I beg to move, as an Amendment to the Address, to add, at the end thereof:—

3.0 P.M.

"But humbly represent to Your Majesty that this House regrets that, notwithstanding the growing pressure of local rates in urban and rural districts, particularly in respect of education, and the heavy financial obligations which local authorities are invited to assume, including the treatment of uninsured persons suffering from tuberculosis, Your Majesty's Gracious Speech contains no announcement of measures to give effect to the recommendations of the Royal Commission on Local Taxation in favour of a large increase in the subventions from national funds in aid of local expenditure upon national services, or to fulfil the expectations of relief to local taxation held out in connection with the Budget of 1909."

This is the third year in succession in which I have endeavoured to obtain the opinion of the House that hon. Members regret that there is no announcement on the part of His Majesty's Government of any measure for diminishing the ever increasing burdens cast upon the ratepayers, especially in connection with services which have been pronounced by the Royal Commission to be preponderatingly national and connected with such matters as education, police, and main roads. This is an old story, but it is still a very painful one for the ratepayers, and it is one which grows more painful every year. The underlying question is really what is the fairest way of raising the money to meet the demands of the National Debt, services of the Army and Navy expenditure, all of which is properly met by Income Tax, Super-tax, Death Duties, and Customs and Excise services, which we all acknowledge to be absolutely necessary in the interests of the nation. I believe there is a general acknowledgment that our whole fiscal system, from a rating point of view, is antiquated and chaotic. In 1892 the Chancellor of the Exchequer expressed the opinion that—

"to throw the cost of every improvement in education, of every improvement in the dwellings of the working classes, and every improvement made and every action taken by the local authority—to throw the cost of all these things on one kind of property and that alone, was intrinsically inequitable, and ought to be remedied."

I am convinced that the whole foundations of our system are wrong. Those foundations were laid 300 years ago and they cannot bear the superstructure which is now placed upon them. More than anything else we want a complete overhauling and a rearrangement of the whole of our fiscal system, both Imperial and local. We want a system more adapted to the twentieth century, and not to the 16th, 17th, 18th, or the 19th century. We want to view all these things with a modern eye. That is what I am constantly asking Governments to do, and some day I hope I shall be successful. The Chancellor of the Exchequer used to share that opinion himself, and he has said over and over again that immediate relief ought to be given to the ratepayer. The right hon. Gentleman has made a very interesting pronouncement on that question, for in his famous Budget speech of 1909 he used these words:—

"… 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 the present Government, more especially in educational matters. He has also been very hard pressed owing to the increased costliness 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."

That was a very strong declaration on the part of the Chancellor of the Exchequer, and shortly after that he received, on the 8th July, 1909; a deputation of the Association of Municipal Corporations, representing 295 different boroughs and borough councils. This deputation included many lord mayors, mayors, and Members of Parliament, and they desired, first of all, an assurance from the Chancellor of the Exchequer that the Budget would not, at any rate, restrict or diminish the resources already at the command of the local authorities. They were anticipating that the Licence Duties, more especially the extra Licence Duties which were going to be imposed by the Chancellor of the Exchequer for the benefit of the National Exchequer, would largely diminish the resources of the local exchequers, and in reply the right hon. Gentleman said:—

"I do not think there will be any real danger of any considerable diminution in the rateable value of licensed premises. … There may be in some districts, possibly in London, a slight diminution of the rateable value, but that would not arise this year at any rate."

I am not sure whether the right hon. Gentleman is aware of the effect his legislation has had on the rateable value of licensed premises in London, and much the same thing has happened in other large towns in England. In London the Budget proposals have been mainly responsible for the first decrease which London has ever seen in the quinquennial assessable value of London, which is a very important matter for London. It means that the area from which we draw cur local taxation has been impoverished, by the action of the Chancellor of the Exchequer, to such an extent that in London we lose something like a penny rate owing to the increased Licence Duties put upon licensed property in London. I have here a Return which shows that the Chancellor of the Exchequer himself has benefited during those three years to the extent of £1,500,000, and he has drawn that amount from London in that time by increased Licence Duties for the National Exchequer. What has been the effect on the local exchequer? It has suffered during those years to the extent of a threepenny rate, and that is a very serious loss.

Is that per annum?

No; I said that for that time it was very nearly a penny rate. That may not seem much to the Chancellor of the Exchequer, but to the ratepayers it means a great deal of money. Therefore the forecast of the Chancellor of the Exchequer was entirely wrong. The right hon. Gentleman said, "Never mind. You may suffer some loss, but I want the local authorities to recollect what there is on the other side of the present Budget." This is what he said was on the other side, and what he said the local authorities were going to gain:—

"There would be first of all seine £600,000 going towards the roads. It is perfectly true that £600,000 is not a Grant in aid of the rates, but it does go towards the improvement of the roads, which is a burden upon the rates."

How has that prophecy turned out? The Road Board has received altogether over £2,000,000, and, up to 31st March last, it had disbursed only £500,000 in the two years. This deputation were informed the ratepayers were going to be relieved to the extent of £600,000 in one year; that is, £1,200,000 in two years. As far as I can make out, the Road Board disbursed up to 31st December last, £900,000. That is very short of the £1,200,000 which the ratepayers were told they would receive in relief of their rates. I am not going to argue this Amendment from the London point of view. Every now and then I must give illustrations from London because those are the figures I am able to obtain with accuracy, whereas the figures for other parts of the country are much more difficult to get. Let, us look at the matter as it affects London. We naturally expected from the speech of the Chancellor of the Exchequer to this deputation that we in London would get a very fair share of this £600,000 a year. What has happened? London, we know, has contributed during that time at least £400,000 by way of Carriage Duties and by way of Petrol Tax to the funds of the Road Board. What has London received back from the Road Board? Under £4,000 in two years. That is a very important thing, because one of the problems which it is most difficult for all highway authorities to solve is the question of the maintenance and upkeep of the roads owing to motor traction. There is one source of revenue—the Petrol Duty—which has been taken away from us and handed over to the Road Board, and which apparently never comes back to us. Again, the Chancellor of the Exchequer, for the enrichment of the National Exchequer, has stereotyped our share of the Carriage Duties at the produce of the year 1907–8. What is the result? There was a growing duty. There was an improving value for all local authorities; there was a tax of which we might have legitimately thought we should feel the benefit and from which we should be able to derive a new source of revenue to be applied to all our numerous wants. The Chancellor of the Exchequer saw a growing wealth, and he seized it for himself. He said, "You shall only have so much. I will stereotype your share of it at so much. I see it is growing. I am going to take that."

That is one instance only of the methods pursued by the present Chancellor of the Exchequer. He not only by his legislation enriches the National Exchequer, but he diminishes and impoverishes the areas over which local exchequers raise their revenues. When he sees a growing source of revenue which might legitimately be retained by the local authorities, he seizes it himself for the enrichment of the National Exchequer, and then with singular and extraordinary irony he points out to the municipalities that they ought to broaden the basis of their taxation, and that they ought to be looking out for new sources of revenue. When we have got our eye on a new source of revenue which is legitimately earmarked for local purposes so has the Chancellor of the Exchequer. He is able to put his hand in it; we are not able to put our hand in it. I am quite sure the Chancellor of the Exchequer is human and will sympathise with those who stand in my shoes, and who see their revenue taken away from them for the enrichment of other exchequers, while the person who takes it ironically points out to the other party the duty of broadening the basis of taxation. I hope the Chancellor of the Exchequer will give a little more light and leading to local authorities as to what new sources of revenue there are open to them, and where he thinks we can broaden our basis of taxation. Will he indicate to us some new source of revenue which when he sees it growing he will not take to himself, and will he say to those of us who have, of are likely to have, the administration of local finance, "There you can go and take that; there will be a fine source of income for you there; I am going to let that source of income entirely alone"? I hope we may, at all events, have some guidance from the Chancellor of the Exchequer, who, after all, is the greatest authority in England on all financial problems. That is one thing he said to this deputation: "There is £600,000 a year I am going to give you." That is not all.

"There is £250,000 a year coming to you, half the proceeds of my new Land Taxes, so that altogether there will be £850,000 of revenue raised by this Budget which this year will go to the local authorities. By next year the yield of the Land Taxes will, I estimate, have at least doubled, so that next year the £250,000 will have grown to £500,000. That far more than compensates for any possible reduction in the revenue of the local authorities which may result from the depreciation of the rateable value of the licensed houses and the decreased consumption of whisky. In fact,"

he said,

"the Imperial dog is most generously sparing some of its bone to the local authorities."

I have never seen any meat on the Chancellor's bone. [Laughter] Well, "on the Imperial dog's bone"; I will put it that way. On the contrary, the Imperial dog has really taken away from the local dog many of its choice and meaty bones. We see no good in this exchange, and the generosity appears to be entirely on the side of the local dog, and not on the side of the Imperial dog. That is what the Chancellor of the Exchequer said. It was exceedingly comfortable and comforting to this very powerful deputation that they should be told, "While you may lose a little bit on one side, you will gain enormously from my Budget on the other side." What did the Chancellor of the Exchequer do about half the value of these Land Taxes? We all know the history of that. In the dead of the night he came down here and seized the whole of them. He said: "I am going to take this at all events for three years." That was the first result of the land values taxation, of which so much has been made at election times by the Chancellor of the Exchequer's party. It was the first result for the ratepayers. They had always been led to suppose that these land values had been created by the expenditure of their rates, but that theory was demolished in a quarter of an hour one night by the Chancellor of the Exchequer, and the whole of that new source of revenue was diverted and appropriated by the Chancellor of the Exchequer, The Chancellor of the Exchequer having been wrong in all these forecasts I think he really ought to have a very generous feeling towards the ratepayers. I want to know from him whether those speeches of his, in reply to passionate speeches on behalf of the ratepayers, and pathetic speeches in some instances, represent at the present time the policy of the Chancellor of the Exchequer and the policy of His Majesty's Government? I cannot find much trace of that policy in the speeches that have been delivered by Cabinet Ministers in the election which has just taken place in London. I have read the speeches of every one of the Cabinet Ministers in the course of that election, and there is nothing there to lead to the hope that they have the remotest sympathy with the hardships of the ratepayers. They have been rushing about night after night in support of the party which is, at all events, anxious to spend money and abusing the only party which is distinctly anxious to economise. They may have been well within their rights in doing so, but I confess I should have admired the President of the Local Government Board a little more if he had maintained that more judicial and important attitude, which I think a man in his position as President of the Local Government Board ought to have maintained in the recent controversy. After all, he is the court of appeal in some most important matters, such as housing, surcharging, and sanctioning of loans. He is the court of appeal from the London County Council and other county councils, and it is a most unfortunate thing when the court of appeal descends into the arena and makes most inflammatory and abusive speeches against one party which, after all, at the present time, is the dominant party in that great county council. It ill fits him to do this, and then to pose as a great judicial an impartial authority, who tries to do justice to all parties in affairs in connection with local government. I hope the Prime Minister's attention will be called to this. I think it is a very bad precedent to see the President of the Local Government Board calling all those opposed to him monopolists, or contractors, or Publicans and sinners. Many even worse things than these he said. The Publicans and sinners were to my mind better characters on the whole than the Pharisees, and I think they were more commended and commendable.

