) Act, 1915, shall continue to be charged, levied, and paid until the first day of August, nineteen hundred and eighteen, that is to say: —

Duty.Section of Act.
Increased Duty on Tea1
Additional Duties on Dried Fruit8
Additional Duty on Motor Spirit.10(1)
New Import Duties12

I beg to move to leave out the line, "Increased duty on tea."

The duty on tea with this increase is now 1s. per lb., and if this Amendment were adopted it would abolish the extra 4d. imposed by this Finance Bill. There was a very remarkable answer by the Shipping Controller the other day which disclosed that the freight on tea had been raised from about ½d. per lb. to 4½d., and that this 4d. goes to the Government as a sort of illicit profit on tea. That seems a most astounding thing, and if this Amendment were accepted the duty imposed directly by this House would be 8d. per lb., while the Government would still get the 1s. by means of this extra 4d. per lb. which is now charged and retained by them. My Amendment is moved as a protest against the duty being raised secretly and indirectly to 1s. 3d. or 1s. 4d. without the consent of this House. I hope I shall succeed in getting support for this proposal. This matter of the burden of the high prices of food is becoming the most important question in this country. Everybody is talking about it, and in every paper you open you see it. Anyone who is familiar with the scenes which take place in connection with some of the articles on which the heaviest burden rests in the poor streets of the Metropolis will agree that if this House does not pay attention to this matter this House is running serious risk of public disorder. The Prime Minister stated in Dundee on Saturday last on this subject as to the conduct of the Government:
"We shall even go to the extent of resorting to the Exchequer in order to see that, at any rate, the price of bread is within the compass of the bulk of the people."
The Prime Minister also said in that speech:
"Food must be brought within reach of the poople. The worst method of enforcing economy is by extravagant prices. It means provoking disconient."
I am doing what the Prime Minister told me to do. He said that the Government would "go to the extent of resorting to the Exchequer." I am resorting to the Exchequer. There is the Chancellor of the Exchequer opposite, and I ask him to have regard to this extra burden direct and indirect which has been put on tea. The Prime Minister went on to mention two causes for the high prices of food, but neither of those account for the high cost and heavy burdens placed upon tea. I am very sorry that the findings of the Committee of this House on Food have been entirely ignored or neglected. The Government of the day appointed that Committee, which issued three Reports. One of those went into the question of tea. I found myself on the Report of that Committee, and I ask that due consideration should be given to the findings of that Committee, and that those findings should not be tossed into the waste-paper basket. That Committee gave four reasons for the high price and cost of tea. The first was the enhanced profits of the producer. That, I think, is at the bottom not only of this question of tea, but also of wheat and meat and sugar, and other things this House has to consider, and I think that is the direction in which we must look. Then they put the action of certain brokers. We had the case of a wholesale co-operative society. I do not pay undue attention to that matter. The representative of the Food Controller, himself a great co-operator, did not like to follow up that matter, and I do not want to follow it up, and merely leave it there. The third point was found to be the increase caused by freights paid to the shipping companies. Since that date mentioned the freights have been doubled, and are paid, not to the shipping companies, but to the Government. My right hon. Friend who looks so innocent is getting 3d. or 4d. per lb. by that means. The fourth reason given by the Committee is the excessive taxation of this article imposed by Parliament Everything we do here is naturally experimental, and my right hon. Friend who raised the duty to 1s. may do something to regain the confidence of the House which may be a little shaken in his wisdom if he supports my proposal to-day. The Parliamentary Committee appointed by the Government, and presided over by my right hon. Friend who was lately connected with the Board of Trade, found that, the high taxation imposed by Parliament was one of the causes of the high prices of tea, and so I ask the Committee to remember that fact to-day. This is a Clause which will now have to receive some attention from the House. It is the extraordinary proceedings of the Government in its purchases of tea, and especially the new Government. We kept the Government right with regard to tea for the first two and a half years of the War, and up to December last the price of tea was low to the Army. The Army was supplied at 10½d. per lb. The price of tea was low to the people, who were supplied at 1s. per lb., apart from the duty. The whole tragedy with regard to tea, so far as it is a tragedy, was caused by the Government— and the new Government! That is the next reason why I ask the House to consider this matter. A very interesting Report has been published, a Report on War Contracts. In this Report there is a little paragraph about tea to which I desire to direct the attention of the House. It mentions that the price of tea was, as I said, 10½d. per lb. for the whole year. Then it says
"A great increase took place."
How did that increase take place? Because the Government instead of being content to supply their requirements on the market basis in the first, place, prohibited the importation of, tea, and that created a great scare, and secondly, they transferred the buying. Now the Government have seen the effect of buying tea—a most difficult and delicate thing to judge ! I said to my right hon. Friend more than a year ago, and I say it to everybody, and I say it to this House, that they ought to get the best expert advice from the houses who have been accustomed to distribute tea, who have distributed it most honestly during the whole of their lives. They could ask their assistance instead of trying—and perhaps succeeding—to create a revolution of their own, with the most disastrous effects on the country. The Government have gone on to buy tea at Calcutta. It has been announced that they have bought tea at 8¾d. or 9d. a lb., but I have a telegram here stating that to-day the price at Calcutta is 5d. to 7d. per lb.—2d. per lb. less. I do not want to be too hard upon them, because they have no expert advice. They are dealing with the producers, and the producers are always most anxious to get the highest price they can get. [An HON. MEMBER: "What about the middleman?"] You will hear about him presently. I would strongly recommend hon. Gentlemen to read this report from which I am quoting. It states that the Government are buying tea at 8|d. What are the Government doing in London?

The Government have fixed prices for tea in London, and to-morrow a sham sale opens, approved by the Government, and the lowest price in that sale is 1s. a lb.—possibly 11d. ! Twenty-five per cent, of that tea has to be sold at 1s., 35 per cent, at 1s. 3d., and 25 per cent. at 1s. 6d. It is a sort of Dutch, auction, a public sale with the Government coming in to prevent the tea falling down to a reasonable price. That is another reason why I ask this House to have mercy upon the poor consumer, seeing that the Government is proceeding in such an extraordinary way, and to do something drastic in this matter. According to this report, which I have quoted, the Government are buying all the tea they can get, and a figure of 60,000,000 lbs. is mentioned at 8¾d. at Calcutta. The report States it costs 1d. to bring the tea here—which is 9¾d. All the time the Government have issued an Order—it is almost incredible—to the buyers that they must not give less than 1s. 4d. per lb. in London for tea. There never was such a thing done. It is perfectly incredible. The auctions have been suspended for a fortnight. They are to be resumed to-morrow, and these prices, approved by the Government, have been established here in London. I ask the question: If the Government can buy this tea, even at the high price of 8¾d., which is 2d. too high, in Calcutta, and can bring it here at id.—if they can do that for the soldiers why cannot they do the same for the people of this country? That is all I ask.

Anyone who reads this report, a most amazing report, will see that it is full of the ability of the Government buyers. Then I say let them buy for the people. Let them buy us tea, sugar, wheat, meat a bit cheaper than now. Notoriously tea ought not to exceed a 1s. a lb., and yet the Government have fixed this high price in the London sales, as compared with the low price of which I have spoken in Calcutta! The House will say: "Of course, the thing will settle itself in a moment." No, it will not settle itself in a moment, and for this reason: The Government have got the key of the door; the Government will not approve of them buying for the public. The Government has shut out the China tea. It will not let even the Dutch send in their excellent Java tea, and it will not bring in our own tea. So there is an extraordinary situation. I know the answer will be made that it is the shipping situation. We shall have repeated the same facts that we heard in February. If they are true—and I do not question those who make them—then we are bound to reduce the duty, be- cause it is too bad. In this report, which I am quoting, hon. Members will see that the Government argue that they were going to save 9d. per lb. in the tea purchased for the Army. I should like that 9d. saved for everybody. The people would like to get their tea 9d. or 1s. cheaper, yet the Government calmly ask us to accept without question the present situation. The report states that tea can be bought so cheap there while we are paying such a high price for it here! These are very remarkable facts. My hon. Friend beside me says he does not understand it. It is very difficult to understand. The Government have done this, and in a cowardly way. They have established what is called a Tea Control in London; yet they have not issued an Order. They are bound to issue an Order before they set up a Control. They have done it on the one side, where the Food Controller is. At 1s. 3d. and 1s. 6d. per lb. for tea, while all the time the Government have —

The right hon. Gentleman seems to me to be opening up a discussion on the Food. Controller's estimates. We have to discuss the tax only, and not the action of the Food Controller.

I was afraid there would be trouble about the matter. I apologise, Mr. Whitley, it is not necessary for me to go at any length into the points which I have mentioned, but I submit to you, without arguing the matter—I am sure you will allow me the usual latitude, for I am moving that we should reduce the duty—that I am at liberty to give reasons for my proposal; and the one reason is that the Government are buying tea so much cheaper in Calcutta than they are allowing us to buy it here in London. I think they have made a corrupt bargain in the sense of saying to the producer: "If you give us our Army tea at 8d. we will allow you to charge the people the usual figure." However, I cannot go into that now. It is a very curious story. I do not know why the Government did it. The Government said it was recommended by the tea trade. I can contradict that. We have had large meetings in the tea trade to protest against the whole thing. I will not go into the question of Government contracts and buying, because I am going to ask my right hon. Friend for a day on which to discuss them. 4.0 P.M.

Here I merely give the facts, and I say to the Government, in the interests of the consumer, "Since you are charging us secretly in freight 4d. per lb. on the tea—since the establishment of the Tea Control—take off the 4d. per lb. duty in order to equalise the matter." Another reason, which I have already mentioned but have not elaborated, why I think the Government ought to reduce the duty, is because of the policy they have followed of excluding imports. What good can they get by excluding imports? Why not let the Dutch send in some tea

Of course, I do not want anything in which the Germans are interested, but I think we are much more interested in the Java estates than the Germans, and precautions could be taken against German trade. Therefore, I think both China tea and Dutch tea ought to be admitted, if they can be got here. I do not want to mix these rather extraordinary facts with the general question of the Clause. I do say they want some examination by this House. I was over in Ireland about three or four weeks ago, and I was asking a poor woman what she paid for tea. She said she now paid 3s. 8d., instead of 2s. 8d., and she bought a pound every week, so that there is a tax of £2 12s. on a family of four, and there is half or two-thirds as great a tax in every house in England. I have great confidence in appealing to the Committee on this Report of the Board of Trade, which went into food prices, and which attached great importance to the high taxes. I commence this Debate, so far as food is concerned, by asking for the reduction of this tax by only 4d. a lb. Perhaps a little late-r on in the Budget I may be able to bring another subject forward.

As indeed you indicated, Mr. Whitley, if I were able to answer the speech with which my right hon. Friend has just favoured us, I should have to know in detail every operation of every Department of the Government, and I confess that I am not, and never hope to be, in that position. As regards this particular proposal, I should at least have, liked some opportunity of verifying the statement that something like 4d. a pound is made on all the tea imported, without freight. I think it is not possible. I am not, however, going to deal with that, but will give an answer on the general grounds. My right hon. Friend has suggested that my predecessor would get back his reputation for financial wisdom, which I did not know he had lost, if he would support trim to-day in taking off the duty imposed last year. I hardly think my right hon. Friend will look upon that as a method of increasing his financial wisdom. This Amendment moved by my right hon. Friend is a very good indication of the difficulty in which anyone stands who represents the Treasury at a time like this, I am perfectly certain my right hon. Friend disliked very much adding 4d. to the Tea Duty last year, and in the same way, when we come to the few cases in which I have added to this kind of taxation, I can assure the House that the last thing one would wish to do would be to put additional burdens of this kind, if they can be avoided. But wo have got to raise money, and I think it may do good if I give the Committee now some indication of the extent to which the additional revenue we have got has come from direct taxation as compared with the extent to which we have got it from indirect taxation. In 1913–14, the last year before the War, the total amount of indirect taxation was £09,000,000. It has been raised in the Budget which we are now considering to the extent of £102,000,000, which, no doubt, represents a very heavy burden on many classes of the community. But compare that with the extent to which direct taxation has been increased. In 1913–14 the amount was £93,000,000; in the present year it has risen to£466,000,000. Or put it in the way of percentage. The percentage of indirect taxation in 1913–14 was 42, and the percentage of direct taxation was 57. Now it has altered to this extent: the percentage of indirect taxation is 18, and the percentage of direct taxation is 82.

Yes, certainly, I include the Excess Profits Tax in the direct taxation. I did think it would be useful that the Committee should have these facts before them at the beginning of our discussion. I do not wish in any sense to suggest that the arrangement we have now made is not fit. That is to say, in time of war we must get the revenue from those able to provide it. That must be the criterion. But, admitting that, I think the Committee will feel also that some part of the burden should be borne by all classes, and what we should try is to make that burden as fair as possible in its incidence. As regards this particular duty, my right hon. Friend suggested that it was a great crime on the part of the Government that we had taken in a crisis a price which was not represented by the actual freight paid, that is to say, that the Government got the difference. If you were to take it otherwise it would mean not that the consumer would get the benefit, but that the particular trader who happened to get a particular ship at a low freight would get the profit, and neither the State nor the consumer would get the benefit. Then my right hon. Friend made this curious argument, as I think it. He said that the Prime Minister had stated it was the intention of the Government, if necessary, to come to the Exchequer to keep some of the necessary supplies at a reasonable level, and he said, "Since you are doing that, what justification have you for taking into the Treasury the amount you are taking from the freight in this way?" I should put it this way: I should say that if the Treasury has to make good in one direction, it is only right that it should get what it can as compensation for the amount it has to put out in that way. I would make this appeal to the Committee. Of course, all these questions could give scope for absolutely unendless discussion, but I am sure that, on the whole, the Committee will take the view that it is not going to take off duties which were imposed last year, and though, of course, it is natural and right that such subjects should be raised, I hope no unnecessary time will be taken in the discussion, which I am sure the majority of the Committee will regard as academic.

The producers loyally accepted the increased duty which the right hon. Gentleman opposite wants to take off. In his speech he rather purported to speak for the producer, the consumer, and anybody but the retailer. I am not quite clear why he took that line, nor have I got up to support his Amendment to-day, because I think the producers, having accepted this increase, it is quite clear it cannot be taken off. There is one thing I cannot understand. I understand the present position to be that a ship calls, let us say, on the Malabar coast. It cannot bring any tea home now. I do not know why, when the Government have exhausted the Priority List. I do not know that the right hon. Gentleman opposite is right in imputing to the Government the raising of freights. To what extent is the Government now in complete control of the shipping so as to be able to control the prices? Is the present enormous rise in freights, which, of course, is a very serious burden in the tea trade, such as the Government can entirely control"! Perhaps, some hon. Gentleman when he rises will make that perfectly clear. If there is this order of priority, bow is it tea cannot be put in the ships, and how is it the Government do not control the freights so as to prevent rises to this tremendous figure? I should rather like to have that cleared up. I have taken every means to find out, but I confess I am in some doubt about it. Then how is it, under existing arrangements, tea grown in Northern India and brought to Calcutta is exported, but tea grown in Southern India has no means of being exported? It makes a very unfair discrimination. That is a point I should like to have cleared up. When my right hon. Friend opposite wants us to get Java and China tea, I do not think anybody in the House should sympathise with him. I wish, on the other hand, we would keep out Java and China tea, and only buy Indian and Ceylon tea at a time like this, and so give that preference to British produce which, I think, almost everybody now thinks it is entitled to get.

When the Chancellor of the Exchequer told us just now that to discuss this Amendment involved his having a knowledge of every operation of every Department of the Government, I thought it was rather an interesting remark, and it will, I hope, show him and other Members of this House what will be expected of Ministers when the Government undertakes the management of the whole of the affairs of the State. If they are going to manage the whole affairs of the State, the Leader of the House will very soon find out that the business of the Treasury Bench is not so pleasant as it used to be, and will be rather exhausting. I understand the object of this tax on tea was to make comparatively poor people in this community contribute some taxation. I understand that was the object of indirect taxation. Of course, if it is also the object of the State to reduce the burden upon poor people by a grant from the Exchequer, which is what the Prime Minister apparently contemplates, then it would appear that the object of this tax is really going to frustrate it, and the subsidising of one article of food indicated by the Prime Minister is negatived by a tax on another. The two cannot be defended at the same time. I want to ask the Chancellor of the Exchequer if he could enlighten the Committee on this point: The Government, for reasons which we need not discuss, be they good, bad, or indifferent, are making a very considerable reduction in the importation of tea. Now it is quite obvious, if that takes place, there must be a very considerable reduction in the yield of the tax. Would the Chancellor of the Exchequer be prepared to tell the Committee what he has estimated will be the total loss to the revenue which is going to be brought about by the restrictions imposed on the importation of tea? I would also commend to the Committee this interesting consideration: What is the use of an import duty as a means of raising revenue when by Governmental decree you have prevented importation of the article? How is it possible to finance any country during a great War, when your source of taxation consists of articles the importation of which has been forbidden by decree1? The facts brought to light with reference to tea seem to indicate the futility of any import duties to finance any country during War time. My right hon. Friend raised another question which I think deserves a certain amount of attention. He alluded to the very high rate of freight being paid upon tea from Colombo. I do not know whether his figures are correct, but at any rate the freights are unreasonable.

The Shipping Controller stated that those figures were approximately accurate.

I believe that is so. On this subject I speak with more freedom, because in one respect I am interested because I have been an unwilling party to fixing those rates. I thought they were unreasonable, I protested against them and I withdrew from the Association because I thought it was so utterly unreasonable. Therefore I think I am entitled to tell the House that the rate of freight from China is only about half of the rate from Colombo, consequently by the prohibition of China tea the public is being deprived of a rate of freight coming in at half the cost for a much better article. I think it is outrageous that people should not only be compelled to take a less quantity of tea, but also an inferior quality. I want to direct the attention of the Committee to what I believe a very serious constitutional point raised by my right hon. Friend. We are asked to sanction a duty on tea of 1s. in the lb., but meanwhile the Government is, in fact, without any vote of this House, by an administrative ukase, proceeding to levy another duty upon tea. What has taken place is this. The Government has requisitioned certain steamers, and they pay them a certain rate of freight. They are directing that a very much higher rate of freight is to be charged in respect of the goods transported by the steamers, and the Government are putting into the pocket of the Exchequer the difference between the rate of freight they are directing should be charged to that which they are paying to the shipowner. No one can deny that that is practically levying a tax, whether it is upon the shipowner or the consumer of tea may be a matter for argument, but for the purposes of this discussion I think we may regard it as a tax upon the consumer of tea.

