The following Bills were presented and read the first time:—

Earl of RONALDSHAY—Easter Offerings.—Bill to exempt voluntary Offerings to clergymen and ministers from taxation. (To be read a second time to-morrow.)

Viscount MORPETH—Clerks of the Peace and County Councils (No. 2).—Bill to amend the Law with regard to the appointment of Clerks of the Peace and County Councils (To be read a second time to-morrow.)

Ordered, "That the Committee of Ways and Means have precedence this day of the business of Supply."—[ The Prime Minister. ]

Ordered, "That the proceedings of the Committee of Ways and Means, if under consideration at Eleven o'clock this night, be not interrupted under the Standing Order (Sittings of the House)."—[ The Prime Minister. ]

[Mr. EMMOTT in the chair.]

(IN THE COMMITTEE.)

I now turn to a brief consideration of the Revenue and Expenditure of 1909–10, the main details of which are already in the hands of hon. Members. It will be seen that on the basis of existing taxation and of the estimates of expenditure already presented to Parliament, there is an anticipated deficit of £15,762,000. This amount is perhaps even larger than some Members may have anticipated, but this is attributable in part, at any rate, to the fact that the true revenue of this year from Customs and Excise has been largely anticipated. Towards the end of last year there were unusually heavy withdrawals of all dutiable commodities, particularly of spirits, owing to a not unnatural apprehension of increased taxes. The sum that was thus added to the revenue of last year must be taken away from the revenue for the present year and therefore has to be counted twice in the comparison. This to a great extent accounts for the very large and otherwise inexplicable drop in our estimate of the Excise of the year.

When we come to Customs, the apparent decline of one million pounds is due entirely to the same cause—the transference of £550,000 which properly belongs to the present year to the receipts of 1908–9, since the normal increase in the consumption of sugar, of tea and of tobacco will, in the opinion of my advisers, more than make up for a probable decline in the consumption of foreign liquor. I ought to observe that apart altogether from forestalments there was, I will not say an alarming, but an encouraging, diminution in the consumption of alcoholic liquors observable during last year. This was partly due to the very bad trade from which we suffered. But the figures of the last few years justify me in assuming that it was also attributable to the steady growth in the habits of sobriety amongst the masses of the people.

Although there is every prospect that before the end of this financial year there will be considerable improvement in the trade of the country—the symptoms are all distinctly favourable—still I shall have to reckon upon a continuation of that steady growth in the habits of self-restraint amongst the people in the matter of indulgence in alcoholic liquors which has been such a very marked feature of the national liquor bill during the past few years, which is so gratifying to the reformer and so discouraging to the revenue. The Committee will bear in mind that a. comparatively small decrease in the consumption of a certain class of highly alcoholised liquor would account for a considerable drop in the revenue. These elements taken altogether, forestalments and increased temperance—account for the considerable diminution which I anticipate in this branch of the revenue for the coming year, and which adds greatly to my difficulties.

Before I leave this brief and cursory examination of the revenue side of my balance sheet I should like specially to call the attention of the Committee to the wonderful steadiness in the yield of the income tax. In spite of one of the worst years of bad trade which this country has experienced for many a year, the income tax has surpassed every prediction and realised nearly a million pounds in excess of the Budget Estimate. No tax could possibly be put to a more severe test, no tax could possibly rise from it more triumphantly than the income tax has during, the past year. Whatever else may be said about our fiscal system, there is this to be said for it, that it stands the strain much better than any other system in time of trade depression as far as producing revenue is concerned. So much for the revenue side.

Now I come to the expenditure side of my balance sheet, and it is to this, after all, that must mainly be ascribed the exceptionally heavy deficit. Were I dealing with a shortage due only to a temporary cause like forestalments I might have resorted to some temporary shift which, would have carried me over until next year, when the revenue would resume its normal course. But, unfortunately, I have to reckon not merely with an enormous increase in expenditure this year, but an inevitable expansion of some of the heaviest items in the course of the coming years. To what is the increase of expenditure due? It is very well known that it must be placed to the credit of two items and practically two items alone. One is the Navy and the other is Old Age Pensions. Now, I have one observation which I think I am entitled to make about both, and I think that now I am about to propose heavy increased taxation it is an observation that I am entitled to make on behalf of the Government. The increased expenditure under both these heads was substantially incurred with the unanimous assent of all political parties in this House. There was, it is true, a protest entered on behalf of hon. Members below the Gangway against increased expenditure in the Navy, but as far as the overwhelming majority of Members in this House are concerned the increase has received their sanction and approval. I am entitled to say more. The attitude of the Government towards these two branches of increased expenditure has not been one of rushing a reluctant House of Commons into expense which it disliked, but rather of resisting persistent appeals coming from all quarters of the House for still further increases under both heads.

As to the Navy, we are now in the throes of a great agitation to double and even treble the cost of our Construction Vote this year; and as to old age pensions, the responsibility was cast upon me of piloting that Bill through the Committee, and the one difficulty I experienced was to persuade the House of Commons not to press Amendments which would enormously augment the very heavy bill we were incurring under the original proposals. I had constantly to appeal to the party loyalty of the supporters of the Government to resist Amendments which commended themselves to hon. Members, and which we ourselves should like to have seen carried, in order to confine within something like reasonable limits the Bill which we were encouraged to pass. And these were not Amendments moved by small sections of the House; on the contrary; they were moved from all quarters and almost invariably received the official sanction and support of the Opposition. I say that in order to show that, in the main, the two great items of expenditure which are responsible for this deficit are items which a vast majority of the Members of the House of Commons have not merely sanctioned, but in regard to which they brought a con- siderable amount of pressure to bear upon the Government to increase.

I made a calculation the other day as to what these Amendments would have cost us in the aggregate if we had assented to them, and I am sure the Committee will be surprised to find that Amendments which received the support of the official Leaders of the Opposition, if they had been carried, would have left me to-day to find not £9,000,000, but £14,000,000. The Amendments received the official sanction of the Leaders of the Opposition. I am not complaining of that. On the contrary, I think that many were Amendments which represented the extensions of the principle which I think are inevitable, but for the time being our attitude was to restrict expenditure rather than extend it. There were a few hon. Members who opposed the Bill altogether. There was my hon. Friend the Member for Preston and the hon. Baronet for the City. They represented a very small party, although no doubt a very intelligent party. I am not mentioning these matters by way of reproach to any section, nor with any desire to divest the Government of any share of its responsibility, but merely in order to show that the deficit in respect of which I have to suggest such heavy imposts to-day is not, as has been hinted in many quarters, one which the Government has landed the country in by wild and extravagant socialistic proposals, but rather an expenditure in which the Government represented the minimum demands and in which its proposals were more moderate from the point of view of expenditure than those which emanated from any other section of the House.

Before I dismiss this question of the expenditure for this year, I think I am entitled to answer a criticism from another quarter. We are told that we ought not to have touched old age pensions—at least, not at the present moment, when heavy liabilities were in sight in connection with the defence of the country. I may point out that when we introduced our Old Age Pensions Bill the emergency had not arisen. But, apart altogether from that, we had no honourable alternative left. We simply honoured a cheque drawn years ago in favour of the aged poor, which bore at its foot the signature of all the leaders of political parties in this country. They had all promised pensions at election after election, and great political parties have no right to make promises to poor people in return for political support, which is all these people had to give, and then—time after time—return the bill with "No assets" written across it. It was time this measure should be carried for the fair fame of British politicians as a whole. I am glad we have done it. I am not here on behalf of the Government to apologise for having done it. On the contrary, I think all political parties ought to be pleased that this thrice defaulted obligation has at last been discharged.

Before I come to explain the proposals which I shall submit to the Committee for the liquidation of this deficit I must invite hon. Members to join me in taking a wider survey of our financial responsibilities at this moment. It must be patent to everyone cognisant of the facts that fresh liabilities must be incurred next year in connection with the Navy and with social reform. These are commitments to which we are pledged, and from which no Government can honourably escape, and if I were to ignore these liabilities altogether in arranging my finance for this year I might, it is true, lighten my burden Very considerably, but I should be guilty of an unbusinesslike short-sightedness which would be highly culpable.

I cannot conceive anything which would be more disturbing to trade than the uncertainty which must ensue if it were thought that in addition to the taxes for the year new and unknown taxes were looming in the near future. It is far better, as well as bolder, therefore, that we should frankly examine the financial outlook and make provision not merely for the ascertained needs of the year, but for the further and increased liabilities which are not merely in sight, but to which the Government and Parliament are definitely and irrevocably committed. Prudence seems to me to dictate such a policy, and although it may seem as if we were needlessly anticipating troubles of the morrow, still those troubles are inevitable, and it is therefore better to provide against them without delay. This is the course which would be adopted in any commercial undertaking conducted on ordinary business lines. Whenever an exceptional effort has to be made to raise money for the discharge of liabilities already incurred stock is generally taken of all further liabilities which must necessarily be incurred in the immediate future, and the financial provision made generally covers both present and future indebtedness. That is the course I propose to follow in the financial operations which I shall submit to the judgment of the Committee.

Let us, therefore, examine our commitments. First of all comes the Navy. Up to the present we have been considering the Naval problem from the point of view of merely spending money.

But, in my judgment, it would also be an act of criminal insanity to throw away £8,000,000 of money which is so much needed for other purposes on building gigantic flotillas to encounter mythical Armadas. That is why we propose only to incur this enormous expenditure when the need for it arises. We must ensure the complete security of our shores against all real dangers, but, rich nation as we are, we cannot afford to build navies against nightmares. It is much too expensive an operation. To throw away millions of money when there is no real need for it purely to appease an unreasoning panic would be to squander resources essential to our safety in time of real danger, and it is the business of a Government to follow with calmness, as well as with courage, the medium path between panic and parsimony, which is the only safe road to national security. However, as it may be necessary to make arrangements for laying down all the eight "Dreadnoughts" on 1st April, 1910, so as to complete them by April, 1912, the financial proposals which I shall submit to the Committee will be of such a character that we can pay for them without resorting either to additional taxation or to the vicious expedient of a loan. Should it on the other hand be discovered that our fears are groundless, and this precipitate "Dreadnought" building is unnecessary, then the money will find its uses either in further endowment of our social programme for the benefit of the masses of the people or in giving the much-promised relief to the local ratepayer. He is entitled to consideration in respect of the increased expenditure imposed upon him both by the late Government and by the present Government, more especially in educational matters. He has also been very hard pressed owing to the increased cost- liness of maintaining the roads, attributable to the development in mechanical traction. I am not sure that it is altogether a fiscal question. It has almost become a great social question, for the municipalities are at the end of their resources, and their work is almost at a standstill in many of these areas because they cannot afford to spend what is absolutely necessary on their development. The local ratepayer has been promised consideration by successive Governments, and he is surely entitled to get it. I think I can safely say more; the financial proposals which I shall lay before the House will enable me to make good that promise.

Now I come to the consideration of the social problems which are urgently pressing for solution—problems affecting the lives of the people. The solution of all these questions involves finance. What the Government have to ask themselves is this: Can the whole subject of further social reform be postponed until the increasing demands made upon the National Exchequer by the growth of armaments has ceased? Not merely can it be postponed, but ought it to be postponed? Is there the slightest hope that if we deferred consideration of the matter, we are likely within a generation to find any more favourable moment for attending to it? And we have to ask ourselves this further question: If we put off dealing with these social sores, are the evils which arise from them not likely to grow and to fester, until finally the loss which the country sustains will not be infinitely greater than anything it would have to bear in paying the cost of an immediate remedy? There are hundreds of thousands of men, women, and children in this country now enduring hardships for which the sternest judge would not hold them responsible; hardships entirely due to circumstances over which they have not the slightest command; the fluctuations and changes of trade—even of fashions; ill-health and the premature breakdown or death of the breadwinner. Owing to events of this kind, all of them beyond human control—at least beyond the control of the victims—thousands, and I am not sure I should be wrong if I said millions, are precipitated into a condition of acute distress and poverty. How many people there are of this kind in this wealthy land the figures of old age pensions have thrown a very unpleasant light upon. Is it fair, is it just, is it humane, is it honourable, is it safe to subject such a multitude of our poor fellow-countrymen and countrywomen to continued endurance of these miseries until nations have learnt enough wisdom not to squander their resources on these huge machines for the destruction of human life? I have no doubt as to the answer which will be given to that question by a nation as rich in humanity as it is in store. Last year, whilst we were discussing the Old Age Pensions Bill, all parties in this House recognised fully and freely that once we had started on these lines the case for extension was irresistible. The Leader of the Opposition, in what I venture to regard as the most notable speeches he has probably delivered in this Parliament—I refer to his speech on the third reading of the Old Age Pensions Bill and the speech he delivered the other day on the question of unemployment—recognised quite boldly that whichever party was in power provision would have to be made in some shape or other for those who are out of work through no fault of their own and those who are incapacitated for work owing to physical causes for which they are not responsible. And there was at least one extension of the Old Age Pensions Act which received the unanimous assent of the House and which the Government were pressed to give, not merely a Parliamentary but a Statutory pledge to execute. I refer to the proposal to extend the pension to the meritorious pauper.

During the discussion on the Old Age Pensions Bill in the House of Commons, several Amendments were moved with a view to extending the benefits of the Act to the septuagenarian pauper, and I think it was generally felt in all quarters of the House that it was rather hard upon those who had managed up to a ripe old age by a life of hard work to keep off the poor law, and who only finally resorted to parochial relief when their physical powers utterly failed them, it was rather hard they should be still kept to their miserable and pauper-tainted allowance of 2s. 6d. a week, while their more fortunate, but not more deserving, neighbours were in receipt of an honourable State pension of 5s. a week, and often of 10s. a week. That cannot possibly stand. It was condemned by all, and could only be defended by the Government on the ground of stern financial necessity. With the unanimous assent of the House of Commons a purely provisional character was given to the pauper disqualification, and unless something is done, it automatically comes to an end on the 1st January, 1911, and all these poor old people, numbering between 200,000 and 300,000, will become chargeable to the Pension Fund. I cannot recommend Parliament to undertake the whole financial burden of putting such a transaction through. It would put too heavy a charge upon the Exchequer, and there is no reason why it should fall entirely upon Imperial funds. At the present moment these paupers cost something like £2,000,000 to the local rates of the country. If we received a contribution from local funds which would be substantially equivalent to the relief which would be afforded by withdrawing such a large number of paupers from the rates, then something can be done to remove this crying hardship. My right hon. Friend the President of the Local Government Board and I have entered into negotiations with some representatives of local authorities with a view to effecting an arrangement on this basis, and although we have not yet arrived at any decision as to the amount of the national contribution, we are very hopeful of being able to enter into a bargain which will be satisfactory to all parties concerned. I do not think it would be desirable for me at this stage to give any figures—otherwise it might embarrass us in the negotiations—but it is my intention in the financial proposals which I shall submit to the House, I am afraid not this year, but probably next year, to make provision which will enable us with the assistance of the local authorities to raise over 200,000 old people from the slough of pauperism to the dignity and the comparative comfort of State pensioners. That is a contingent liability which I am bound to take full note of in arranging for my finance, because it is perfectly clear we cannot impose taxation this year and next year impose new taxation for proposals of which at the present moment we have full cognisance.