All these Cabinet Ministers rushing about night after night, with one accord, whilst they expressed no sympathy with the ratepayers, so far as any relief could be expected in an increased subvention from the Imperial Exchequer, told the ratepayers, "Wait and see; there is going to be some splendid new taxation put upon land, and out of that you will be able to enrich yourselves." I do want to know, when Cabinet Ministers go about London making these speeches—why do not we find a single trace of any measure of the kind in the King's Speech, any measure which would even attempt to carry out any of these promises which they made so liberally and rashly on the eve of the elections? We cannot but be persuaded that these matters are brought forward by them only to serve an electioneering purpose by Cabinet Ministers. They have no intention whatever of bringing in any legislation of the kind. They have this Session in which they might do it. Even the Chancellor of the Exchequer himself I recollect last year rather indicated—I have his exact words here; I do not know whether he intended it only for London—that we were able by a reform in the rating system to make it possible for municipalities within their own areas to equalise the burden of rates. Then he said, "There would not be the same case, and there would not be the same demand upon the Imperial Exchequer." There again, like any measure for the taxation of land values, a measure for the equalisation of rates requires legislation. These are not matters in which municipalities can interfere in any practical way. They are matters for the Government. And again I see no trace in the King's Speech of any attempt on the part of the Government to bring about a further equalisation of rates in London. It was once mentioned by the present Government in a King's Speech many years ago, but it has never appeared since. In the London County Council, the whole of the council is in favour of a considerably further equalisation of rates, and are quite prepared to support such a measure. I am personally in favour of a considerably further equalisation of rates. I have said that constantly; I never said anything else. The poor rate is about 70 per cent. and that might be further equalised. But it is not a matter for the county council. It is a matter for the Government, and I say, "Do not point the finger of scorn at the municipalities because they do not find new sources of revenue when it is impossible for them to find new sources of revenue unless His Majesty's Government, or some Government, by legislation puts them into a position to get these sources of taxation." I say it is a lamentable thing when Cabinet Ministers go and make these speeches, one after the other, to lead people to suppose that relief can be given and will be given almost immediately to the ratepayers by means of legislation which will enable the municipalities to put some new taxes upon land values, or in another direction to equalise the rates between the richer and poorer parts. This promise has appeared for a great number of years—I think twenty years—in almost every speech of every Progressive or Radical candidate for the London County Council.

If the Government have a policy, if they are prepared with a policy, why do they not bring forward that policy and put it into a Bill? We are not able to argue the matter as things stand. We never know what we have to argue upon. Certain opinions are held by hon. Gentleman opposite in favour of the single tax, but the Chancellor of the Exchequer has repudiated the single tax Therefore it is no good our breaking a lance against the single tax, because the Government apparently are going to put themselves into a position of opposing the single tax. I do not know whether or not they are in favour of a single rate. We do not know how far they are prepared to go with the taxation of land values. There has been no opportunity of considering anything, except the speeches that are made, the many flimsy and immaterial speeches, by Members on that side of the House, and even by Cabinet Ministers, and made at a time of election when they are desirous of capturing votes. I do not think that is a very exalted position for Cabinet Ministers to take on one of the most difficult of all questions. It is not a question I intend to argue to-day; I am prepared to argue it at some other time. When Cabinet Ministers, one after the other, speak on questions of this kind, we ought, at least, to know that they are within measurable distance of being able to put on the Table of this House a Bill which will contain some practical solution which the House can discuss.

I say in my Amendment that the local authorities are constantly being invited to assume other financial obligations. In order to give some little freshness to an old Amendment, I have included the treatment of uninsured persons suffering from tuberculosis. The local authorities are being invited year after year to undertake new financial obligations. Those invitations are rather in the nature of Court invitations—invitations which the local authorities are not expected to refuse. There are all kinds of invitations. These invitations we all understand. They are not absolutely obligatory, but you expect them to be accepted, and there may be some kind of penalty for those who do not accept them. The local authorities were compelled to undertake medical inspection, and invited to undertake medical treatment. That resulted in a very large addition to the expenditure of money by the local education authorities. I have here both the estimate and the expenditure of the local education authorities. I admit that last year the Chancellor of the Exchequer did put upon the Estimates a sum of £60,000 for England and Wales, to go towards this expenditure on the part of local education authorities. The London County Council had estimated that it would receive £20,000 for the year 1913–14, but even so the total expenditure will be £67,500. That is an increase in expenditure of £46,500 put upon the ratepayers. For my part, I not only approve of this form of service and expenditure, but, if I may say so, I am grateful to the Government for imposing this new service on the education authorities. I believe it is money which will be well spent, and I have constantly said that inspection without treatment is nothing worth. I hope we shall go more thoroughly into this question. I am anxious to do so, but the Chancellor of the Exchequer must remember the tremendous growing burden of the education rate in many places. If education authorities go slowly in this class of expenditure it is not because they feel that the particular item for which the money is being charged is undesirable, but because they feel the total weight of this expenditure. Every year now the ratepayers are being called upon to pay more of this expenditure, and the National Exchequer is called upon to pay less. I have some interesting figures here. For the year 1909–10 the total expenditure on education in England and Wales was, in round figures, £23,000,000. The percentage borne by the rates was 50.7, and the percentage borne by the Grants was 49.2. For 1910–11 the total expenditure was £24,000,000. The proportion borne by the rates, instead of being 50.7, was 51.4; and the proportion borne by the Grants, instead of being 49.2, was 48.6. That is from England and Wales generally. London, as we all know, has to pay a very much larger proportion of the total expenditure by means of the rates. In London, out of every £100 spent on education, £70 is provided by the ratepayers, and only £30 by the National Exchequer. Again, we have been invited to adopt another form of expenditure. That invitation we have accepted. It is to reduce the numbers in our classes. That is an invitation which, I think, has been generally extended to every education authority. London has accepted it. It is going to cost London £5,000,000 in capital expenditure. In fifteen years it will cost London another 4½d. rate, unless some Grant is given towards this form of expenditure. Every time these invitations from Departments and from the Government are accepted, it means that the ratepayer is increasing the burdens he already feels to such an onerous extent.

I come to the third invitation. The Chancellor of the Exchequer, in his anxiety, with which I have a great deal of sympathy, to hasten the day when we may greatly diminish the amount of tuberculosis in this country, has, through the Local Government Board, made rather more than a suggestion. He has caused an invitation to be sent to all local authorities to find half the amount of money required. The Government is to find half and the county councils are to find half the money that is to be expended on the general treatment of consumption or tuberculosis. It is not confined to insured persons nor to the dependants of insured persons, but is to be a general treatment of all consumptive cases. I do not wish at all to prejudice the decision of the local authorities as to whether or not they will fall in with the arrangement and accept the invitation, but I want to tell the Chancellor of the Exchequer that that invitation must be considered with other invitations, that it would be quite impossible for anyone who has any regard for local exchequers, for the effect of new services on the rates, and for the effect of new services and rates on the ratepayers, especially the poorer ratepayers, to consider an invitation of that kind as if it were art isolated invitation. It must be considered with due regard to all the other obligations which are being increasingly imposed upon the ratepayers. I am not going to suggest for one moment that if it stood by itself it would be an unfair proposition. I am not going to say that the country would not gain by that expenditure. All I am going to say is that this and other matters affecting national health are really national services far more than they are local services; they have much more intimate reference to the country as a whole than to any particular locality. There is an amount of national wealth in this country which is not tapped adequately, and which does not make sufficient or adequate contribution to national expenditure of that kind. The Royal Commission in 1901 found that the total personalty that was liable to Imperial subventions was three times the value of the realty upon which rates were levied in this country. If that was true in 1901 it is much more true to-day because there has been a fall in values in realty. There has been a great accretion of personal wealth in this country, and that personal wealth does not contribute, in the way that realty does, its fair share towards national services, and towards these forms of national expenditure of which I for one will not complain, but which I wish to see, if anything, brought to that full fruition which is desired by the Chancellor of the Exchequer. All this is a fair and legitimate complaint on the part of the ratepayer, and it is a complaint which is growing as the years go by, because of the enormous number of increased obligations which are put upon the ratepayers from time to time by different Government Acts and Departmental actions.

I think I know what the answer of the Chancellor of the Exchequer is going to be. He is going to say, "In obedience to your request, made from this side of the House and voiced by me, I have set up a Departmental Committee which is inquiring into all these matters, and until it has reported, we, the Government, are perfectly impotent to bring about any promised relief to the ratepayer or to do anything whatever to diminish the burdens which are imposed upon him and which the Government acknowledge are extremely onerous." That Departmental Committee was appointed two years ago next April. The terms of reference were given and the names were given on 3rd April, 1911. The former Secretary to the Treasury, now Chancellor of the Duchy of Lancaster, stated in answer to my criticism, that—

"We must proceed expeditiously, and the Government will appoint a small Committee to go as soon as possible into the points that stand over in order that the pledges given by the Chancellor of the Exchequer, by the Prime Minister, and by the leader of the Government in the other House, may he kept and redeemed in good faith as they were made."

I ask the Chancellor of the Exchequer whether, looking to all the speeches which he made inside and outside the House and looking to his own solemn declarations at that box and looking to other promises made by other Ministers, he thinks that this matter is being dealt with with expedition, and whether he thinks that the country and the ratepayer are being treated with the good faith which the Chancellor of the Duchy of Lancaster said they were entitled to. When is the Committee going to report? We have asked again and again for an interim report. No, not even an interim report. Volumes of evidence have been delivered, but no expression of opinion. Over 10,000 questions have been asked and answered. No, the Committee cannot form any opinion. Always and ever when we ask anything, the Committee is still sitting. How long is that going to be the answer? Will it carry us over the next General Election? Will the Committee still be sitting? Will 100,000 questions by that time have been asked and answered? Why does it not report? It was rumoured that the Committee was about to report many months ago. There were also rumours that for some reason or other it resumed its researches, and it went pursuing many paths of economic doctrine, and many quaint theories, and that it is still purusing them. Who has any control over them? Has the right hon. Gentleman? Has he ever communicated with them? Has he ever told them at all what sort of inquiry they should continue to pursue, or are they entirely immune from any possible acts on the part of His Majesty's Government? They may do what they like. Can they remain sitting till after the General Election? Are they bound at any time to give us any report? Are we ever to have the result of their deliberations, or are we always to be told, "It is no good bringing this matter forward. You are only wasting time. The Committee is still sitting"?