Now it is perfectly obvious that if the Government pursue this policy of requisitioning steamers in the way they are now doing, they do not want a vote of this House to levy a tax upon the importation of any commodity whatever. By pursuing this policy they are arrogating to themselves without any vote of this House the right to levy an import duty upon any commodity which they please, and it appears to me that that is wholly immoral. It is entirely contrary to any constitutional principle which has ever been accepted by this House. I think this is a point which should be better understood. I imagine that there will be a certain number of people sufficiently public spirited to contest these operations in the Law Courts. I think it is the duty of every public spirited citizen who is in a position to bring an action, to bring this matter into the Courts in order to obtain a decision as to the legality of these proceedings. I think this Committee should insist on the Government coming forward with proper legislation to sanction any steps whatever they propose to take in the way of taking money out of anybody's pocket, I do not care whose it is. Money ought not to be taken out of anybody's pocket without an Act of Parliament. The Government are undoubtedly levying a very substantial additional tax on tea—whether it is 2d., 3d., or 4d. per lb. is a matter of argument, and I do not think it matters how much it is, and I will put it for the sake of argument at about 2d. a lb. When the Government without the authority of Parliament are levying an import duty of 2d. a lb. on tea in this way, I do not think this House ought to sanction a duty of 1s. a lb.

The freight is 245s. per ton, and how does that represent an additional tax of 2d. a lb?

I am speaking of the approximate rate. A ton of tea is approximately 1,000 lbs. net weight, the actual ton is 50 cubic feet, therefore I work it out at 220s. per ton of 50 cubic feet. If the right hon. Gentleman chooses to make the calculation he will find the discrepancy between that and the amount he proposes to pay the shipowner is something in the neighbourhood of 2d. in the lb. Therefore I say that the Government. are levying a tax on the tea of 2d. in the lb. which they have no right whatever to do, and if my right hon. Friend will go into the Division Lobby I will vote with him as a protest against the whole illegality of this form of taxation upon tea.

I think I have raised this question before. I do not want to argue whether the tax is high or low, but it is a well established rule of the Constitution and of this House that no grant of money to the Crown shall be made or can be made without the grant having originated by a vote in Committee of Ways and Means in this House. If by any construction this 2d., or whatever it may be, is added fortuitously in this way, I say it is wholly unconstitutional and ultra vires. Of course we are at war, but I think the Government have no right to increase the taxation by a silent method. This is not the only case in which the Government have proposed a special tax. I know a case of a soldier down at Greenwich employed to discharge two cargoes of sugar, and the Government paid this soldier l½d. per hour and charged the owners of the ship 9d. per hour, and they pocketed the difference. Really, that is not strictly just. The Government have no right to charge a single penny more than what they pay. 'To impose a charge which, in fact, is a grant of money to the Crown, from whatever source, must and ought to originate in a Committee of Ways and Means of this House, and if it does not it is ultra vires.

I hope my hon. Friends who have raised a very important point will not think it necessary to press it further. It is quite clear that the Government are proceeding rightly in not allowing the difference of the two rates of freight to go into private pockets. Whether the Government have authority already existing by law to appropriate this difference to the Exchequer is quite another point, and if they have not got authority that is a question to be settled, as my hon. Friend has said, in the Courts of law. If by the regulations under the Defence of the Realm Act they have this authority, then the argument of my right hon. Friend falls to the ground. In either case I do not think there is any possible ground for voting against this tax.

I think the Government has not been sufficiently explicit in reference to the rise which has taken place in the price of tea, and it ought to be explained more fully to the public. The causes ought to be clearly stated which have contributed to this rise in price. There is a great feeling of irritation among consumers of tea, which I do not think would exist if it were clearly explained how this rise has occurred. The result is that they write to the papers and take things for granted; they say that it is a monstrous thing and that someone is making a huge profit and ought to be punished. A tax of 1s. upon tea always means a little more to the consumer than the amount of the duty. The price charged now is anything from 5d. on the lower grades up to a possible l0d. on the higher grades. It should not be forgotten that the cost of tea cases has trebled what it used to be; in fact, they cannot get the wood to make tea chests, and the price of lead for lining the same is double or treble what it used to be, and this must raise the price of tea. The public do not know these facts, and they say that the grocer is charging exorbitant prices and making enormous profits. I am sure that explanation might be given by the Food Controller of the Treasury to show how it is that this rise in price has taken place.

We have often had the question raised of this duty being reduced for Colonial tea. I do not wish to raise this point now during the War, but I wish to say that I got an answer to a question the other day stating that 30,500,000 lbs. of tea had come in from Java last year, and this must mean that £1,500,000 have gone into the pockets of Dutch and Java companies for this produce. I am told that the Germans are largely interested in the Java States and they have largely financed tea production in Java. Therefore I think the action of the Government in prohibiting the export of tea from Java is perfectly correct. I only hope they will allow the ships to call in at Indian ports as they used to do. We have been told that there is not more than three months' supply in the country to meet the present demand, and that prices must rise again shortly if something is not done. Under these circumstances, although we cannot ask for a reduction of the duty upon tea, I hope the Government will arrange for the accumulation of large stocks coming in at a more moderate rate than is now charged, and explain more clearly to the public the causes of the increased cost.

If the right hon. Gentleman who moved the Amendment insists upon going into the Lobby, I shall certainly vote against him on the broad ground of principle which was raised, and very properly raised, by the Chancellor of the Exchequer. The ground which he took was the proportions which are at present being borne by direct and indirect taxation. If he had gone a little further back he would have made an even stronger case than that which he placed before the Committee. I had the curiosity a short time ago to take out the figures on this point since the accession of Sir Robert Peel to office in 1841, and I will summarise very briefly the result of that inquiry. Broadly speaking, the proportions between those two classes of taxation have been almost precisely reversed in the course of three-quarters of a century. Whereas when Sir Robert Peel came into power in 1841 the percentage paid by indirect taxation was 73 as against 27 per cent, paid by direct taxation, ten years later, in 1851, the proportion of indirect taxation was 67 per cent., and direct taxation, therefore, 33 per cent.; in 1881—I skip over certain decades—the proportion paid by indirect taxation was 60 per cent., and by direct taxation therefore 40 per cent.; in the first year of the present century, if 1901 was the first year, the proportions were almost exactly equal, 50.6 per cent, being the indirect taxation and 49.4 per cent. the direct taxation; ten years later, in 1910–11, 43 per cent, was the indirect taxation and 56 per cent, was the direct taxation. This went on continuously down to last year, when the proportions were, indirect taxation 28 per cent, and direct taxation 72 per cent.

One or two very obvious reflections are suggested by this very remarkable series of figures. In the first place, as I have already said, it will be observed that in the course of three-quarters of a century the proportions between the two classes of taxation have been almost exactly reversed, because whereas in 1841, the year in which Sir Robert Peel came to power, indirect taxes contributed 72 per cent., last year 72 per cent, was contributed by direct taxation. The second point is the unbroken consistency of the transition from the old financial system to the new. If I had given the figures in greater detail, they would have indicated an absolutely uninterrupted tendency. That is worth bearing in mind. The third point which I desire to emphasise is the very gradual nature of the transition. Down to the year 1909 there was no violent jump—it was a very easy gradation—but from that, point onwards the tendency has been very notably accentuated, and the point which the Chancellor of the Exchequer has incidentally raised is one which ought to be very carefully considered by this Committee, namely, whether we can safely go further in this direction.

Amendment negatived.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

I beg to move to omit the Clause, because the principle contained in it of legislation by reference is unconstitutional and most irregular. If hon. Members will look at the Clause they will find that we are not given the particulars of the different duties, but are simply referred to Part I. of the Finance (No. 2) Act, 1915. I have had some difficulty in getting possession of that Act at the Vote Office, but all the details of these particular taxes are to be found there in Sections 1, 8, 10, and 12, which give the increased duty on tea, the additional duty on dried fruits, the additional duty on motor spirit, and the new import duties. If anyone takes the trouble to study that Finance Act they will find that they are given at considerable length and with some detail. These duties are most important, and they ought to come up again for review. This method of asking us to pass a Finance Bill by reference is most irregular. We know that we have to have legislation by reference in ordinary statutory legislation, but if there is one thing more than another which is the very bedrock of British Finance it is that we have an annual statement, and that we are entitled to have the taxes brought before us every year. We ought to have the produce of these taxes with the additions from year to year. We know, owing to the exigencies of the situation, that we have to put up with token Estimates, but I hope that we have not yet arrived at token taxes. It seems to me that we are entitled to have the details of the taxes we are asked to pass, and I emphatically protest against this method of asking us to pass Part I. of the Bill applying to a very considerable number of taxes without giving us an opportunity of discussing them. We know that the balances in every Department are surrendered to the Treasury every year. We are entitled to know the produce of the taxes, and we ought to have a detailed statement from the Chancellor of the Exchequer when he asks us again to pass them. He ought not to ask us to pass them by reference to an Act already on the Statute Book.

When I spoke before I asked the right hon. Gentleman if he could tell me what was the loss of Tea Duty consequent upon the restrictions on importation?

I had detailed Estimates, of course, at the time of my Budget statement, but I have not got them here, and I should have to send for them. It must be plain to the Committee and my hon. Friend that, knowing there were restrictions in force and more to come, it was impossible to make any Estimate with anything like security, and I do not think it would be of much assistance if I gave the Estimate.

Does the right hon. Gentleman admit responsibility for the extra freight charge?

I would like my right hon. Friend to give this Motion just a little consideration. This House has really no Finance Act before it at all except as regards the Income Tax and Excess, Profits Tax. It is legislation by reference in a permanent form. When the different taxes were brought up in the old traditional course we had a reasonable talk about them. Our experience this afternoon provides that is not so now. We used to have the taxes on tea, sugar, and all the other articles, but now they are all swept away and darkness overshadows the sea. The country has no opportunity of knowing what it pays by a particular tax or what is done. I asked what was covered by these taxes. They are very voluminous There are the tea, dried fruits, motor spirit, and new import duties. What, for example, is meant by "new import duties"? No one knows. They ought to have been given in a separate Clause with full details. The Chancellor of the Exchequer is not responsible. My right hon. Friend (Mr. McKenna) introduced them, some years ago with a great flourish of trumpets, and we thought that there was going to be a new policy. Does the right hon. Gentleman intend developing that policy, or will he let it die out? The new import duties are not doing very well. In 1915–16 they brought in £600,000. Last year they produced less than £300,000. Trade is. disturbed, a great staff is employed, and we get a dwindling duty. I will say nothing about motor spirit, but the duty on dried fruits has also diminished, and it seems to me a pity that such articles should be taxed at all just now. There is perhaps this excise for the right hon. Gentleman. This Clause follows exactly the Finance Bill of last year. That was a bad example,, and if the right hon. Gentleman, with regard to these duties, which are really very important, although they bear a very small proportion to the whole taxation, would say that he would give us the facts in the old form in future, it would be a very useful reform on the method introduced by my right hon. Friend.

I find myself between two difficulties. I do not like not to answer any point, but on the other hand I do not like to make a speech which may probably result in us not getting on so quickly with the business as we otherwise might do. It is obvious that the point raised by my hon. Friend is a very big issue indeed. I am not going to discuss it, but I should like to say, especially to my hon. Friend opposite (Mr. Holt), that I do not think he quite realises the extent to which that pure doctrine of pure finance would carry him in time of War. It would mean that you could not do what we have done in the case of thousands of articles. You could not requisition articles for the War Office and for the general public except by getting an Act of Parliament.

My right hon. Friend will excuse me, but you could not do anything to create additional revenue in any shape or form. Just consider this particular instance. It is not so simple as some people seem to think. If it were the case that the whole of any article was brought in on requisition rates it would be a simple thing to say that the charge to the consumer should be a certain amount and nothing more. But expediency comes in in this way. If you are trying to regulate prices all round the duty of the Food Controller is to try and prevent any article of necessity going to an excess price and not to prevent a certain rise in other articles. Therefore the expediency comes in from that point of view. Is it or is it not right to allow this particular article to rise to a certain level in order to have the means of preventing the price of other articles rising. But it is much more difficult than that. Anything that comes into this country comes in in British ships and neutral ships which are used to bring in a much larger proportion than formerly. I think it is quite obvious there must be some latitude in matters of this kind. As regards the point raised by the right hon. Gentleman, I remember the discussion very well on the import duties of specific articles. My right hon. Friend was one of those who thought it better to have full-fledged Tariff Reform, and I remember telling him at that time that no tariff reformer would try to advocate a policy of Tariff Reform by his particular method. I thought so, and the reason for it was that at that time the limit on imports by the restrictions and absence of shipping and other things had not gone to the length it has gone now. The then Chancellor of the Exchequer thought, in those circumstances and I agreed with him, that he should try to prevent the consumption of unnecessary articles by taxation and by restriction, and the conditions are now so altered and had been so affected by the absence of shipping that I would not dream of putting on extra duties. But that is a different thing from taking them off. My expert advisers tell me we can get the taxation without employing additional men. The machinery is now all working, and I can assure my right hon. Friend that in those circumstances it would be carrying prudery to the point of absurdity to take off this source of revenue.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Clause 2 (Continuance Of Excise Duties Imposed Under 5 And 6 Geo 5, C 89) Ordered To Stand Part Of The Bill

Clause 3—(Increase Of Entertainments Duty 6 Geo 5, C 11)

(1) On and after the first day of July nineteen hundred and seventeen Section one of the Finance (New Duties) Act, 1916, shall have effect as if the following scale of rates of entertainments duty were substituted for the scale set forth in that Section—

Where the payment, excluding the amount of the duty—

Does not exceed 2d½d.
Exceeds 2d. and does not exceed 3d.1d.
Exceeds 3d. and does not exceed 6d.2d.
Exceeds 6d. and does not exceed 1s.3d.
Exceeds 1s. and does not exceed 2s.4d.
Exceeds 2s. and does not exceed 3s.6d.
Exceeds 3s. and does not exceed 5s.9d.
Exceeds 5s. and does not exceed 7s. 6d.1s.
Exceeds 7s. 6d. and does not exceed 10s. 6d.2s.
Exceeds 10s. 6d. and does not exceed 15s.3s.
Exceeds 15s.—3s. for the first 15s. and 1s. for for every 5s. or part of 5s. over 15s.

(2) On and after the first day of July nineteen hundred and seventeen, where a person (not being a member of any of His Majesty's naval or military forces in uniform, or a nurse in uniform in attendance on sick or wounded sailors or soldiers in uniform) is admitted to, or to any part of, a place of entertainment without payment or on the payment of a less amount than that charged to the general public for such admission, entertainments duty shall be charged, levied and paid as though that person had paid on admission the same amount as members of the general public, and this provision shall have effect as if it were included in the Finance (New Duties) Act, 1916.

I beg to move to leave out Sub-section (1).

I should like to have some information as to whether the Government have altered the standpoint on which they originally imposed these taxes. Is the reason for now imposing them different from the one given by the late Chancellor or the Exchequer When the duties were imposed the late Chancellor of the Exchequer said in this House that they were to be used as a medium for collecting taxes from people who otherwise might not contribute to the revenue. When the present Chancellor of the Exchequer made his Budget statement speech he said that the reason for—

I am sorry to interrupt my hon. Friend, but he has made the point before. I can assure him that there is no difference in the intention, which was to tax not the trade as representing the people engaged in it but the public who go to this form of entertainment.

I am glad to hear the Chancellor of the Exchequer say that. It is important to establish the fact that this is war taxation. Whether it may or not be necessary in the future to collect the revenue, is another question. But it has not been established as a basis of this tax that the industry will bear the taxation. I should like to know what the Government intend to do with this Sub-section before we proceed to deal with the specific rates and, obviously, it would be more convenient for the Committee to have at the beginning information on these points as a whole, rather than that they should proceed to discuss each particular point on each particular rate. Generally speaking, the question that is involved in this additional taxation is the question of whether or not the entertainments—and when one says entertainments one must not forget the fact that it includes not only the cheaper forms of entertainment, such as the cinemas, but also large football clubs up and down the country, and big theatres, both in London and in the Provinces—and those of us who are in touch with any one of these three interests know already the very disastrous effect which the tax has had upon each one of them. This morning I had a letter from the secretary of the Heart of Midlothian Football Club, which is the largest club in East Scotland. I may incidentally remind the Leader of the House that the whole of the team of this club joined the 16th Royal Scots, and thus have been patriotic like everybody else. This club has been trying to carry on as other clubs have done, but the secretary informs me that, as a. result of last winter's football season, the club is down another £l,000. That is not an unusual thing in various parts of the country.

With regard to cinema entertainments, I may mention that the result of the imposition of this tax has been that over 700 cinemas have been closed in different parts of the country. With regard to the theatres in London and the provinces the proprietors are finding it increasingly difficult to carry the burden of this taxation. The general question is whether or not it is wise to tax amusements of this kind. This is a point upon which people may have various views, and my view is that it is unwise. There is little left for the people of this country through the anxieties created by the War. These entertainments constitute a useful method of catering for their leisure and recreation. If you impose taxation to such an extent as to deprive the people of these opportunities, you are doing a harmful thing. I was glad to hear, at any rate, when the right hon. Gentleman introduced his Budget, that this additional taxation is not to come into effect until October. That is a useful kind of fact to know, for it is more difficult to collect the tax in the summer months than in the winter, and it is certainly more difficult for the entertainments to carry it. I should be glad if my right hon. Friend will tell us what is to be the attitude of the Government with regard to this tax. Are they prepared to give any concessions whatever? My right hon. Friend said, with regard to the Tea Duty, that he must ask the Committee not to request that any taxation put on last year should now be taken off. But we do not ask for these taxes to be taken off on this occasion. What we do hope is that my right hon. Friend will not increase the taxation, and if he can give us an assurance on that point it will very much expedite the discussion of the various items.