But still, all those who have given any thought and study to this question must realise that the inclusion of the septuagenarian pauper is but a very small part of the problem which awaits solution—a problem of human suffering which does not become any easier of solution by postponement. On the contrary, the longer we defer the task of grappling with it the more tangled and the more desperate it becomes. We are pledged, definitely pledged, by speeches from the Prime Minister given both in the House and outside, to supplementing our old age pensions proposals. How is that to be done? It has been suggested that we should reduce the age limit. I am emphatically of opinion that that is the most improvident and ineffective method of approaching the question, and that it would be the line upon which advance would be slowest and most difficult, and which would achieve the least hopeful results. For the moment it is financially impracticable.

A reduction of the age limit to 65 would cost an additional 15 or 20 millions a year to the Exchequer. I will not say that is beyond the resources of a rich country like this, but it is much the most wasteful way of dealing with the question, for whilst it would afford relief to many thousands and hundreds of thousands probably who neither need nor desire it, and whose strength is probably more happily and profitably employed in labour, it would leave out of account altogether far and away the most distressing and the most deserving cases of poverty. What are the dominating causes of poverty amongst the industrial classes? For the moment I do not refer to the poverty which is brought about by a man's own fault. I am only alluding to causes over which he has no control. Old age, premature breakdown in health and strength, the death of the bread winner, and unemployment due either to the decay of industries and seasonable demands, or the fluctuations or depressions in trade. The distress caused by any or either of these causes is much more deserving of immediate attention than the case of a healthy and vigorous man of 65 years of age, who is able to pursue his daily avocation, and to earn without undue strain an income which is quite considerable enough to provide him and his wife with a comfortable subsistence. When Bismarck was strengthening the foundations of the new German Empire one of the very first tasks he undertook was the organisation of a scheme which insured the German workmen and their families against the worst evils which ensue from these common accidents of life. And a superb scheme it is. It has saved an incalculable amount of human misery to hundreds of thousands and possibly millions of people who never deserved it.

Wherever I went in Germany, north or south, and whomever I met, whether it was an employer or a workman, a Conservative or a Liberal, a Socialist or a Trade Union Leader—men of all ranks, sections and creeds of one accord joined in lauding the benefits which have been conferred upon Germany by this beneficent policy. Several wanted extensions, but there was not one who wanted to go back. The employers admitted that at first they did not quite like the new burdens it cast upon them, but they now fully realised the advantages which even they derived from the expenditure, for it had raised the standard of the workman throughout Germany. By removing that element of anxiety and worry from their lives it had improved their efficiency. Benefits which in the aggregate amounted to 40 millions a year were being distributed under this plan. When I was there the Government were contemplating an enlargement of its operation which would extend its benefits to clerks and to the widows and orphans of the industrial population. They anticipated that when complete the total cost of the scheme would e 53 millions a year. Out of the 40 millions the Government contributes something under three millions a year. Out of the 53 millions they were looking forward to having to find five millions. I know it is always suggested that any approval of the German scheme necessarily involves a condemnation of the Act of last year. That is not so. The Act of last year constitutes the necessary basis upon which to found any scheme based on German lines. It would be quite impossible to work any measure which would involve a contribution from men who are either already 70 years of age or approaching the confines of that age as a condition precedent to their receiving any benefits. It was therefore essential that people who had attained this great age should be placed in a totally different category. But that is not a reason why the young and vigorous who are in full employment should not be called upon to contribute towards some proposals for making provision for those accidents to which we are all liable, and always liable.

At the present moment there is a network of powerful organisations in this country, most of them managed with infinite skill and capacity, which have succeeded in inducing millions of workmen in this country to make something like systematic provision for the troubles of life. But in spite of all the ability which has been expended upon them, in spite of the confidence they generally and deservedly inspire, unfortunately there is a margin of people in this country amounting in the aggregate to several millions who either cannot be persuaded or perhaps cannot afford to bear the expense of the systematic contributions which alone make membership effective in these great institutions. And the experience of this and of every other country is that no plan or variety of plans short of an universal compulsory system can ever hope to succeed in adequately coping with the problem. In this country we have trusted until recently to voluntary effort, but we found that for old age and accidents it was insufficient. In Belgium they have resorted to the plan of granting heavy subsidies to voluntary organisations, and they have met with a certain amount of success. But whether here or in Belgium, or in any other land, success must be partial where reliance is absolutely placed upon the readiness of men and women to look ahead in the days of abounding health and strength and buoyancy of spirit to misfortunes which are, not even in sight, and which may be ever averted.

The Government are now giving careful consideration to the best methods for making such a provision. We are investigating closely the plans adopted by foreign countries, and I hope to circulate Papers on the point very soon. We have put ourselves into communication with the leaders of some of the principal friendly societies in the country with a view to seeking their invaluable counsel and direction. We could not possibly get safer or more experienced advisers. We are giving special attention to the important reports of the Poor Law Commission, both Majority and Minority, which advise that the leading principle of poor law legislation in future should be the drawing of a clear and definite line between those whose poverty is the result of their own misdeeds and those who have been brought to want through misfortune. All I am in a position now to say is that, at any rate, in any scheme which we may finally adopt we shall be guided by these leading principles or considerations. The first is that no plan can hope to be really comprehensive or conclusive which does not include an element of compulsion. The second is that for financial as well as for other reasons, which I do not wish to enter into now, success is unattainable in the near future, except on the basis of a direct contribution from the classes more immediately concerned. The third is that there must be a State contribution substantial enough to enable those whose means are too limited and precarious to sustain adequate premiums to overcome that difficulty without throwing undue risks on other contributors. The fourth, and by no means the least important, is that in this country, where benefit and provident societies represent such a triumph of organisation of patience and self-government, as probably no other country has ever witnessed, no scheme would be profitable, no scheme would be tolerable, which would do the least damage to those highly beneficent organisations. On the contrary, it must be the aim of every well-considered plan to encourage, and, if practicable, as I believe it is, to work through them. That is all I propose to say on that particular subject at this juncture. I have gone into it at this length merely to indicate that here also is a source of contingent liability which I am bound to take into account in my financial scheme. In this country we have already provided for the aged over 70. We have made pretty complete provision for accidents. All we have now left to do in order to put ourselves on a level with Germany—I hope our competition with Germany will not be in armaments alone—is to make some further provision for the sick, for the invalided, for widows and orphans. In a well-thought out scheme, involving contributions from the classes directly concerned, the proportion borne by the State need not, in my judgment, be a very heavy one, and is well within the compass of our financial capacity without undue strain upon the resources of the country.

The Government are also pledged to deal on a comprehensive scale with the problem of unemployment. The pledges given by the Prime Minister on behalf of the Government are specific and repeated. I do not wish to encourage any false hopes. Nothing that a Government can do, at any rate with the present organisation of society, can prevent the fluctuations and the changes in trade and industry which produce unemployment. A trade decays, and the men who are engaged in it are thrown out of work. We have had an illustration within the last few days, to which Lord Rosebery has so opportunely called our attention, in the privation suffered by the horse cabdriver owing to the substitution of mechanical for horse traction. That is only one case out of many constantly happening in every country. Then there are the fluctuations of business which at one moment fill a workshop with orders which even overtime cannot cope with, and at another moment leave the same workshops with rusting machinery for lack of something to do. Trade has its currents, and its tides, and its storms and its calms like the sea, which seem to be almost just as little under human control, or, at any rate, just as little under the control of the victims of these changes, and to say that you can establish by any system an absolute equilibrium in the trade and concerns of the country is to make a promise which no man of intelligence would ever undertake to honour. You might as well promise to flatten out the Atlantic Ocean. But still, it is poor seamanship that puts out to sea without recognising its restlessness, and the changefulness of the weather, and the perils and suffering thus produced. These perils of trade depression come at regular intervals, and every time they arrive they bring with them an enormous amount of distress. It is the business of statesmanship to recognise that fact, and to address itself with courage and resolution to provide against it.

Now, I have a word to say about the proposals of the Government to meet this state of things. The Poor Law Commission has recently called attention to the; importance of endeavouring to devise some effective scheme of insurance against unemployment. The question is one which bristles with difficulties, and the Commission put forward no definite scheme of their own, but they expressly approved the principle, and recommended that immediate steps should be taken to devise a workable scheme. My right hon. Friend the President of the Board of Trade has anticipated this recommendation, and the Board of Trade have been closely engaged for the last six months in endeavouring to frame and develop a scheme which, while encouraging the voluntary efforts now being made by trade unions to provide unemployment benefit for their members, will extend the advantage of insurance to a very much larger circle of workmen, including unskilled labourers. I do not now speak of the unemployment due to infirmity or personal failings or of unemployment due to labour disputes, but to that unemployment, by far the larger part of the evil, which occurs as a regular feature, varying with seasons and cycles, in important groups of trades; which renders the position of the worker in such trades unusually precarious; and which can only be dealt with, and ought clearly to be dealt with, by a process of spreading wages and of averaging risks and fluctuations. I do not propose to enter into the details of the Board of Trade scheme, which is, however, far advanced, and for which the national system of labour exchanges promised in the King's Speech will afford the necessary machinery. We recognise in this matter that we must walk with caution, and that it will be best to begin with certain groups of trades peculiarly liable to the fluctuations I have referred to, and in other respects suitable for insurance rather than to attempt to cover the entire area of industry. The Royal Commission were emphatic in recommending that any scheme of unemployment insurance should have a trade basis, and we propose to adopt this principle. Within the selected trades, however, the scheme will apply universally to all adult workers. Any insurance scheme of this kind must necessarily require contributions from those engaged in the insured trades, both as employers and employed; but we recognise the necessity of meeting these contributions by a State grant and guarantee. We cannot, of course, attempt to pass the necessary Bill to establish unemployment insurance during the present Session. But the postponement will not involve any real delay, for the establishment of labour exchanges is a necessary preliminary to the work of insurance, and this will occupy time which may also be advantageously employed in consulting the various interests upon the details of the scheme and in co-ordinating its financial provisions with the machinery of invalidity and other forms of insurance.

So much for the provision which we hope to be able to make for those who, under the changing conditions which are inevitable in trade and commerce, are temporarily thrown out of employment. We do not put this forward as a complete or an adequate remedy for all the evils of unemployment, and we do not contend that when this insurance scheme has been set up and financed that the State has thereby done all in its power to help towards solving the problem. After all, it is infinitely better, in the interests both of the community and of the unemployed themselves, that the latter should be engaged on remunerative work, than that they should be drawing an allowance from the most skilfully-contrived system of insurance. This country is small—I suppose it is the smallest great country in the world—but we have by no means exhausted its possibilities for healthy and productive employment. It is no part of the function of a Government to create work; but it is an essential part of its business to see that the people are equipped to make the best of their own country, are permitted to make the best of their own country, and, if necessary, are helped to make the best of their own country. [Cheers.] I am glad that that statement has been received with such general assent. A State can and ought to take a longer view and a wider view of its investments than individuals. The resettlement of deserted and impoverished parts of its own territories may not bring to its coffers a direct return which would reimburse it fully for its expenditure; but the indirect enrichment of its resources more than compensates it for any apparent and immediate loss. The individual can rarely afford to wait, a State can; the individual must judge of the success of his enterprise by the testimony given for it by his bank book; a State keeps many ledgers, not all in ink, and when we wish to judge of the advantage derived by a country from a costly experiment we must examine all those books before we venture to pronounce judgment.

Any man who has crossed and recrossed this country from north to south and east to west must have been perplexed at finding that there was so much waste and wilderness possible in such a crowded little island. There are millions of acres in this country which are more stripped and sterile than they were, and providing a living for fewer people than they did even a thousand years ago—acres which abroad would either be clad in profitable trees or be brought even to a higher state of cultivation. We want to do more in the way of developing the resources of our own country. [Cheers.] Hon. Members opposite cheer, and I am sure they will help me to find the money. There is much to be done for the re-settlement of neglected and forgotten areas in Britain. We have been spending for the last two or three years £200,000 to £300,000 a year upon work which I would not like to discourage. I have no doubt that it has relieved a great deal of distress, and that it is the best thing that could be done as a temporary shift and expedient, and all thanks and gratitude are due to the people who have devoted their time, leisure, and labour in expending the money in the most profitable way possible, but still it is a wasteful expenditure. Sometimes I have no doubt some good is done, but it is wasteful whenever you create work for the sake of creating it. We think that the money could be spent much more usefully and profitably, and with better direction, so long as we take a wider view of our responsibility in this matter.

This brings me straight to the question of afforestation. There is a very general agreement that some steps should be taken in the direction, I will not say of afforesting, but of reafforesting the waste lands of this country. Here, again, we are far behind every other civilised country in the world. I have figures here on this point which are very interesting. In Germany, for instance, out of a total area of 133,000,000 acres, 34,000,000, or nearly 26 per cent., are wooded; in France, out of 130,000,000 acres, 17 per cent.; even in a small and densely populated country such as Belgium 1,260,000 acres are wooded, or 17 per cent., out of a total area of 7,280,000 acres. Again, in the Netherlands and Denmark, out of total areas of 8 and 9½ million acres respectively, over 600,000 acres, or between 7 and 8 per cent., are wooded. In the United Kingdom, on the other hand, out of 77,000,000 acres, only 3,000,000, or 4 per cent., are under wood.

Sir Herbert Maxwell, who has made a study of this question for a good many years, and whose moderation of statement is beyond challenge, estimates that, in 1906, "eight millions were paid annually in salaries for the administration, formation and preservation of German Forests, representing the maintenance of about 200,000 families, or about one million souls," and that, "in working up the raw material yielded by the forests, wages were earned annually to the amount of 30 millions sterling, maintaining about 600,000 families, or three million souls."

Anyone who will take the trouble to search out the Census Returns will find out that the number of people directly employed in forest work in this country is only 16,000. And yet the soil and the climate of this country are just as well adapted for the growth of marketable trees as that of the States of Germany. I am disposed to agree with those who contend that afforestation is not particularly well adapted to the provision of employment on any large scale for the kind of labourer who is thrown out of work by the fluctuations of trade in the towns, and that its real utility will be rather found (to use the phrase of the hon. Member for Merthyr) "in the extension of the area of employment." It will be serviceable in providing employment in the rural districts during that inclement season of the year when work is least abundant. It would also afford an excellent adjunct to a system of small holdings and allotments.