I think it is about time, when all these Cabinet Ministers go rushing about making these declarations of policy, that the Government, with all the information at their command, were able to make up their minds what kind of taxation of site values it is that they think they can practically recommend to the House There is a mass of information on the subject. You do not want any more. It is contained in volumes of evidence taken by one of the ablest Commissions that ever sat, the Royal Commission of 1901. If you read the two Blue Books issued by the present Departmental Committee, will you want to know anything more about what is possible in connection with the taxation of site values? So all these questions have been examined over and over again by the Royal Commission and by the Departmental Committee. Last year the Chancellor of the Exchequer suggested that we should look about for new taxes. Every suggestion I ever heard for new taxation has been examined either by the Royal Commission or by the Departmental Committee or by both. I do not believe there is anything new into which they can inquire. I believe if you want to study the subject there is ample information. All that you want really is a Cabinet decision as to what can be done. The ratepayers are entitled to have those pledges redeemed. They have been solemnly and sacredly made, and in some way or another ought to be met. The debt is long overdue, and it ought to be paid. Language has lost its meaning if pledges of that kind are to be made and are not to be carried out, and it is the final degradation of the House of Commons if Ministers are able to make these pledges so solemnly at that box and let year after year go by without intending or endeavouring to give any effect to them.

The House is indebted to the right hon. Gentleman for bringing this question forward. We have had many Debates with regard to it, but I think the urgency of the question has become such that the Government must deal with it on an early occasion. Whether we look at it from the point of view of a county council, a county borough, a municipal authority, or an urban or rural district, we are all agreed, and the Government have admitted the fact, that many services which are borne by the local ratepayers are of a national character, and some relief should be given from the National Exchequer. I do hope that before this Debate closes the Chancellor of the Exchequer will give the House some assurance as to dealing with this very important and pressing question. It is a question which cannot be delayed. During the thirteen years I have been in this House I have voted on every occasion for Motions dealing with the important matter of local taxation, and I believe to-day if we went to a vote on this question untrammelled by party ties there would be a unanimous opinion that the time had arrived when it should be dealt with. It is a serious question. It is not only serious in the urban districts, but also in the rural districts. The right hon. Gentleman who moved the Amendment has given various illustrations with regard to the position of local taxation as affecting the ratepayers in London, but I venture to say that, although these illustrations were drawn from his experience of the London County Council, yet at the same time similar illustrations could be given as to what is taking place in every borough and county throughout the land. The ratepayers during the past twenty years have, at any rate, had burdens placed upon them by Parliament which ought never to have been placed upon them. They are for services which are national in their character, and those services should be borne on the broader back of the taxpayers rather than by the ratepayers of this country. It has been acknowledged by the Prime Minister himself that the cost of education, police, poor relief, main roads, and various other services are national in their character, and that assistance to a very large extent should be given from the National Exchequer in respect of those services. We stand to-day as we stood some fifteen or twenty years ago. Parliament after Parliament has given pledges and passed Resolutions with regard to dealing with the important question of local taxation, but still nothing has been done.

I, as representing an agricultural constituency, acknowledge that some sixteen or seventeen years ago, when the Agricultural Rates Act was passed, something was done with regard to the pressing burdens which were placed upon agricultural land in this country. It gave some assistance at that particular time. Parliament gave a subvention from the National Exchequer of one-half of the rates as they then existed with regard to agricultural land, but Parliament pledged itself that that Act should only remain in existence for five years, and that the House of Commons would deal with the question in the meantime. Parliament has never dealt with it. What has been the experience of agriculturists throughout the country? I may say—and I say it advisedly—that at the present time, although agricultural land is only rated one-half, under the Agricultural Rates Act, it is paying more to-day for local taxation than it paid previous to the Grant of that Exchequer contribution. It is high time that this question was dealt with. Reference has been made to the fact that the Departmental Committee is still sitting. That. Committee, to my mind, ought to have reported within a very short time as to one of the principal inquiries which it was set up to advise the House upon, and that was, What difference exists to-day as to the Exchequer contributions towards the local ratepayers as compared with the contributions which took place on the Report of the Royal Commission on Local Taxation? That information could have been given by a Department of the Government, and we might have had the information before us in order that the question might have been dealt with. I, for my part, think that throughout the country there is a growing feeling that the time has arrived when this important question should be dealt with, and this House should endeavour to get the Government to deal with it on the earliest possible occasion. A very great deal of injustice takes place throughout the country in respect of services which are of a national character when the cost of these services is placed upon local rates. The cost of these services is continually increasing the burdens upon the local ratepayers, and I trust the Chancellor of the Exchequer to-day will give some indication that the question is ripe for consideration and will be dealt with in an effective manner, in order to relieve the local ratepayers of the heavy cost which is at present thrown upon them in respect of these services.

It is impossible not to feel very much sympathy with the remarks made by the right hon. Gentleman opposite (Mr. Hayes Fisher). I am sorry that some parts of his speech put a party complexion on this question, because I feel myself if the London Members could speak with one voice we could exact vastly different terms from the Government from those which we enjoy to-day. My quarrel is not with a particular Government. I would point out that we have been trying for a long series of years to get this subject dealt with. I find that of the total burden of taxation on London, only 15 per cent. comes from Imperial Grants, and that country boroughs get 24 per cent. and counties 31 per cent. It is clear, therefore, that the case of London requires consideration. The cost of education places London in a worse position still. In London, as the right hon. Gentleman has said, the London County Council only receive £30 out of £100, while in the rest of the country nearly 50 per cent. is borne by Imperial Grants. To my mind the Grants for education prove the case for London better than any other portion of the services for which Imperial aid is given. With regard to education, I have a grievance against the Mover of the Amendment. He was once a member of a Government. I believe he was Financial Secretary to the Treasury in 1902. Presumably at that time he had some influence in connection with the Grants which were given for education. A Grant called the "A Grant" was given for education. Under no Grant given from the Imerial Exchequer has London suffered more than under that Grant. The terms of it were unfair. That Grant was voted by the Unionist Government when the right hon. Gentleman was Financial Secretary to the Treasury, and it was based largely on the assessment. The effect of this particular Grant alone has been that while the country districts receive 9s. 4d. and the boroughs 9s. 6d., London only receives 7s. 4½d. It does seem to me that there is a preposterous difference between the Grant made to London and those made to other places. The Grant was given in aid of education in the whole country. It is evident that the cost of education must be greater in London than elsewhere. The teachers' salaries have to be higher, the erection of schools cost more, and education all round is very much more expensive in London than anywhere else. When the last Grant was established and the basis was so arranged that London must suffer to the extent of 2s. per child, London Members must have been asleep to allow any Treasury, however artful, to impose those terms upon them. There are over 600,000 children in London, and on this head alone London suffers to the extent of £65,000 a year. The case here is so irresistible that I hope the Government will at least undertake that when new arrangements are instituted the case of London shall be met in this respect. This result arises largely from annual value or assessment being taken into account. London suffers in this way also under the Licence Duties for beer and spirits in the Budget of 1910. Those duties being based on annual value, London paid a very much higher share than the rest of the country, and the effect has been to reduce the rateable value of London by a very heavy sum, certainly not less than £100,000. Here, again, London has a very clear and strong claim upon the consideration of the Government in any rearrangement.

The right hon. Gentleman opposite spoke about the Petrol Tax. I had occasion to go to Stepney this morning, and there I saw large tracts of road being repaired by the borough council. Without a doubt those repairs were rendered necessary by the large amount of motor traffic down Commercial Road. But the whole of the Petrol Tax is taken by the Government; none of it goes to the local authorities who have to bear the burden of repairing the roads. The trams which run down the same road, through the upkeep of the roads and their contribution to the rates, pay to the extent of £120 each to the local authority, whereas the motor traffic, which is quite as heavy as the trams in this part of London, is taxed through the petrol that it uses, and none of that tax goes to the local authority. I am an old member of the London County Council. When I was a member there was an account between the Exchequer and the London County Council. It was arranged on very benevolent terms, and showed a large balance which was the perquisite of the London County Council. I was a member of the council for nine years, and in no year was that balance less than £200,000, while in one year it was as much as £440,000. That balance went to the benefit of the rates of London. Since 1907 the sum has been rapidly diminishing. From 1907 to 1910 the balance in favour of the London County Council was about £20,000 a year; but for the last three years there has been a deficit. Here again, consideration is due to London from the Imperial Exchequer. I have ventured to make these remarks because ever since I have been a Member of this House I have been struck by the very unfortunate terms which London has always obtained in the financial arrangements made by whatever Government is in power. I think it is partly London's own fault. We have been shown how to do it and have had an example in the methods of the Irish Members. Whenever there is any question of an Imperial Grant the Irish Members speak with one voice. If London Members acted together we should represent nearly sixty votes, and we could obtain from any Government very different terms from those which exist to-day.

The object of my remarks is to impress upon the Government that when this rearrangement of local Grants is made London has a special case and requires a special Grant as compared with any other part of the country. I can assure the Chancellor of the Exchequer that this grievance is felt very strongly in London, and that some rearrangement has long been looked for. I was very pleased at one remark made by the right hon. Gentleman opposite. He said that he was prepared to support some further equalisation of rates. I speak as the representative of a very poor district, inhabited almost entirely by the industrial and poorer classes, where it is felt to be a great hardship that the poor rates of the district should fall on that particular place. It is a very heavy charge. In Poplar the charge is 4s. in the £; in Stepney it is well over 1s. in the £; but in many other districts it is only 3d. or 4d. in the £. We in the East End of London claim that at least we are entitled to an equalisation of the poor rate. It cannot be argued that a poor district should undertake the burden of the poor rate instead of requiring assistance from the other parts of London. This was half promised in the King's Speech of 1907, but we have heard nothing about it since. I know the difficulties of the case, but I submit that the Government might very beneficially turn their attention in this direction.