I should like to ask the same question as my hon. Friend opposite. I want to know what attitude the Government is going to take up in regard to the new rates to be imposed. I gathered from the Chancellor of the Exchequer to admit that the trade is not one on which additional taxation can be fairly put at this time, and the suggestion is that the taxation will be borne by the people who go to the entertainments. But I am convinced that this taxation, if raised now, will not be borne by those people, but will fall to a considerable extent on the trade, and I therefore support the Amendment now before the House. I do not think it is correct to imagine that you can immensely increase the taxation on entertainments, and that it will be cheerfully borne and entirely borne by the people who go to the entertainments. In my opinion, the burden will fall, not on the spectators, but on the owners of theatres, and it will be a very real burden. There are several Amendments down for dealing with the proposals affecting the cheaper seats, but I do not propose to say very much about those. I rather wish to draw the attention of the Chancellor of the Exchequer to the proposals to increase the tax on the more expensive seats—proposals which will particularly effect the big London theatres. Take for instance the increase of the tax on seats ranging in price from 7s. 6d. to 10s. 6d. The tax is to be 2s. I think the tendency of that will be lamentable. It is quite true that during this year the people have been paying an increased price for the seats up to 11s. 6d., but it is also true that the Government entirely miscalculated the amount that would be raised by this tax. They said it would be between £4,000,000 and £5,000,000, and, indeed, it was suggested by the right hon. Gentleman's advisers that that was an under estimate. But as a matter of fact, the amount actually obtained was very much less than the estimate. The right hon. Gentleman told us that he is very anxious to preserve the revenue of this country. But in this case he is not going to increase it; he is merely going to hit the theatrical profession. Suppose you have a very expensive entertainment, such as people occasionally go to—some of those revues which are got up at very great expense and the performers in which get high salaries. I do not say it is impossible that in these cases the management may not be able to bear this extra burden, but I do say it will be impossible for theatres to continue to put on those forms of entertainment which the Government would wish to encourage for educational and other reasons, because it is impossible to imagine that people will go on paying 8s. or 9s. for dress circle seats and 12s. 6d. for stalls.

5.0 P.M.

I believe that you are going to hit the more serious entertainments very seriously indeed by these proposals without getting any more money whatever for the Exchequer. If I thought that it was going to be paid by the audience I should raise no objection at all, but I believe the result will be quite the contrary. I was: talking the other day to a well-known theatrical manager in Liverpool, who was telling me of his experiences during the last year, and he related how he managed, in spite of war conditions, to run a long season of opera arid make it pay. Those-who have realised what has been going on in London in this direction of making; operas pay know what that means. There you have a man running a form of high-class entertainment with a very small margin but making it go, and he told me that it would be perfectly impossible, if you are going to keep on even the existing: taxes, to run these high-class entertainments, which are run on a very narrow profit. I would also point out the character of the burden. This means, if I am right, that it will apply to all provincial theatres, and that the theatre-goer will want a good deal of this higher tax to be shifted on to the theatre owner. It has been extremely difficult during the past three years for the touring managers, and thereby for the provincial theatres, to keep going at all. In the first year practically every touring company, with two or three exceptions, could only get through that first year of war by largely reducing salaries, and it was a great struggle for everyone concerned. In the second year they managed to get back part of their losses in the first year—I am speaking of an average company. In the third year, owing to the enormous increase in the cost of railway travelling, printing, porterage, the lifting of scenery, and labour generally, it became practically impossible for any company to play to the same business as they were able to do in the second year. The burdens have gone on increasing all the time, and I cannot imagine anything more unfortunate than the possibility of putting a burden on that may produce nothing to the Exchequer and yet may do serious injury to the industry of entertainment, which is one of the few legitimate amuse- ments left to the people of this country. I hope the Chancellor of the Exchequer will be able to give to this matter of the raising of the tax to a higher level most earnest attention.

I know that in speaking against these increases I am voicing the wishes of the huge majority of the theatrical managers in this country, and particularly the views of those who have run in circumstances of great difficulty and with a very small margin of profit during these two or three years of war high-class entertainments all over the country. I think they are deserving of the greatest possible encouragement. The State does little enough in all conscience to encourage high-class entertainments. It is the only country that does not see that its people are educated through the theatre in foreign languages. We have a good deal to learn from foreign countries in that respect. But we have our own traditions in this country, and we have certain cases which show perfectly well what the public will stand and what they will not stand. To take a case of this kind; only the other day there was a new theatre opened in London to do what the managers felt sure they could do, namely, to make the public pay a guinea for the stalls. That lasted, I think, a fortnight, when the price was reduced to the ordinary price of 10s. 6d. The point had been arrived at, although the entertainment included many favourites, where it was impossible to make the public pay more than the price they had been used to pay. I believe you will find that that is so in this case, and that although some of the entertainments regarding which nobody cares whether they live or die may be able to pay, yet the very best class of entertainment in the country will find this burden that is thrown upon it too great. Let me take one other case. We know one man who unhappily is dead, although his son is carrying on his traditions, under the greatest discouragement, to establish grand opera here. You are going to put a tax on shows like that. I do not suppose that at any time during his career Sir Thomas Beecham has made a penny out of any season he has run, and here, just when he is doing what the State ought to have done, establishing at last something like an English opera in this country, you are going to raise his stalls to 11s. 6d. and then to 12s. 6d. I say that a high-class entertainment like that depends on the stalls, and you are going to do a great harm in this case. You are going to put on a tax which falls on the public-spirited man who has for years and years been trying to establish the highest class of musical entertainment in this country. I think, therefore, that not only in the case of cinemas, the Government, before they increase these taxes, should really take the greatest care that they are not making the same miscalculation that was made by their advisers a year ago. I think this is a most unfortunate tax. This is not the time to tax amusements any further. I am confident that we have reached the limit where in future the tax will fall on a profession and business which has, in circumstances of most extreme difficulty, managed to keep going during the War.

I desire in a few words to make a very strong appeal to the right hon. Gentleman to reconsider the proposal now before the Committee. I think this is the first occasion upon which I have objected to any taxation in any Budget since the commencement of the War, because I have always felt that at a time like this the Executive must be trusted to get the money required from the sources that they consider will bear them. I approach this question entirely from the point of view of whether the Government are taking a course which is going to be good for the country and good for the State. I do not think it is good for the Government or the country that they should ruin hundreds—it may be thousands—of people throughout the country. I can assure my right hon. Friend, from evidence that has been put before me, and which I have examined, that the result, in my judgment, will be that many men will be ruined, and that scores of theatres will be closed if he adheres to his present proposal. I do not think it is good for the country that you should have a whole section of the community feeling that they have been unfairly treated. There can be no other decision on the proposal of my right hon. Friend. Take, for example, the stalls. I am not pleading for the rich people; they must pay if they can afford it, but I do point out that the people who go to theatres are taxed in all sorts of ways, entirely apart from that, on their income and in other directions, and therefore we have to consider it as a tax upon the amusements, if you like, of the people.

Surely the Government do not want to come to us and say, "We are going to make prices so high that it will practically ruin the theatres, and the result will be that very large numbers of people will be unemployed ! I think it is unfair in proportion. Take, for example, the seat of 7s. 6d., which is to be raised to 10s. 6d. under this Act.

If the stall is 7s. 6d., 2s. is going to be added to it up to 10s. 6d.

At any rate, the Chancellor of the Exchequer will be able to explain it when he gets up. That is how I read it; but in any case what I want him to consider, whether that shilling is included or whether it is not, is that, in fact, it is included. As we all know, the theatre agencies practically buy the house in anything like a successful play, and therefore you have to pay your extra shilling through the booking agency. I say the percentage is far too high; it will have a ruinous effect, and it will prevent people going to the theatre who might otherwise go. Many theatres will have to be closed, and we shall have a large number of unemployed. The right hon. Gentleman will say, "No; they can well afford to pay it; they have paid it before," and so forth. It is the case that very large numbers—shall I say hundreds —of theatres throughout the country—I believe the correct number is 700—have been closed in consequence of the taxes that already prevail. I think they will now be too high, and that they will have an effect which the right hon. Gentleman does not anticipate. I do not think he will get the amount for which he has budgeted, and I think there is a very urgent case now for more inquiry. Take another class connected with this industry, the musicians. They represent thousands of people throughout the country. All those have gone to service who could be spared, and the secretary of the union assures me that it will practically mean that thousands of them will be unemployed in consequence of these taxes. Can we refuse to listen to an authoritative trade union of that character? I do not think we can. I do not know whether such a large addition in proportion has been imposed elsewhere as is proposed here, but I do not think it will come off. I think you will have the whole theatrical community of the country and the people engaged in it against you, because they will feel that you are doing them an injustice in imposing the large amount which you are putting upon them.

I am one of those who think that the Government is wrong in trying to deprive the people of the country of all sorts of recreation. I do think they are wrong. I will not discuss the question of racing. I do not know whether they have stopped it or not; they have been considering it for a month, and have come to no decision yet. I am pointing out that in that and other directions the Government appear to be kill-joys, and to be trying to stamp out all amusements. That is not the way to win the War. People who work twelve and fourteen hours a day are all the better for a little recreation in the evening, and the Government are wrong in trying to prevent them getting it. I submit that people are doing as well in going to a theatre as in listening to people preaching anti-war sermons. I do not think the Chancellor of the Exchequer will get his money, but that is a matter of speculation. The theatrical people are as patriotic as anyone else, and the heads assure me that no matter what is said here what I have stated will be the immediate effect. I appeal to the Government to modify the proposals they are putting forth. I should like the right hon. Gentleman to have some small independent committee sitting between now and October to investigate and put before him the real facts for consideration. If he will not adopt that, I have no doubt the majority of the Government will carry the proposal, but I think that will be a cause for just grievance to a large class of the community. I think the proportion is too high, and that the Government would be well advised to make a concession.

May I come to the right hon. Gentleman's assistance and make a suggestion, for I think that I can possibly point out a way in which he could satisfy the hon. Member who moved this Amendment as well as myself on a later Amendment which it would not be in order for me to discuss now. If the right hon. Gentleman will refer to the financial statement 1917–18. which was laid before the House when he was opening the Budget, he will see on page 9 that the Entertainments Tax was estimated to bring in a sum of a million, but that from that was deducted the abatement on Liquor Licence Duties, which amounts to £900,000. The real reason, therefore, he has put on this taxation to which the hon. Member for East Edinburgh (Mr. Hogge) and other Members object is that he has given an abatement of £900,000 on the Liquor Licence Duties.

At all events, the right hon. Gentleman has had to make up this deficiency which I will argue when we come to Clause 7. The fact is that he is going to get out of this tax a sum which just makes up what he loses under the abatement he is introducing in Clause 7. If he will drop the abatement on Clause 7 and at the same time drop the Entertainments Tax, he will be square. He will be able to satisfy me and to meet fully the arguments the justice of which I will put to him later and, at the same time, satisfy those who are appealing to him on this Clause. That would be a much more satisfactory way out of the matter, both to him and to me, and to the hon. Member for East Edinburgh.

I desire to emphasise what has been said by my right hon. Friend the Member for Kirkcaldy (Sir H. Dalziel) and my hon. Friend the Member for East Edinburgh (Mr. Hogge) on this occasion. I should not like to say that I agree with what the hon. Gentleman opposite (Mr. C. Roberts) has said, because it was very difficult to follow his argument without having a good many more facts before us. With regard to the Entertainments Tax, I was in favour and am still in favour of the original tax that was imposed, but I believe that the increase now proposed is much too drastic a measure, even in these times. I should like to support the protest which has been made particularly against the increase of the tax on smaller amounts. On that we have an Amendment which will be moved presently. With regard to the whole question of increase, I submit to the Chancellor of the Exchequer that he will not succeed in getting any increase in revenue from the tax. It is a question of speculation and judgment, but if he does not succeed in that, then he will be doing a very serious injury both to the people who desire amusements and the people who run them. I am not one of those who believe that trade unions are always right or that employers are always right, but here we have a consensus of opinion both from those who run the theatres and the people who man them. My right hon. Friend the Member for Kirkcaldy referred to the Musicians' Union. They have been as patriotic a body during this War as any section of society. They have contributed their quota to the Front. Many of the men who play the violin or clarionette have found that the change from the artist's life to the conditions of the Army has been a much greater strain upon them than it is upon the ordinary citizen who is used to hard work. I have had cases sent to me in which in consequence of the tax they have suffered very severely. These people tell us that this increased tax will not come from the public and that it will have the effect of creating unemployment amongst the men and of injuring the theatrical and amusement profession in the country. If it does have that consequence it will be a very serious thing indeed. The nerve-racking effect of this War is such that anything which interferes with ligitimate joy or entertainment or amusement that has any tendency to soften the effect of the War would be a great injury to the State as a whole. I hope the Chancellor of the Exchequer may see his way not to make the increase at all this year. He has postponed it until October, and if he permits the experiment started last year to be continued I shall be satisfied.

I rise to support the Amendment, which goes to the root of the proposal made by the Government in this Clause. The proposal to increase this particular tax is a most unwise one. I hope the hon. Member for Linooln (Mr. C. Roberts) will persist in his view that it is an unjust proposal, that he will support those who are prepared to oppose the Government in the Division Lobby, especially as he has expressed very cogent and solid reasons for his opposition to the proposal, and that he will trust his temperance reform to what the Committee may do when Clause 7 is reached. I shall not be prepared to make a bargain with him as to how I shall vote on that Clause. I should like to ask the Chancellor of the Exchequer what is really his object in making this proposal? Is it to kill entertainments or to increase revenue? If he takes the advice he has received not only from the Committee, but from those responsible for the conduct of entertainments and who are in a position to see what the effect would be of making this increase, he would be told that if revenue is his object that object is bound to be defeated. In the other object he most certainly will succeed, because in proportion as you decrease the revenue you decrease the drawings of houses of entertainment, and in that way you limit the legitimate facilities which people have for indulging in pleasant and harmless forms of entertainment. I would protest especially against the imposition of this tax so far as it applies to the lower-priced tickets. It is most unfair and unjust to the working classes and to those who cater for them in a number of legitimate entertainments. I sincerely hope the right hon. Gentleman will see his way to withdraw this proposal and that, at any rate, if he is not prepared to make a further concession in regard to the taxes already in force, he will allow the status quo to be maintained.

As palinodes are very popular just now and are associated with Prime Ministers or ex-Prime Ministers, I hope the Committee will allow a private Member to make a recantation. On a former occasion when this matter was discussed I said that I had been informed on very good authority—I thought it was— that this tax did not prejudice the promoters of entertainments to the extent which was then stated and because of which it was urged that it was open to serious objection. I was entirely wrong. It has been pointed out to me since then that it will seriously prejudice entertainments, that it hits hard the providers of enter- tainments, and that it cannot be passed on to the public. Therefore I hope the Chancellor of the Exchequer will see his way to-day to make some further concession on that score, and also because this is not a time when the public Should be deprived of such amusements as they may have. Already a glass of beer has become a rock of offence upstairs, and the "glad eye" is regarded as a mortal sin in another Committee room. If theatres are going to be closed or made more expensive it will seriously affect our soldiers. Anybody who works every day in the Strand, as I do, knows how popular these entertainments are. There are enormously long queues through which one can hardly force his way. Believing that many thousands of people should be allowed to have their legitimate pleasure, I sincerely hope the Chancellor of the Exchequer will see his way to make some concession.

It is no use threatening the Chancellor of the Exchequer with a Division. If we can convince him on the subject it would be the far better course. I hope the Chancellor of the Exchequer will take this matter into further consideration, because there is no subject upon which I have had more correspondence from my Constituents. As that contains 217,000 people, the tax is naturally a very burning question. Apart from the proprietors of these entertainments, who, of course, will pay less Income Tax and less Excess Profits Duty, an enormous number of people are employed in these entertainments. The general public in a large town such as I represent are very much affected by the tax. They are working very strenuously for very long hours, especially in my Constituency, and they feel that some amusement is absolutely necessary to them, and should be encouraged as far as possible. From the position in which we stand in regard to Russia and other things, it seems as if the War were going to be long-drawn out. In that case it is essential that we should keep the people as happy and contented as possible when they are making a supreme effort to win the War. The tax on the lower prices ought to be kept as at present, or at any rate the line should be drawn at 1s. Of course, if we can get the whole thing removed, we shall be very pleased; but something is better than nothing. All over the country, in all the larger towns, there is this unanimous appeal made to the Chancellor of the Exchequer not to increase the prices, especially the lower-priced seats. Perhaps he will know what the popular feeling is, and have a better idea of what the actual situation is, and will be able to give us some concession.

I am sorry I was not here in time to move an Amendment similar to this one which is in my name. I hope the right hon. Gentleman will accept the Amendment or adopt the suggestion made by the right hon. Gentleman the Member for Kirkcaldy (Sir H. Dalziel), namely, adopt the present tax for this year and then appoint a Committee to go into the whole matter. If he does that he will have information put before him by the people interested which will convince him that he would not be able to introduce it in his next Budget—that is, assuming that he then occupies his present position. On behalf of the working men, I would remind the right hon. Gentleman of the old proverb that all work and no play makes Jack a dull boy. During the last two and a half years many of the minor theatres have done a great deal to allay unrest and discontent among the working people of the country. What is more, the cinemas and theatres have done excellent work for the Government in the matter of recruiting. Some notice ought to be taken of that. This is simply playing with taxation. The tax is a second Income Tax upon the incomes of a large number of working men. Some working men spend the afternoon off going fishing or boating. There is no tax on that. Others prefer to go to the theatre, or the music-hall, or the cinema, and there they have to pay a tax.

I believe the Government have received protests from football clubs against the increase of the tax. I come from a part of the country where we have very good football teams, and I am told that the tax has had a very bad effect on the attendance at the matches during the last season. I want to give the right hon. Gentleman an illustration of what is happening. In a small provincial town there are two places of amusement—one which gives entertainments twice nightly, which is a music-hall, and the other one is sometimes used as a music-hall and sometimes as a theatre. In the year ending February, 1915, when there was no tax, there was a small loss on the twice-a-night house of £6 6s. 7d.

In the year ending February, 1917, with the tax, they made a loss of £490 4s. Although the shareholders suffered that loss they paid in tax to the Government £1,176. If you double the tax they will either close the place or there will be a bigger loss if they run it. Taking the other two houses, the Theatre Royal and the Grand, for the year ending February, 1916, with no tax, the profits amounted to £2,112 10s. For the year ending February this year, with the tax, the profits on the two houses dropped to £1,249, but the two places paid in tax no less than £5,024, making a total for the three houses of £6,100. The Managers of these places tell me that if the tax is increased they will undoubtedly have to close two of these places of amusement. Therefore you are going to take away the opportunity of amusements from the people, and at the same time you are going to ruin the theatre proprietors and get no tax. I am told by people who know that this prevails throughout the country with the exception of London, which is a world to itself. With these figures in front of him I hope the Chancellor of the Exchequer will give further consideration to the proposals of this Clause. I feel certain that it would be in the best interests of the Government and of all concerned if we dropped the increased tax for this year and reconsider it after taking the opinion of experts. The managers of these places have asked the Revenue officer to audit the books and satisfy himself that the statements I have made are correct. I am certain, on these figures that I have given, that if the same losses have been sustained in the other provincial towns the Government is going to lose a great deal more than it will gain, and at the same time a large number of people will be thrown out of employment.