Recently we have been favoured with a striking Report of a Royal Commission very ably presided over by my hon. Friend the Member for Cardiff. A perusal of the names attached to that Report will secure for it respectful and favourable consideration. It outlines a very comprehensive and far-reaching scheme for planting the wastes of this country. The systematic operation which the Commission recommend is a gigantic one, and, before the Government can commit themselves to it in all its details, it will require very careful consideration by a body of experts skilled in forestry. I am informed by men whom I have consulted, and whose opinion on this subject I highly value, that there is a good deal of preliminary work which ought to be undertaken in this country before the Government could safely begin planting on the large scale indicated in that Report I am told that experiments ought to be made, so as to test thoroughly the varying conditions of climate and soil and the best kind of trees and methods of planting to meet those variations. I am also told that we cannot command the services in this country of a sufficient number of skilled foresters to direct planting. I am advised, and, personally, I am disposed to accept that counsel as the advice of prudence, that the greater haste in this matter will mean the less speed, and that to rush into planting on a huge scale, without first of all making the necessary experiments, organising a trained body of foresters, and taking all other essential steps to secure success when you advance, would be to court disaster, which might discourage all future attempts.

I will tell the Committee how I propose that this subject should be dealt with; but, before I do so, I have something more to say about proposals for aiding in the development of the resources of our own country. The State can help by instruction, by experiment, by organisation, by direction, and even, in certain cases which are outside the legitimate sphere of individual enterprise, by incurring direct responsibility. I doubt whether there is a great industrial country in the world which spends less money on work directly connected with the development of its resources than we do. Take, if you like, and purely as an illustration, one industry alone—agriculture—of all industries the most important for the permanent well-being of any land. Examine the Budgets of foreign countries—we have the advantage in other directions—but examine and compare them with our own, and hon. Members will be rather ashamed at the contrast between the wise and lavish generosity of countries much poorer than ours and the short-sighted and niggardly parsimony with which we dole out small sums of money for the encouragement of agriculture in our country.

We are not getting out of the land anything like what it is capable of endowing us with. Of the enormous quantity of agricultural and dairy produce and fruit, and of the timber which is imported into this country, a considerable portion could be raised on our own lands. There, hon. Members opposite and ourselves will agree. The only difference is as to the remedy. In our opinion, the remedy which they suggest would make food costlier and more inaccessible for the people; the remedies which we propose, on the other hand, would make food more abundant, better, and cheaper. What is it we propose?—and, let the Committee observe, I am only dealing with that part of the problem which affects finance.

I will tell the House therefore, briefly, what I propose doing in regard to this and all kindred matters I have dwelt upon. There is a certain amount of money—not very much—spent in this country in a spasmodic kind of way on what I call the work of national development—in light railways, in harbours, in indirect but very meagre assistance to agriculture. I propose to gather all these grants together into one Development Grant, and to put in this year an additional sum of £200,000. Legislation will have to be introduced, and I will then explain the methods of administration and the objects in greater detail, but the grant will be utilised in the promoting of schemes which have for their purpose the development of the resources of the country. It will include such objects as the institution of schools of forestry, the purchase and preparation of land for afforestation, the setting up of a number of experimental forests on a large scale, expenditure upon scientific research in the interests of agriculture, experimental farms, the improvement of stock—as to which there have been a great many demands from people engaged in agriculture, the equipment of agencies for disseminating agricultural instruction, the encouragement and promotion of co-operation, the improvement of rural transport so as to make markets more accessible, the facilitation of all well-considered schemes and measures for attracting labour back to the land by small holdings or reclamation of wastes. Every acre of land brought into cultivation, every acre of cultivated land brought into a higher state of cultivation, means more labour of a healthy and productive character. It means more abundant food—cheaper and better food for the people.

The sum which I propose to set aside for these large and diverse purposes may seem disproportionate, especially as a good deal of capital expenditure will necessarily be invested in the carrying out more especially of the experiments. For the purpose of afforestation schemes, at any rate at the earlier stages, when the expenditure will be particularly heavy, I propose that borrowing powers should be conferred upon the Commission directing the distribution of the grant, though I intend to avoid the necessity of resort to loans in connection with the capital expenditure required for other parts of the scheme.

It would be better that I should in this connection inform the House of another project which I shall have to submit in detail to its judgment later on in the course of the Session, but as it involves a substantial addition to the financial burdens of the year, I have to outline its general character in my Budget statement. It also has an indirect, but important, bearing on the question of providing useful and not purposeless employment in times of depression. I propose that a beginning should be made this year with a scheme for dealing with the new, but increasingly troublesome, problem of motor traffic in this country. We are far ahead of all other European countries in the number of motor vehicles upon our roads. We have at least three times as many as France and more than four times as many as Germany. And I am informed by those best able to judge, that to-day among, the products of our factories are some of the best cars procurable in the world, both as regards the compara- tive perfection of the more costly vehicles and the value given for the prices asked for those designed for popular use.

I therefore look forward to a great future for this industry, and I am the last to wish to hinder its development or be responsible for proposals which would be in any way hostile to its interests. Quite the reverse. I am anxious to be helpful to its growth and prosperity. But I cannot help feeling that this problem is urgent, and calls for immediate attention. Any man who takes the trouble to consider the damage which is done to the roads of this country, often by men who do not contribute—or perhaps I ought to put it in another way, who have not been given the opportunity of contributing to the upkeep of the roads they help so effectively to tear up—the consequent rapid increase in the expense of road maintenance, the damage done, if not to agriculture, at least to the amenities of rural life by the dust clouds which follow in the wake of these vehicles, above all, the appalling list of casualties to innocent pedestrians, especially, to children, must come to the conclusion that this is a question which demands immediate notice at the hands of the Central Government. The question of road construction, which was at one time deemed to be part of the essential development of the country, seemed to have been almost finally disposed of by the railways, but the advent of the motor has once more brought it to the front. It is quite clear that our present system of roads and of road-making is inadequate for the demands which are increasingly made upon it by the new form of traction. Roads are too narrow, corners are too frequent and too sharp, high hedges have their dangers, and the old metalling, admirably suited as it was to the vehicles we were accustomed to, is utterly unfitted for the motor-car.

If there be any truth at all in Ruskin's sweeping assertion that "all social progress resolves itself into the making of new roads," it must be admitted that we have been lamentably deficient. The State has for a very long period done nothing at all for our roads. I believe that no main road has been made out of London for 80 years. We have no central road authority. The roads of England and Wales are administered by 30 metropolitan borough councils (including the London County Council and City of London), 61 county councils, 326 county and non-county borough councils, and 1,479 urban and rural district councils. The great North Road, our greatest his- toric and national highway from London to Carlisle, is under no fewer than 72 authorities, of whom 46 are actually engaged in maintaining it. Among those are such authorities as the Kirklington Urban District Council, which controls one mile, and the Thirsk Rural District Council, which is responsible for 1 mile 1,120 yards in one place and 2 miles 200 yards in another! Both the general public and motorists are crying out for something to be done, and we propose to make a real start. How the funds will be raised for the purpose it will be my duty later on to explain; the only indication I shall give now is that the brunt of the expense at the beginning must be borne by motorists, and to do them justice they are willing, and even anxious, to subscribe handsomely towards such a purpose, so long as a guarantee is given in the method and control of the expenditure that the funds so raised will not merely be devoted exclusively to the improvement of the roads, but that they will be well and wisely spent for that end. For that reason we propose that the money shall be placed at the disposal of a central authority, who will make grants to local authorities for the purpose of carrying out well-planned schemes which they have approved for widening roads, for straightening them, for making deviations round villages, for allaying the dust nuisance, and I should also propose that power should be given to this central authority to set aside a portion of the money so raised for constructing where they think it necessary and desirable, absolutely new roads. Power will be given them not merely to acquire land for that purpose, but also for the acquisition of rights over adjoining lands, which will enable them eventually to bring into being new sources of revenue by taking full advantage of the increment and other benefits derived from the new easements they will be creating for the public. That is all I have to say with regard to expenditure, and I now come to the question of how I have got to meet it.

Once more I want to make it clear before I dismiss this part of the subject that the expenditure undertaken out of the fund must be directly referable to work done in connection with the exigencies of the motor traffic of the country. Although this is expenditure which will be incurred in the course of the present year, and is, therefore, not in the same category as the prospective liabilities which I have hitherto sketched, I do not think it incumbent on me to add this new liability to the ordinary deficit for the year, and I think the House will see that I have a sufficient reason for not doing so. I propose to deal with this expenditure by raising a special fund for the purpose, and it is therefore not quite in the position of being part of the current expenditure of the year. The expenditure will be strictly limited by the revenue we succed in raising.

I have outlined what I deem to be some of our more pressing requirements in the near future. I have now to consider in what way my proposals will affect the balance sheet of the current year. For this purpose I shall leave out of account for the moment the expenditure upon motor roads since it will, as I have indicated, be covered by and limited to the produce of certain special sources of revenue. Liabilities in respect of schemes of insurance against unemployment and other contingencies affecting the working classes will not mature within the current year, but for labour exchanges £100,000 will be required mainly for the provision of buildings. Under the head of development £200,000 will, as I have explained, be set aside for the first year's grant to the proposed fund. These two items together give a total of £300,000, to which must be added a sum of £50,000 for a purpose which will shortly become apparent, making a total addition of £350,000 to the estimated expenditure. If this is added to the estimated deficit of £15,762,000 on the basis of present taxation, and of the Estimates already presented to Parliament, the amount which must be found, either by further taxation or other means, is increased to £16,112,000, or (allowing a margin for contingencies) to, say, 16½ millions.

It is important that the Committee should recollect that during the first three years of the present administration taxes amounting in the aggregate to something over 7½ millions a year were taken off. In addition to that, provision has been made for a net reduction of deadweight debt to the extent of no less than 47¼ millions, and of our aggregate capital liabilities to the extent of 42¼ millions. This means a saving to the country in respect of interest of over a million pounds a year, which, if it had been directed to relieving the taxpayers' burthens instead of to increasing the Sinking Fund, would have enabled the total remission of taxation to have been raised to 8½ millions—a sum practically equivalent to the annual cost of the Old Age Pensions measure of the Government.

Another satisfactory element in our Capital Account is to be found in the fact that under the head of "Other Capital Liabilities" the repayments will, in the present financial year, for the first time since the introduction of the system of naval and military works loans, exceed the new borrowings. The estimated borrowings on capital account for 1908–9 were £2,785,000. The actual borrowings were £2,636,000, of which £1,300,000 was for telephone purposes, £859,000 for naval works, and £270,000 for military works, while the amount applicable in the year to repayment of principal was £2,279,000. The estimated borrowings for the current year are only £1,795,000, of which £1,300,000 will be required for telephone works, while the amount applicable to repayment of principal is estimated at £2,497,000. The borrowings under the Naval and Military Works Acts are now limited to works actually in progress, and have practically come to an end. The proposal which I now have to make was foreshadowed and justified by the Prime Minister when he opened the Budget last year, and I need now scarcely say more than that the amount by which I propose that the fixed debt charge should be reduced is three millions pounds.

How am I to obtain the necessary money for the settlement of this very heavy account? I dismiss borrowings. One way, of course, to balance the account would be to effect a saving of expenditure, and the other is by raising taxes. I should like to say one word on the first before I come to the second question. The path of the economist is hard. His is not a very attractive or popular role in any Government. One might infer that the first object of a finance minister who has to face a heavy deficit would be to inquire as to possible economies, with a view, if not of obviating new imposts altogether, at all events lightening them as far as possible. Last summer, when there was a suspicion that I might possibly do my level best to seek out economies and make a beginning in that respect, what was the result? I saw paragraphs in responsible Opposition journals accusing me of impertinence in instituting a search into possible economies in some of our most expensive services. What happened? Merely because I proposed to inquire, merely because I sought investigation, myself and my colleagues were subjected to such persistent abuse, insults, and scurrility as few Ministers have ever been subjected to, merely for desiring inquiry. I am still of opinion that it is worth this country's while to inquire thoroughly into its affairs, but I am equally clear that until public opinion is educated up to the point of assenting to the institution of that inquiry, and therefore giving the necessary support, no substantial results will be achieved in that way. Therefore I fall back upon the other resource of raising taxes and of so meeting and liquidating the demand.

Now what are the principles upon which I intend to proceed in getting those taxes? The first principle on which I base my financial proposals is this—that the taxation which I suggest should be imposed, while yielding in the present year not more than sufficient to meet this year's requirements, should be of such a character that it will produce enough revenue in the second year to cover the whole of our estimated liabilities for that year. And, moreover, that it will be of such an expansive character as to grow with the growing demand of the social programme which I have sketched without involving the necessity for imposing fresh taxation in addition to what I am asking Parliament to sanction at the present time. The second principle on which I base my proposals is that the taxes should be of such a character as not to inflict any injury on that trade or commerce which constitutes the sources of our wealth.

My third principle is this, that all classes of the community in this financial emer- gency ought to be called upon to contribute. I have never been able to accept the theory which I have seen advanced that you ought to draw a hard-and-fast line at definite incomes and say that no person under a certain figure should be expected to contribute a penny towards the burden of the good government of the country. In my judgment all should be called upon to bear their share. No voluntary association, religious or philanthropic or provident, has ever been run on the principle of exempting any section of its membership from subscription. They all contribute, even to the widow's mite. It is considered not merely the duty, but the privilege and pride of all to share in the common burden, and the sacrifice is as widely distributed as is the responsibility and the profit. At the same time, when you come to consider whether the bulk of the taxation is to be raised by direct or indirect means, I must point out at this stage—I shall have a little more to say on this subject later on—that the industrial classes, in my judgment, upon a close examination of their contributions to local and Imperial finance, are paying more in proportion to their incomes than those who are better off. Their proportion to local finances especially is heavier, because, although nominally the rates are not paid by them, as everyone knows, they are really. For that reason the burden at the present moment of new taxation bears much more heavily in proportion to their income on that class than it does, upon the wealthier and better-to-do classes.

I now come—and I trust that the Committee will not think that I have delayed too long—to the most interesting and the most difficult part of my task, the explanation of the various proposals for fresh taxation which I have to lay before them. I think it will be to the convenience of the Committee if I deal first with motor cars, and so dispose at once of a source of revenue from which, as I have explained, I, as Chancellor of the Exchequer, shall derive no advantage. In Great Britain, private cars, as distinct from hackney carriages ( i.e., taxicabs and motor omnibuses) at present pay £2 2s. carriage tax if under one ton in weight, with an additional £2 2s. if between one and two tons in weight, and an additional £3 3s. if between two and three tons, while motor-cycles pay 15s. In Ireland there is at present no tax on motor- cars. I propose to remove that Irish grievance. These duties brought in for the year 1908–9 the sum of £150,569.

I propose to substitute for this a new and increased scale, with graduations, which will come into force next January, for the whole of the United Kingdom, and I have decided to base the scale on the power of the cars and not on the weight. The horse-power will be determined in accordance with regulations made by the Treasury, and in the case of petrol cars with reference to the bore of the cylinders. It will no doubt be somewhat more difficult to ascertain the power than it is to ascertain the weight, but I believe that the plan I am adopting will be on the whole the fairest method of distributing the tax.

The scale I propose will be as follows:— Under 6½ horse-power, tax £2 2s. Under 12 horse-power, tax £3 3s. Under 16 horse-power, tax £4 4s. Under 26 horse-power, tax £6 £6 Under 33 horse-power, tax £8 8s. Under 40 horse-power, tax £10 10s. Under 60 horse-power, tax £21 0s. Above 60 horse-power, tax £42 0s.