My hon. Friend told the House that this question was one which especially affected London. I have risen to assure the House that it by no means affects London only, but that the large boroughs, as well as the agricultural districts, are feeling the pinch very much indeed. I do not claim to have the intimate, detailed knowledge possessed by the right hon. Gentleman opposite who so ably introduced the subject, or by other speakers in the Debate, and I would not have intervened but for the fact that the local authority in the borough which I have the honour to represent are in a constant state of irritation and resentment in reference to this matter. I get many communications begging me to urge upon the Government the necessity for the immediate treatment of the grievance in question. I have many times endeavoured by means of question and answer to elicit from the Government some information as to the expected Report of the Departmental Committee, but in vain. The Committee goes on, as has been said, asking questions, getting answers, and receiving volumes of evidence, but we are no forwarder. I do not know whether the nation is really forwarder, but the present Parliament does not seem to get one inch nearer a solution of the question. It is admitted on all hands, I believe, that there are placed upon municipalities and local authorities a good many burdens which ought to be national charges, and of these education is one of the chief. There is no doubt, to my mind, that local education authorities would develop their systems much more, attempt experiments, and improve the whole scope of their work if they could afford to do so; but they have placed upon them by the Imperial Parliament burdens which really compel them to cramp and confine their operations far more than they ought to do. The poor districts in the country really suffer the most from this inequality. The right hon. Gentleman opposite said quite truly, and I am glad he recognised it, that there is in the country plenty of wealth from which to draw the resources to relieve the burdens of the local ratepayers. I agree. It is not for me to point out in this Debate where those sources are. No one knows better than the Chancellor of the Exchequer himself. Some of us are looking eagerly for an attempt to be made to draw revenue from those fortunate holders of land, which, in my judgment, ought to belong to the nation, and in that way to finance the operations of education and other matters which local authorities have to take up. The right hon. Gentleman said that it was all a question as to the best way of raising the resources required. No one wants to spend less, but we want to spend it on other things, and—at least, I do—to get it from other sources. It is not necessary to point out how national funds are being squandered in other directions. I hope an opportunity will come very soon for a discussion of that description. We are spending enormous sums of money upon other services, while we cramp and confine the expenditure upon education and other necessary works in the boroughs and districts—work which might be enormously developed if assistance could be obtained from the Government. I would press the Chancellor of the Exchequer to tell us plainly what are his expectations as to the Departmental Committee, how soon we may hope for a Report, and what are the prospects of settling this question, which is becoming quite a hoary one, by adjusting the Imperial and local charges with greater fairness to the local ratepayer, and without undue burden, as I believe, on the general taxpayer.

I wish to ask particularly for information as to the Report of the Departmental Committee. After all, if that Committee continues indefinitely to consider this question, it will sit as long as the Royal Commission presided over by Lord Balfour of Burleigh. That Commission, at any rate, broke the back of the question. I admit that new problems have arisen since; but, from the point of view of the local administrator, that Commission broke the back of the question, and it is in the capacity of the local administrator that I am more particularly interested. It has become very difficult to conduct local administration under the existing incidence of the burden, and it is getting more and more difficult. We always hear the complaint of London. No doubt there are poor districts in London which severely feel the rates, But some steps have been taken to equalise the rates: I do not know how much further progress might be made in that direction. London as a whole does pretty well out of the Government. If the Government put burdens on London, it also spends a good deal of money in London. In one way or another I do not think London has much to complain of in the matter of expenditure if you balance it with receipts. I will give two examples of what we call landward parishes. In a prosperous agricultural district there is a landward parish—I was chairman of the parish council at one time. There were no land values in the parish; there was no source of income whatever except the land rental. The burdens were not heavy there, but they are rapidly increasing, and you have to contemplate the position of communities where there is nothing but agricultural rentals from which to derive revenue; there is nothing in the way of prairie values, but simply rating upon the fixtures to enable the agricultural rentals to be earned. I could give the example of a Highland parish—and I, for one, deplore the fact—where 60 per cent. of the rates is levied upon sporting land. That is a very unnatural and unhealthy condition of things, and the fact is that without the 60 per cent. of revenue from sporting lands the rates would be over twenty shillings in the pound. I should hope that a large proportion of the sporting landlords will disappear, and the land developed in other ways, so that alternative sources of revenue may be obtained; otherwise there would be nothing left for many years except the existing revenue.

But it is not only a land question, for in many boroughs besides those of London the rates have now become too heavy to enable the necessary expenditure to be met. The fact is that it is tins House which is imposing liabilities on the ratepayers. It should be remembered that a substantial proportion of local expenditure is insisted upon by Parliament and by Departments, and not by the representatives of the local ratepayers at all; and that is why these burdens are constituting so very serious a difficulty from the ratepayers' point of view. I have always held the view, like one of my teachers, Adam Smith, that land is a proper subject for bearing a fair proportion of taxation, but, on the other hand, I do not think that all taxation should be put upon the land, and that liquid fortunes should be made to contribute. I remember that last year the Chancellor of the Exchequer commented on the death of two persons, one a noble Duke, and another, a Mr. Smith, commonly known as "Chicago Smith," who lived in a bedroom at the Reform Club. Mr. Smith left £5,000,000, and I imagine his contributions to local taxation were exceedingly small. I remember the Chancellor of the Exchequer comparing him with the nobleman who had transferred his estate, and saying that if he had not lived like a lord, he had died like a gentleman, paying Death Duties on £5,000,000. I should like to have seen some proportion of the duties on that £5,000,000 going to the educational rate, and to some extent Poor Law relief and police rates. The Chancellor of the Exchequer, who has always spoken on this subject with great moderation, the other day used words to the effect, one cannot produce land reform entirely by piling taxation on land, which already has to bear such a large proportion of taxation: and I submit that in any readjustment of taxation great liquid fortunes as well as great landed possessions should contribute towards local taxation. Though the whole subject is of a most intricate character, I do not think it ought to be much further delayed, but that the time has arrived for a settlement of the matter. There are various adjustments of local taxation which have to be carried through by a process of evolution, and from every point of view, therefore, I hope that the Departmental Committee will not sit indefinitely. Between Lord Balfour of Burleigh's Committee and the Departmental Committee we shall have material on which to come to a final judgment, which cannot be taken too soon, in the interests of the local administration of the country.

Although I am a London Member, I do not want to argue the case from the point of view of London alone, because I think we discredit the general case by dwelling too much upon what may be considered to be the special claim of London. At the same time, I cannot accept the view of the hon. Gentleman who has just spoken that London has no case, and I cannot see any reason why the poor London ratepayer should be called upon to pay an excessive share of expenditure on national services than the poor ratepayer in any other district. We must look upon this matter from the general point of view of the ratepayer. I really thought that the Chancellor of the Exchequer intended to deal with this question, after his clear declarations upon it, but I cannot help reluctantly coming to the conclusion that, after all, the policy of the Radical party remains what it has been for many years, namely, one to exploit the grievances of the ratepayers for party purposes, whilst postponing all practical measures of relief. The hon. Member for Limehouse (Mr. Pearce) remarked what a pity it was that London Members did not unite upon this question. But how difficult he and his friends make that. I could give examples of how this question has been exploited for party purposes in the London County Council elections. There was put into my hands a pictorial address to the ratepayer, representing a man drowning in a river, and it was suggested that the only possible people willing to help him were the Progressive Radical party. The difficulty about arguing this case really is that the whole of it is admitted, If you ask whether the ratepayer is entitled to relief, the Chancellor of the Exchequer tells you very plainly that the local ratepayer has been promised consideration by successive Governments, and is surely entitled to it. If you ask whether the case is urgent, then again I cannot find any stronger language than that used by the Chancellor of the Exchequer when he said:—

"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."

If you ask whether the Government can find the money for this purpose, I would point out that the Chancellor of the Exchequer said in 1909, that he hoped by the proposals he was introducing, that he would be able to find money to relieve the local ratepayer. Is there need of further inquiry? There again the Chancellor of the Exchequer has told us in very plain words that there is no need of further inquiry. He said:—

"We have had Committees and Commissions galore, all taking evidence, all reporting, all making suggestions, and nothing is ever done. I therefore thought it was no use going through the farce of appointing more Commissions to take evidence and get conclusions which are not acted upon, but I thought the time had come for the Government to act upon its own responsibility."

I think one is entitled to ask why the Government could not act on their own responsibility and deal with this matter. The only reason that might be suggested against their acting is that the Government are not in a position to proceed at once, as the Departmental Committee is still sitting, or slumbering, or whatever it is they are doing. I think the deliberations of that Committee might be expedited. After all, is not the Departmental Committee a fraud on the ratepayers? This Committee has assumed quite a different character from that which was indicated when it was appointed. We were told it was to be a small Committee; it has proved to be a Committee of thirteen, which I think a large Committee. We were told it would be a Committee of experts, but it is a Committee which has to go and seek information elsewhere. We were told it was not to go through the farce of taking evidence; they have gone through the farce of taking evidence. We were told that it would be able to make a Report expeditiously; that was the very word used—and that there was no reason or excuse for delay. If the Departmental Committee had kept to their reference they really could have reported long ago. What, after all, is their reference? Their reference, first of all, was:—

"To inquire into the changes which have taken place in the relations between Imperial and local taxation since the report of the Royal Commission on local taxation in 1901."

Everybody knows that what has taken place has been to the disadvantage of the ratepayer. Surely it should not take many months to ascertain what are the changes which have taken place between Imperial and local taxation. Surely that could be done in a few months or a few weeks. [HON. MEMBERS: "No, no."] The reference goes on:—

"To examine the several proposals made in the reports of that Commission, and to make recommendations on the subject for the consideration of His Majesty's Government, with a view to the introduction of legislation at an early date."