I should like to join hon. Members in making an appeal to the right hon. Gentleman to drop this tax, especially upon the cheaper of these cinematograph theatres. They have been a boon and a blessing to the working classes. They have enabled the very poorest in all our great industrial communities to have an opportunity of enjoying pleasures which are not only healthy but sometimes most informing. Anyone who has gone into the large manufacturing parts of cities like Belfast and seen, the children of the poor crowding into-these establishments and taking advan- tage of the opportunities which these cheap amusements afforded to them must recognise that it would be a great blunder on the part of the Government to rob these theatres of the advantages which cheap admission gives or to burden them with any larger tax. We already have it from those who have gone into this matter that no great financial advantage will really come to the State by the imposition of an additional tax, and therefore I hope the right hon. Gentleman will accede to what, as far as I have heard, is almost an unanimous appeal to the Government.

I am sure the hon. Member (Mr. Devlin) has been long enough a Member of the House to know that the inference which he has just drawn from the fact that everyone has spoken against the tax has not much weight. I should like to congratulate my right hon. Friend on the bench opposite on a sense of humour which I have not noticed before in some of his speeches, and I may congratulate myself on the fact that before he had uttered three words I saw exactly the point he was wishing to make. He suggested that we should set this off against another abatement which I have agreed to make, and that would be perfectly feasible if the Budget consisted of those two items. But it does not. There are a great many other items in the Budget. I can assure him that the last thing which was in my mind in putting on this additional Entertainments Tax was that we did it in order to enable us to take something off the Licence Duty. I have not heard much from hon. Members who have spoken that this is a kill-joy proposal, but I really have been amused to see in some of the papers connected with this trade the suggestion that that is the motive in my mind in putting on this additional tax. There is no one in the House who would be less likely to act from that motive. I feel very strongly that the most foolish thing any Government could do would be to try to prevent people getting legitimate amusement, and the most foolish thing an individual man could do would be to act on the assumption that people who work hard do not need a little amusement of some kind. In coming to the conclusion that we might increase this Entertainments Tax we believed that the people who go to these places of entertainment could afford to pay a little more and that that would be a legitimate way of getting a little additional revenue. That is my view. I have seen several deputa- tions and my hon. Friend (Mr. Baldwin) has seen a good many more and it is our belief that this additional taxation could be borne by the people without any danger of destroying either theatres or cinemas. That is my belief, and if I did not believe it I should not persevere with it to-day.

Everyone on whom you impose taxation has the impression—and this applies however patriotic they are and however willing of bearing their share—that this particular thing is not quite fair and that they are asked to bear more than their share of the burden. That comes with every tax you put on. It would be a very bad introduction to the taxes which give larger revenue if we were to yield to the request to reduce this tax. I quite agree that this is not a source of revenue which will make the difference between winning the War and losing it or anything of that kind, but, on the other hand, every million that we can get is needed and I am unwilling to take off any tax which I think fair and reasonable on the whole. On the whole I think this is, but I should like to make concessions where it is possible to do so. I should like to point out how difficult it is to make concessions in regard to the lower-priced seats. The rate at present is 1d. up to 3d., and then from 4d. to 6d. it is 2d. Suppose I were willing to say I will make it 1d. up to 6d., I should have to drop the tax altogether, because 80 per cent of the revenue is derived from seats of 6d. and less.

The hon. Member has overlooked the point I was trying to make a moment ago. It is that, after all, the working classes should bear some share, and if you start on the basis that if a duty touches them at all therefore you are to take it off, that is a bad preliminary for the larger taxes on those who have more money. I have considered making the 1d apply up to but not including 6d.— i.e., to make it 1d. for 4d. and 5d. I will tell the Committee the objections to doing that. I am informed that you would really do harm to a great many of the owners of cinemas, as the result would be that the 6d. seat would practically disappear and they would not get the extra 1d. which they now get from their customers. The most I can do to meet the feeling that it is too high—and I shall be glad to do that —would be to make the 2d. begin at 5d. instead of 4d.—that is to say, to make the rate, which at present is 1d. up to 6d., a 1d. including 4d., and begin the 2d. tax at 5d. So much for the lower prices.

I have seen the representatives of the big theatres in London more than once. I really do not share the view of hon. Members that this addition will press hardly upon managers of theatres. My hon. Friend who advocated taking off the duties altogether mentioned in illustration of his argument the queues of people in the Strand waiting to go in. I should draw another inference. If there is such a demand they would probably be willing to pay a little extra. But there is a point of view from which the recommendation made to me deserves consideration. Even in time of war we should like to have as much of the higher class of theatrical life as we can. There is no doubt that, in a time like this, when we are all living in a state of nervous tension, the people are more inclined to go to the more obvious forms of amusement. I should, therefore, be willing to make this concession in regard to these higher prices. At present the rate stands in this way: The duty on seats of 5s. and not exceeding 7s. 6d. is 6d., and the proposal is that that should be made 1s. That is only an addition of 6d. Then we come to exceeding 7s. 6d. but not exceeding 10s. 6d., and the rise is from 1s. to 2s.—that is, twice as much as the increase in the previous rate. In the same way, exceeding 10s. 6d. but not exceeding 15s. there is also a 1s. rise. I should be willing to make it a 6d. rise in all these cases. I do not for a moment contend that this is a vital thing for the Government or anyone else, and I say, further, that the fact that I have introduced it would not make me hesitate a moment in taking it off if I thought it desirable, but I have been trying to look into the matter, and I think those who frequent places of entertainment can afford to contribute a little more to the revenues of the country, and I sincerely hope the Committee will support me in carrying through the provisions with the Amendments I have announced.

I think we ought to recognise that my right hon. Friend has tried to meet us, and I am sure the Committee will appreciate the spirit in which he has approached the question. So far as I am concerned, I thank him for his concession, and I hope it will be generally accepted. I think we ought to accept this concession and see whether his anticipations are realised.

As I moved the Amendment in the absence of my hon. Friend (Mr. T. Wilson) and as I have been in close touch with the Chancellor of the Exchequer I recognise that he has made a large advance towards those of us who are interested in this taxation. Speaking for myself, I am prepared to accept his compromise in regard to the lower-priced seats. As a matter of fact there are not many 5d. seats in any of these theatres, and I think the cinema industry could carry the 2d. on the 6d. seats. I was really concerned about what occurred during last year, namely, the crushing out of people in the lower-priced seats—the very lowest-priced seats—and depriving them of amusement. If the Chancellor of the Exchequer will put these figures into the Sub-section, I, speaking for myself, would be prepared to accept them.

Amendment, by leave, withdrawn.

Amendment made: In Sub-section (1), leave out the word "July" ["first day of July"] and insert instead thereof the word "October."—[ Mr. Bonar Law.]

I beg to move to leave out "3d." ["does not exceed 3d."], and insert instead thereof "4d."

This Amendment, I take it, replaces the Amendment which is down in my name, to leave out 3d. and insert 6d. While I welcome the concession which has been made by the Chancellor of the Exchequer I think he might have gone the length which is indicated in my Amendment. I have worked out the percentage of tax which is applied to these minimum prices, and, as usual, the people who pay, whether for food or entertainment, small amounts, are the most heavily taxed from the percentage point of view.

If the hon. Baronet will allow me to quote two figures he will find that what I say is correct. He will find that on the 1s. seats, where the tax is 4d., it represents only 33⅓ per cent., but on the smaller-priced seats the tax is 40 per cent, now, and before the concession was made it was 66⅔ per cent. It would appear to me that if justice is to be done all round, the concession should go a little further than it has done, and I appeal to the Chancellor of the Exchequer, even now, to accept the Amendment which is down in my name, so that on all tickets of 6d. and less the lower tax should be applied. He has stated that 80 per cent, of the revenue comes from people who pay the smaller amounts for admission to these entertainments. I think that again shows the unfair incidence of the tax, and is another reason for making the change which I suggest. I beg to move, therefore, to leave out the word "3d." and insert "6d."

Then mine will have to take the form of a protest against the acceptance of the Government Amendment.

The percentage test made by the hon. Member is quite fallacious when you get to small sums of this sort.

Amendment agreed to.

Further Amendments made: Leave out "3d." [" exceeds 3d."], and insert instead thereof "4d."

Leave out "two shillings" ["exceeds 7s. 6d. and does not exceed 10s. 6d.—two shillings"], and insert instead thereof "1s. 6d."—[ Mr. Baldwin.]

I beg to move to leave out the word "three" ["exceeds 10s. 6d. and does not exceed 15s. — three shillings "], and insert instead thereof the word "two."

The right hon. Gentleman said that the increased tax would be 6d. less in every case.

My hon. Friend (Mr. Baldwin) understood it in that sense, so I must have been indistinct. I will accept it.

Amendment agreed to.

Further Amendments made: Leave out the word "three" ["exceeds l5s.—three shillings "], and insert instead thereof the word "two."

Leave out the words "one shilling," and insert instead thereof the word "sixpence."—[ Mr. Baldwin.]

Scale, as amended:—

Where the payment, excluding the amount of the duty—

Does not exceed 2d½d.
Exceeds 2d. and does not exceed 4d.1d.
Exceeds 4d. and does not exceed 6d.2d.
Exceeds 6d. and does not exceed 1s.3d.
Exceeds 1s. and does not exceed 2s.4d.
Exceeds 2s. and does not exceed 3s.6d.
Exceeds 3s. and does not exceed 5s.9d.
Exceeds 5s. and does not exceed 7s. 6d.1s.
Exceeds 7s. 6d. and does not exceed 10s. 6d.1s. 6d.
Exceeds 10s. 6d. and does not exceed 15s.2s.
Exceeds 15s.—2s. for the first 15s. and 6d. for every 5s. or part of 5s. over 15s.

I beg to move to leave out Sub-section (2).

I do not know whether the Chancellor of the Exchequer can tell us how much money is expected to be raised by Subsection (2), but it strikes me that it must be a very small sum. If I gather the object of this Sub-section aright, it is to tax the person, who is popularly known as a deadhead. In many ways that is an excellent plan, especially to people who do not understand theatres. Hon. Members may not understand what the effect of this tax will actually be. We do not want to put the tax upon the proprietors of theatres. Let us take the first night of a new production, when, say, about 150 newspaper critics go in. Who is going to pay that tax? They are all invited, and they do not pay for their seats. Are the newspapers going to pay the tax? I do not think so. I think it will mean that the theatre proprietors will have to send free tickets, tax paid, to the newspapers, so that the tax will fall upon the theatre. Let us take the second night, when practically always, except in one or two theatres very long established and great popular favourites, the house has got to be substantially paper—almost always—and that may be not only for a few nights, but for a longer period. I could give, although I am not permitted to do so, the name of one of the greatest successes there has ever been in a London theatre —at the performance of which I certainly saw several members of the Government Front Bench—which was largely kept with paper by the management for some weeks, and ultimately it ran for hundreds and hundreds of nights. I give that instance as showing how, in an absolutely legitimate success, by careful management of the theatre, by the sending out of tickets to people, the proprietors are enabled to keep the house in such a condition that the public think the play is going rather better than it is. That is by no means an unfair method. Many of the successes that have been known in the last twenty years have been made owing to skilful management, and owing to the excellent free list attached to the theatre, enabling the management to keep the house properly dressed for the first few weeks of the play. You arc going to put the whole of that burden in future upon the theatre.

6.0 P.M.

A syndicate—and, after all, most plays are run by syndicates—in future in putting up a play will have to calculate not only for the expense of the production and for the expense of running the play, but they will have to calculate to a certain extent that they have to pay this tax through inviting a certain class of the public, who are always invited, to theatres of standing to dress the house. Let us see the sort of people to whom free seats are given. We all know there is a certain type of person who always gets free seats if he can, and very often he is a person who can perfectly afford to pay. Take the sort of free list that is used by the leading theatres in London. I will not mention any by name, because it would be invidious, but I will take a theatre of first-rate reputation in the West End. What is the free list it adheres to? The first persons on the list would be probably staffs of hospitals and the second on the list would be institutions dealing with students for the stage—clubs like the Three Arts Club. You get a number of young women with very little money, living together during their collegiate existence, and every decent theatre makes a point of sending to these young women who are studying for one or other form of art free tickets to go to the theatre. Who is going to pay the 1s. 6d. tax? Those who are given these tickets will either have to pay it—and although it is a small sum these young women cannot afford to pay it—or the theatre has got to pay it when they are sending out these tickets. It either means taxing these persons, who in most cases are really very poor or taxing the theatres, although you start out by saying that you do not intend to do so. The idea that there is a large free public in this country which goes to the theatre without paying, though it can afford to pay, is, I believe, a profound illusion. Take the provinces, a play which goes there does not play, as many would imagine, to the full capacity of the house. It is doing very good business as the ordinary play goes, if it plays to a house one-fifth full. A house capable of holding a couple of hundred pounds, if it took £40 would probably be doing a good business and making a profit. Every provincial house throughout the country has its free list of people who are invited on the first night. That does not mean people who have not paid, because very often they are people connected with the theatre in one way or another—people who advertise by putting bills in windows are given free tickets. All that is going to fall on the theatre, and you are going to take away all this method of getting plays advertised in the country. You are simply going to throw the whole of that expense on the management. At the present time managers are running the provincial shows with the greatest possible difficulty, and if you are going to put down the giving of tickets to these people who come every Monday night, and indeed during the week, you are going to do a very serious injury.

I am much more concerned with the injury which this does to people who are after all doing something to learn through the stage—all the young students, all the people connected with colleges and schools. That is another class that escapes to a great extent. When you got managers producing Shakespeare, and plays that perhaps do not draw the largest houses, in London a great many tickets arc sent to schools and places of education generally, and you are going to put a heavy tax upon the schools, which I am quite sure they will not pay, or you are going to put the tax on the managers. I believe that in every decently conducted theatre it will be found necessary, according to the traditions of the British theatre, to a certain extent, to dress the house. That is going to fall upon the manager. It is going to yield an infinitesimal sum, but it is going to cause the greatest possible trouble. It is going to try something which I think is practically impossible. How are you going to prevent a man who owns a theatre from in- viting his friends into the theatre to see the show? Are you going to put inspectors there when tickets are being sold? How are you going to prevent, if someone knows a manager, supposing this tax was in operation, calling to the theatre, talking to him, walking in with him, and staying in the theatre with him? I do not see how you are going to collect such a tax. You certainly will not have the goodwill of the theatre managers with whose legitimate business you are interfering. You certainly will not get the assistance of the theatrical community in enforcing such a tax. You rely very much in collecting this tax on the cordial co-operation of theatrical managers. I do not think you will find these taxes easy to collect. If one could hit the deadhead, the person who might be called the stage deadhead, the person who is supposed to be able to pay and does not, everybody would be very glad, but I believe that the people who dress the theatre are largely people of very small means—students, nurses, and so on. This tax reminds one of another tax which was once proposed. Some people seemed to imagine that every one who went into a restaurant for luncheon ate about five courses, and the persons who started this tax have exactly the same idea of a theatre. I cannot imagine any tax that would be more completely futile and more completely subversive of running theatres in this country, and that would be of less value in raising money for the State.

I have never had a free ticket in my life, and I have not been to a theatre since the War began.

I was not talking about railways; I was talking about theatres. I have a pass on railways, but if I went to a theatre and presented it I do not think that I should be admitted. Though I have not the knowledge of the hon. and learned Gentleman in reference to London theatres, and know nothing whatever about the system of dressing theatres, of which I never heard before, I do think that there is something to be said in objection to this particular tax, though on other grounds. A tax should be on something received and not on nothing received. In this particular case the theatrical proprietor receives nothing. Why should he be taxed for receiving nothing? That does not seem to me to be fair. The hon. and learned Member says that he could not bring in his family with these. That does not appeal very much to me. I put the matter more on the financial ground, which, I think, is a valid objection, that a man should not be taxed on what he has not got.

I confess that, so far as I am concerned—and 1 believe that I am speaking for my right hon. Friend (Mr. Bonar Law)—my hon. and learned Friend has been voyaging through strange seas of thought. I was very much interested in what he said, and perhaps I have learned something. When we put in this Subsection we did not expect to make much revenue, but my right hon. Friend had seen representatives of the London theatres, and he certainly thought that by putting in these words he was meeting the desires of some of them.

But we are quite prepared, if the hon. and learned Member will leave these words as they stand now, to look into this matter again before Report stage and, if we find that the case which my hon. and learned Friend has made can be sustained, we shall be pleaded to reconsider it.

I think that I could name, although I will not do so, the people who have taken the view of the theatrical profession which has just been referred to, but the people for whom I am speaking are the very people whom the Chancellor of the Exchequer said he would assist, and they are certainly those whom the public want to assist and do not want penalised. In the circumstances I beg to ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Amendment made: Leave out the word "July" and insert instead thereof the word ': October."—[ Mr. Bonar Law.]

Clause, as amended, ordered to stand part of the Bill.

Clause 4—(Continuance Of Additional Duties On Tobacco At Double Rates)

(1) The additional duties of Customs payable under Part I. of the Finance (No 2) Act, 1915, on tobacco imported into Great Britain or Ireland, shall, as from the third day of May, nineteen hundred and seventeen, be doubled, and shall continue

to be charged, levied, and paid at the double rate until the first day of August, nineteen hundred and eighteen.

(2) The additional duties of Excise payable under Part I. of the Finance (No. 2) Act, 1915, on tobacco ground in Great Britain or Ireland, shall, as from the third day of May, nineteen hundred and seventeen, be doubled, and shall continue to be charged, levied, and paid at the double rate until the first day of August, nineteen hundred and eighteen.