It will be seen that the tax rises rapidly when we get to cars over 40 horse-power—a provision with which I think the Committee will not quarrel.

Doctors' cars I propose to charge at one-half these rates.

Motor cycles I would charge at the uniform rate of £1.

No additional duties will be placed on hackney carriages, and the existing exemptions to trade vehicles will be continued. The new duties on private cars and motor cycles I estimate to yield, in the aggregate, this year £410,000, or an increase of £260,000 over last year's figures; but such an estimate must be to a large extent guess-work, for, though I am able to say with fair certainty that the number of private cars is about 55,000 and of motor cycles 40,000, the number of the former in each category of power is of course entirely a matter of conjecture. I need hardly say that, in accordance with the Prime Minister's undertaking in ids Budget Speech in 1907, arrangements will be made so that the local authorities will continue to obtain a sum equivalent to the old duties.

I now come to a second proposal that I have to make in this connection. I have already explained to the Committee that one of the chief reasons for imposing additional taxation on motor cars is the fact that the increase in their numbers necessitates a reorganisation of our main-road system, and it will be obvious that, were I to confine taxation to a mere re-adjustment of the scale of licence duties, the burden would be imposed with absolutely no relation to the extent that the car might use the roads. Some cars are out four or five hours a day all the year round, others are used but rarely, and I believe that, were I to obtain anything like adequate contribution from motor cars entirely by direct taxation, I might hinder to some extent the development of the motor industry by discouraging persons from keeping a motor, or an additional motor, should they only want it for occasional use.

I, therefore, propose to put a tax of 3d. per gallon on all petrol used for motor vehicles. This small tax, very small compared with what hon. Gentlemen would have to pay if they were motoring in France, where they would be compelled to pay 1s. 8d.—[HON. MEMBERS: "They have got protection," and "No, no."] I worked it out, and the hon. Member is absolutely wrong. It varies very much, but in the principal towns you also pay an octroi duty. This small tax will fall on motorists in proportion both to the distance travelled and also to the power of the car, for the Committee knows that a high-powered car will consume considerably more petrol per mile run. In order to meet the case of commercial vehicles and vehicles such as motor cabs and omnibuses which will not perhaps profit to so great an extent by the improvement in our roads, I propose to give a rebate of half the duty on the quantity consumed in their propulsion. There will, of course, be a rebate of the whole duty on petrol used for all purposes other than propelling motor cars—though the amount used for such other purposes is comparatively small.

I estimate the yield of this tax to be about £340,000 for the 11 months of the current financial year, and to be about £375,000 for a full year. The total sum, therefore, available for that part of my development scheme which bears on road improvement from these two sources (after allowing for the payment to the local authorities of a sum equivalent to the old licence duties) will be some £600,000—a figure which should rapidly increase in succeeding years. I propose that the proceeds of these duties should be issued from the Exchequer to a separate account under statutory arrangements similar to those applicable to the estate duties grant, and the local taxation grant. Now that disposes of motors, and gets them out of the road.

Now I come to my direct taxation. It must be obvious that in meeting a large deficit of this kind I should be exceedingly unwise if I were to trust to speculative or fancy taxes. I therefore propose, first of all, to raise more money out of the income tax and estate duties. Income tax in this country only begins when the margin of necessity has been crossed and the domain of comfort and even of gentility has been reached. A man who enjoys an income of over £3 a week need not stint himself or his family of reasonable food or of clothes and shelter. There may be an exception in the case of a man with a family, whose gentility is part of his stock in trade or the uniform of his craft. Then, I agree, often things go hard.

Then when you come to estate duties what a man bequeaths, after all, represents what is left after he has provided for all his own wants in life. Beyond a certain figure it also represents all that is essential to keep his family in the necessaries of life. The figure which the experience of 70 years has sanctified as being that which divides sufficiency from gentility is £150 to £160 a year. A capital sum that would, if invested in safe securities, provide anything over that sum ought to be placed in a different category from any sum which is below that figure.

There is one observation which is common to income tax and the death duties, more especially with the higher scales. What is it that has enabled the fortunate possessors of these incomes and these fortunes to amass the wealth they enjoy or bequeath? The security ensured for property by the agency of the State, the guaranteed immunity from the risks and destruction of war, ensured by our natural advantages and our defensive forces. This is an essential element even now in the credit of the country; and, in the past, it means that we were accumulating great wealth in this land, when the industrial enterprises of less fortunately situated countries were not merely at a standstill, but their resources were being ravaged and destroyed by the havoc of war. What, more, is accountable for this growth of wealth? The spread of intelligence amongst the masses of the people, the improvements in sanitation and in the general condition of the people. These have all contributed towards the efficiency of the people, even as wealth-producing machines. Take, for instance, such legislation as the Education Acts and the Public Health Acts: they have cost much money, but they have made infinitely more. That is true of all legislation which improves the conditions of life of the people. An educated, well-fed, well-clothed, well-housed people invariably leads to the growth of a numerous well-to-do class. If property were to grudge a substantial contribution towards proposals which ensure the security which is one of the essential conditions of its existence, or towards keeping from poverty and privation the old people whose lives of industry and toil have either created that wealth or made it productive, then property would be not only shabby, but short-sighted.

Now what do I propose? When it is remembered that the total yield of income tax on its present basis amounts to little more than five years' normal growth of the aggregate income upon which income tax is payable (which increased from £607,500,000 in 1901–2 to £640,000,000 in 1906–7), it will be seen that our present reserve of taxable capacity is as great at the present moment with the existing rate of the tax as it would have been five years ago if there had been no tax at all. If the tax were doubled in the present year income tax payers would, in the aggregate, after payment of the double rate, be in the enjoyment of almost exactly the same net income as five years ago. A careful consideration of these figures ought to convince the most sceptical that the maximum rate of the tax may be retained at 1s., or even increased, without seriously encroaching upon our available reserves for national emergencies. The time, however, has gone by when a simple addition of pence to the poundage of the tax, attractive as the simplicity of that expedient is, can be regarded as a satisfactory solution of a financial difficulty.

As the Prime Minister so well pointed out two years ago, inequalities which might be tolerated in a tax designed for the purpose of meeting a temporary emergency are intolerable in a permanent part of our fiscal machinery. The income tax, imposed originally as a temporary expedient, is now in reality the centre and sheet anchor of our financial system. The principles of graduation and differentiation, the apportionment of the burden as between different classes of taxpayers, according, on the one hand, to the extent, and, on the other hand, to the nature of their resources, are in the lower stages of the income tax scale already recognised by abatements and allowances. It remains to complete the system by extending the application of these principles, and in regard to differentiation by taking account to some extent, at any rate, not only of the source from which income is derived, but also of the liabilities which the taxpayer has contracted in the discharge of his duties as a citizen, and of the other burdens of taxation borne by him by virtue of those responsibilities.

Notwithstanding the relief given by the Finance Act of 1907, the burden of the income tax upon earnings is still disproportionately heavy. While, therefore, I propose to raise the general rate at which the tax is calculated, I propose that the rates upon earned income in the case of persons whose total income does not exceed £3,000 should remain as at present, namely, 9d. in the pound up to £2,000, and 1s. in the pound between £2,000 and £3,000. In respect of all other incomes now liable to the 1s. rate I propose to raise the rate from 1s. to 1s. 2d.

In the case of incomes not exceeding £500, the pressure of the tax, notwithstanding the abatements at present allowed, is sorely felt by taxpayers who have growing families to support, and although a comparatively trifling additional burthen will be imposed upon them by the increased rate, since the aggregate income of this class is to the extent of at least four-fifths exclusively earned income, I think that even upon the present basis they have a strong claim to further relief. Even from the purely fiscal point of view there is this essential difference between the position of a man with a family and that of the taxpayer who has no such responsibilities. The family man is, generally speaking, a much heavier contributor to that portion of the revenue which is derived from indirect taxation and inhabited house duty, so that in comparison with the bachelor he is taxed not so much in proportion to his income as in proportion to his outgoings.

The rate of income tax under the present law is absolutely uniform upon all incomes in excess of £2,000 a year; between that rate and £700 the allowance in respect of earned income operates to relieve the less wealthy taxpayer, and thus to introduce the principle of graduation. Below £700 the system of abatements produces a regular graduation by descending stages. The introduction of a complete scheme of graduation, applicable to all incomes, besides raising questions of general principle, which it is not necessary now to discuss, would require an entire reconstruction of the administrative machinery of the tax, including in all probability the abandonment to a very large extent of the principle of collection at the source upon which the productivity of the tax so largely depends. It would create for the administrative Department a series of problems which, if not insoluble, could at any rate scarcely hope to obtain a satisfactory solution in a year where other taxation of a novel character must necessarily claim a large part of its attentions.

The imposition of a super-tax, however, upon large incomes on the lines suggested by the Select Committee of 1906 is a more practicable proposition, and it is upon this basis that I intend to proceed. Such a super-tax might take the form of an additional poundage charged at a uniform rate upon the whole income of persons whose total income exceeds the maximum above which the tax is to be applied, or the poundage might be varied according to the amount of the income to be taxed. A third, and I think preferable, alternative is to adopt a uniform poundage, but to charge the tax not upon the total income, but upon the amount only by which the income exceeded a certain fixed amount which would naturally, but need not necessarily, be the amount of the minimum income which attracts the tax. We might begin, say, at £3,000, and levy the new tax upon all income in excess of £3,000, or at £5,000, and levy the tax upon income in excess of £5,000. In the former case some 25,000 assessments would be required, in the latter only 10,000—from the point of view of administration a very strong argument in favour of the adoption of the higher figure at any rate in the first instance. On the other hand, a general abatement of £5,000 per taxpayer would be extremely costly, and though it would have the effect of largely reducing the actual as compared with the nominal rate of the tax except in the case of very large incomes indeed, the nominal rate necessary to produce an adequate revenue—though in reality no measure of the general burthen—would tend to appear somewhat alarming. While therefore I propose to limit the tax to incomes exceeding £5,000, I propose to levy it upon the amount by which such incomes exceed £3,000, and at the rate of 6d. in the £ upon the amount of such excess. An income of £5,001 will thus pay in super-tax 6d. in the £ on £2,001, the equivalent of an addition to the existing income tax of rather less than 2½d. in the £, and an income of £6,000 the equivalent of an additional 3d. The equivalent of an extra 4d. (or a total income tax of 1s. 6d. in the £) will only be reached when the total income amounts to £9,000 and 5d. not until £18,000. Assessments to the new tax will be based upon the Returns of total income from all sources, which will be required from persons assessable. The machinery will be, in the main, independent of the machinery of the existing income tax, but the assessments will be made by the special Commissioners appointed under the Income Tax Acts, and assessable income will be determined according to the rules laid down in the income tax schedules. Total income for the purposes of the tax will be ascertained in the manner prescribed by Statute for determining total income for the purposes of the present income tax exemptions and abatements, that is to say, deductions will be allowed for interest upon loans and mortgages and any other payments made under legal obligation, while in the case of real property assessed to property tax under schedule A, a special 5 per cent. allowance will be made for cost of management, as well as the allowances of one-sixth and one-eighth for repairs at present made in collection of the property tax under that schedule. Sir Henry Primrose, in his evidence before the Select Committee in 1906 estimated the number of persons in receipt of incomes over £5,000 a year to be 10,000, and their aggregate income to be £121,000,000. From this it will be seen that the amount of income liable to a super tax would be £90,000,000. The yield of the super-tax in a full year is estimated at £2,300,000, but as new machinery has to be set up and as returns have to be obtained from taxpayers, examined, and assessments made upon them, I should be sanguine if I anticipated that more than a small proportion of the first year's income will reach the Exchequer before 31st March next. In these circumstances I have not felt justified in including more than £500,000 in my Estimate for the current year.

My last proposal relating to the income tax is the restriction of the exemptions and abatements to persons resident in the United Kingdom. The income of a person resident abroad only comes within the scope of the income tax in so far as it is derived from sources within the United Kingdom. Whatever may be his total actual income, his total income from all sources within the meaning of the Income Tax Acts comprises only such receipts as accrue to him from sources in this country. A foreign millionaire, who draws anything between £160 and £400 from English investments, can obtain £8 from the Commissioners of Inland Revenue. If his dividends exceed £400 but do not exceed £700 he can recover a sum which varies from £7 10s. to £3 10s. in accordance with the abatement scale. If they are £701 or upwards he can recover nothing. There is reason to suppose that by far the greater part of the money paid to persons outside the United Kingdom in respect of these abatements goes to people who, if they were resident here, would not be entitled to it. The claims are, besides, from an administrative point of view, very difficult to deal with, and the difficulty will be greatly increased if my proposal to grant special abatements to the fathers and mothers of families are adopted. The claims themselves are received in the main through income tax repayment agencies, which absorb in commission a large percentage—often, I believe, as much as 50 per cent.—of the amount recovered. In these circumstances I am satisfied that the abolition of this concession, which was recommended by Lord Ritchie's Committee of 1904, will give rise to no appreciable hardship. The consequent saving to the revenue will be something like £250,000, to which must be added a considerable saving in respect of the salaries of the staff at present employed in the troublesome business of dealing with the claims. As, however, the repayments take place in a year subsequent to that in which the tax is collected, and I do not propose to make the alteration retrospective, no part of the saving will accrue to the revenue of the present year.

The proposals I have to make with regard to the death duties are of a very simple character. The great reconstruc- tion of these duties in 1894, which will always be associated with the name of Sir William Harcourt, has given us a scheme of taxation which is at once logical and self-consistent as a system, and a revenue-producing machine of very high efficiency. Apart, therefore, from one or two minor changes in the law, which experience has shown to be desirable, I intend to confine my attention to adjusting the rates with a view to increasing the yield without altering the basis on which the duties are levied.

The estate duties upon small estates of which the net principal value does not exceed £5,000 will remain at one, two or three per cent., according to value, as at present; but between £5,000 and £1,000,000 I propose to shorten the steps and steepen the graduation. I do not propose to increase the maximum of 15 per cent., but I propose it should be reached at £1,000,000 instead of £3,000,000. An estate of £10,000 belongs to a different category, and represents a greater taxable capacity, than an estate of £1,001, yet both alike pay three per cent.; and the same is true of an estate of £25,000 as compared with one of £10,001, both of which now pay four per cent. Under the new scale, estates from £5,000 to £10,000 will pay four per cent., and those from £10,000 to £20,000 five per cent. The next step will be £20,000 to £40,000, and the rate six per cent.; the next £40,000 to £70,000, with seven per cent., while estates of £70,000 to £100,000 will pay 8 per cent.; from £100,000 to £150,000, the rate will be 9 per cent.; from £150,000 to £200,000 it will become 10; the rate from £200,000 to £400,000 will be 11 per cent.; from £400,000 to £600,000, 12; from £600,000 to £800,000, 13; from £800,000 to £1,000,000, 14; and above £1,000,000, 15 per cent. upon the whole of the estate. The new rates, if chargeable, as I propose they should be, in respect of all estates passing upon deaths occurring on or after to-morrew, are estimated to yield an additional revenue of £2,550,000 in 1909–10, increasing to £4,200,000 in the following year, and ultimately to £4,400,000.