If they had kept to that reference they could surely have reported without delay, but instead of doing so they have inquired into matters which were not reported upon by the Royal Commission at all, which were not recommended by the Royal Commission, and which were in direct conflict with the recommendations of that Commission. They have gone out of their way to inquire into what the Royal Commission described as "crude and violent theories." I quite agree you do not dispose of those theories merely by calling them "crude and violent," but surely those theories have been expounded by very competent people, and need no further inquiry. Indeed, if the Government want information upon those theories, they can find very competent people in the House to advise them. No further inquiry is wanted. Either one accepts those theories or one does not; either the Government holds that land value is public value, and may be taken away from the owners, and used for the relief of the rates or they do not. Either they and those associated with them hold that theory or they do not. I understand that they do not, and I think it would be better if we had a definite statement in respect of that subject. If they do not hold that theory, then they must give relief to the ratepayers on lines recommended by the Royal Commission, either by the extension or development of the system of assigned revenues, or, what most people prefer, a direct Grant from the Exchequer. There is really no need for further inquiry upon that point, nor is there any need to make further inquiry as to the recommendations of the Minority of the Royal Commission. The Minority of the Royal Commission undoubtedly suggested that if further Grants were made though the Exchequer a make-weight should be established in the shape of a direct contribution from owners. I have never been able to follow the theory of the make-weight and I cannot pretend that I am a great admirer of the Land Taxes, but if the Government adopt the theory of the make-weight then their course is perfectly clear. They should carry out the promise which they made to allocate half the proceeds of the Land Taxes to the municipalities. If ever there was a promise which assumed the nature of a Parliamentary bargain surely it was that promise. We had a very definite statement from the Chancellor of the Exchequer that the municipalities had a special interest in those Land Taxes, and he proposed to allocate half the proceeds to the municipalities. The Prime Minister emphasised that point. Speaking on 24th June, 1909, he said:—

"When you adjust the strictly local portion on any basis you like to choose, you will be more and more disposed to agree that the Government have come to a wise decision in dividing the fund between the local and the central authorities."

Surely one is entitled to ask why has the go-by been given to that wise decision, and why the proceeds of the Land Taxes are not to be divided between the Imperial Exchequer and the municipalities. It seems to me no further inquiry is needed, and that all that is required is that the Government should act on its own responsibility. I venture to support this Amendment, because it seems to me there is absolutely no case against it, and no reason for delay. The Government have made a definite promise, and we ask them at once to give effect to it.

I am sure the House is very pleased that this question of rating has been raised, and I myself only wish that the right hon. Gentleman who moved it had gone a little further than he did. His remedy seems to be to suggest that we should organise the disordered conditions of affairs rather than deal with the causes of the disorder. I think if he had gone a little further into the question of rating he would have seen that it is not only a question of the amount of the rates, but that it is a question of principle on which the rates are levied. We have heard a great deal from right hon. Gentlemen opposite about the encouragement of agriculture. I can fancy no system which discourages agriculture more than the present system of rating. Take the simplest case, and suppose a man were to take a piece of unused headland and were to break it into cultivation and to erect farm buildings, hay sheds, and various other things of that character, what do we find? We would find this system operating, that the more he improved the land the more he would be rated and the more he would have to pay, and, in fact, he would be steadily rated on his improvements. Subventions, such as the subvention under the Agricultural Rates Act, do not deal with the root of that evil at all. We ought to have a rating system on a totally different principle, and to exempt improvements from rating as far as we possibly can and to rate on the market value of the land alone.

We have heard complaints that British capital is driven abroad. We want to see British capital put into British industries, and not only in the agricultural industry but in the manufacturing and secondary industries, but there, again, our rating system operates in precisely the same way. Suppose, for instance, some one wants to extend his factory and to develop his workshop, or to set up a new industry, as soon as he has his building up and his machinery installed as a going concern, the money he has put into it is at once penalised by the rating system, which rates him not only on his buildings but on his machinery as well. In Scotland, I am glad to say, we have got loose machinery exempted from rating, but that is not so in England. In both countries the present rating system penalises manufacturing industries to an extent which everyone interested must recognise. Take one other point and I have done with this particular aspect of the question. If we take the case of housing we have the same difficulties, Apart from the difficulty of getting the land, as soon as the house is built and is a going concern so soon is that house rated, and the better the building the higher the rating, and the better the accommodation for the people the more it is penalised by this system against which I protest. I see some mention in the Amendment of the treatment of uninsured persons suffering from tuberculosis. Bad housing is one of the causes of tuberculosis, and it is a far better thing to remove the causes than that we should merely seek to remedy the defects.

What do we find, suppose a municipality or private individual wants to obtain land for the building of houses or anything of that sort? The rating valuation may be very low and merely nominal, but when a man who is going to develop it tries to get it he finds that although the valuation for rating is very low that the valuation for purchase may be very high. It is the experience, not only of individuals but of municipalities, not only in one part of the country but in almost every part of the country, that the high price that has to be paid for land frequently makes building an impossible commercial proposition. There are two things necessary, the first is that we should do all we can to unrate buildings and improvements of every kind, and, secondly, that we should rate land on its market value, whether it is used or not. When we do that we will bring a great deal of unused land into the market, and the more unused land we make available the more will be reduced the rates generally to their natural level. These things lie at the very root of improvement in our rating system. Various critics say, "Ah, well, but the land values may not be sufficient for these purposes." I wanted to know what the land values are. As far back as 1907 and 1908 the present Government passed through all its stages a Bill to ascertain the value of land in Scotland. I venture to hope that that Bill may be taken up again, and that at least we shall have the data, and the last people who should object to a measure of that sort are the people who base any argument on what they suppose the value is to-day. We want really to ascertain what those values are: Even if it could not be perfectly done, and if we could not afford to exempt improvements altogether from rating, I would still say let us do that as far as we possibly can. I believe when we have the data we shall find it can be done.

The Mover of this Amendment said he wanted to know new sources of national wealth to tap. He spoke of broadening the basis of taxation, and we speak of that and of broadening the basis of rating, but I venture to suggest broadening the basis of contribution. There are a good many just now who do not contribute their fair share, and I may take the case of owners of grounds rents in London and various other places, and owners of feu duties in Scotland. I know it may be said that because of the rating they are able to get less than they would otherwise get. To some extent that may be true, but fifty or sixty years ago when the rates were very small they still bore their quantum of ground rent, and very much so in London, and yet they did not contribute any further share to rating at all. In fact, they are not rated. I venture to think people in that position might well be called upon to join in a contribution to these local needs. I am very sorry that the Mover of this Amendment has laid such stress on the point of subvention. There are a good many people on this side who are tired of subventions and doles, and who do not believe that that is the way to meet these difficulties. We want to get a sound principle and system of rating, and we want also to get a sound system of Imperial taxation. I, for one, have never favoured doles and subventions, and I do not suppose I ever shall, because, in the first place, it complicates the relation between local and Imperial finance, and, in the second place, you at once land yourself in difficulties if you abandon the simple principle. When we have straightened our standard of rating and settled various other questions we should reallocate both the raising of finance as between local and Imperial authorities. That is the line, I venture to think, on which we could go. We have had far too many doles and subventions, and I venture to hope there may be an end to those. This whole question is of very great importance. Hon. Members have spoken for London, and my right hon. Friend (Mr. Munro-Ferguson) has spoken for Scotland. May I put in an additional word as regards Scotland? It is a well-known fact that during the last couple of years the population of Scotland instead of increasing has been diminishing. It is a well-known fact that this year emigration is beginning again at a rate which threatens to exceed the emigration in years past. We would not stand in the way of any of our people doing the best they can anywhere, but it is very important, if we want to realise the possibilities of our own country and if we want to give British labour and British capital a fair chance here, that we should do what we can to remedy those evils to which I have referred, and to enable our people to make the best use of their own country in all its industrial and housing aspects.

This Amendment draws attention to a grievance which I think is generally acknowledged amongst all sections in this House, and that is the grievance which results from casting certain services which may be considered to be national in essence on to the counties. The Amendment refers to the Report of the Royal Commission on Local Taxation. That Commission reported in favour of certain services being regarded as national and being financed very much more than at present from national funds. I desire to find out to what extent those services are now met by way of the rate and what this Commission Report therefore involves and the recommendations of which find support from right hon. Gentlemen opposite. For police and police stations in England and Wales last year a sum of £3,120,000 was raised by way of rates, and for the support of lunatic asylums a sum of £980,000. For education there was a sum of £14,260,000, and for highway and bridges £12,000,000, and for Poor Law relief and the support of pauper lunatics, £11,760,000. Those are services which the Commission reported ought to be transferred to the National Exchequer, and which are now financed from the rates to that extent. That virtually means that a revenue of about £40,000,000 now made by way of rates should be transferred to the National Exchequer.

There is a general agreement as regards this matter of the transference of these burdens, now locally borne, to the National Exchequer, and the reason is very clear, because the result of calling upon localities to bear these burdens, such as poor relief and education, is this, that the heaviest burden is naturally cast upon the locality least able to bear it, while the lightest burden is cast upon the locality best able to bear it. Obviously where the poor live there will be the most children to be educated by the public authority, and the most poor to be relieved. Where the rich live there will be fewer children to be educated, and perhaps no poor to he relieved. Obviously that naturally results in the heaviest burden being cast on the locality least able to bear it, and the lightest burden being cast on the locality best able to bear it. Hon. Members who have spoken have referred to the difficulties in Scotland, in London, and elsewhere. I desire to point out how this system of casting these national burdens upon localities in the provincial town of England bears upon the borough which I have the honour to represent. In Hanley the rates are 11s. 3d. in the £. That extortionate levy is largely due to the burden of education, and the rates are rising in consequence of the increased demands for educational purposes. It is a borough almost entirely inhabited by working men. The rich men who have made money out of industry in the place take good care to go outside the borough boundary and live, under more pleasant conditions, in districts which are rated very much lower than is the borough of Hanley. Consequently this enormous burden is thrown upon the workers, who are not getting very high wages, and the result is, as I have found out from careful inquiry and calculation, that you find a man earning £1 a week living in a cottage, and that very miserable abode is assessed at £8 a year, which means that, with the rate of 11s. 3d. in the £, this man is paying from £4 to £4 10s. a year in rates. I reckon that that man is paying what would be equal to an Income Tax of 1s. 6d. to 2s. in the £. Now that is a very grievous burden indeed, and it results from this system of casting these national burdens upon the localities.

Such conditions of affairs exist throughout the length and breadth of the country, and the consequence is there is a very general agreement that the time has come when these national services should be financed wholly or very much more than they are at the present time by the National Exchequer. The controversy in regard to this agreement only arises when we come to the question as to how the revenue is to be found to provide for the thirty or forty millions of taxation which ought to be transferred from the local authorities to the National Exchequer. After all, that is a matter for the Chancellor of the Exchequer to deal with. We are at the moment simply putting forward what are the grievances of the localities and the municipalities in regard to this important matter. The right hon. Gentleman opposite (Mr. Hayes Fisher) complained of the delay which is taking place in the solution of this problem, and he referred to the delay in connection with the Report of the Departmental Committee. I think the reason of that delay is very obvious. Only one solution has been brought into the field. There is only one proposal which can at all be maintained by argument as to how the revenue shall be found when the transfer of these enormous burdens takes place from the local authorities to the National Exchequer. No argument has been brought forward that in any way can be substantiated except the proposal for an Imperial tax levied upon the land of the United Kingdom, Vague suggestions have been made for the finding of this money by way of an Income Tax. I do not, however, think that any definite proposal or any proposal which has any sound support whatsoever has been brought forward for the raising of thirty or forty millions of revenue by way of the increase of the Income Tax. Therefore the cause of the delay is the one which I have pointed out. Only one proposal, or, at any rate, only one sound proposal, has been brought forward, and that is for the raising of this money by way of a National Land Valua- tion Tax, and that National Land Valuation Tax we cannot get until the valuation of the land in the United Kingdom has been completed. Whilst I am largely in agreement with the wording of the Amendment, I regret that it does not go further and say that we should have had from the Chancellor of the Exchequer some statement as to the progress of that valuation, which is the only means by which he can fulfil the pledges he and his colleagues have made in regard to this matter.