(3) Sub-section (3) of Section eighty-three of the Finance (1909–10) Act, 1910, and any other enactment relating to drawback on tobacco, shall have effect as if the rates set out in the First Schedule to this Act were submitted for the rates set out in Part III. of the Second Schedule to the Finance (No. 2) Act, 1915, in cases where it is shown that additional duty has been paid at the double rate imposed by this Section

I beg to move, in Sub-section (1), after the word "until," to insert the words "the sixteenth day of July, one thousand nine hundred and seventeen, and as from the last-mentioned date the said additional duty instead of being charged at double rate shall be increased by fifty per cent, and shall be continued, levied, and maintained at that rate until"

This is also one of those charges which nobody would like to put on if it could be avoided Before we decided to put on this duty we had a strong feeling that there was one class who should if possible be saved from the charge, and there is an Amendment put down by two of my hon. Friends to exclude soldiers of His Majesty's military forces. From my own knowledge of the position of soldiers who are engaged in Home defence, I know that although their separation allowances, compared with former scales, are now generous, yet our soldiers really are very badly off compared with men who are earning wages, and therefore there was a very strong desire to exempt them from this particular duty. But when we began to see how the thing would work out, it was found that it was not possible to do it. In the first place, our regiments are in towns all over the country, and are coming into contact every day with their friends who are not members of His Majesty's Forces. We do not impute to them any lower level of intelligence or honesty than to other people, but I think that it would be almost impossible for them to resist the temptation of giving their friends cigarettes at prices lower than they would have to pay, and I am advised that the loss of revenue from that cause would be very great, and that it would be to an extent which no one could foresee. Another difficulty which I think of great importance is this: It would, of course, be quite possible to supply soldiers with tobacco through canteens, and to make an arrangement by which they could escape this higher duty, but what would be the effect? I have made inquiries, and I am told that something like four-fifths of the tobacco bought by soldiers is bought from small shopkeepers, and the effect of any such arrangement is that this custom would disappear altogether from these small shops; so that, while trying to do a service to the soldier, you would be doing a great injury to the class which is now catering for soldiers. We came to the conclusion, therefore, that it was not possible, as I should haze liked, to make any concession to apply in this way. Then the next thing which we have to consider is the question of price. It is all very well for certain people to say that tobacco is not a necessity, but is a luxury. It is very difficult to draw the line between a necessity and a luxury. I have received, for instance, in answer to a question which was asked by my right hon. Friend (Mr. Lough), received information as to the amount derived from two articles which he specified and from other domestic necessities, some returns from the Revenue authorities in which I find that they class tobacco as a necessity. The effect of this increase of duty has been to raise the price of tobacco, and it is of course, a very heavy addition to the cost. On the whole it is those who have a low rate of wages who feel that it is a very heavy increase. One consideration brought out by the discussion of this Amendment, and to which I attach as much weight as do those who have moved it, is that the increase in the duty should not be used as a means for getting higher prices for the tobacco itself. My right hon. Friend the President of the Board of Trade has set up a committee to control the prices of tobacco and they have gone very closely into the whole question as to whether or not the addition which was put upon the price was justified by the increase in the cost of manufacture. There can be no doubt there has been a very heavy addition to the cost of production, and that has to be taken into account. The price of the leaf abroad has risen and the charges and cost of manufacture are very important, and have resulted in a good deal of the added cost of tobacco apart from the duty charged. Looking into the subject, I inquired about the low-priced tobaccos to begin with, and I came to the conclusion, after a good deal of inquiry, that in view of the greater cost of production, and in view of the high price of the leaf abroad, it would not be asking too much to keep to twopence in some cases, but on the cheaper manufacture we have decided to increase the price only by half that amount, and the effect of the Amendment will be that the lower-priced tobaccos will be raised by Id. instead of 2d. Another suggestion which was made was that we should have graduated prices and graduated rates of duty and that the higher-priced tobacco should pay the higher duty. But on examination it was found absolutely impossible to do that. The Committee will understand that, apart from the home market there is a great deal of tobacco exported abroad on which we have to impose the full duty, and there is no method by which tobacco could be exported some at one price and some at another, and the result is that I ask the Committee to increase the duty by 11d. instead of 1s. 10d., so that the lower-priced tobaccos will only be raised in price by a penny, though a larger amount may be added to the higher-priced tobaccos. I have been in consultation with the representatives of the Board of Trade who are dealing with the matter, and I understand that they will be able to fix the prices on which the duty can be settled at an advance of one penny.

What is to happen to those people who have paid the duty when it is too much?

We propose to make a. new scale of dutes, which will come into force in July.

Does the right hon. Gentleman's Amendment deal with the case of the soldiers?

Discussion is not possible at this point. I hope, on the whole, that the Committee will see that this is as fair a way as we can possibly adopt of dealing with the subject, and I hope there will not be a long discussion.

I should like to say at once that I am much obliged to the Chancellor of the Exchequer, and it seems to me that we have a very good case on the whose Clause. It is undoubtedly a fact that the effect of this great increase in the Tobacco Duty has had an enormous effect on the working classes throughout the country, and, indeed, it has something to do with the unrest which has been experienced in the country during the last few months. Whatever it may be to other people, tobacco has become a necessity of vast numbers of the community. It may be that there are some people who can do without tobacco quite easily, but when the habit has once been formed, and when, as we know by experience, it enables men to go on smoothly with their work, I venture to think that the concession which has been made by the right hon. Gentleman will be very much appreciated throughout the country. I wish the duty could have been made still less, but as circumstances are at present, we accept what is proposed.

I had the honour and pleasure of introducing a deputation of working men from Derby to the right hon. Gentleman the Chancellor of the Exchequer, and they put a very strong case before him on behalf of their fellow working men. The right hon. Gentleman has pointed out the difficulties which he has had to encounter, and, as I understand, has decided that in the case of the cheaper tobaccos the increased duty, instead of being 1s. 10d., will be 11d. A good deal of the unrest and friction which was caused by the former proposal arose from the fact that the addition of 1s. 10d. in the lb. translated itself into something like 2d. on the ounce, or something like 2s. 6d. or 3s. a lb. There was a good deal of suspicion in the minds of some of the working men whom I introduced to the right hon. Gentleman that this was another case of what is known by that ill-defined term "profiteering." At any rate, the right hon. Gentleman has shown that there are other causes of the increased price of tobacco besides the increase of duty. I understand that with the assistance of the Board of Trade and by the action of the Committee of Control, the additional price on the cheaper varieties of tobacco will not exceed 1d. an ounce, and that, I am sure, will be received throughout the country as a reasonable and fair concession.

I am grateful to the right hon. Gentleman for having reduced the tax on the cheaper varieties of tobacco, though in the case of the soldier I am still a little disappointed, and I could have wished that there was some more straightforward way of dealing with his ease. I would point out that tobacco still is up to 6d. an ounce, as compared to 3½d. previous to 1916, and that 6d. an ounce represents the soldier's net pay. The soldier only draws 1s., and in the majority of cases 6d. is deducted in respect of various charges. The Chancellor of the Exchequer has in mind the people with low wages among the civil population, but I would point out that the soldier has a very much lower wage than even the lowest paid civilian, and I had hoped that the right hon. Gentleman would have given some special treatment to the soldier. The right hon. Gentleman says he does not wish to injure the small tobacconists, but perhaps he might find out some method of dealing with the point as to the soldier, because it does seem a little bit hard that he should have to pay to save the small tobacconist. There is another way of dealing with the matter. The Chancellor of the Exchequer might decide to give a soldier 1 lb. or ½ lb of tobacco per month free of duty, and I shall be glad if the right hon. Gentleman will give that suggestion his consideration. The soldier abroad gets his tobacco duty free, and I submit that the right hon. Gentleman might consider whether ½ lb. of tobacco per month free of duty could not be issued to the soldier at home. I should think there would be no difficulty in persuading the Army Council to agree to such a proposal, and I understand that the actual cost of the tobacco, exclusive of duty, is only 1s. per lb.

:I think the hon. and learned Gentleman had better defer the discussion of that point till he reaches the Amendment which is upon the Order Paper in his name.

The Chancellor of the Exchequer told us that arrangements had been made by the Board of Trade with regard to the duties on tobacco so that the increase on the cheaper kinds of tobacco would only be a 1d. per ounce. Can he tell us to what classes of tobacco that would apply? For instance, does it apply to plug tobacco which soldiers and others smoke, and what is the effect on cigarettes? Perhaps he can tell us how these arrangements will affect the selling price of cigarettes under the altered duties?

It is impossible, of course, to give details of that kind. What I said was that I was told that they had every hope that the increase on certain kinds of tobacco would not exceed a 1d. per ounce, and as regards the. other kinds of tobacco that they are to be regulated by the Committee which is dealing with tobaccos and which will take into account all the circumstances of the case.

Can the right hon. Gentleman give us an assurance that this reduced tax shall not be levied on water? I think it is the experience of almost everyone who smokes that since the increase of duty the consumer of tobacco has paid not merely more than the increase of duty, but he has also found that his tobacco is considerably watered and consequently he has paid duty on that at the high rate. I am quite aware that this adulteration by adding water to tobacco is illegal, but so far as I am aware—and my experience in this respect is, I think, the same as others—there must be some laxity of inspection which allows retail tobacconists to charge the full price on duty-paid tobacco for water, which forms a very considerable portion of the tobacco you get. I think it will be found that there is very much more in this point than the experience of the Chancellor has led him to feel. I think it would be a good thing if the Treasury or Customs and Excise Department would undertake some system of inspection to ensure that the tobacco consumer is not defrauded as he has been during the last two months.

Amendment agreed to.

I beg to move, in Subsection (2), after the word "until," to insert the words "the sixteenth day of July, nineteen hundred and seventeen, and as from the last-mentioned date the said additional duties instead of being charged at tho double rate shall be increased by fifty per cent, and shall continue to be charged, levied, and paid at that increased rate until."

May I ask whether the Government are satisfied that they can adopt this course, having regard to the Resolution which we have already passed and to which statutory effect has been given? Have we any right now to alter that Resolution as from a certain date and still give the Resolution statutory effect? I gather the Government intends to leave the duty at the reduced rate as from the 16th inst. I have examined the Provisional Collection of Taxes Act, and it seems very doubtful if they have this power.

We are following precedent set up by the Government last year with regard to cocoa.

Amendment agreed to.

Further Amendments made: In Subsection (3), after the word "in" ["set out in "], insert the words "Part I. and Part II."

After the word "were" ["were substituted"] insert the word "respectively."

At the end, insert the words '' or the increased rate imposed by this Section as the case may be."— [ Mr. Baldwin.]

I beg to move, at the end to add the words, "Provided that no additional duties under this Section shall be payable on tobacco sold by the Army Canteen Committees to soldiers of His Majesty's military forces."

I gather that the Chancellor of the Exchequer was very sympathetic to the ease of the soldiers in this respect, and I hope, if I can show him an alternative proposal for giving some advantage to the soldiers, he will, at all events further consider the matter. Let me remind the Committee that even under the concession which has been made an ounce of tobacco will cost a whole day's pay to the soldier. We know that in some instances the stoppage of tobacco is a punishment, and I submit that under these proposals we are punishing the soldiers, although no doubt anxious to give them the advantage of any reduction. The Chancellor stated that one difficulty with regard to my proposal was the small shopkeeper. I submit that the large proportion of the soldiers buy their tobacco in the canteen. However we may sympathise with the position of the small shopkeeper or the small tobacconist, I submit that the soldier has some claim to our consideration. My original proposal was that I lb. per month per man should be issued free of duty, and the alternative proposal which I now suggest is that ½ lb. per month per man should be issued under the Army Council by an arrangement with the Army Service Corps with the ration. The cost of such a concession would not be very great. I am informed that tobacco brought to this country costs, free of duty, about a shilling per lb., and if my suggestion were adopted it would only mean sixpence per man per month. I cannot obviously state the total amount representing the total number of men, but I would ask the Chancellor to consent to forego the duty on that ½ lb. per soldier per month. I am told that this suggestion is quite practicable, and that the tobacco could be issued with the rations to every soldier at home in the same way as it is now done abroad. It would be a valuable concession. To a certain extent, also, it would meet the position with regard to the small shopkeeper, because most soldiers smoke far more than the amount I suggest, and they would therefore still spend a considerable amount in buying tobacco from the small shopkeeper and they would also have-more money left to spend. I do hope the Chancellor will consider the matter and will notify the Army Council that if they are prepared to issue the tobacco in this way that he will not stand in the way by insisting on the full duty being charged.

I am sorry that the Chancellor of the Exchequer does not see his way to accept this Amendment. I can quite understand that there are difficulties, but what I rose to say is that I deeply regret that the Chancellor should have gone further and said, as far as I understood him, that he is against a. ration of tobacco being issued to the soldier because it would be unfair to the shopkeeper. I really must enter a protest that the question of the issue of a ration of tobacco to our soldiers at home should depend in any way on the question of the local shopkeeper. The sailor gets his ration of tobacco, and you do not consider the local shopkeeper there, and the soldier gets his ration abroad. [An HON. MEMBER: "The sailor is not on shore."] He is sometimes, and he gets this ration in. harbour and brings it on shore with him. I really believe the soldier ought to get it too. It is suggested that it would harm the shopkeeper. I really do not quite follow that argument. I think our soldiers' pay is so small that it is our duty to see that everything that is necessary for their "domestic necessities "—to use the words of the Chancellor—should be provided. The mere fact that the Chancellor of the Exchequer has called tobacco a domestic necessity proves to me that it is desirable that the Army Council should supply it. I do not rise—I hope the right hon. Gentleman will understand—to object to his not accepting this Amendment, but in order to protest against his having gone further and against him saying that he does not think tobacco should be issued as an Army ration. It is issued abroad, and I consider it should be issued as an Army ration here. The question of the local shopkeeper really does not arise, and, as my hon. and gallant Friend (Colonel Hope) has so clearly pointed out, the largest amount of tobacco is bought in the regimental canteen. I do hope that the Chancellor will reconsider this matter and not put his foot down altogether against tobacco being issued as an Army ration.

Amendment negatived.

Clause, as amended, ordered to stand part of the Bill.

CLAUSE 5 ( Effect of Repeal of s. 2 of 2 & 3 Geo. 5. c. 8) and Clause 6 ( Powers to Reduce Minimum Weight of Packages of Imported Tobacco) ordered to stand part of the Bill.

Clause7—(Reduction Of Licence Duty In Respect Of The Restriction On The Output And Delivery Of Intoxicating Liquor)

(1) In order to give relief in respect of the restriction of business caused by the Intoxicating Liquor (Output and Delivery) Order, 1917, the holder of an Excise liquor licence, being one of the licences specified in the Second Schedule to this Act, shall be entitled to obtain on the expiration of the licence repayment in respect of the duty paid by him for the licence at the rate of one-sixteenth part of the duty for every month or part of a month during which the said Order has been in force and the licence has been current.

(2) The provisions of this Section shall have effect as from and after the thirty-first day of March, nineteen hundred and seventeen,, and as regards any Excise liquor licence to which this Section applies, but subject always to the right of the holder of any such licence to a proportionate repayment or rebate in respect of the period ending on the said thirty-first day of March, the provisions of Section nine of the Finance Act, 1914 (Session 2), Section six of the Finance Act, 1915, and Section seventeen of the Finance (No. 2) Act, 1915, shall cease to have effect.

The Amendment which appears on the Paper in the name of the Chancellor of the Exchequer—[" to add at the end the words (3) If at any time an Order is made amending the Intoxicating Liquor (Output and Delivery) Order, 1917, the Food Controller may, subject to the approval of the Treasury, provide by the Amending Order for such modifications of the relief granted by this Section as appear necessary having regard to the effect of the Amending Order on the restriction of business. Provided that nothing hereinbefore contained shall authorise the Food Controller to provide by any Amending Order for an increase of the rate of relief granted by this Section ' "]—is in a form which I do not think I can pass. It would allow an authority other than the Committee of Ways and Means to impose taxation. As Chairman of Ways and Means, I do not think I ought to countenance such a departure.

I beg to move, in Sub-section (1), to leave out the words 'repayment in respect of the duty paid by him for the licence at the rate of one-sixteenth part of the duty for every month or part of a month during which the said Order has been in force and the licence has been current," and to insert instead thereof the words "such part of the duty as may be proportionate to any reduction of the licence holder's profits as compared with his profits in the preceding year, provided that no such reduction shall be allowed unless the reduction of profit exceeds ten per cent."

The object of this Clause is to give a rebate to the licensing trade of about £1,000.000 in respect of its liquor licence duties. I think that, for reasons which I will submit to the Committee, is an abatement which is gratuitous and uncalled for. I am suggesting that a very much lesser abatement would meet the case. May I say that in answering the Chancellor of the Exchequer on a previous occasion I referred to this Clause, and the right hon. Gentleman commented, apparently with feeling, on the reprehensible levity I displayed. I can assure him that I was completely in earnest, but that faint, approach to humour of which I was guilty shall not be repeated. I regret that it seems to have given him. pain. Meanwhile, I really do not see in the least why the licensed trade should be given this very considerable abatement. The facts are that before the War the Liquor Licensing Duties paid by the trade amounted to £4,430,000. In the present year they have dropped to £3,487,000. It is now proposed to drop them to £2,100,000. Only to-day I heard the Chancellor of the Exchequer say every million that we can get is needed. He went on to say that he could not give away anything except what was demanded by fairness and equity. No doubt he claims that it is fairness and equity that demand this abatement. I do not think so, for reasons which I shall explain. Meanwhile I do think it is quite a serious point that this very large abatement should be proposed. On his invitation that I should draw attention to the matter at an early stage I draw attention to it on the Finance Bill. I think the matter is entirely in order. I have submitted the point to the Chairman of the Committee and he encouraged me by the thought that I might object to this abatement which the Chancellor of the Exchequer proposes. The point that, in the first place, I submit, is this: that during the course of this War—

On a point of Order, Mr. Whitley. On the Amendment which has been submitted to you, do I gather that the matter is settled? I should have thought that an objection to an abatement proposed by the Government was precisely the same thing as suggesting an increase of taxation. If so, I should have thought it would not be in order?

On a point of Order May I submit that, if I cannot object to an abatement, then whenever the Chancellor of the Exchequer makes an abatement, however unjustifiable it may be, it will be impossible for any member of this Committee to object to that abatement if an objection to an abatement is equivalent to a proposal to increase the taxes?

This is a matter which I do not think is the subject of a Ways and Means Resolution. The Clause in the Bill is the first time that the Committee approaches the matter. It is not an abatement that is in existence at the present time. Therefore, on various grounds it appeared to me allowable for the hon. Member to propose that, if there is to be an abatement, it should be for a less amount than is here for the first time proposed by the Government. Similarly it would be within the power of the hon. Member to move to leave out the Clause altogether.