As a consequence of these increases, added to the increases made in the higher steps of the estate duty scale two years ago, it becomes necessary to deal with the settlement estate duty, which has remained unaltered since its original imposition in 1894. Non-settled property is chargeable with estate duty according to scale every time the interest in the property passes on death upon the full corpus of the property. Settled property, on the other hand, if settled by will, is so chargeable only upon the death of the testator, or, if settled otherwise than by will, only upon the death of the first tenant for life, and, unless a subsequent life tenant is competent to dispose, escapes any further payment of estate duty until the expiry of the settlement, however many life tenants may intervene. For example, a non-settled estate left to a son, by him to a brother, and by the brother to his son would pay estate duty three times, whereas, if it took the same course under a settlement made by the will of the original testator, it would pay once only—at the original testator's death. By way of set-off to this preferential treatment of the settled estate it was provided by the Finance Act of 1894 that an additional rate of 1 per cent., called settlement estate duty, should be paid in addition to the estate duty, at the rate appropriate to the estate, on the first occasion of its passing at death under the settlement. The duty must therefore be regarded as a sort of composition for future payments of estate duty to which the property would become subject in the absence of a settlement. Sir William Harcourt's intention, as expressed in the Budget speech of 1894, was to secure by means of this duty absolute equality of treatment as between settled and non-settled property. "In this manner," he said, "we levy the same amount from the estate as if it were left absolutely, but each beneficiary will contribute according to the extent of his interest by the reduction of his income resulting from the original diminution of the capital."

The proposition that an immediate payment at the rate of 1 per cent. is an adequate composition for a future payment, or possibly several future payments, according to the character of the disposition and the course of events, at rates varying from 1 to 8 per cent. (the then limits of the Estate Duty Scale) is at first sight somewhat startling. On the other hand, when we remember that the expedient of settling a whole estate is often adopted as an alternative to dividing it in the first instance, that the average age at which a life tenant succeeds is probably much higher than that of the average beneficiary taking free property, and last, but not least, that the difference in value between the fee simple of the property and the life interest or life interests of the tenant or tenants for life passes, in theory at any rate, directly from the settler to the remainderman, it is not unreasonable that a substantial abatement should be made from the present value (calculated on a strictly actuarial basis) of what would probably be the future liability in respect of estate duty, in the event of the whole estate being charged in full every time it passed upon death under the settlement. When, however, every allowance has been made for difference of circumstances, I think there can be no doubt, especially when regard is had to the fact that settlement estate duty is not chargeable where the only life interest is that of a spouse, that the 1 per cent. additional duty was not, even in 1894, when the average rate of estate duty was approximately 5 per cent., anything like the full equivalent for the immunity from further charge enjoyed by the property during the remainder of the settlement. The alterations in the estate duty scale made in 1907 and those which I now propose will together have the effect of raising the average rate of estate duty from about 5 to approximately 7 per cent., and the charge of only 1 per cent. settlement estate duty, which was not in fact a full equivalent for the privilege granted even on the basis of the 1894 rates, clearly cannot be defended in conjunction with the new scale. I propose, therefore, to increase the rate from 1 to 2 per cent. Although the effect of this alteration will ultimately be to double the yield of the present 1 per cent. duty (about £500,000) I can only reckon on £50,000 extra revenue from this source in 1909–10 and £375,000 in 1910–11, since these duties are in most cases not collected until some time after the death.

I propose at the same time to correct a small anomaly, introduced as an—I believe—accidental effect of the legislation of 1894, which gives rise to a very considerable loss of revenue every year. Where property subject to a life interest does not fall into possession until after the death of the prospective beneficiary, only one estate duty is payable, namely, as in respect of settled property. But where it falls into possession in his lifetime, two estate duties are payable, namely, one on the transmission of the property to him, and one on the transmission of the property from him. It is, of course, a matter of indifference to the ultimate taker whether the decease of the life tenant is prior or subsequent to the decease of his own testator; yet, in the former case, it comes to him charged with two duties, and, in the latter, charged with one duty only. My proposal is that such property should be treated, as before 1894, in the same way in the latter as in the former contingency. The estimated advantage of this alteration to the revenue of the current financial year is £250,000, and £375,000 in 1910–11 and future years.

The rate of legacy and succession duties, where the beneficiary is a brother or sister or a descendant of a brother or sister of the deceased, will be raised from 3 per cent. to 5 per cent.; while the other legacy and succession duties, which at present vary from 5 to 10 per cent., according to the degree or absence of relationship, will be charged at the uniform rate of 10 per cent. ["Oh, oh."] Most of them are charged 10 per cent. at present. [An HON. MEMBER: "Not at all."] It is so. The present exemptions from the 1 per cent. legacy and succession duties now chargeable, where the beneficiary is a lineal ancestor or descendant of the deceased, will be abolished, and the duty extended to the case where a husband or wife takes the legacy or succession. In the cases of spouses and lineals, however, I propose to exempt from the new and reimposed duties all legacies and successions of whatever value in cases where the aggregated property passing on the death of the deceased does not exceed £15,000.

Exemption will also be allowed, whatever may be principal value of the aggregated property, wherever the amount of the legacy or succession itself does not exceed £1,000, or, if the person taking the legacy or succession is the widow of the deceased or a child under the age of 21 years, wherever the amount of such legacy or succession does not exceed £2,000. The changes will, like the new estate duty scale, operate only in the case of persons dying on or after the 30th instant; but as these duties are not as a rule payable until the end of the executor's year, I cannot count on receiving any additional revenue until 1910–11. I estimate the amount which the alterations will produce next year at £1,370,000, and that the yield will in course of time increase to £2,150,000.

Apart from the question of rates, the method of valuation adopted for the purposes of the death duties has necessarily a very important influence on the revenue. Under the present law, agricultural property enjoys the somewhat peculiar privilege that, whatever may be its value in the market, its valuation for death duty purposes cannot exceed 25 years' purchase of the net rental after allowing for expenses of management. I propose to abolish this limitation, and to deal with the class of property to which it applies on the basis applicable to all other property passing upon death—namely, the actual price which would be paid by a willing buyer to a willing seller as on the date upon which the property becomes chargeable to duty.

Further, the law as to the valuation of large blocks of stocks and shares is not sufficiently clear. It is sometimes contended that, if the whole property were placed on the market on the date of the deceased's death, a "slump" would take place in the value of the securities Of course, no executor would be so imprudent as to take this course. There is no reason why it should not be definitely laid down that stocks and shares are in all cases to be valued at the market price, without any reference to the size of the holding, and I propose to amend the law accordingly. From these two changes in the law relating to valuation, I hope ultimately to derive a considerable accession of revenue, but the effect of the changes will only be felt gradually, and the advantage to be derived from the alteration in the current financial year is scarcely likely to be appreciable.

I now come to the period within which gifts made during the lifetime of the deceased are reckoned as part of the estate for the purposes of estate duty. The loss to the revenue arising from voluntary dispositions inter vivos, made with the purpose of avoiding the death duties, cannot be precisely ascertained; but it is probably very considerable, and I fear that resort to this expedient may become still more common when the rate of duty is raised. I therefore propose to substitute five years for one year, as the period within which property so alienated shall remain liable to duty. I am not sanguine that this reform will do more than operate to check what at present is thought to constitute a considerable leakage of revenue; and I do not therefore feel justified in estimating any positive increase of revenue from the alteration.

My last proposal is to extend to free estates the concession made by section 20 of the Finance Act, 1896, which grants exemption from estate duty in respect of objects of national, scientific, or historic interest forming part of a settled estate. The estate duty in respect of such objects, whether forming part of a free or settled estate, will only become chargeable in future if and when they are actually sold. This concession will, I hope, result in keeping together many collections whose owners are, from various reasons, unable to take advantage of the privilege afforded by the present law, and so keep in the country many national treasures which would otherwise, more especially in view of the prospective change in the United States customs tariff upon such objects, tend to find a home on the other side of the Atlantic.

Under the head of stamp duties I propose to increase the duty upon conveyances on sale from 10s. to 20s. per cent., an exemption from the increased rate being made in favour of conveyances of stock or marketable securities which, by reason of the greater frequency with which they change hands, in comparison with other kinds of property, bear a disproportionate burthen under the present uniform scale. The greater part of the additional revenue under this head will be derived from transfers of real property. As such property will benefit largely from the decrease of the poor rate, which must necessarily follow as a result of the adoption of a State system of old age pensions and other schemes of social reform, it is equitable that it should be called upon to contribute to the Exchequer expenditure for these purposes. [Some cries of "Speak up."] I am afraid I shall have to appeal to the indulgence of the House. I cannot go right through as I thought, but I will just say what I have to say with regard to stamps. Even after my proposed addition, the transfer duty upon such property will still be low as compared with the rates charged in other communities. In Germany, there are both State and municipal taxes which, in towns like Cologne and Frankfort, at any rate, together amount to not less than 3 per cent.; while, in France, the rates are still higher.

Conveyances or transfers operating as a voluntary disposition, inter vivos —an expedient largely resorted to as a method of avoiding the death duties—will in future Attract, instead of the present fixed duty of 10s., an ad valorem duty calculated on the worth of the property transferred, at the same rate as is applicable to a con- veyance on sale of property of a similar description, and the same rates will apply to certain instruments chargeable at present with stamp duty as settlements. The rates upon marriage settlements will remain unaltered. As a corollary to the increase of the conveyance duties, duties upon leases will be doubled, except in the case where the 1d. rate is chargeable, which will remain as at present.

My next proposal relates to bonds to bearer and other securities transferable by delivery. The duty in these cases is the counterpart of the stamp duty upon the conveyance necessary to transfer securities transferable by deed; but, whereas the latter covers only a single transaction, the duty upon bearer securities covers all the transactions taking place during the life of the bond. It is therefore an anomaly that under the existing law this valuable privilege should be given at the cost of a single transfer. I, accordingly, propose to increase the duty upon such bonds (not being bonds issued by a Colonial Government, upon which the rate will remain as now at 2s. 6d. per cent.) from 10s. to 20s. per cent. of the nominal value, the duty upon bonds issued in lieu of existing bonds being concurrently raised from 2s. 6d. to 5s. per cent.

This completes the list of my proposals relating to stamp duties, with one important exception. The transfer duty upon stocks and shares is at the rate of 10s. per cent. ad valorem, leviable upon the conveyance by which the transfer is effected. There are, however, many transactions in securities which, for one reason or another, are never followed by an actual conveyance. A block of shares may be sold and resold several times in the course of passing from one permanent holder to another, and the whole of these transactions may be covered by a single transfer from the first seller to the final purchaser. In such cases the intermediate transactions escape taxation altogether, except for the stamp duty chargeable upon the broker's contract note—1d. upon transactions between £5 and £100, and 1s. upon larger transactions irrespective of amount, and they may, I think, reasonably be required to make a moderate contribution to the Exchequer.

Such transactions, being mainly of a speculative character, and worked upon narrow margins, will clearly not bear a rate of duty in any way comparable with that charged upon an actual conveyance. Such an impost would, in the first place, from the point of view of the revenue, defeat its object by rendering the greater portion of such transactions impossible, while, in the second place, it would, in my opinion, be opposed to the public interest as calculated to curtail that free circulation of securities which is a necessary condition of steady prices and an open market. For, although these transactions are in the main speculative, and do, at times, like all speculative transactions, degenerate into mere gambling, it is a mistake to suppose that this is their essential or pervading characteristic. In their proper place they form part of the legitimate machinery for discounting fluctuations in value, necessary, not only to the Stock Exchange, but to every sphere of commercial activity, and the imposition of a penal tax designed to curtail the mischievous developments of the system could scarcely attain its object without inflicting irretrievable damage upon the marketability of securities as a whole.

The same objections do not, however, apply to a small ad valorem tax, which would operate to check business, if at all, only in the case of operations undertaken upon infinitesimal margins, in which, as a rule, the purely gambling element is most prominent, and which can be dispensed with without seriously endangering the stability of the market. I propose, therefore, that the rate between £5 and £100 should be 6d., instead of 1d.; from £100 to £500 1s. (as at present); from £500 to £1,000 2s., with a further 2s. for every additional £1,000 To prevent those rates affecting what are known as "carry-over" operations with undue severity, a single duty will be charged upon the two transactions involved therein, instead of, as now, the full duty upon each transaction.

"Option notes" will be charged at similar rates, calculated upon the value of the securities to which the option relates. When a substantive contract follows upon the option and involves the payment of stamp duty upon the contract note, there will be a return of the duty already paid in respect of the option contract. Brokers who are not members of the Stock Exchange, whether acting as agents or principals, will be required to issue similar notes to their clients and such notes will be chargeable with the same duties. The preferential treatment now enjoyed by the so-called "bucket shops"—institutions whose principal object is the encouragement of gambling—in the matter of stamp duties will thus be removed. These additional stamp duties may be expected to yield about £1,450,000 in a full year—of which conveyances, deeds of gift, settlements and leases will account for £850,000, bonds to bearer and other marketable securities for £350,000, and contract notes for £250,000. They will not, however, come into force until the Finance Bill has received the Royal assent. The greater part of the first half-year's revenue will thus be lost, while, in the case of most of the duties, a considerable amount of "fore-stalment" has to be reckoned with, since transactions will no doubt be expedited wherever possible to secure the advantage of the lower rate of duty. I cannot, therefore, safely calculate upon receiving more than £650,000 in 1909–10.

[Sitting suspended for half an hour.]

Mr. LLOYD-GEORGE [resuming at 23 minutes past six of the clock]: I am exceedingly obliged to you, Sir, and to the House for the indulgence extended to me. I now come to the question of licences. I think I may fairly say that further taxation of licences has been anticipated for some time. It has been generally felt that the State has not received a fair return for the valuable monopoly which it has granted to the trade. If a comparison is instituted with the amount charged for this privilege in a community like that of the United States, one cannot help feeling amazed that the trade has been let off so lightly in this country. Land and licences have this in common, that where they have a value at all it is a monopoly value. No one would pay rent for a plot of land if he could secure an equally valuable piece of ground in the same neighbourhood for nothing; nor would anyone give the slightest consideration for an existing licence if a new licence could be got for the asking. The State for reasons of public utility limits the number of licences in a given neighbourhood, with the result that the holder of one of the licences is able to enjoy the exceptional rate of profit which the possession of the privilege permits him to earn. This point was very effectively put in the able circular issued by the brewers themselves during the passage of the Licensing Bill through this House. I shall quote the words they use, as argument could not have been more forcibly or more fairly put. These are the words which the brewers used in stating their case:— Now, with the exception of that portion of the trade which is done by delivery to private houses and clubs, and that which is done through off-licences, the only channel through which the consumption of excisable liquor can take place is through the licensed houses. Parliament has provided that it shall not be sold in any other way, and as a consequence the existing licensed houses, being in possession of a practical monopoly, have acquired a very high value. That is the statement of the case of the brewers themselves. As to the extent of that value I shall be able to afford the Committee some statistical enlightenment in the course of a few minutes, but I should like to premise that during recent years there have been two or three elements which have added very considerably to the value of this monopoly. The first is the growing disinclination of benches of magistrates to issue fresh licences and the steady effort made by benches of magistrates rather to reduce the numbers. The reduction which has been made under the Bill of the right hon. Gentleman in 1904 has undoubtedly contributed to the increase in the value of licences. All this has endowed old licences with a special value, which did not attach to them in the days when new licences were more readily granted. The second element in the enhancement of value has undoubtedly been the tied-house system; and the third has been the conversion of what was an annual licence, determinable by the magistrates on evidence as to the necessities of the neighbourhood, into an interest—I will not call it a freehold—determinable only on misconduct.