My concern in regard to the delay in this valuation largely arises from a fact which I think we should face, and which the Chancellor of the Exchequer should face, and that is that his valuation when it is complete, if it is completed on the line on which it is going, will be absolutely useless for the imposition of a National Land Valuation Tax, because the proper valuation is not being made of agricultural land. As regards agricultural land, improvements and other expenses are being included in what virtually may be regarded as the site value. Until these improvements are excluded from the valuation, the Chancellor of the Exchequer will not be able to meet this difficulty on the lines on which a large section of the supporters of the Government are demanding that it shall be met. He cannot find in his own party any section which is urging that this difficulty should be met on any other lines except by these means, namely, the imposition of a National Land Valuation Tax. I would like to support what the hon. Member who has just sat down said. There is another reason why this method of dealing with the land problem has such large support in the country, and it is not only because it meets the difficulty of the adjustment between local and Imperial taxation, but it also deals with that other grievance for which a solution must be found—the grievance which arises from the taxation of industry. The Chancellor of the Exchequer has told us recently about the housing problem in the country and of the horrible conditions under which the agricultural labourer lives and his miserable rate of wage. It is absurd, to my mind, to talk about the difficulty under which the agricultural labourer lives and labours if, at the same time, you continue that method of taxation which results in this, that whenever a man erects a cottage for an agricultural labourer to live in round comes the assessor and proceeds to levy a heavy tax which the unfortunate agricultural labourer, earning 14s. a week, has to pay. I have been examining into the conditions affecting agricultural labourers, and I find that where an agricultural labourer is earning, say, 14s. a week, he pays a rate of as much as 10d., 11d., 1s., or 1s. 1d. a week.

I say to the Chancellor of the Exchequer that it is an excellent thing to bring forward these grievances and expose the wrong that exists, but it is about time we had more definite statements from him and some assurance that the problem will be met along the lines of taxation and rating reform. This question—and I speak with some feeling on this matter — is brought prominently forward into the politics of the day with the support of Cabinet Ministers on certain specific occasions. During the past year, whenever a contest took place in a democratic constituency in which a Labour candidate came forward as well as a Liberal candidate, then the Liberal candidate put this question of the taxation and rating of land values very conspicuously in his programme and asked for the support of the workers as being the best policy for them. That policy had then, so far as we know, the assent of the Government and of the Liberal party. Under these circumstances I would like to have some assurance that this is not a policy solely for three-cornered contests and that the memorial which was presented to the Government on this question is going to be embodied in the legislation of the near future.

The two last speeches to which the House has listened so attentively have been speeches of great interest. No one can complain that when an Amendment to the Address like this is before the House hon. Members who feel very strongly the value of remedies in which they believe should state very clearly what in their opinion are the great disadvantages and inequalities of the rating system, and impress upon the House the necessity for reform. I hope the two hon. Members will not think me disrespectful to them or that the House will think I am anxious to divert the Debate into other channels if I do not enter into a discussion of high political theories or indulge in the pleasure of looking into certain electioneering methods. I wish to confine myself to the point, which is an exceedingly grave one, as to the present conditions of local authorities in regard to the discharge of their onerous duties, and how imperative it is that some relief should be given to the ratepayers in those districts long before the time suggested by my hon. Friend (Mr. Outhwaite), when another and a better valuation will be completed and when thirty or forty millions of taxation will be taken from the shoulders of the local authorities and put upon the Imperial Exchequer.

5.0 P.M.

However desirable these things may be, they are not going to be done within the next year or within the next two years. We want something to be done at a much earlier date. It is really, I think, blameworthy on this Government, as on previous Governments, that more has not been done to meet the serious position which has arisen, and to relieve those local authorities up and down the country, in London, in the great towns, and in the country districts, who are trying to carry out the decisions of this House by administering the law. It is no exaggeration to say that the work of local administration, which is none too easy at any time, has been made far more difficult of late years. On the one hand, old duties have been placed upon local authorities for a long time, duties which, as regards the administrative counties, were defined in the County Councils Act of 1888, and even then promises made by the Government were not redeemed. Whenever there was a question as to whether a certain proportion of the cost of police, roads, or anything else was to be borne by the Imperial Exchequer, it invariably happened that in every bargain that was struck it was struck to the disadvantage of the locality and to the advantage of the Treasury. Since then, by all Governments in turn, more duties have been placed—I will not say wrongly—upon local authorities, duties not only of the old kind of maintaining in efficiency the police, the asylums, and the roads, but new duties of quite a different kind, such as those in regard to education and public health, which are constantly and necessarily growing, and which were intended to grow when they were put upon local authorities, and which, because they are of that growing character, raise in a more acute form than ever this question of the relation between local and Imperial expenditure. We have been promised from time to time definite forms of relief. We welcome the appointment of this Committee, and, however trenchant may be the criticism made by hon. Gentlemen opposite—whose political exigencies have to be thought of—I say that that Committee in itself is a good thing, and I believe hon. Members will agre with me in that. I desire to join in pressing for some Report from that Committee. As a means of inquiring into a very important question of national and local finance it has been of the greatest value, but there is danger of it being turned into an engine for delay, and it is of the utmost importance that we should guard against that. May I briefly touch upon two points, both of which I quite agree will not be finally solved until you really do have a complete dealing with this complicated problem, and which certainly will not be solved even then unless you have great changes in the incidence of rating, and unless you have many matters to which my two hon. Friends have referred dealt with in a spirit of courage? In these two points a great deal could be done immediately if the Exchequer saw their way to give a Grant of some substance in respect of both of them. One is the question of higher education, especially in the English counties. The County Councils Association, who have their reports from every county in England and Wales, know how exceedingly difficult it is with the present feeling of the ratepayers, and with the present burden of the rates, to get enough money raised locally for those duties of higher education, which are not compulsory to the extent which the duties of elementary education are, and yet which everybody knows, if neglected, are a real injury to the growth of young English people in all parts of the country, and put our country to the gravest disadvantage with competing countries. Recently in the county in which I am allowed to do a little work for education, we have had two projects before the county council.

The one was to establish a farm school, together with other matters of agricultural education, and the other was the creation of an institute in connection with the boot and shoe trade, which is the principal trade next to agriculture in the county. In the first case a Grant from the Board of Agriculture of something like half the capital cost was offered by my right hon. Friend the President of the Board. What was the result? Although the projects involved an expenditure of some two or three thousand pounds by the county, it was got from committee after committee, and from the council itself, with comparatively little difficulty. With regard to the boot and shoe insti- to which there was no corresponding Grant possible from the Board of Education, or, at any rate, none available, we have the greatest difficulty to get the sanction of the representatives of the ratepayers to the experiment. We have now to wait months, or even years, before we are able on financial grounds to do what would be of the greatest possible value if the quality of that great trade that I refer to is to be kept up in the future, with benefits, not only to the locality, but to English commerce generally, and the trades and persons wherever they choose to go. What we ask in connection with this Debate is that there should be set aside this year and in this year's Budget additional money available for education Grants, especially for higher and technical instruction. These raise no question of religious or political controversy, and the Grants are absolutely necessary if the duties of the local authorities are to be carried out with the necessary amount of local support and sympathy from the public, among whom the institutions are placed.

The other instance I venture to give is this: A question of the relationship between local and Imperial expenditure in regard to the roads. The traffic on the main roads of this country has been revolutionised in the last thirty years. Thirty years ago the traffic of those roads, which are really the great arterial roads of the country to-day, was almost entirely local. The vehicles of all kinds that went along them, even of those which tried their surfaces the most, and which involved the greatest wear and tear, were, nine-tenths of them, vehicles from the county area in which that section of the road was. The development of motor traffic has altered all that. In many parts of England now the bulk of the traffic along those roads, so far from being predominantly local in any sense, is now overwhelmingly general. You are getting from year to year an increasing amount of traffic, which formerly went by the railway, going now by the roads, which are maintained, under the old laws, at the expense of the ratepayers. We may see any day in any part of the country my right hon. Friend the Chancellor of the Exchequer, and my right hon. Friend the Attorney-General going through at a vivid speed, the greatest possible, with due regard to their conscientious devotion to the speed limit. In their wake come all kinds of fashionable and influential persons, who appreciate fully the trunk roads of this country for purposes of pleasure as well as of business. What do we say in regard to that? We say whether this Committee has reported or not, whether we are able or not to get any readjustment of the law of rating, there is a case here and now made out why the expenditure on this special type of roads, which I venture to call trunk roads, should not be as it is now more than half borne by the locality, but that three-quarters of the cost should be borne by the Exchequer and only one quarter by the locality, with most certainly the added check on efficiency of special inspection on the part of the Board of Agriculture or the Government Department most appropriate. That is a matter which can be attended to, if the Government think fit to Budget for it, in this Session of Parliament. It would be a very direct and none too adequate acknowledgment of the changed conditions of the road traffic in this country.

I desire to speak with respect and appreciation of the work that has been done by the Road Board in regard to many of the roads of the country. But the Grants made by the Road Board are almost, entirely made for the benefit of the persons who use the roads by this non-local traffic. What we also say is that the ratepayers on whom is placed an additional burden in consequence of the traffic which is not local should have the same claim with the users of the road for recognition and considerate treatment from the Treasury. I apologise for keeping the House so long on what are really details of these questions, but I do assure the Government that this is a matter in which local authorities of all kinds are of one mind. The friction caused by the pressure of the rates has hindered good administration in all parts of the country. Just as no Government can be efficient that has not got adequate support in this House, so no local administration can be efficient which has not got the real sympathy and support of the community in which its work is done. That sympathy and support is largely impaired, and to a great degree withdrawn, because of the present state of the rates, and the present unsatisfactory relations between local and Imperial expenditure in these matters. Therefore, not merely on the ground of finance, but on the ground that I am sure, the Government desire to take into consideration the conditions of good local administration as well as the conditions of good Parliamentary work, I make my appeal to the Government not to allow this Debate to close without giving a definite and prompt hope of some appreciable amelioration of what is a universal grievance.