My point is that during the course of the War, though there have been abatements granted to the licensed trade, the profits of the licensed trade, so far as I have been able to test them, have not been reduced by the restrictions. On the contrary, they have increased during the War. I admit there have been restrictions of output; in that case the abatements already granted by the previous Resolution arc quite sufficient at the present time, and there is no need to go any further. Those abatements began with the present Prime Minister when he was Chancellor of the Exchequer. He offered an abatement of 15 per cent of the Licence Duty in virtue of the restrictions which he imposed. That was subsequently increased to 25 per cent.; that is the abatement which exists at the present time. The Chancellor of the Exchequer, on a previous occasion, told me that the whole principle was given away by his predecessor the right hon. Gentleman the Member for Monmouth, who had, he thought, stated that the reduction of the Licence Duty ought to be in proportion to the reduced output of the trade. I have very carefully looked into it, and I cannot find any utterance whatever by the predecessor of the right hon. Gentleman to that effect. It is quite true that the Licence Duties were reduced 25 per cent. by the Chancellor of the Exchequer at that time, but the right, hon. Gentleman made no statement whatever as suggested. Certainly he laid down no principle which would justify a further reduction in the Licence Duty which the Chancellor of the Exchequer is now proposing. My point is this: that the principle on which this abatement is suggested, and advocated, by the Chancellor of the Exchequer is wrong. He is reducing these Licence Duties an extra 50 per cent., so that they are now only three-quarters of what they were before, on the grounds of the restriction in barrelagc—the restriction to 10,000,000 barrels. My whole point is that these Liquor Licence Duties are not taxes on output but taxes on profit. They are taxes on the monopoly value of the trade.

That was always the ground on which they were actually advocated, and, therefore, they ought to depend, not on the reduction in consumption or the restriction of output, but on the profits which the trade has made, whatever may be their output and whatever may be the consumption. If that is the case—and I contend that is what the Licence Duties are—they are really taxes on extra rent which can be claimed or exacted by the owners of public houses in virtue of the monopoly which the State confers upon them. That is the only justification for these Liquor Licence Duties. If that be the case, then my further point is that the profits of the licensed trade, so far as we can test them, have not diminished during the War, but, whatever the Committee may think, have actually increased. I have investigated the matter. I have looked through—I will not say very exhaustibly— but at all events have looked through the materials at my disposal. I have looked at the accounts of many of the breweries. I find that about 100 of them have increased their profits, and about forty-one have remained the same.

I am aware of that. But these Licence Duties fall primarily upon the big brewery companies.

7.0 P.M.

At all events, I do not think it can be argued that the smaller men in the free houses have been losing if the brewery companies have been gaining by the simple test of the profits of the trade. It is not merely my calculation. The Committee may think me an unsafe guide on the matter. But I have here an article which appeared in May in the "Economist." The paper was investigating the profits of the brewery companies. The "Economist" says:

"It is not perhaps generally realised that, taken as a whole, the brewing industry has had a prosperous time during the War up to now."
The paper gives a list of some eighty or ninety brewery companies' accounts for the years 1914–15–16, showing that their net profits amount to about £4,500,000 in money, and they have gone pretty steadily up each year. The "Economist" says:
"Ninety brewery reports published for the year ending 30th June, 1914, showed an increase in profit of £291,000. Eighty-one reports published for the year ended 30th June, 1915, showed an increase of £42l,000. Seventy-seven reports published for the year ended 30th June, 1916, showed an increase of £274,000. To take our record a little nearer to the present date, seventy-four reports in the calendar year, 1916, gave a. net profit of increase of £32,000. Twelve brewery companies published reports during the first quarter of 1917, the companies representing a total capital of nearly £11,500,000, and were able to show an advance of £65,000 net profit. In every case net profits are struck after deduction of debenture interest and other fixed charges."
In these circumstances, and if all this be true, then I cannot see why the Chancellor of the Exchequer should go out of his way to present this £1,000,000 to the brewing trade and to the persons who pay this Licence Duty. The argument of the right hon. Gentleman on a previous occasion was this: "You grant all licences for a period. You put restrictions on it, and just as if you restrict the use of the licence granted to a motor 'bus you ought to give the owner abatement, so in the case of the licence holder you ought to give him an abatement proportionate." There, if I may say so, I think the right hon. Gentleman is wrong. What you need to do is to diminish his Licence Duty in proportion to his profit. The profit, as I say, does not depend upon the output. It depends upon the business management of the trade. By means of dilution, by means of increased prices, and by other methods which are known to the trade, up till now the big brewery companies, and those who have to pay these licences, have not suffered. On the contrary, although they may have suffered inconvenience, although it may have been awkward for them to have their business interfered with, they have not suffered in the matter of profit. Therefore I venture to say there is absolutely no justification whatever for this very considerable throwing away of revenue. My Amendment proposes to leave the 25 per cent. reduction which was given in previous years, and to give the licensed trade abatement of their Licence Duties in proportion to any reduction which they can show to the Inland Revenue in their profits. If the Chancellor of the Exchequer is right, and the profits of the trade are going to fall off, as suggested, then they will get just as much abatement under my Clause as he proposes; if I am right, and the profits of the trade are not going to fall off to this extent, then in that case he will save revenue, and we shall not require to give this abatement. I have suggested, as a mere precaution to the Inland Revenue, that no abatement should be given unless the reduction of the profits amounts to 10 per cent. That would save them going into small reductions of profits which might be due to trading losses and so on, but, apart from that, I think you ought to make the reduction of Licence Duties dependent upon the reduction of the profits, and if you accept that principle, then I venture to think that the Chancellor of the Exchequer will not give away revenue which I think he requires.

I suppose the right hon. Gentleman thinks that this reduction, which is given in virtue of a reduction of output from 26,000,000 to 10,000,000 barrels, is going to produce this great diminution in the profits of the trade. There are two points on that which I wish to put. In the first place, will he tell us now, what we have asked for hitherto, what he proposes to do in reference to the 10,000,000 barrels? Is he going to increase the 10,000,000 barrels by another 3,000,000? That has been stated in the Press in apparently inspired quarters. If he is going to do that, then his reduction becomes still more unjustifiable. If, on the assumption that the barrelage is reduced from 26,000,000 to 10,000,000, he is reducing his Licence Duties by 75 per cent., now, if he raises the 10,000,000 barrels to 13,000,000 barrels, he has certainly no justification for a reduction of 75 per cent, in the Licence Duties. I have an Amendment further down to deal with that particular point, but we have not yet been able to find out what his intention is in this matter, and we should very much like to know.

The second point is this: The Government have just established a Commission to investigate the finances of the trade, and Lord Sumner and other Commissioners have been appointed for the purpose. If the right hon. Gentleman is right, that the profits of the trade have been cut down by 75 per cent, in virtue of these restrictions, I presume it will be for the Commission to take that fact into account when it fixes the price either for control or the purchase of the trade. If he is right in his belief that there is going to be this very profound and serious reduction in the profits of the trade, that is a very material matter for the Commission to consider, and if the trade, as it no doubt has done, claims this reduction on the ground of that reduction in their profits, then they cannot go to the Commission and say that their profits have been as high as I think they were. I will not proceed along that point any further, but I will say that many of us are feeling that in a great number of the Government Departments money is being thrown away recklessly with two hands. A vast amount of waste no doubt is inseparable from war, but while you are throwing away millions it is no reason to come down to the House and propose a gratuitous squandering of £1,000,000. It is only a million, no doubt, but the Chancellor of the Exchequer wants every million he can get, and unless he has got a very much stronger case than he has yet shown to this, Committee for throwing away £1,000,000, unless he can establish that there has been anything like this reduction in the profits of the trade, then it is a gratuitous squandering of the revenue; it is bad finance, and it is entirely unjustified.

This point on which my hon. Friend has dwelt with much knowledge and considerable warmth is really a tolerably simple question. He desires to reduce, as I understand, the abatement which the Government proposes of three-quarters of the Licence Duties to one-half—

That is a separate point. I am on the first Amendment. The effect of the Amendment which I moved will be to leave the abatement of 25 per cent., plus an abatement proportionate to any reduction of profits which the licensed trade can show. But I left that as an unknown quantity, because I myself do not believe it will show any reduction of profits.

The difficulty that the Government are in is this: We cannot quite take the hon. Member's view of the reason for which licences are given. He would claim that the licence is really given and calculated on the basis of the profit that the owner of the licence makes. A licence really—I speak subject to correction, for I am no lawyer—is that which gives a man the power to trade, and is calculated, it is true, on his annual value, and in that view there is possibly a rough kind of proportion maintained between what he pays and what he may be expected to make. But the question of profits qua profits has never come into this matter, and, in introducing the question of profit in making a calculation of this kind, my hon. Friend is bringing us on to new ground—ground that we have never stood on for this purpose before, and ground where, I very much fear, we could find no standing place where we could maintain our footing, and for this very obvious reason: It is no use telling me that because a large number of breweries have succeeded in maintaining the profits they have been making, therefore a large number of licence holders do not require the abatement which we propose to give them in this Clause. To my mind the two things are not on the same footing, and they are not comparable. It is quite impossible to prove between them any relation that would justify us in accepting the hon. Member's argument. We must remember that there are about 150,000 licence holders in the United Kingdom who are affected, and we must remember that a number of these have no accounts of profit and loss to show. They are too small men for that, and, having regard to the number of accounts which would have to be looked into, and having regard to the staff which exists for that purpose, it would be perfectly impossible —even if we thought it desirable—to make a calculation that would enable us to give effect to this Amendment.

We propose to have regard to what, I think, is perhaps the fairest thing to look at, and that is the facility that the licence holder has for carrying on the trade for which we grant him a licence. It was under the late Government that the hardship of the licence holder was recognised, and the restriction of hours which he suffered in certain parts of the country was allowed for by a certain abatement, but, as time has gone on. the licence holder is affected not only by the reduction in his hours, but by a very much more serious thing, and that is, the reduction in the amount of the material which he can purchase. The reduction of hours becomes to him a secondary question entirely, and it is for that reason that we remove the allowance given for the reduction of hours, and we merge what we believe the loss to which he is put into one calculation, and we make the proposal that we make in this Clause. We must remember that the difficulty of making compensation now merely on the ground of reduction in hours lies in this, that whereas it was possible, however reduced the hours were, to do good business throughout those hours, the position now is so far altered that in many cases difficulty is found in doing business during the hours which the licence holder is allowed to keep open. That has completely altered the problem. The question really which the Government have had to decide—we are perfectly open to consider the question with the best judgment the House can give us—is what, under the circumstances, we can arrive at the fairest bargain for making a licence to him which, I am sure, most members of this Committee feel he is entitled to on every ground of equity. We know that great reductions have been made in the amount of material at his disposal for sale. We know the difficulty that he has had to encounter in certain districts in his restricted time. We know the other difficulties with which he has, certainly in common with almost everyone else who carries on trade in this country, to contend—difficulties in securing service, and difficulties in securing the same kind of wage that he would have paid two or three years ago. I think when we take all these considerations into account, when we remember what the restriction is that has been imposed, when we consider the facts that for some time during the existence of the abatements that have been given hitherto—we know Members have got up here and claimed that, even under them the licensees were not receiving as much as they were entitled to—when you consider all that, I think the Committee will consider the view that the proposal we make that three-quarters of the full licence shall be remitted is not an extravagant view, and that we shall not be doing more than justice to a large body of people who, although they may carry on a trade which in the eyes of many hon. Members they ought not to be allowed to carry on under any circumstances, are fully entitled to this abatement by every rule of equity.

I think my hon. Friend will not be surprised when I tell him that he has not succeeded in convincing me. I would like to know, are we to understand that this reduction is based on the theory of a 10,000,000 barrel output, and in the event of that output being increased, is there going to be a fresh revision of the Licence Duty? What is the relation of this reduction of three-quarters to the supposed reduced profits of the licensed holders? I cannot help thinking that the Government has been misled in this matter. The Financial Secretary spoke of the reduction of hours and the reduction of the materials supplied to the brewers, but he did not attempt to show why those two things should lead to a reduction of this duty. The real argument for a reduction would come if you had reduced the profits of the drink seller, but no evidence has been presented or can be presented to the Committee that such a reduction of profits has taken place, and it seems very extraordinary when the Government are looking for revenue in all directions that they should, without proving that profits have been reduced, make a present of £900,000 to the drink trade. My point is that the profits of the drink trade had not been reduced to the end of the last financial year. It may be that their profits are going to be directly affected during the present financial year, but we have not had any increase up to the present upon which that matter can be determined. A mere reduction of the amount of the materials to be sold does not determine the amount of profit in any measure whatsoever. Prices have been raised, and the increased prices up to the end of the last financial year recouped the trade for the reduction of output and hours. It may be that that will not happen again, but before this duty is reduced some effort should be made to prove that the effect of the present measure is going to be a reduction of profit, and merely to talk about a reduction of the hours or output is to befog the eyes of the Committee. If the profits have been reduced that would be a fair argument for a reduction of the Licence Duty, but that argument has not been put forward, and I suspect the reason is that the Government have not in their hands the material to prove that the profits are going to be reduced in a way to justify this reduction.

I think the hon. Member has drawn our attention to a very important principle, and his arguments have not been met by what has been said by the Financial Secretary. It has been said that my hon. Friend was breaking mew ground, but if we turn to the Bill itself the very Order to give this relief is based upon a restriction of business, and because of that supposed restriction the Treasury propose this rebate. The hon. Member who moved this Amendment produced evidence to show that for three years the profits of some sixty or seventy breweries have steadily increased. This Amendment is along the lines of the Bill itself, and I think it is a proper way to base the licence upon profits made. If the profits have not been reduced it is most foolish of the Treasury to give away this £900,000, and probably more if the profits have increased. We certainly are entitled to retain this Licence Duty, and I think this Amendment deserves further consideration from the Treasury. The only reason for putting this Clause in the Bill was a restriction of trade. There has been no case made out to show that there has been any reduction of profits—in fact the evidence shows quite the contrary. My hon. Friend who moved this Amendment gave very significant figures showing an increase of profits, and why we should give a rebate and throw away some £900,000 passes my comprehension. I do not think the Treasury has made out any case for reducing this Licence Duty, and I hope, therefore, this matter will receive some further consideration either now or before we give away such an important concession as this.

Might I ask for an answer to my question as to what the Chancellor of the Exchequer is going to do with regard to these 10,000,000 barrels? Are we reducing this duty because of a reduction of the 10,000,000 barrels, because that was the reason given when this Clause was first proposed? Now we are told in the Press that the Government are going to allow an extra 3,000,000 barrels. If this abatement was right for 10,000,000 barrels it is entirely wrong for 13,000,000 barrels, and clearly I cannot think that this is intended.

Does it not depend upon who is to have the sale of these 3,000,000 barrels?

The Committee should not be expected to vote blindly in the dark. We do not know who will have to do with the 3,000,000 barrels. The Government have had a fortnight at least to consider this point, and yet they cannot tell us. I really do not think it is fair to ask us to give this abatement and refuse the information we have asked for. Supposing the Government have made up their minds and they do know what they mean to do. We do not know, and we are asked to vote blindly, and I very much object to doing that. The only other argument which the Secretary to the Treasury used was that it was too much trouble for the Inland Revenue to adopt my proposal. Under the Government proposal there will be 150,000 abatements to repay, but, under my plan, there would not be any. If I am right there will be no reduction in profits and no abatements to repay, and the revenue authorities ought to be grateful to me for saving them trouble. At all events there will be a good deal less trouble by my 10 per cent, margin than would be involved in repaying these abatements.

The other argument of the Financial Secretary was quite fallacious. He said I was breaking new ground and that I did not know the theory on which the Licence Duties had been levied. I know they have been levied on the monopoly profits as measured by the annual value, but that surely depends upon the profits. If the profits do not fall there will be no ground for the publican asking for an abatement in rent or of the annual value. If I can prove that profits have not fallen during the course of the War, then there is no ground for reducing the annual value and no ground for a reduction in the Licence Duty. It is no use telling us now that the great brewery companies do not own or control at least 90 per cent, of the houses under a tied-house system. It is no use saying that if the brewery owners are making a profit the individual licensees are losing money. If they are, the big brewery companies are losing money as well. It is obvious that the big brewery companies are not losing, and there is not a shadow of evidence showing that individual publicans are losing money. Has the Secretary to the Treasury a single case to prove this point? I could give him plenty of individual brewery companies who have increased their dividends and made hundreds and thousands of pounds extra profits during the War, but I will not trouble the Committee with them. It is perfectly obvious that the Secretary to the Treasury has not made out his case. He has submitted no argument to justify this abatement, and he is simply giving away public money for which there is no justification.

I do not really think it is necessary to say anything more, but out of courtesy to my right hon. Friend I shall try to give some reasons for the course we have taken. No member of the Committee likes to vote blindly, and I am quite sure my right hon. Friend will never do it under any circumstances. I think this is an illustration of an obection to proposals affecting this particular trade which I do not think they would have raised in connection with any other trade if we were dealing with it in the same way. I wish to put to the Committee exactly my reasons for dealing with this matter in this way. First of all, my predecessor found it necessary to take off 25 per cent, of the licence practically, and he did it on the principle that the restrictions then imposed really supposed that the holder suffered to the extent of the reduction given.

The Chancellor of the Exchequer then was not aware what the effect would be, and he estimated the reduction of output and based it upon a reduction of profits. We know now that that is not so.