Now let us take the case of the thriving house, or rather of the house whose trade proves that it is required by its neighbours. I have had before me a list of 141 licensed premises which have been acquired by the London County Council in connection with street and other improvements between March, 1889, and February, 1907. The total premium value attaching to the sites by reason of the licences has been estimated at £344,550, or an average of £2,443 per site. The acquisition of such sites in connection with the Kings-way and Aldwych has been estimated to have cost the Council in respect of the premium value attaching to the sites of the public-houses acquired, a sum of £132,300. In another instance, the premium value of a public-house site required for the improvement of the northern approach to the Tower Bridge is estimated at £20,000. I might multiply these instances, but I think I have furnished the House with sufficient evidence of the enormous value which this monopoly has created. Anyone who impartially investigates the figures may come to the conclusion that the rent or toll exacted by the public is ludicrously inadequate, and that in the interests of good management of public property that rent ought to be brought up to a figure which, without reaching anything like the proportions of a rack rent, will at any rate be commensurate with that which would be charged by a fair-minded and tolerant landlord, who, without doing himself a gross injustice, still at the same time wishes to afford his tenant not only a reasonable but even a generous margin within which to make a living out of his trade. And when a country requires revenue to provide for the defence of its shores and to supply the urgent social need of its people, that seems to be just the moment when, before imposing fresh taxes on its citizens, it ought to look round and see whether it has farmed its property to the best advantage.

Now the legislature has long ago fixed what it considers as a reasonable toll in the case of the little village inn. For a house assessed under Schedule A at £9 a licence of £4 10s. is charged, that is, 50 per cent. of the nominal annual value. As I shall point out later on, this bears no relation to the real value; in the vast majority of cases the assessment is probably less than one-half of what it ought to be on the basis acknowledged by the trade itself, in all its business transactions, so that the real charge imposed upon the licensee of the village inn amounts to something like 25 per cent. of the value. The principle which has been considered good enough for the small village publican we think ought to be extended to the proprietors of the prosperous liquor palaces of our great towns, and our rates of duty will be based generally on that principle. But before I actually give the figures I should like to say a few words on the question of valuation. We realise that by keeping the present assessable value as the basis of computation for our licences there will be a good many anomalies and inequalities. Any man who looks at the list of compensated public-houses, and compares the amount of the compensation given in each case with the annual value, will realise how unequally the present principle of licensing bears upon public-house owners. Here is one house, with an annual value which could hardly exceed £40, receives in compensation money £3,246. Here is another house, with an annual value of nearly £300, receives in compensation money £731. We have therefore come to the conclusion that it is essential, in order to ensure fair treatment as between one publican and another, that there should be a valuation based upon the principles on which publicans for the time being receive compensation, and therefore generally accepted by the trade as an equitable basis for appraising the value of their monopoly. This assessment, when it is complete, will be translated into terms of annual value, and the licence will be levied accordingly. The burdens of some publicans may be lightened, that of others may be increased, but on the whole justice will be done, as each man will be called upon to pay according to the value which he receives from the privilege which the State confers upon him.

My new scale of duties for the full publican's licence begins, as I have already indicated, like the existing scale, at 50 per cent. of annual value; but, instead of following the existing scale—by gradually diminishing the percentage as the value increases until upon houses having an annual value of £700 the charge amounts to no more than 8½ per cent., above which figure, thanks to the cessation of the scale at that point, the decrease in the rate of the charge in proportion to annual value proceeds with still greater velocity, until, in the case of the highest values, it becomes almost insignificant—we propose to charge an uniform 50 per cent. of annual value throughout, subject to a minimum. The minimum rate in rural districts and in urban areas having a population of less than 2,000 will be £5, which, although only 10s. in excess of the present minimum charge, is, I think, a sufficient duty to exact from the small country inn, which satisfies the legitimate social needs of a scattered population, and whose volume of trade is in many cases not more than sufficient to provide the inn-keeper with a decent subsistence. The same considerations do not, however, apply to the poorer class of premises in the larger urban areas. A very large part of the mischief resulting from the liquor traffic is associated with the small, and often disreputable, house of this kind, which, in fact, ought never to have been licensed. Such houses are, indeed, in many cases, mere survivals from the period before 1872, since which date new licences have not, in fact, been granted, at any rate in England and Wales, to any premises in towns containing a population of not less than 100,000 inhabitants, of a lower annual value than £50; and in other towns, containing a population of not less than 10,000, of a lower annual value than £30. Such houses, where they do exist, have often a turnover quite out of proportion to the character of the premises, and make large profits. We think, therefore, that no hardship will be created by the charge of a minimum duty of £10 in urban areas of between 2,000 and 5,000 inhabitants; £15 between 5,000 and 10,000; £20 between 10,000 and 50,000; £30 between 50,000 and 100,000; and £35 in London and other towns having a population in excess of 100,000.

So much for the full "on" licences. The next point in importance is the beer-retailers' "on" licence, commonly known as the "beer-house" licence. The same conditions as regards the enjoyment of a monopoly value attach to these licences as to the publicans' licences. The trade done in a beer-house is frequently as extensive and as profitable as the trade done in fully licensed premises, though, of course, as the privilege granted by the licence is a more restricted one, this is not invariably the case. The present fixed charge of £3 10s. for a beer-house licence, without regard to the value of the premises to which it is attached or to the profits which it enables the owner to earn, is, if judged by the standard of what would form a fair and reasonable consideration for so valuable a privilege, absurdly inadequate.

I propose, therefore, to introduce for this class of licence rates graduated on the same basis as that which is to be made applicable to full "on" licences, the rate being in each case two-thirds of the amount chargeable for a publican's licence in respect of similar premises—that is to say, one-third of the annual value of the premises. The principle of a minimum rate according to the size of the place in which the house is situated will be applied to this as to the public-house licence. The scale will be: For rural districts having a population of under 2,000, £3 10s.; between 2,000 and 5,000, £6 10s.; between 5,000 and 10,000, £10; from 10,000 to 50,000, £13; 50,000 to 100,000, £20; and above 100,000, £23 10s.

The distinction made by the existing law between hotels and ordinary public-houses works in a very unsatisfactory and arbitrary manner, both from the point of view of the revenue and from the point of view of hotel-keepers. The charge for the hotel licence, properly so-called, is, on the one hand, an extremely low one; but, on the other hand, it is so difficult for the average keeper of a bonâ fide hotel to comply with the conditions laid down for the grant of this licence that the great majority of such hotel-keepers in fact find it necessary to take out the full publican's licence.

This latter licence, even at the rates at present charged, constitutes in the case of small hotels, at any rate, whose receipts from the sale of liquor are sometimes insignificant compared with the total business done, an undue burden, and it would clearly be inequitable to apply the new scale without qualification to this class of house. I therefore propose to make special concessions to bonâ-fide hotels, inns, and restaurants. I am anxious to draw a deep and clear line for purposes of taxation between the house which supplies all the best traditional objects of the inn and the mere drinking establishment which lives and thrives on "swilling" and "tippling." Under the new system, therefore, a distinction will be drawn between houses whose receipts from the sale of stimulants do not exceed one-third of their total receipts from all sources, and those in the case of which that proportion is exceeded. I have made careful inquiries, as a result of which I am satisfied that the proportion of one-third, at which I suggest the line should be drawn, will cover the case of practically all establishments whose business primarily consists in supplying food and lodging, facilities for recreation, or other services only incidentally connected with the consumption of alcohol. Hotels end restaurants which are mainly drinking places will thus be, as they ought to be, chargeable with the full publican's licence duty, but where the bulk of the business consists in the satisfaction of public requirements in directions other than the supply of stimulants, the rate of duty applicable to the publican's licence will be reduced in proportion as the receipts from the sale of intoxicating liquor diminish. It must, of course, be remembered in this connection that the possession of a licence gives an advantage not only as respects the sale of liquor, but also as respects the other business of a hotel, higher price being obtainable both for food and lodging in licensed premises than in premises not enjoying a licence. This value, no less than the profit directly derived from the sale of liquor itself, is part of the monopoly value of the premises and ought to be taken into account in assessing the duty. I propose to recognise this principle by making the reduction dependent on the proportion which the receipts from intoxicants bear, not to the whole, but to one-half of the total receipts from all classes of business. Thus, a house whose receipts from the sale of liquor amount to one-quarter of its total receipts will pay only one-half, and one whose liquor receipts amount to one-sixth only one-third of the full rate. The effect of this reform will be to tax hotels on a logical basis and to put large hotels for the first time into their proper place as contributors to the revenue. A provision is inserted in the Bill under which the increase in duty will not, in the case of tied houses, fall on the publican. Payments in respect of monopoly value of new licences under the Licensing Act of 1904 will, in future, be taken for the Exchequer, thus removing the temptation to local justices to grant such licences for the sake of the profit accruing to the local authority, which, in some parts of the country at any rate, has resulted in the grant of licences in excess of legitimate public requirements.

The case of clubs remains to be dealt with. The sale of intoxicating liquor in a club is not legally "sale," but "supply," and this method of distribution is under the present law entirely untaxed. Clubs in which liquor is supplied, at present compete to a large extent directly with the ordinary public-house, and this competition of an alternative and untaxed method of distribution is not only unfair to the holders of publican's licences, but likely, in the long run, seriously to encroach on the revenue derived from licence duties. In some cases, particularly where licences have been suppressed under the Act of 1904, clubs have sprung up which are mere public-houses in disguise, some of them financed by the very persons who have received compensation for the trade supposed to be lost by the withdrawal of the licence, but really transferred, with the added privilege of exemption from licence duty, to the house in which the club has been established. A scheme of licence duties for clubs, however, based upon annual value, would be both inequitable and impracticable. The better class of club, from whatever social rank its members may be drawn, possesses, as a rule, much better premises than a club which is mainly a drinking club. A tax upon annual value would, therefore, in all probability, vary almost inversely with the amount of liquor consumed, and it would penalise a club for increasing its accommodation for other than drinking purposes. I therefore propose that the duty should take the form of a poundage upon the amount of the receipts from the sale of liquor. Under this proposal clubs will not be licensed, that is to say they will not be put in the same position as licensed premises; but an obligation will be imposed upon them to keep an account of the receipts from the sale of liquor, and a duty of three-pence in the £ will be imposed on every £ of those receipts. The effect will be that clubs will not be taxed as clubs, but will simply be taxed as drinking clubs.

These are, from the point of view of the Revenue, and of public interest, the most important of my proposals relating to licence duties; but I propose to take the opportunity of revising the whole system of Excise liquor licences—a system which is at present full of confusion and anomalies, both in law and practice, and to place it upon a simple and intelligible basis. These licences are divided into three main classes: (1) manufacturers' licences, (2) wholesale dealers' licences, (3) retailers' licences. Speaking generally, no licence of the first two classes requires a justices' licence; but, with a few minor exceptions, all the licences of the third class require such a licence. The considerations to which I have referred relating to monopoly value are, therefore, applicable only to licences of the third class, but this does not, of course, mean that a further contribution to the revenue by way of taxation cannot properly be required from the holders of the other classes of licences. Under the head of manufacturers' licences I propose to substitute for the present fixed duties of £1 and £10 10s. for brewers for sale and distillers of spirits respectively, graduated scales of duty according to the amount produced. In the case of the brewer's licence, the present payment of £l will cover a production of 100 barrels only, and 12s. additional will be charged for every 50 barrels or fraction of 50 barrels above that quantity. The distiller's licence will be £10 for any quantity not exceeding 50,000 proof gallons, with an additional £10 for every additional 25,000 or fraction of 25,000 proof gallons. For the other manufacturers' licences the duties will still be charged at fixed rates, but I propose to increase the licence for rectifiers of spirits from £10 10s. to £15 15s., and that for makers of sweets—a term which in this case does not, of course, mean confectionery, but British-made wines—from £1 to £5 5s. Makers of cider or perry will likewise pay a duty of £5 5s., except when they manufacture solely from fruit which they themselves produce, in which case the duty will not be chargeable. The system of taxing wholesale dealers' licences will be the same as that at present in force, namely, a fixed duty, but the duty will be increased. There is, however, one important change, namely, that these wholesale dealers' licences will not in any case authorise retail sale, and the licences for wholesale dealing and retail sale are kept absolutely distinct. Subject to this qualification, the rates for wine (including sweets) and sweets will remain at £10 10s. and £5 5s. as at present. That for beer will be raised from £3 6s. 1d. to.£10 10s., and spirits from £10 10s. to £15 15s. A licence to deal by wholesale in cider and perry will cost £5 5s.

The existing additional licences for retail trade, issued in connection with some of the wholesale dealers' licences, will be abolished, and wholesale dealers who desire to engage in retail trade will be required to take out the ordinary retailer's off-licence, subject, however, to a reduction of 25 per cent. in the scheduled rate for that licence. A separate retailer's off-licence will be introduced in the case of spirits, and the spirit retailer will accordingly be relieved from the necessity under which he at present labours, of taking out a wholesale licence which he does not require. The manufacturer's licence will cover the sale by wholesale of his own product, and dealers' licences will not require to be taken out by manufacturers unless they desire to engage in independent business as dealers.