I am glad to find that all the speakers have been practically unanimous in pressing this Amendment upon the Government. I hope the Government will accede to it. It will please their own supporters, and will also satisfy hon. Members on this side. But I am afraid that in the form in which the Amendment is the Government will perhaps not be in a position to accept it. I do hope, however, that they will really pay respectful attention to the many very weighty arguments which have been advanced this afternoon. I agree with a great deal of the speech of the hon. Member who has just sat down, but I cannot altogether agree with him in his concluding remarks on the Road Board. Take the case of London. The Road Board has received over £400,000 from the ratepayers of London. Of that money only £4,000 have been spent upon London. Something like £80,000 have been spent upon Ireland. So that we have really got nothing to be thankful to the Government for in connection with the proceedings of the Road Board. I am glad to see the hon. Member for Limehouse in his place, because he has told us that the London Members were a very powerful body. We number sixty here; if we joined hands we could bring any Government to its knees! It is not our fault on this side that that has not been done long ago. It is the fault of hon. Members opposite. In 1896 they brought forward a Motion on the King's Speech for the further equalisation of the rates in London. Nothing has been done since that time. They have much more influence with the Government than we have. Why have they not pricked the Government into action or allowed the Government to treat London as has been done? The right hon. Gentleman the Member for Leith Burghs told us, in his important and interesting speech, that, after all, London grievances were not very large compared to other parts of the country. This is a general Motion, and I quite admit the way the rest of the country has been treated in respect to the allocation of Imperial taxation and local burdens, But our case in London is stronger than anywhere else.

No.

My hon. Friend says "No." He will agree with me in this particular, that our case is an extremely strong one. In respect to educational services London ratepayers pay 70 per cent., as against the Government subvention of 30 per cent., whereas in the other great county boroughs I think the proportion is half-and-half—50 per cent. paid by the local authorities, with 50 per cent. from the Government. That is one of our great grievances in respect of London. The hon. Member for Perthshire and the hon. Member for Hanley drew attention to their remedy of the taxation of land as the method in which the money required by this Amendment could be raised. The hon. Member for Perthshire pointed out what a hardship it was that whereas the rates on vacant and idle land were very small, that when a man took the trouble to put a house on the land that industry was taxed at once, high rates being put on. But surely the hon. Member forgets that when a house is built on land there are certain duties in connection with it cast upon the local authorities, and these have to be paid for. In the first place, the district has to pay its proportion for the police. Again, it is presumed, in these days of stringent by-laws from the Local Government Board, that the house has to be well drained, sewers put in, and so on, that public lighting has to be provided. Last, but not least, it may be presumed that the occupants of that house will have children who will require to be educated. All these things have to be paid for, and for all these reasons it is quite apparent that the tax upon the house is not upon industry, but is to go towards services rendered to the occupants of the house. These things have to be paid for out of the rates. I think that ought to dispose of that part of the question.

Then the hon. Gentleman says he never was in favour of subventions from the Government to local authorities, but there again I think he totally misunderstands the nature of the case. What we are asking is a proper payment by the State for national services rendered; it is not a question of mere subvention or doles. The local authorities do certain national duties and we on this side of the House are of opinion that the Government of the day does not bear its proper share with the local authorities. Year by year the burdens are heavier upon the local authorities while the Government is doing less. While we are on the question of the taxation of site values, I am sorry the hon. Member opposite did not go a little further and try to get from the Government some explanation which I hope we shall get upon this question. I rather wondered why there was no reference in His Majesty's Gracious Speech to the taxation of site values. There has been an interesting election recently for the London County Council. The Postmaster-General, the President of the Local Government Board, and the Secretary for Scotland were running about all over London like so many rabbits preaching and advocating a tax upon site values, and they actually told the electors that if only the Progressive party were returned His Majesty's Government would bring in a measure to tax site or land values. I do not know whether it is as a result of that election that this great measure has not appeared. I am glad the Chancellor of the Exchequer is here, and I may say we shall be very glad to know why Ministers were allowed to range themselves beside the Progressives, preaching the taxation of site value, while there was no indication in His Majesty's Speech of any such measure. I say their action was a fraud and a delusion and a snare upon the ratepayers of London, and we are entitled to know how His Majesty's Government stand with regard to the matter. Judging by the speeches of hon. Gentlemen opposite we on this side of the House are not the only people who want to know something about the action of His Majesty's Government. We are not concerned about the domestic question on foot between Radicals and Liberals, but the hon. Gentleman opposite has raised a very important question, and if I were he I would press the Chancellor and the Government for an answer so that we may know where we are upon this matter.

Passing from that I should like to say a word about the incidence of taxation, and first I should like to say one or two words about London. In London, if something were done to equalise the Poor Law, some step would be taken in that direction. At the present moment 70 per cent of the taxation of London is equalised by Grants from the central authority, and I do not think we would object much if the Poor Law was equalised, but it has become a large question as regards the country where the burden is getting to be too great altogether upon the rates. Session after Session Ministers of the day come down to the House and lay new burdens upon the ratepayers, and do not make any corresponding advance. For higher education and elementary education new provisions and regulations are constantly made by the Board of Education. More drastic remedies are called for, such as fewer pupils in classes, necessitating more expensive provisions in the schools. These sort of things are constantly being done, and year after year we are told the matter is urgent and requires the attention of His Majesty's Government. What do they do? They palm us off with a Departmental Committee, which as far as I can see, is taking its time to report, not because it has not got evidence already, but because it is giving the Government every opportunity of delay to make up its mind. I ask the Government in all seriousness—I do not suppose for a moment they can cover the whole of the ground—but at all events to make some step in advance. Perhaps the Chancellor of the Exchequer will say he has given us something last Session for medical treatment. He has given a very small amount, and I ask the Government in all sincerity this Session, if they cannot make a step in advance, and if they cannot, complete the whole thing, at least do something to relieve the growing burden upon the ratepayers.

I did not intend to intervene in this discussion, because I should rather hear from the Chancellor of the Exchequer what his views are with reference to this problem, the urgency of which has been urged upon us from both sides of the House. There is an unanswerable case for the ratepayers. If the case is urgent for transferring certain burdens from the ratepayer to the taxpayer, it is surely because of this fact that the incidence of Imperial taxation, imperfect as our system of taxation may yet be, is much fairer than the incidence of local taxation. When, therefore, we transfer a burden from the ratepayer to the taxpayer we do really perform a good and wise act of government. I very earnestly hope, therefore, that we shall hear something from the Chancellor of the Exchequer with regard to the pleas of urgency made. I have been led to intervene for a few moments in this discussion by what has been said by several of my Friends, the hon. Member for Hanley and others, with regard to the taxation or rating of land values. I understand what is called the single tax is unpopular, and that is not surprising; but it does surprise me that hon. Members who repudiate the idea of the single tax should rise and advocate the rating of site value as a remedy for the grievances of the rate- payers, because if one is convinced that the whole of the local rates should be placed upon land values surely there is even a stronger case for the imposition of Imperial taxes in the same manner! Of course, as we know, many local burdens could hardly be called taxation at all. They are payment rendered for direct service. If, therefore, there is a case for charging these solely and entirely upon land value, how much stronger is the case of giving an Imperial burden exactly the same incidence! It seems to me that the Government, if they are going to consider this question of rates as a whole, must have regard both to the origin of the rates and to the purposes of the rates.

What is the origin of the rates? To go back to the origin, we find they were intended to be an Income Tax. It was not until somewhere in the forties that by an Act included every year in the Expiring Laws Continuance Act the inhabitants and occupiers of districts are exempt from contributions as individuals to taxation for local purposes. There is a curious parallel in this matter to which I very strongly direct the attention of the House and the Government. In the reign of William and Mary an Income Tax was imposed for Imperial purposes. It was supposed to be levied upon all forms of property, or rather upon individuals owning all sorts of property, and also upon personal incomes. What happened? At that time the assessment on personal property was very difficult, and therefore it came about that what was intended to be an Income Tax became in effect solely a tax upon realty. There we have a perfect parallel with the case of the rates. What came to be called the Land Tax was reimposed in various forms from period to period until at last Pitt cleared up the matter by making the remains of these so-called Land Taxes, which was intended to be an Income Tax, a fixed charge. Pitt reimposed the Income Tax of our time upon a better assessment, including, as was the intention in the time of William and Mary, not only realty, but personalty. Here we have an historical parallel and an historical example to which I direct the attention of my right hon. Friends. The local rate, intended to be a local Income Tax, failed to become what it was intended to be.

At the present time we have our rates assessed solely upon individuals in relation to one particular form of property. What is the result? This country, of course, has passed through the Industrial Revolution. It has passed from the conditions of an agricultural country to that of an industrial country; it has become a wealthy country in the process, and yet this wealthy country raises its local taxation just as if the Industrial Revolution had never been accomplished. What has been done for Imperial Income Tax has not been done for local Income Tax, yet hon. Friends of mine, in speeches whose earnestness and sincerity cannot be denied, plead not to go forward to the real reform, but to go backward and to levy our rates even more upon one form of property. What is suggested is not reform, but something in the nature of a retrograde movement. As a matter of fact, that kind of income would not stand the test. My hon. Friend the Member for Hanley spoke of the popularity of it in the country. If you go up and down the country telling people there are £300,000,000 or £400,000,000 which can be got front a sort of Tom Tiddler's land, from which you can distribute largess, you will no doubt find a great number of people to believe you, and it will be very popular, but if it is ever put to the test of experience it will be found that the alleged hundreds of millions are figurative.

It is particularly unfortunate that this historic parallel has not received as much attention as I think it deserves. The Commission of 1901 dismissed the subject in a few paragraphs as impossible. In Germany and other countries this principle has been carried out as a practical measure, and yet we find a Commission in our own country dismissing the matter as quite impracticable. I should be the last to suggest that we should abolish local rating as we know it to-day, and change it into a sole Income Tax system, because if we did that, we should do an injustice to many individuals. What we ought to do is to establish something on the lines of what Pitt did, and impose a local Income Tax in relation to all new burdens. By doing that we should make the incidence of taxation a truer one, and we should help to lay the burdens upon those best able to bear them. I would ask my hon. Friends who are doing so much to preach the doctrine that the rating of land values means not only the raising of large amounts of new income, but who are also commending it as a policy which would have very great social effects. [An HON. MEMBER: "Of course it What social effects would it have? Let us con- sider what we are doing. My hon. Friend spoke earnestly on the housing question, and references have been made to tuberculosis, but what will the rating of land values do? I heard a speech made in London in which the speaker talked of the 12,000 acres of open spaces, and he told his audience that the rating of land values would fill them up which is precisely what we should not do.