My predecessor gave this reduction, and it had to be considered by the Customs authorities. The restrictions which were then proposed were enormously greater than those which hare brought about a reduction of 25 per cent., which is enormously greater. My advisers came to me with the suggestion that under all the circumstances a reduction of 75 per cent, was fair. My right hon. Friend asks what about the 3,000.000 extra barrels. I cannot give him the figures, because I cannot give them to the House of Commons generally, but we have made up our-minds as to the principle. I know it is difficult to carry it out in detail, and I cannot state the details until I know exactly what we are going to do. We are financing for a year, and we are making this arrangement for a year. What we have to consider, in view of the probability in front of us, is whether this proposal is a, fair or an unjust one. No Chancellor of the Exchequer would have hesitated for a moment in making the reduction greater than it was last year under the new conditions. The most that could possibly be said is that perhaps I might have been content by giving them one-half instead of three-quarters. I have done what on the whole, after the best advice I could get, I thought was fair, just in precisely the same way as I have given back a portion of the Motor Car Licence Duty where the owner is not able to get the petrol. My right hon. Friend says that I was irritated or something akin to it by what he said before. Not at all. Every time I hear my right hon. Friend speak on this subject I listen to him, not in anger, but in sorrow. I have always been keenly interested in temperance reform, as I understand it, and it is my deliberate opinion that it is the view of extreme advocates like the hon. Member that has done more to prevent temperance reform than anything else. That is my real opinion. Let me give my right hon. Friend an illustration. He says that the Commissioners, when examining into the fair price to be paid to the trade, must take into account the fact that they have lost three-quarters of their value. This loss is due to the War and arising out of the War, but my right hon. Friend says that it is the most natural thing in the world to look upon it as a permanent fall in the value of the trade. Rightly or wrongly, we have done what we considered just in the matter, and my right hon. Friend is quite mistaken in thinking that here the brewers and the licence holders are the same. He says that he can judge by the profits, but that is absolutely impossible. I am told by my advisers that there are 176,000 licences on the country, and in a great number of cases, probably the majority, they have no means of telling what their profits are. You have got to make an assumption, and I ask the Committee to believe that we are bound to make some concession—and that the concession which we are making is fair.

I am very glad that my right hon. Friend the Member for Lincoln (Mr. C. Roberts) has had a lesson in this matter, because I understand he is one of those men who are keenly anxious to see the State become the owner of all breweries and public-houses.

I think I am right. He leans very strongly in that direction. This is a lesson what he may expect. The views of the brewers and publicans are very well represented on that Front Bench, and this will be a lesson to him to be more alive as to what is in view and to assist some of us in trying to stop it.

Amendment negatived.

I beg to move, in Sub-section (1), to leave out the words "one sixteenth" and to insert instead thereof the words "one twenty-fourth."

The Chancellor of the Exchequer told us that apparently there is going to be an increase of 3,000,000 barrels, and I think in virtue of that the reduction should be one twenty-fourth per month, or a reduction of 50 per cent., instead of 75 per cent. The right hon. Gentleman in an Amendment later on the Paper seems to have taken some precaution to deal with the point, because, if I understand it aright, he seeks by that Amendment to take power if there is an increase of output to diminish the reduction. That Amendment, however, cannot be moved, and under the circumstances I submit that he ought to be content, in view of this increased output which is obviously coming, with a reduction of 50 per cent, instead of 75 per cent. With reference to the advice which he gives me as to importing passion, which I do not feel any more than I accept the account of my views attributed to me by the hon. Member opposite (Mr. J. M. Henderson), all I would say is that the right hon. Gentleman pursues the cause of temperance doubtless with philosophic calm and a very proper appreciation of the right spirit in which that great cause should be undertaken. I will accept with all humility the lesson which he inculcates for my guidance, but I only wish that the philosophic calm which he has always shown on this question had somehow or other led to greater practical results, because I cannot see that it has had any effect whatever in the promotion of temperance reform.

I lope that my right hon. Friend does not want me to make a speech about this Amendment. It really is not the case, and never has been, that the reduction is in direct proportion to the reduction of barrelage. You have to take into account all the other circumstances and look at the thing as a whole. I am sorry, but I cannot accept the Amendment.

I cannot see any principle in the right hon. Gentleman's proposal, except that he means to do it.

Amendment negatived.

Amendments made: After the word "duty" ["one-sixteenth part of the duty"] insert the words "for a full year."

At the end of Sub-section (1) insert the words, "but repayment shall not in any case exceed three-fourths of the duty paid for the licence."—[ Mr. Baldwin.]

Clause, as amended, ordered to stand part of the Bill.

Clause 8—(Relief From Duty On Liquor Licences Where Business Cannot Be Carried On)

(1) Where the holder of any wholesale dealer's or retailer's licence taken out under Part II. of the Finance. (1909–10) Act, 1910, satisfies the Commissioners of Customs and Excise that by reason of the licensed premises having been destroyed or seriously damaged, or by reason of any prohibition or restriction imposed by or under the authority of any enactment or regulation in connection with the present War, it was impossible during any period to carry on the business for the purpose of which or in connection with which the licence was granted, he shall be entitled to obtain repayment, or, so far as the duty has not been paid, remission, of such part of the duty for the year as bears to the full amount of that duty the same proportion as the period aforesaid, or the part thereof falling within the year, bears to a whole year.

(2) In any such case as aforesaid (but as respects any case to which Section 3 of the Dublin Reconstruction (Emergency Provisions) Act, 1916, applies without prejudice to the rights under that section), the Excise licence, and any justices' licence on the authority of which the Excise licence was granted, shall be deemed to be suspended as from the commencement of the period aforesaid; but at the expiration of that period any such justices' licence shall revive, and have effect as if it had been granted for the then current licensing year, and a person who was the holder of an Excise licence which has been so treated as suspended shall be entitled to take out an Excise licence on payment of such an amount in respect of Excise Duty as would have been payable by him had he been a new beginner at the expiration of that period:

Provided that if during the period for which any licence is so treated as suspended a contingency occurs upon which

a transfer of the licence might have been granted, but for the suspension, a transfer may be granted either—

  • (a) at the time at which, and to a person to whom, a transfer might have been granted had the licence not been suspended; or
  • (b) after the expiration of the period to any person to whom a transfer might have been granted had the contingency occurred immediately after the expiration of the period.
  • (3) In the application of this Section to Scotland references to a justices' licence shall be construed as references to a certificate as defined in Part VII. of the Licensing (Scotland) Act, 1903.

    I beg to move, in Subsection (1), to leave out the; words "it was impossible during any period to carry on."

    This is one of a series of drafting' Amendments. It is considered very difficult to ascertain when it is impossible to carry on, and the phrase "has been discontinued" is going to be introduced as one which the authorities consider more easily recognised.

    On a point of Order. I have handed in an Amendment which comes in front of this Amendment. It is to insert the words "Was the registered owner of the licensed premises—"

    I had already called on the Chancellor of the Exchequer before this Amendment reached me, and I really think the hon. Member ought to wait until another stage.

    Amendment agreed to.

    Amendments made: In Sub-section (1), after the word '"granted" ["in connection with which the licence w as granted "] insert the words "has been discontinued."

    After the word "shall" ["he shall be entitled to obtain repayment"] insert the words "on making application to the Commissioners within one month after the discontinuance or within such longer period as the Commissioners may in any special case allow."

    After the word "aforesaid" ["the same proportion as the period aforesaid "]

    insert the words "during which the business is not carried on."— [ Mr. Bonar Law.]

    I beg to move, at the end of Sub-section (1), to add the words, "and in any case such licence holder or registered owner shall also be entitled to obtain repayment or remission of a similar proportion of the charge payable by hint under Section 21 of the Licence Consolidation Act, 1910."

    It is clear that where the licence is suspended and no Excise Licence Duty is payable no compensation could be payable, because, under the Licence Consolidation Act, Section 21, Sub-section (2), compensation levy is to be paid with and to be part of the Excise Licence Duty. These words are intended to bring this Act into conformity with the Consolidation Act, and to avoid any confusion arising. Probably the Government did not quite realise this point, but if they agree that it ought to be made clear, perhaps they will consider these words and agree to the insertion of them or some similar words at a later stage.

    There are many subjects in connection with this Bill which are confusing, but this particular Amendment is so remarkably confusing that I think it must have some bearing upon the Amendment my hon. and gallant Friend (Colonel Gretton) was not allowed to move. In any case, I think it could well stand over, as it is a manuscript Amendment, and on Report stage we will give the hon. and gallant Member an opportunity of raising the matter.

    Amendment, by leave, withdrawn.

    Further Amendment made: After the word "year" ["the then current licensing year"], insert the words "and if the revival takes place between the date of the general annual licensing meeting in any licensing year and at the end of the year as if it had been granted for that year and the next licensing year, or, in the case of a licence granted for a term as if the term were extended by a period equal to the period of suspension."—[ Mr. Bonar law.]

    I beg to move, after the word "suspended" ["suspended shall be entitled"], to insert the words "or his representatives or the persons who as holders of a justices licence."

    The point in this Amendment is as regards the persons who shall hold a licence. It is necessary to contemplate the disappearance of the Excise licence holder or his non-appearance at the Court, or of anyone there on his behalf to claim for him. The licence may have been transferred or may have lapsed into the hands of the owner of the premises. The tenancy may be terminated. It is necessary to provide, unless the property is to be lost, that the tenant may be able to claim through his personal representatives. There is, for instance, such a case as that of a man who has gone to the War and has not returned, or the case of a man who, upon demobilisation, has not been discharged. If the tenancy has lapsed, the whole of the licence is gone. It is clearly intended that the licence should continue. This matter requires some consideration. I think the Government must have omitted, in drafting what is really a complicated and technical Clause, to remember this contingency. It was clearly intended the right should not lapse owing to accident, but that it should be preserved.

    The points of licensing law are extraordinarily complicated, and I think, when the Amendments are put in manuscript dealing with so complicated a matter, we really might ask to see them on the Paper. This may be all right, but I am sure it is really very difficult to follow. Knowing as I do something of the complexities and intricacies of licensing law, I should ask the Government not to accept it now but at least to let us see it upon the Paper.

    In regard to the Amendment which has been proposed I do not think that there is any objection in substance to the suggestion which was made by my hon. and gallant Friend. But this particular Amendment does not appear to be necessary in order to give effect to his intention. As the Clause stands it is provided, among other things, that a person who was the holder of an Excise licence that has been treated as suspended shall be entitled to take out an Excise licence on payment of such an amount, and so on. If I followed the criticism, what is said is that it is not enough to make that provision with regard to the person himself, who is the holder of an Excise licence, but that it should be extended to the legal personal representative of that person. But my hon. Friend will see that there are provisions for the transfer of the licence during the period of suspension, and in such a case as that which he has in mind it is perfectly possible for the licence to be or to have been transferred to the legal personal representative, and,in that case he becomes the person who is the holder of the Excise licence. If that be so the particular provision which is sought to be made by this Amendment is superfluous.

    I am satisfied with the explanation of the Solicitor-General and I have no doubt that what he says is correct. If, however, on further consideration there should be found the need of some further provision to carry out the intention which he has expressed on behalf of the Government, I have no doubt that that provision will be introduced and the matter put right on Report, For that reason, I beg to ask leave to withdraw the Amendment.

    Amendment, by leave, withdrawn.

    Further Amendment made: At the end of the Clause to add the words, "Provided also that if, during the period for which any licence is so treated as suspended, a person desires to make an objection on the ground of misconduct to the revival of the licence, he may make such an objection in the same manner as he makes an objection to the renewal of a justices' licence, and if, on any such objection being made, the justices certify that had the licence not been suspended they would have refused the renewal thereof, the licence shall not revive.''—[ Mr. Bonar Law. ]

    I beg to move, after the words last inserted, to add the words, "In the application of this Section to Ireland reference to justices' licence shall be construed as reference to a justices' certificate, and reference to the General Annual Licensing Meeting shall be construed as reference to the Annual Licensing Session."

    This Amendment can be accurately described as a mere drafting one. The Irish licensing law is very different from that which obtains in this country. As a matter of fact, in Ireland the licence is not granted by the justices; the justices merely issue a licence certificate. I think the Government will have no objection to this Amendment.

    I agree with the observations of my hon. and learned Friend that this is a drafting Amendment of a necessary kind, and the Government will accept it.

    Amendment agreed to.

    Clause, as amended, ordered to stand part of the Bill.

    Clause 9—(Repayment Of Half-Duty On Surrender Of Motor Car Licence For Current Tear)

    Where the holder of any licence to keep a motor car granted for the year nineteen hundred and seventeen has at any time before the first day of July in the said year surrendered the licence in such manner and to such person or authority as may have been prescribed by regulations made by the Treasury, for the purpose of being cancelled, he shall be entitled to repayment of one-half of the duty paid on the licence.

    Motion made, and Question proposed, "That the Clause stand part of the Bill."

    As we are now going on with the second part of the Bill I should like my right hon. Friend, if he will, to let us know if it is intended to go beyond the second part to-night. It would, I think, be much more convenient for everybody that the Excess Profits Duty should be taken first to-morrow.

    As my right hon. Friend well understands, if he were in my place he would like to get on as quickly as possible. At the same time I do feel that big considerations are involved in this, and that it is desirable from every point of view, in spite of our desire to make progress quickly, that if we get to the stage my right hon. Friend has named to-night, we shall not ask the Committee to go further.

    Question put, and agreed to.

    Clause 10—(Income Tax For 1917–18)

    (1) Income Tax for the year beginning on the sixth day of April, nineteen hundred and seventeen, shall be charged at the rate of five shillings, and Super-tax, and the additional Income Tax under Section twenty-seven of the Finance Act, 1916, on securities which the Treasury are willing to purchase, shall be charged, levied, and paid for that year at the same rates as those charged for the year beginning on the sixth day of April, nineteen hundred and sixteen.

    (2) All such enactments relating to Income Tax, including Super-tax and the said additional Income Tax, as were in force with respect to the duties of Income Tax granted for the year beginning on the sixth day of April, nineteen hundred and sixteen, shall have full force and effect with respect to any duties of Income Tax hereby granted.

    (3) The provisions of Sections twenty-nine, thirty, and forty-three, of the Finance Act, 1916 (which give relief from Income Tax in certain cases for the then current Income Tax year), shall have effect as if herein re-enacted and in terms made applicable to the Income Tax year beginning on the sixth day of April, nineteen hundred and seventeen.

    (4) The annual value of any property which has been adopted for the purpose either of Income Tax under Schedules A and B in the Income Tax Act, 1853, or of Inhabited House Duty, for the year ending on the fifth day of April, nineteen hundred and seventeen, shall be taken as the annual value of such property for the same purpose for the next subsequent year; provided that this Sub-section—

  • (a) so far as respects the duty on inhabited houses in Scotland, shall be construed with the substitution of the twenty-fourth day of May for the fifth day of April; and
  • (b) shall not apply to the Metropolis as denned by the Valuation (Metropolis) Act, 1869.
  • With regard to this Clause, I wish to draw the attention of the Committee to a point of some importance. In the drafting of this Clause, as it appears in the Bill, Sub-section (3) seems to me to constitute a new departure. In last year's Finance Bill and for a number of years previously—how far back it goes I do not know—the Clause proposing the | Income Tax for the year was confined to that matter, and all matters involving relief or abatement in particular cases were put in separate Clauses. It seems to me that from the point of view of drafting, and from the point of view of precedent, it would be very desirable if that method were continued. I just wish to mention that at the beginning. There are many reasons, but I need only point out one. If we once begin introducing reliefs and abatements into the first operative Clause of the Income Tax private Members as well as the Government must have the full scope which has hitherto been customary when these reliefs were brought up in the form of new Clauses. I understand that the hon. Member for Yarmouth (Mr. Fell) is not moving at this stage his Amendment, but will put it down when the question is put that the Clause stand part of the Bill.

    We are quite willing to postpone consideration of Sub-section (3) and to act in accordance with your suggestion, and put it down in the shape of a Clause in the Bill. That I take it will postpone any discussion which would have taken place now.

    That is exactly the point; you cannot postpone Sub-section (3); you may leave it out here, and bring the substance of it up in the form of a new Clause. That will follow all the precedents, but if Sub-section (3) is going to be moved here, then, of course, these other Amendments will be in order on this Clause, whereas, according to precedents of previous years, these matters would have been brought up in the form of new Clauses.

    Of course, I should not dream of pressing this if your objection to it is very serious, but, especially in view of the pledge I have given my right hon. Friend (Mr. McKenna), that we will not go beyond this Clause, it would be exceedingly awkward if we cannot discuss this matter now. I should hope for that reason your objections are not strong enough to make us desire that we should not proceed with this Sub-section.

    I would not have asked my right hon. Friend to give a pledge not to go beyond Clause 16 if I had not anticipated there would be a considerable Debate on this Clause.

    Is it not quite possible to meet your point and yet allow the discussion to proceed, because if an undertaking was given by the Chancellor of the Exchequer that in the Report stage he would deal with Sub-clause (3) by splitting it into several Clauses, you could still have discussion upon the Amendments which are at present put down and yet at the same time the Clause would be separately introduced upon Report? That would meet your point—a very important and valuable point, and one which I think the Chancellor of the Exchequer will accept. At the game time it would make it quite possible to have a discussion in the light of the Amendments which have been put down.

    On that point I understood the course you indicated from the Chair was going to be pursued by the Government, and with regard to the Amendments I have on the Paper I communicated with the Members who are supporting me, saying it was impossible the Amendments could come on to-day. Members, therefore, have left the precincts under the impression that the course you have indicated is going to be pursued.

    May I say that exactly the same thing has happened with regard to the Amendment I proposed to move? A great number of the Genelemen who were going to support my Amendment have left the House understanding that the Government are going to take the course suggested y you. In these circumstances it would not be fair to take a vote upon either of the proposals mentioned in this Sub-section.

    8.0 P.M.

    Of course, that is not a matter within my jurisdiction. I would only remark that I did not say that Sub-section (3) was out of order as drafted by the Government. I thought it my duty to call attention to the precedent in the matter, and. in view of future convenience, to point out that a new departure appeared in the Clause this year which will have considerable consequences in the future conduct of debate on Finance Bills. It is, of course, entirely within the Government's right to proceed with the Clause as it stands.

    On the point of Order. If you rule in that way, Mr. Whitley, might I ask whether, as Members have been led to suppose that another course was going to be followed, the right hon. Gentleman (Mr. McKenna) would withdraw his request to the Chancellor of the Exchequer not to go beyond this part of the Bill, so that the Excess Profits Tax, which it was anticipated everywhere would be discussed this evening, can be taken?

    I am sure my right hon. Friend (Mr. McKenna) will agree that we must take one or the other. It is simply a question of which is fairest. I was not aware of any such undertaking as the hon. Member opposite (Mr. Peto) suggested.

    No; I was not aware of such an undertaking. It is simply a question of which is most convenient, and I shall be glad to fall in with the views of the House.

    I did not ask on my own behalf, but because I understood that a number of hon. Members wanted to know whether they would be able to discuss Excess Profits Duty now. I should have said myself that there are far more hon. Members interested in the Excess Profits Duty than there are in this Clause, and outside in the country I am quite sure that the interest taken in certain aspects of the Excess Profits Duty is much greater. For my own part, I should be quite willing to withdraw the request which I made of the Chancellor of the Exchequer, and to leave it for him to decide which of the two he would rather take.