I now come to retailers' on-licences. With the public-house and beerhouse licences I have already dealt, as also with hotels, restaurants, and clubs, which come under the same category. Theatres will, as at present, pay the same rates as public-houses, but with a maximum of £50 instead of £20. In the case of wine, sweets, and cider, I propose to substitute for the present fixed duties (£3 10s. in the case of wine (including sweets), and £1 5s. in the other cases), a scale according to annual value in four sections, the steps being at £20, £50, and £100. The respective rates for wine will be £4 10s., £6, £9, and £12, and for sweets and cider one-half these rates. Under retailers' off-licences the same principle will be adopted, the rates for spirits will be £14 for premises under £20 annual value, £20 between £20 and £50, £30 between £50 and £100, and £50 above £100. The scale for the off beer licence (including cider and perry) will be £3 10s., £5, £7, or £10, according to the value of the premises, and for wine (including sweets) the same, but off-licences for cider alone or sweets alone will cost only £2 irrespective of annual value. The new rates will be applicable to the whole of the United Kingdom, and the anomalies at present existing as between England, Ireland, and Scotland, as regards this class of licence, will be removed. As regards Scotland, there are various minor points in which the adoption of a uniform system throughout the United Kingdom will make a certain amount of difference, but the point which will attract attention is the modification of the conditions under which the retailers' off-licence for spirits is granted. In Scotland, at present, the holder of a grocer's spirit licence can sell wholesale, and can also sell in open vessels and in small quantities, whereas the English grocer can only sell in quart bottles or larger quantities. A great deal of business at present done by the holders of grocers' spirit licences in Scotland is really publican's business, that is to say, they sell small quantities of spirit in little glass noggins which are drunk outside the house and the glass noggin is left on the pavement outside. There is no doubt that a business of this sort is an abuse of the retailer's off-licence, and constitutes an abuse which ought to be suppressed. The present combined beer and wine licences will be abolished, and persons desirous of selling both beer and wine will in future have to take out two separate licences. The rate for passenger vessels will be increased from £5 to £10, the daily rate being raised from £l to £2, while railway restaurant cars, which do not at present pay any licence duty will pay £1. The charge for occasional licences will be raised from 2s. 6d. to 10s. a day for a full licence, and from 1s. to 5s. a day for beer or wine only. I propose that the new rates should come into force on 30th September next, subject to the necessary adjustments with respect to unexpired existing licences, and I estimate that the effect of the changes will be to increase the revenue of the year from licence duties by £2,600,000.

Now I come to the question of land. The first conviction that is borne in upon the Chancellor of the Exchequer who examines land as a subject for taxation is this: that in order to do justice he must draw a broad distinction between land whose value is purely agricultural in its character and composition, and land which has a special value attached to it owing either to the fact of its covering marketable mineral deposits or because of its proximity to any concentration of people. Agricultural land has not, during the past 20 or 30 years, appreciated in value in this country. In some parts it has probably gone down. I know parts of the country where the value has gone up. But there has been an enormous increase in the value of urban land and of mineral property. And a still more important and relevant consideration in examining the respective merits of these two or three classes of claimants to taxation is this. The growth in the value, more especially of urban sites, is due to no expenditure of capital or thought on the part of the ground owner, but entirely owing to the energy and the enterprise of the community. [Cries of "Oh."] Where it is not due to that cause, and where it is due to any expenditure by the urban owner himself, full credit ought to be given to him in taxation, and full credit will be given to him in taxation. I am dealing with cases which are due to the growth of the community, and not to anything done by the urban proprietor. It is undoubtedly one of the worst evils of our present system of land tenure that instead of reaping the benefit of the common endeavour of its citizens a community has always to pay a heavy penalty to its ground landlords for putting up the value of their land. There are other differences between these classes of property which are worth mentioning in this connection, because they have a real bearing upon the problem. There is a remarkable contrast between the attitude adopted by a landowner towards his urban and mineral properties, and that which he generally assumes towards the tenants of his agricultural property. I will mention one or two of them. Any man who is acquainted with the balance-sheets of a great estate must know that the gross receipts do not represent anything like the real net income enjoyed by the landowner. On the contrary, a considerable proportion of those receipts are put back into the land in the shape of fructifying improvements and in maintaining and keeping in good repair structures erected by them which are essential to the proper conduct of the agricultural business upon which rents depend. Urban landlords recognise no obligation of that kind, nor do mineral loyalty owners. They spend nothing in building, in improving, in repairing or in upkeep of structures essential to the proper conduct of the business of the occupiers. The urban landowner, as a rule, recognises no such obligations. I again exclude the urban landowner who really does spend money on his property; that ought to be put to his credit. The rent in the case with which I am dealing is a net rent free from liabilities, or legal obligations. Still worse, the urban landowner is freed in practice from the ordinary social obligations which are acknowledged by every agricultural landowner towards those whose labour makes their wealth.

It is true in the rural districts that there are good landlords and there are bad landlords. But in this respect there are so many good landlords in the country to set up the standard that even the worst are compelled to follow at a greater or a less distance. But the worst rural landlord in this respect is better than the best urban landlord in so far as the recognition of what is due to the community who produce the rent is concerned. [Cries of "Oh!"] I will point out what I mean. First of all the rural landowner has the obligation to provide buildings and keep them in repair. The urban landowner, as a rule, has neither of these two obligations. There is that essential difference between the two. The urban landlord and the mineral royalty owner are invariably rack-renters. They extort the highest and the heaviest ground rent or royalty they can obtain on the sternest commercial principles. They are never restrained by that sense of personal relationship with their tenants which exercises such a beneficent and moderating influence upon the very same landlord in his dealings with his agricultural tenants. And the distinction is not confined merely to the rent. Take the conditions of the tenancy. I am not here to defend many of the terms which are included in many an agricultural agreement for tenancy. I think many of them are oppressive, irritating, and stupid. But compared with the conditions imposed upon either a colliery owner or upon a town lessee they are the very climax of generosity. Take this case—and it is not by any means irrelevant to the proposals which I shall have to submit to the Committee later on. What agricultural landlord in this country would ever think of letting his farm for a term of years on condition, first of all, that the tenant should pay the most, extortionate rent that he could possibly secure in the market, three, or four, or even five times the real value of the soil; that the tenant should then be compelled to build a house of a certain size and at a certain cost, and in a certain way, and that at the end of the term he, or rather his representatives, should hand that house over in good tenantable repair free from, encumbrances to the representatives of the ground owner who has not spent a penny upon constructing it, and who has received during the whole term of lease the highest rent which he could possibly screw in respect of the site? Why, there is not a landlord in Great Britain who would ever dream of imposing such outrageous conditions upon his tenant. And yet these are the conditions which are imposed every day in respect of urban sites; imposed upon tradesmen who have no choice in the matter; imposed upon professional men and business men who have got to live somewhere within reasonable distance of their offices; imposed even on workmen building a house for themselves, paying for it by monthly instalments out of their wages for 30 years purely in order to be within reasonable distance of the factory or mine or workshop at which they are earning a living.

This is by no means an imaginary picture which I am drawing. If anyone thinks so I would invite him to examine for himself the evidence given before the Town Holdings Committees in 1888 and the subsequent Committee of the same character held later on—Committees appointed by the Unionist administration of that date. There was the case of the Festiniog quarrymen, who had to build on rocks which could not feed a goat, and upon swamps for which the landlord could not, and did not, receive more than, sometimes, 2s. an acre, and, at the outside, 7s. 6d. an acre. These were let to the quarrymen for building purposes at rents that amounted to £50 an acre. Leases were given for 60 years. All the improvements were effected either by the quarrymen themselves or by the local authority to whom they paid their rates. To build or buy their houses, most of these quarrymen generally borrowed money from building societies. As long as they were in good health and in full employment they were able to pay their monthly instalments. When either health or work gave out they were very hard pressed indeed. But they never got any assistance or sympathy from the landllord. As they paid, the property, instead of increasing in value for them, became of less and less value as it passed year by year into the possession of the landlord. There were many illustrations of that kind given before these Committees, though not all 60 years. Some were 70, some ran up to 90, other were for lives And 21 years.

You cannot put cases of this kind at all in the same category as that of an agricultural landlord who builds farmhouses and farm buildings, and generally incurs most, if not all, of the capital expenditure in and around a farm, and who by no means, if he is a fair-minded landlord, ever thinks of extorting these monstrous rents out of the necessities of his tenants. I might give other cases where land in the neighbourhood of towns has appreciated in value owing to the growth of the population. I do not wish to multiply instances, because every hon. Member must have in his own mind illustrations, with the details of which he is cognisant, from his own experience and observation of what I am referring to. I might, perhaps, take another case, and I am not sure that you can find a better or a fairer one than that which is provided by the working class suburbs of London. I am referring to the case of Woolwich. Considerable population has been attracted there largely owing to the expenditure of public money upon the Arsenal. If there is any increase in the value of land there, not a penny of that increment is attributable to anything done by the local landowners. Now I would commend Members of the House to a speech delivered by the late Conservative Member for Woolwich, who in his day was one of the most striking figures in this House. This is what he says about Woolwich:— In the parish of Plumstead land used to be let for agricultural purposes for £3 an acre. The income of an estate of 250 acres in 1845 was £750 per annum, and the capital value at 20 years' purchase was £15,000. The Arsenal came to Woolwich; with the Arsenal the necessity for 5,000 houses. And then came the harvest for the landlord. The land, the capital value of which had been £15,000, now brought an income of £14,250 per annum. The ground landlord has received £1,000,000 in ground rents already, and after 20 years hence the Woolwich estates, with all the houses upon them, will revert to the landowner's family, bringing another million, meaning altogether a swap of £15,000 for a sum of £2,000,000. There are many cases of a similar character which will readily occur to the memory of every hon. Member who is at all acquainted with the subject. Take well-known properties in Lancashire and Cheshire in regard to which evidence was given. And yet, although the landlord, without any exertion of his own, is now in these cases in receipt of an income which is ten or even a hundred-fold of what he was in the habit of receiving when these properties were purely agricultural in their character, and although he is in addition to that released from all the heavy financial obligations which are attached to the ownership of this land as agricultural property, he does not contribute a penny out of his income towards the local expenditure of the community which has thus made his wealth, in the words of John Stuart Mill, "whilst he was slumbering." Is it too much, is it unfair, is it inequitable, that Parliament should demand a special contribution from these fortunate owners towards the defence of the country and the social needs of the unfortunate in the community, whose efforts have so materially contributed to the opulence which they are enjoying?

There is another aspect of this matter which I should like to say a word upon before I come to the actual proposals of the Government. I have dwelt upon the fundamental difference in the demeanour of landowners towards their urban tenants and that which under the inspiration of more high-minded and public-spirited principles guide their conduct towards their agricultural tenants. There is no doubt that the spirit of greed is unconsciously much more dominant and unrestrained in the former case. One disastrous result of this is that land which is essential to the free and healthy development of towns is being kept out of the market in order to enhance its value, and that towns are cramped and their people become overcrowded in dwellings which are costly without being comfortable. You have only to buy an ordnance survey map and put together the sheets which include some town of your acquaintance and the land in its immediate vicinity, and you will see at once what I mean. You will find, as a rule, your town or village huddled in one corner of the map, dwellings jammed together as near as the law of the land will permit, with an occasional courtyard, into which the sunshine rarely creeps, but with nothing that would justify the title of "garden." For it is the interest of the landlord to pile together on the land every scrap of bricks and mortar that the law will allow. And yet outside square miles of land unoccupied, or at least unbuilt upon; land in the town seems to let by the grain, as if it were radium. Not merely towns, but villages (and by villages and towns I mean the people who dwell in them) suffer extremely from the difficulty which is experienced in obtaining land, and by the niggardliness with which sites are measured out.

You cannot help feeling how much healthier and happier the community could have been made in these towns and villages if they had been planned on more spacious and rational principles, with a reasonable allowance of garden for every tenant, which would serve as a playground, as vegetable and flower garden, for the workman and his family, and which would even, in many districts, help materially to solve the problem of unemployment.

The same observations apply to the case of mineral royalties. There all the expenditure is incurred by the capitalist, who runs the risk of losing his capital, while the miner risks his life; and I do not think it is too much to ask the royalty owner, who has contributed no capital and runs no risk, to contribute in this emergency to bear the large burden that is cast upon us for the defence of the country, and to help to pay the large sum of money needed to make provision for social needs, for the aged, and for those who have been engaged in digging out mining royalties all their lives.

My present proposals are proposals both for taxation and for valuation. Although very moderate in character, they will produce an appreciable revenue in the present year and more in future years. The proposals are three in number.

First, it is proposed to levy a tax on the increment of value accruing to land from the enterprise of the community or the landowner's neighbours. We do not propose to make this tax retrospective. It is to apply to future appreciation in value only, and will not touch any increment already accrued. We begin therefore with a valuation of all land at the price which it may be expected to realise at the present time, and we propose to charge the duty only upon the additional value which the land may hereafter acquire. The valuations upon the difference between which the tax will be chargeable will be valuations of the land itself—apart from buildings and other improvements—and of this difference, the strictly unearned increment, we propose to take one-fifth, or 20 per cent., for the State.

We start with the valuation of the present moment. No increment that has accrued before the date of the valuation will count. We value the land at its present value, and then count the increment from that point. You get the increment on two bases. You get at it when the land is sold. Then it will be discovered what the actual increment is. We propose to charge 20 per cent. on the increment which the landlord receives, ascertained by comparing what he receives with the valuation to be made immediately after this Bill. It would be also made on the passing of the property upon death, so that there will be an increment of estate duty; and if there is any increment which is not due to expenditure by the landowner himself on improvements, but is due merely to the appreciation of land in the neighbourhood owing to the growth of population or some other cause, then the same charge would be made on that increment. Corporations (which do not die) will pay upon property owned by them at stated intervals of years, being allowed the option of spreading the payment of the duty upon the increment accruing in one period over the following period by annual instalments.

The second proposal relating to land is the imposition of a tax on the capital value of all land which is not used to the best advantage. The owner of valuable land which is required or likely in the near future to be required for building purposes, who contents himself with an income therefrom wholly incommensurate with the capital value of the land in the hope of recouping himself ultimately in the shape of an increased price, is in a similar position to the investor in securities who re-invests the greater part of his dividends; but while the latter is required to pay income tax both upon the portion of the dividends enjoyed and also upon the portion re-invested, the former escapes taxation upon his accumulating capital altogether, and this although the latter by his self-denial is increasing the wealth of the community, while the former, by with holding from the market land which is required for housing or industry, is creating a speculative inflation of values which is socially mischievous.

We propose to redress this anomaly by charging an annual duty of ½d. in the £ on the capital value of undeveloped land. The same principle applies to ungotten minerals, which we propose similarly to tax at ½d. in the £, calculated upon the price which the mining rights might be expected to realise if sold in open market at the date of valuation. The tax on undeveloped land will be charged upon un-built-on land only, and all land of which the capital value does not exceed £50 an acre will be exempted, as also any land exceeding that value with respect to which it can be shown to the satisfaction of the Commissioners of Inland Revenue that no part of the value is due to the capability of the land for use for building purposes. Under these provisions all land having a purely agricultural value will be exempt.

Further exemptions will be made in favour of gardens and pleasure grounds not exceeding an acre in extent, and parks, gardens, and open spaces which are open to the public as of right, or to which reasonable access is granted to the public, where that access is recognised by the Commissioners of Inland Revenue as contributing to the amenity of the locality. Where undeveloped land forms part of a settled estate, provision will be made to enable a limited owner who has not the full enjoyment of the land to charge the duty upon the corpus of the property. The valuation upon which the tax will be charged will be the value of land as a cleared site, deductions being allowed for any expenditure necessary to clear it, and likewise for any value attributable to works of a permanent character executed by, or on behalf of, any person interested in the land within a specified period of the date of valuation, for the purpose of fitting the land for building purposes. Until a valuation has been obtained it is impossible to estimate the yield of the tax with any precision, and the yield in the first year is made still more doubtful by the fact that, pending the completion of the valuation, the tax must be collected provisionally upon the basis of declarations by owners—arrears (if any) to be collected later when the valuation has been completed. But as these declarations will also form the basis for the charge of increment value duty until the valuation is completed, with respect to which an under-declaration may have serious consequences, it may be expected that they will be sufficiently reliable to allow at any rate, a large proportion of the whole amount due to be obtained within the year. I therefore feel justified in estimating that the duty of ½d. in the pound on undeveloped land and ungotten minerals will produce not less than £350,000 in the current financial year.

My third proposal under the head of land is a 10 per cent. reversion duty upon any benefit accruing to a lessor from the determination of a lease, the value of the benefit to be taken to be the amount (if any) by which the total value of the land at the time the lease falls in exceeds the value of the consideration for the grant of the lease, due regard being had, however, for the case of the reversioner whose interest is less than a freehold. The reversion at the end of a long building lease having no appreciable market value at the time the lease is granted is, when the lease falls in, of the nature of a windfall, and can be made to bear a reasonable tax without hardship. Some consideration must, however, be shown to the purchaser of an approaching reversion where the purchase has taken place before the imposition of such a duty was contemplated. I therefore propose to have special provision to deal with that case. Special provision will also be made to meet the case of an increment value, in respect of which increment duty is payable under my first proposal, being included in a reversion. Another case in which special consideration should, I think, be shown is that of a lease determined by agreement between lessor and lessee before its expiration for the purpose of renewal. Towards the termination of a lease the lessee may be willing and even anxious to make improvements in the premises, provided that he can obtain a decent security of tenure at a reasonable rent. His business may be crippled for want of proper accommodation, but he is at the mercy of the ground landlord, who, in many cases, wrings out of him the uttermost farthing before agreeing to a renewal, which is to the interest of both parties. If the parties fail to come to terms the opportunity for an improvement, possibly of great public utility, is at any rate postponed, and perhaps irretrievably lost. The importance of facilitating such renewals to the interests of lessees, of the building trade, of the public generally, and even of the ground landlord himself, can scarcely be exaggerated. Accordingly in cases where a reversion is anticipated in circumstances of this character, and comes under taxation at an earlier date than would have happened in ordinary course, by reason of an agreement entered into with the lessee to enable him to improve the premises, I propose to make a special abatement of duty proportionate to the unexpired period of the original lease which is surrendered, and I have great hopes that this allowance, coupled with the fact that the value of the reversion for the purpose of the duty, will be calculated upon the difference between the consideration for the old and the consideration for the new lease, will induce owners to grant renewals more readily and upon more favourable terms than at present, and so tend to remove one of the most mischievous effects of the leasehold system.

There are no official statistics of the value of leasehold property, or of the dates upon which existing leases determine, and I am therefore not in a position to give more than a conjectural estimate of the annual yield of this duty. There is, besides, reason to believe that the num- ber of leases falling in from year to year is by no means a constant quantity, and this makes the task of estimating for a particular year still more difficult. On the whole, I do not think that I can in the present year rely on a larger revenue than £100,000 from this source, and I propose, therefore, to estimate the yield of the three land taxes for the current year at £500,000, an amount which, however, must not, as I have already explained, be regarded as any indication of the revenue they will ultimately produce.

I am not going at this late hour to enter into any discussion of the principles which ought to guide a Finance Minister in the imposition of indirect taxation. But one thing I am sure will be accepted by every Member of this House, and that is that we ought at any rate to avoid taxes on the necessaries of life. I referred some time ago, in the course of a discussion in this House, to the old age pension officers' reports. There was one thing in those reports which struck me very forcibly, and that was that they all reported that the poorer the people they had to deal with, the more was their food confined to bread and tea, and of the price of that tea, which of course was of the poorest quality, half goes to the tax gatherer. That is always the worst of indirect taxation on the people. The poorer they are the more heavily the tax falls upon them. Tea and sugar are necessaries of life, and I think that the rich man who would wish to spare his own pocket at the expense of the bare pockets of the poor is a very shabby rich man indeed, and therefore I am sure that I carry with me the assent of even the classes upon whom I am putting very heavy burdens, that when we come to indirect taxes, at any rate those two essentials of life ought to be exempt.

There are three other possible sources—beer, spirits, and tobacco. An increase in the beer duty, sufficiently great to justify an addition to the retail price, would produce a very large sum—larger, indeed, than I require for my present purposes—and would have, besides, in all probability, the effect of diverting the consumption of alcohol from beer to spirits—a change which would certainly not conduce to the social health of the country. The incidence of a small duty, on the other hand, would, to a large extent, at any rate in the first instance, be upon the liquor trade rather than upon the consumer; and I should not feel justified in imposing such a burden in a year when so considerable an additional contribution is being called for from that trade under the head of licence duties.

The case of spirits is, however, somewhat different. I am aware that the small increases in the spirit duties which were made by Lord St. Aldwyn during the South African war were disappointing in their financial results, and that any further increase would undoubtedly result in a considerably diminished consumption, which would to a very large extent at any rate nullify the benefit to the revenue which might otherwise be expected to accrue from it. It does not, however, follow from the result of this small experiment that we have reached the absolute limit of the profitable taxation of spirits, or that a substantial increase in the rates of duty would not, in spite of its effects upon consumption, produce an appreciable amount of revenue. I am disposed, at any rate, to try the experiment, which, even, if it ends—to take the most pessimistic view—in no larger revenue being raised from the higher rate upon a diminished consumption, than by the existing rate upon the present consumption, will still, in my view, be conducive to the best interests of the nation. It is perfectly true that the small duties imposed up to the present have not been productive. The reason for that was that the publican, or the retailer, found that, probably by changes in the character of the whisky, or by other means, he was able to get his money in another way, and the consumption decreased by a considerable amount. It is idle, therefore, to put on anything except a fairly heavy tax, and I impose a duty which the publican will find it to his interest to charge. I propose to raise the present duties (Customs and Excise) on spirits by 3s. 9d. per gallon, an amount which will, on the one hand justify an increase in retail prices, and on the other hand, assuming such an increase to be at the rate of a halfpenny per glass, will leave a margin to the publican to recoup himself for loss of profits arising from decreased consumption, and have something over towards mitigating the pressure of the new licence duty. The mere paper increase of a duty of that sort would be very considerable, but I do not expect to get anything approximating to that. The right hon. Gentleman knows perfectly well the possibilities of getting more out of spirits. This year there are exceptional circumstances. First of all, the forestalments are very heavy. It is not merely forestalments up to the end of the last financial year, but they have been going on since, so that the wholesale people have got in hand sufficient stock to carry them on comfortably for a good many weeks at any rate. Therefore, we do not get the increase for some weeks, possibly for some months. That will make a very considerable hole in the estimate which I should otherwise have made of the yield of those taxes. Not only that, but I have not the faintest doubt that it will have the effect of decreasing consumption; that will be the inevitable effect. It may drive a good many from spirits to try beer and to expedients of that sort. It will involve a very considerable increase in the price of the commodity, and therefore, I think, must have a very considerable effect in diminishing the actual consumption. Taking all these influences into consideration, I do not feel safe in counting upon receiving more than £1,600,000 additional revenue as the result of the change in 1909–10.

I have still nearly two millions more to find, and for this I must turn to tobacco—from a fiscal point of view, a much healthier source of revenue. The present rate of duty on unmanufactured tobacco containing 10 per cent. or more of moisture is 3s. a pound, and the increase I propose is 8d. a pound, with equivalent additions to the rates for cigars, cigarettes, and manufactured tobacco. Now, one pound of unmanufactured tobacco as imported, produces, after allowance has been made on the one hand for waste in manufacture, and on the other for the moisture which is added in preparing it for sale, nearly 1 1–5 pounds of the tobacco of retail trade, so that an addition of half an ounce to the retail price leaves the tobacco trade with an ample margin to finance the increased duty.

In estimating the additional yield from the increased rate of duty, regard must be had, as under the spirit duty, to the considerations that one month of the year has already passed, and that the duty-paid stocks are inflated by forestalments. Allowance must also be made—but in this case a comparatively small allowance—for decrease of consumption consequent upon the higher rate of duty. My estimate, therefore, is £1,900,000 for 1909–10, and £2,250,000 for a full year.

I am now in a position to present my final balance sheet for 1909–10.

To the Revenue side of the Account must be added:— Under Customs and Excise:— New duty of 3d. a gallon on petrol £340,000 Increase of spirit duties 1,600,000 Increase of tobacco duties 1,900,000 Revision and increase of liquor licence duties 2,600,000 Motor-car licences 260,000 Making a total addition under the heads of Customs and Excise of £6,700,000

Under the various Inland Revenue duties the new proposals are estimated to produce:— Estate duties £2,850,000 Stamps 650,000 Income tax (net). 3,500,000 And the new land taxes £500,000 Or a total from new and increased Inland Revenue duties of £7,500,000 These amounts (namely, £6,700,000 from Customs and Excise and £7,500,000 from Inland Revenue) added together give as the total estimated yield of new taxation £14,200,000 Adding these sums to the estimated Revenue on the existing basis 148,390,000 We arrive at £162,590,000 as the estimated Revenue of the year.

To the expenditure side of the account must be added:— Under the head of Consolidated Fund Services:— The proceeds of the petrol duty and motor car licences which will be paid to the new fund for improvement of roads £600,000 Under Civil Services:— The amount required for the first year's grant to the new Development Fund £200,000 For labour exchanges 100,000 Making a total addition under Civil Services of 300,000 and under Customs and Excise and Inland Revenue 50,000 for the payment of valuers and other administrative expenses arising in connection with the proposed taxes on land Adding these sums together we arrive at a total additional expenditure of £950,000 which, with the expenditure on the basis of the Estimates already presented 164,152,000 increases the total estimated expenditure for the year to £165,102,000 Deducting, under the head of Consolidated Fund Services, the amount of the proposed reduction of the Fixed Debt Charge 3,000,000 We arrive at £162,102,000 as the final figure on the Expenditure side of the Account.

There will be a very considerably increased demand upon the yield of those taxes for the coming year. If the Navy expenditure is at the maximum, which I anticipate, most of the increased expenditure will be absorbed by naval expenditure. The balance will be appropriated to those schemes of social reform which I sketched at the beginning of my observations.

I have to thank the House for the very great indulgence which they have extended to me and for the patience with which they have listended to me. My task has been an extraordinarily difficult one. It has been as disagreeable a task as could well have been allotted to any Minister of the Crown. But there is one element of supreme satisfaction in it. That is to be found in contemplating the objects for which these new imposts have been created. The money thus raised is to be expended first of all in ensuring the inviolability of our shores. It has also been raised in order not merely to relieve but to prevent unmerited distress within those shores. It is essential that we should make every necessary provision for the defence of our country. But surely it is equally imperative that we should make it a country even better worth defending for all and by all. And it is that this expenditure is for both those purposes that alone could justify the Government. I am told that no Chancellor of the Exchequer has ever been called on to impose such heavy taxes in a time of peace. This, Mr. Emmott, is a War Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away we shall have advanced a great step towards that good time when poverty and wretchedness and human degradation which always follow in its camp will be as remote to the people of this country as the wolves which once infested its forests.

The right hon. Gentleman resumed his seat at three minutes before eight of the clock.

Motion made and Question put.

1. That in addition to the duties of customs now payable on spirits imported into Great Britain or Ireland there shall on and after 30th April, 1909, be charged the following duties (that is to say):— For every gallon computed at s. d. proof of spirits of any description except perfumed spirits 3 9 For every gallon of perfumed spirits 6 0 For every gallon of liqueurs, cordials, mixtures, and other preparations entered in such a manner as to indicate that the strength is not to be tested 5 5 and the duties of customs on the articles hereafter mentioned, being articles in which spirit is contained, or in the manufacture of which spirit is used, shall be proportionately increased and shall be as follows:— £ s. d. Chloral hydrate the pound 0 1 9 Chloroform the pound 0 4 4 Collodion the gallon 1 14 11 Ether acetic the pound 0 2 7 Ether butyric the gallon 1 1 10 Ether sulphuric the gallon 1 16 6 Ethyl, iodide of the gallon 0 19 0 Ethyl bromide the pound 0 1 5 Ethyl chloride the gallon 1 1 10

3. Motion made, and Question put, "That, in lieu of the duties of Customs now payable on tobacco imported into Great Britain or Ireland, there shall on and after the 30th day of April, 1909, be charged the following duties (that is to say):—

Upon tobacco unmanufactured, viz:—

Containing 10 lbs. or more of moisture in every 100 lbs. weight thereof:— s. d. Unstripped … … the pound 3 8 Stripped … … the pound 3 8½

Containing less than 10 lbs. of moisture in every 100 lbs. weight thereof:— s. d. Unstripped … … the pound 4 1 Stripped … … the pound 4 1½

s. d. Upon tobacco manufactured, viz.:— Cigars the pound 7 0 Cigarettes the pound 5 8 Cavendish or Negrohead the pound 5 4 Cavendish or Negrohead manufactured in bond the pound 4 8 Other manufactured tobacco, the pound 4 8 Snuff containing more than 13 lbs. of moisture in every 100 lbs. weight thereof, the pound 4 5 Snuff not containing more than 13 lbs. of moisture in every 100 lbs. weight thereof, the pound 5 4." —[ The Chancellor of the Exchequer. ]

The Committee divided: Ayes, 267; Noes, 130.

4. Motion made, and Question put, "That, in lieu of the duties of Excise now payable on tobacco grown in Ireland, there shall, on and after the 30th day of April, 1909, be charged the following duties (that is to say):—

Upon tobacco unmanufactured, viz.:— Tobacco containing 10 lbs. or more of moisture in every 100 s. d. lbs. weight thereof. the pound 3 6 Tobacco containing less than 10 lbs. of moisture in every 100 lbs. weight thereof, the pound 3 11

Upon tobacco manufactured, viz.:— Cavendish or Negrohead manu- s. d. factured in bond the pound 4 8 and that duties of Excise at the same rates shall be charged on tobacco grown in England or Scotland, and that there shall be charged on a licence to be taken out annually by every person growing, cultivating, or curing tobacco in England or Scotland an Excise duty of 5s."—[ The Chancellor of the Exchequer. ]

The Committee divided: Ayes, 257; Noes, 125.

5. Resolved, that there shall be charged on motor spirit, on and after the 30th day of April, 1909, a Customs import duty of 3d. per gallon, and on and after the first day of June, 1909, an Excise duty of the like amount; and that there shall be charged, on and after the last-mentioned date, on a licence to be taken out annually by a manufacturer of motor spirit, an Excise duty of £1, and on a licence to be taken out annually by a dealer in motor spirit an Excise duty of 5s.—[ The Chancellor of the Exchequer. ]

Resolutions to be reported upon Monday next (3rd May). Committee to sit again upon Monday next.

And, it being after half-past Eleven of the clock on Thursday evening, Mr. Speaker adjourned the House without Question put, in pursuance of the Standing Order.

Adjourned at Twenty-five minutes after Twelve o'clock.