    It is really very awkward, because I wish to do entirely what is fair and what the House desires. But I am bound to say from all the indications that have reached me that whereas Income Tax is nothing new Excess Profits Duty means a change, and it would seem to be unfair to take the matter at an awkward time. I would suggest that there is an opportunity for further consideration. It can be taken now, and if hon. Members feel that it has not been sufficiently debated—I hope they will not take that course—they will have another opportunity on the Report stage.

    I beg to move, at the end of Sub-section (3), to add the words "but Section 30 of the Finance Act, 1916, is hereby amended to provide that all statutory abatements to which any persons are entitled shall, in the case of soldiers and sailors, be made primarily from income other than pay." I must ask the indulgence of the House, as I have neither friends nor supporters in the House for the Amendment, while I am left quite without papers or records of any sort or kind. At the same time, in submitting the Amendment I can say that it is not a new one. I will not say that we fought it out, but I attempted to show last year that by the insertion of these comparatively harmless looking words, that the statutory abatement to which the soldiers and sailors who were given special concessions in 1915, which were extended in last year's Finance Act, are entitled, are to be deducted primarily from their pay, in effect rendered, I think I should not be exaggerating in saying, absolutely nugatory the whole of the concessions to those who hare the smallest income, the non-commissioned officer with £70 or £80 a year, and with an additional income from other sources which raises him to just under the £300 total limit, who is entitled, under the Act passed in 1915, to pay Income Tax on his pay only at the rate of 9d. in the pound. What happens is this: lie is entitled, as every civilian is entitled, to an abatement of £120. The old pre-war abatement, of £160 was continued in respect of sailors and soldiers as a separate concession, and therefore the abatement of £160 more than covers the whole of his pay and Income Tax is charged at precisely the same rate on the remainder of the pay as if he had never joined His Majesty's forces at all, as if the whole £300 a year were derived from civilian sources, and as if he were safely at home with his wife and family. That is not what the Committee which discussed this matter in 1915 intended. On the contrary, I was pressing for a much more extended scale of rebates, which was ultimately conceded last year up to a total income of £2,500 a year, which, I think, from memory, pays an Income Tax of 3s. 6d. instead of 5s., extended as it was last year.

    I was told when I first advocated that that it would be doing too much for people who had quite large incomes. That was what the right lion. Gentleman the Member for Monmouth (Mr. McKenna) told me when he was Chancellor of the Exchequer, that I was wrong in asking for these rebates on such large pay as that received by brigadier-generals, and the like, because a great many people had incomes which rendered them quite independent of any remission of Income Tax by the Government. I remember he went so far as to say that he was not at all sure they would be grateful to me or any other Member who advocated such a course. There was a great deal in those arguments, but ultimately they did not prevail because last year we had an allowance which now exists right up to £2,500. The point we argued was that we wanted to give a rebate which would really assist people with quite small incomes of less than £300 a year. The subaltern and noncommissioned officer were the people we were thinking of, and the man raised to commissioned rank from the non-commissioned ranks, the man with a wife and family to support, who finds himself much worse off than he was before as regimental sergeant-major or whatever rank he held. That being so, is there a, particle of justification for drawing a parallel between that case and our action when we differentiated between earned and unearned income in 1907, that if there was a composite income part of it should be charged at one rate and another part at another rate, that the abatement should be taken off the portion of the income that was paying the lower rate of Income Tax. That was a very natural provision to make when we were merely dealing with earned and unearned income, but what has that really to do with this special concession granted to our soldiers and sailors of Income Tax at a very much lower rate on the portion of their income received from pay? There is no parallel between that and the action of 1907. In actual working it amounts to this—that wherever the pay is less than the amount of the abatement you give no concession whatever because everybody is entitled to the same abatement. The abatement washe3 out the pay and the Income Tax is charged at the same rate as that which any civilian would pay on the remainder of the income.

    I have had actual cases worked out, and I have given them to the Joint Financial Secretary to the Treasury, and I know the Chancellor of the Exchequer has had them. It is only necessary just to refer to them. I show that an officer of the rank of major, with £400 a year pay and £400 a year income from other sources, a total income of £800 a year, is above the abatement limit. He is not entitled to claim the abatement of £120, and, therefore, you have a perfectly simple income—£400 from pay, £400 from other sources—the whole of which pays Income Tax. Under the concession of last year with an income of £800 he benefits to the extent of £35. Another man who is only a sergeant-major, with a pay of just under £80 a year and a total under £300 does not benefit by last year's concession by a single halfpenny, because the whole of his pay is washed out as being below the abatement to which he is entitled, and therefore he pays at exactly the same rate of Income Tax as everybody else. I do not think that is what the Committee intended, and therefore I hope to hear from the right hon. Gentleman that the Government are prepared to accept this very simple Amendment, which really means that we are going to give to the soldiers and sailors in the matter of Income Tax the concession which we have always advertised to the world in general, and to them in particular, that we intended to give them. When they have come to claim it they could not get it, and now I want them to get what the House intended in the case of all incomes up to £2,500 a year.

    I desire to support this Amendment. The question one always has to ask oneself from the point of view of the Chancellor of the Exchequer is how much money he is going to lose if he grants this Amendment. There are figures we had given to us last year, which I am sorry I have not available now, but which I think show that what he would lose is something infinitesimally email compared with the amount of relief which he would give. The next question is, Can this relief be given? May I remind the Chancellor of the Exchequer that we proceeded by steps. In the Finance Bill which was passed in the autumn of 1914 we gave—

    I do not wish to interrupt my hon. and learned Friend, but, as a matter of fact, we had decided to accept the Amendment, and my hon. Friend the Joint Financial Secretary to the Treasury will state how we propose to deal with it.

    We did propose, in order to give effect to our desire to meet this case, to move to omit the word "thirty" at the beginning of Sub-section (3), but we thought it better that discussion should take place on this Amendment, and what we propose to do is on the Report stage to remove this Subsection (3) altogether, as the Chairman has desired, and to split it up into such portions as will be necessary in the shape of new Clauses dealing with exemptions, either granted this year or in continuation of exemptions granted last year. I think the Chairman's objection is one of very great substance, and that we should keep the taxing part of the Bill in and reserve the exemptions for a later part of the Bill. Under the procedure we are now adopting we get our discussion now, and the result of that discussion would be embodied in the splitting of the Sub-section into certain new Clauses on the Report stage. We entirely meet the case which the hon. Member (Mr. Peto) has put.

    May I have it made quite clear? Do I understand that the Chancellor of the Exchequer says that he accepts this Amendment, but that what is really going to happen is that he will accept a new Clause which has been put on the Paper in my name on page 1272 of the Amendment Paper (Right of Soldiers and Sailors to Pay Reduced Rates of Income Tax in Respect of their Pay)?

    As regards the Amendment of my hon. Friend, we are accepting it entirely so far as the principle is concerned, but the words are not considered most suitable by the draftsman. I will give him the words as we propose them:

    "Provided that for the words from 'and in calculating' to the end of Subsection (2) of the said Section thirty there shall be substituted the words ' and in calculating the earned income on which relief is to be given under this Section the deductions required to be made from earned income under Subsection (2) of Section nineteen of the Finance Act, 1907, as amended by any other Act, shall not be made from the pay unless and except in so far as the amount of those deductions exceed the aggregate amount of the earned income other than the pay and of the unearned income."

    In other words, it meets entirely the point of my hon. Friend. He had spoken to me about this at an earlier stage of our proceedings, and it seemed to me from the point of view of strict justice, admitting the principle of the deduction, that the fair way would be to take half and half from the earned and unearned income, but on looking into it I found that the effect on the Treasury would not be very great, and as the concession was given on the ground of a feeling shared by the Government and the House that something exceptional ought to be done during the War, I thought it was far better to accept in principle the Amendment now proposed.

    May I, on behalf of the soldiers and sailors, offer my thanks to the right hon. Gentleman for the exemption he has so kindly given them by accepting this Amendment.

    I am quite sure that this is a better way of dealing with the matter, rather than by putting in the Amendment which has been moved, because, on looking at Section 30, it is quite clear that something will have to be done in order to deal with the question beyond merely inserting the Amendment of the hon. Member for Devizes (Mr. Peto). In view of the terms in which Section 30 of the Act of last year was drawn, it is clearly necessary that Sub-section (2) shall be dealt with as well as Sub-section (1). Therefore, the new Amendment which the Chancellor of the Exchequer has suggested really meets the case, and I am very grateful to him for it.

    May I say that I think this very much confirms the caution which I entered in approaching this Clause. First I should say this: If it is a matter which is in order as an Amendment to a Clause, ipso facto it is out of order as a new Clause. That is a simple rule of our procedure, because you cannot have it both ways. Secondly, if the Amendment of the hon. Member for Devizes is inserted here in the Committee stage and it should turn out that the new Clause in some small matter is less favourable to quite a small proportion of His Majesty's subjects, it would be out of order on the Report stage, the House would not be able to put it in, in the form in which it really desires it without recommitting the Bill. It adds more strength to my view that these matters should be brought up in separate Clauses and not annexed or attempted to be annexed to the operative taxing Clause in the Bill.

    I wish to understand the position. I hope we are doing exactly what you, Sir, think is best in the circumstances, and that what we have done does not interfere with the view you have just expressed. We propose to put this in as a new Clause on Report, leaving this Sub-section out altogether. In other words, what I propose is—I do not know whether you think it advisable—that just as we have had this discussion on this Sub-section, we should have a discussion on the double Income Tax and then leave-out the Sub-section altogether, to be dealt with otherwise on Report.

    I do not know what Mr. Speaker will think, and it is not for me to trench on his functions, but you will then have in this Bill the words:

    "the provisions of Sections twenty-nine, thirty, and forty-three of the Finance Act, 1916…shall have effffect as if herein re-enacted and in terms made applicable to the Income Tax year beginning on the sixth day of April, nineteen hundred and seventeen."

    Is it not a fact that after we have dealt with all these matters and when the question "That the Clause stand part of the Bill" is put, the Chancellor of the Exchequer could accept the negative, and then all these various undertakings we have secured can be brought up in their proper form. I would remind you, Sir, of another discussion on this question we had a few years ago. The Finance Bill of 1907 proposes that certain Clauses in the Finance Act, 1804, should be deemed to have been reinserted in every Finance Act passed subsequently. Some of us pointed out that it was very difficult to have recurring Clauses which ca-me into every Finance Act, although it had not been inserted at that time, and it was ultimately withdrawn because of the very difficulty which you now point out. If we get a discussion and the undertaking from the Government it is quite unnecessary at the present time for the Committee to affirm that the Clause should stand part of the Bill. It could be negatived or withdrawn on the undertaking of the Government to bring it up in its amended form, or as a new Clause embodying the same principle.

    On a point of Order, I understand the Chancellor of the Exchequer to say that it is proposed to discuss the double Income Tax Amendment now and then to withdraw Sub-section (3). In that case will it not be subject to a second discussion when it is put down as a new Clause?

    Not if it is brought up as an Amendment to this Clause, as I have already ruled. The same thing cannot be in order, in two places. It cannot be in order on a new Clause if it is in order as an Amendment to an existing Clause. I understand the suggestion now made to be that after the discussion of the six proposals on the Amendment Paper down to the end of the Sub-section we should go back and leave out Subsection (3) altogether.

    Surely not! The mere fact that while this has been going through we have decided to bring it up in a different form, provided that when the Bill is passed the Income Tax Clause stands good, does not interfere with the proposed Act.

    I could not accept that view, that the Committee should first of all negative the whole of the 5s. Income Tax and then bring it up afresh. That decision would stand.

    When shall we see the Chancellor's words on the Paper? If we omit Sub-section (3), I suppose there will be nothing whatever on the Paper about any portion of the other six Amendments to which you have alluded, which he may accept, until we get to the Report stage. Will that be a very convenient procedure? Will he put them down as new Clauses for the Committee stage, so that we can see them on the Paper?

    If the Subsection is left out the Government can put down a new Clause.

    That is my idea— to put down the new Clauses on the understanding that there is no Debate and they are accepted right off. Whether it is feasible or not, I must leave to you.

    I could not entertain that, because it would be a complete breach with our procedure, and it would establish a precedent for a thing being in order as a new Clause which had been moved, debated, and may be withdrawn and negatived as an Amendment to an existing Clause. If it is desired to have a discussion, would not the better way be to move to leave out Sub-section (3) here, and on that Motion to take this discussion, the Government announcing what it is prepared to do? Then it would be in order to bring up thy particular matters in the form of new Clauses at the end of the Committee stage.

    Would it not be in order, and would it not assist the matter in connection with double Income Tax, if the Amendment was withdrawn and a new Clause put down to that effect? All those who are keenly interested in the question have left the House. If the right hon. Gentleman could meet us to that extent it would make a great deal of difference.

    On that point I can only say again that if an Amendment is moved to a Clause, whether it be withdrawn or negatived, it cannot be brought up again in the same stage of the Bill in the form of a new Clause.

    If the Government pursues the course it now indicates and brings Sub-section (3) as a new Clause and puts it down, can we then move Amendments to it on the Report stage?

    Because it would not do, as the hon. and gallant Gentleman (General Croft) suggests, to move a new Clause which really amounted to an Amendment of the Government Clause. That would be out of order. It would be out of order, therefore, to put down the Amendment which stands in the name of myself and my hon. and gallant Frined as a new Clause, or really an Amendment to what is going to be a Government Clause.

    Supposing the Government accepted this Amendment of my hon. and learned Friend and added at the end these words about Section 30, and then the Clause was allowed to stand part with these additional words on the Clause, would it be in order for the Government to amend that Clause, splitting it up into more. Sub-sections—it would be rather a complex Amendment but it would not make it a new Clause—and entirely redrafting the Clause as amended on the Report stage? Is not the simplest course to accept the words of my hon. and learned Friend, and as a matter of drafting put it in order on Report?

    I do not say it would be impossible to do that, but the Committee is the chief authority on matters of taxation. Things of that importance should not be left to the Report stage. There is the danger I have indi- cated, that if in some small particular it increased the taxation of the subject it would be liable to be ruled out of order.

    I think it very clear from your ruling that if we want these new Clauses brought up in Committee, as they ought to be, instead of being brought up on Report, it will be necessary to get rid of Sub-section (3) of the Clause now. I think everyone is agreed upon that. There is no other way of doing it if you want to discuss this matter on the new Clauses in Committee. If that be so is not the only way in which we can get rid of Sub-section (3) for the Government now to move that it be omitted from the Clause, because if we have a discussion on the Clause and certain Amendments are moved, would it not be impossible for the Government, when Subsection (3) has been passed, possibly with Amendments, as a matter of order, to move to leave it out? If I am right in saying that the Government could not after discussion move to leave it out, should we not be in this difficulty, that we should not be able to discuss the matter in Committee at all on the new Clauses. Therefore, I would suggest that my right hon. Friend should now move to leave out Sub-section (3). It is quite true that that would prevent a discussion taking place upon the double Income Tax and so on, but there is really no alternative. I suppose we can talk about it but not very effectively, because we could not move direct and specific Amendments as to double Income Tax. We might talk at large about double Income Tax, but we could not have any discussion because there would "be no Amendment before the House.

    That is obviously the difficulty, and we have every desire to make an arrangement which would be satisfactory to everyone, but we have found it impossible. It is obvious that we must move to leave out this Subsection; otherwise we shall not be acting in the spirit of what you think is proper drafting of the Finance Bill, so I propose to do that. On the other hand, by this arrangement, unless we carry out the understanding which was come to that we should have a discussion on double Income Tax now, the whole of this evening is to a large extent lost. What I propose, therefore, is that we should have that discussion on the Motion that the Clause stand part of the Bill. That will be perfectly in order. Of course, under the circumstances, I do not ask lion. Members to undertake not to discuss it at all when it conies up later as a new Clause, but I would ask them to bear in mind the circumstances in which we have got and to make the subsequent discussion as brief as possible.

    Amendment, by leave, withdrawn.

    The Chancellor of the Exchequer has only mentioned the question of double Income Tax, but there are four definite small matters which stand on the Paper in my name and in the name of other hon. Members. These have not been discussed at all, and I propose to move them as new Clauses, quite unfettered by any discussion which has taken place this afternoon.

    On a point of Order. Is it not the case that when the new Clauses are put down representing the breaking up of this Sub-section (3) that those Clauses must have a Committee discussion upon them? Will not that be the proper time for us to move our Amendments to Sub-section (3) as put down by the Government?

    The Government, I understand, are accepting the substance of the proposal of the hon. Member for Devizes (Mr, Peto). Presumably, they will have their new Clause on the Paper in Committee dealing with that point. With regard to the proposal of the hon. Member for Inverness (Mr. Bryce), if the Government has not a new Clause standing in its own name, he will, of course, move the new Clause in his name in Committee. Is that clear?

    Yes. The Government Clauses which represent the fragment of Sub-section (3), must come to Committee for discussion.

    Then when we see them we can move our Amendments as Amendments to the Government Clause?

    Yes. If they are relevant to the Government Clause; if not, as separate new Clauses. Of course, the preliminary discussion on this subject of reliefs will be in order on the Question, that this Clause stand part of the Bill.

    May I make this clear? I hope there will be an understanding that the time now will not be altogether lost, and that the extent to which we have discussed these subjects now will be taken into account when we come to the later stages in Committee on the Bill. I hope my hon. Friends will bear that in mind and make the later discussion as brief as possible

    Amendment agreed to.

    That deals with all the Amendments on the Paper relating to this Clause, except the one in the name of the hon. Member for Tamworth (Mr. Wilson-Fox), which is out of Order. That, like another proposal I had to refer to this afternoon, proposes some other taxing authority than the Committee of Ways and Means, and cannot be allowed.

    Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

    I want to ask a question in regard to paragraph (a) of Sub-section (4), which says:

    "So far as respects the duty on inhabited houses in Scotland, shall be construed with the substitution of the twenty-fourth day of May for the fifth day of April."

    I should like the Chancellor of the Exchequer to look into this matter. This is a concession made for the purpose of collecting rents in Scotland, and I believe on inquiry that the only place in Scotland where the trouble is felt is in Glasgow, and that the other towns in Scotland would much prefer that the financial year ended on the same day as in England. Perhaps between now and the Report stage he may look into this matter. There is a great difference between the 5th of April and the 24th May, and, for the purpose of material taxation, I think it would be worth while to adhere to the same day as in England, particularly as other towns in Scotland do not want this change.