Anyone who has considered this subject will see that if you rate or tax any particular commodity you restrict the use of that commodity, and that is as true of land as of any other commodity. Even the Minority Report, which reported very gingerly in favour of the taxation of land values declared that you would have to be very careful about gardens and open spaces, and you would probably find it necessary to exempt them. That is only one of the things we have to consider. Surely my hon. Friends must consider the problems of leaseholds, leases, and sub-leases, and other difficulties which have been solved by the advocates of this policy in a dozen different ways, none of them agreeing with the other. There is the difficulty of mortgages, and this problem is all the greater in view of the fact that a large number of houses and business premises in this country are built with borrowed money. What is the suggestion of my hon. Friends in this respect? Let them make up their minds whether they are going to rate mortgagees or not. I submit these remarks to the House in the earnest hope that they may do something to induce the Government to tell us what is the state of their mind on this important subject. It is a question which cannot brook delay. It has brooked delay a long time now, and the time is approaching when we must clear up the muddle, and I hope the Government will not dismiss as impracticable, without very serious consideration the question of imposing a local Income Tax.

I am afraid that I approach this subject in rather a pessimistic spirit, because it is nearly twenty years since I was a member of the Royal Commission which was appointed to find a solution of this very difficult problem as between local rates and Imperial taxation. I am bound to say as regards both sides of the House, so far as the Front Bench is concerned, nothing has been done from that date to this to carry out on any sound principle the very important matter suggested by the Royal Commission, and if we have done anything we have gone in a backward direction. The hon. Member who has just sat down exposed the fallacy contained in the suggested single tax or tax upon site values, and his exposing of that fallacy is exceedingly valuable. The hon. Member has traced the history of this question from the time of Pitt and as regards modern rating it is fair to take Pitt as the starting point for our modern life and conditions. On the industrial side the hon. Member pointed out, what everyone must admit who has had practical experience and does not talk really from a theoretical standpoint, that if you are going to put all the burdens of your rates and taxes on occupied land and other land, you must affect the social difficulties which exist at the present moment. What could be worse than to deprive our towns and such places as London of their open spaces? There is no social advantage which is of greater importance for the benefit of poor Londoners than the open spaces.

What has been suggested would put an unfair burden on undeveloped land. I do not mean land dedicated to public purposes and open spaces, but land which is capable of being built over and which has not been built upon. I would ask the Chancellor of the Exchequer whether it is not the result of his experience that the effect of putting this exceptionally additional burden upon undeveloped land has not been to retard the housing problem, and diminish considerably the ratio of building that was going on for the benefit of the housing of the working classes in our large towns? I think all the statistics point in that direction. I am sure the right hon. Gentleman will agree that if you look at the statistics, and if you consider the number of houses for the working classes which have been constructed since the 1909 Budget was introduced, it will be found that the ratio of increase has been considerably diminished as compared with preceding years, and that is a very serious matter. It is always very popular to advocate the putting of a tax upon somebody else and not upon yourself, and you can always get a cheer for that, but I think the hon. Member opposite is quite right in giving the go-by to mere theoretical statements of that kind, and in seeking to inquire what the result of a proposal of this kind is likely to be. If the Chancellor of the Exchequer considers what I am saying is worth replying to, perhaps he will answer the allegation I am making, that at any rate since the undeveloped Land Tax has been made legal it has had the effect of intensifying all the difficulties of the housing problem in our large towns; it has put an additional and exceptional burden upon the building trade, and has therefore discouraged a branch of industry which under no conditions has been exceptionally remunerative.

Of course, it is part of the business of the builders to select a suitable site, and a great deal of the business ability of the builder consists in selecting an appropriate site. Supposing the builder does not do this, and selects a site which does not develop. In that case the builder is enormously taxed because he has bought property not suitable for the purposes to which he desires to dedicate it, and that is the hardest form of taxation you can imagine. That is a liability which no one will undertake if he can possibly avoid it. Take the other position. Suppose a builder buys a piece of land with great business skill, and the value of that land immediately rises because it has been well selected as regards the site of the houses, which are immediately taken up. Then he is met by the Increment Duty, and therefore what would be his legitimate profit in the case of success is taxed off, whereas in the case of failure he is subjected to a special and exceptional tax of an enormously heavy and detrimental character. Under these circumstances one does not wonder that we get this result.

The hon. Member who has just sat down rightly calls attention, as every business man would, to the difficulty in the case of mortgages. It is not so much a question of dealing with mortgages, because now you cannot get mortgages. You may go to the bankers who were finding the money in the old days for the builders, but they will not advance the money. This has never been a very profitable matter for the bankers, because the building trade was always speculative. Now the builder cannot get advances, either by mortgage or otherwise, from the bankers to enable him to carry on one of the most beneficial businesses for society, that of providing proper housing for the working classes in our large towns. From whatever point of view you approach this section, you arrive at this result: First of all, that the form of the tax is in itself reactionary against the spirit of Pitt, as the hon. Member opposite put it, and when you come to inquire into its operation and effect, putting aside these mere theoretical expressions, you find you are throttling in a most detrimental way a development in that nature of building for the working classes which ought to be encouraged, and which everyone who desires to see social improvements would wish to encourage in every possible way. Let me deal with another matter which was also mentioned by the hon. Member who spoke last. He said, "Is not the ratepayer the same as the taxpayer?" That is not really true when we come to the question of the incidence of local taxation.

I added that.

Yes, but let me emphasise a little bit what I mean, because it is from this point of view, I think, it is so important to introduce the right principle, and I hope the Chancellor of the Exchequer will consider it. It may roughly be taken that a penny on the rates only gives a third of what you would get from a penny on the Income Tax. We draw from that the most important deduction that when you put a charge on the rates, and not on the National Exchequer, you exempt two-thirds of the people in this country who are obtaining their income either from industrial sources or to a very great extent from investments abroad. When you come to national problems, apart from mere local problems, although they may be locally administered, it has always appeared to me a most monstrous thing, for which there is neither excuse nor argument, that two-thirds of the property of this country should be exempted from that taxation to which, if it is for a national service, it ought properly to be subject. We have sometimes considered this too much from the point of view of the ratepayer. I think the ratepayer is very hardly treated, but I want to consider it also from the other Point of view, particularly having regard to what has been expressed from time to time by some Members on the opposite side of the House. How, for instance, in such a matter as education can they, when putting a large amount of that charge upon the rates, justify exempting from taxation in respect of a matter of that kind two-thirds of the realised property or income from abroad, as is the case at the present time? I have never heard any excuse for that proposition. Of course, I feel very strongly what I may call the ratepayers' burden, but I feel much more strongly the injustice and inequity of not making people contribute in proportion to their means towards these great national services.

I do not believe you will ever get any satisfactory solution of this question merely by tinkering with it. You must grapple with it at the foundation. You must make up your mind clearly what ought to be a local charge which, generally, is that which is beneficial in the locality, and what ought to be what we on the Royal Commission called a national and onerous charge. You must as regards the national and onerous charge make all sources of income in this country contribute in proportion to their ability. I know there is a different principle when we come to rating, but when you are dealing with a national charge, and dealing with it as an onerous charge, a charge which has to be borne by the country for national purposes and objects, then I say the real test of the imposition of taxation under those conditions is the ability of the person to bear the burden that you put upon him. Immediately you bring that test to bear, you cannot justify, and I am sure the Chancellor of the Exchequer will not attempt to justify, putting these heavy national charges upon a particular form of property from which the ratepayer contributes, although it is perfectly clear that form of property does not get any special benefit whatever as regards these particular burdens and these particular charges. It is quite true, and people are apt to forget, that what we call "personal property"—I think that is the largest term—is only exempted from local taxation in this country owing to an Act which has been incorporated in the Expiring Laws Continuance Act each year. Up to about 1840 this great distinction which now exists in only having certain property subject to rates, and having income subject to national charges did not exist. The hon. Member is quite fair about that.

May I say why that was, and give two illustrations. We know in matters of money Scotch people are a careful people and quite right too. A Scotch judge went for his holiday to a country district in Scotland. When he was there they rated him on his income as a judge. He said, "This is rather a monstrous thing. I have come down here for my holiday, and you rate me on my income as a judge." That Scotch judge made his voice so largely heard that it was one of the incidents which led to the passing of this Act in order that the incidence should be on real property only. I do not know whether the Lord Advocate who on questions of land taxation pronounces what I should call the most outrageous propositions has the same cautious views as this Scotch judge or as Scotch people generally. May I also say one word as regards the history of the change in England. It was not in old days exactly real property, but what was called "visible property," which was taxed, and a case was brought as regards a farmer and a manufacturer, and it was held by Lord Denman—I have not looked it up, but I think I am right—that you must rate the profits both of one and the other in order to get equity of rating. A tremendous fuss was raised by the industrial interests in this country, and a Bill was passed to relieve them for one year from the effect of that decision, but, unfortunately, I think because no one has really attempted to grasp this principle, that Bill, which was intended to be quite temporary, has gone on from year to year with the disastrous result that, instead of going in the industrial direction, as the hon. Member has pointed out, and as other economists thought was right, you had a reactionary policy as regards the ratepayer, and you went back to the old principle of the Land Tax. Unfortunately, from that day to this the remedy has never been applied, and the injustice then constituted has been aggravated and increased to the detriment particularly of the rural districts.

Let me say one other word upon this distinction between local and national services. We, in this House, quite properly determine what is to be the level of our national education. Is it not for the State to determine how they desire the children of the people to be brought up, and if we in the House of Commons lay down quite irrespective of local needs, a general level of national education to be observed in all portions of the country, ought we not to pay the bill from the National Exchequer? If education is one of the great means of social progress, how can you justify allowing two-thirds of the industrial property coming from investments abroad, or from ordinary industrial profits in this country, to escape from bearing that portion of this national service which they ought to bear in proportion to their wealth and ability. That is exactly the principle laid down by the hon. Member opposite, and I hope, when the vote comes, he will carry out his views by voting for the Amendment. May I give one other illustration? It is again an illustration from the Royal Commission. I do not know whether the Chancellor of the Exchequer has read a really interesting history of rural roads, published by Mrs. Sydney Webb, which bears out the view we took on the Royal Commission. It is quite true that in the old days a road was, practically, purely a local matter. There was, in fact, hardly a road at all. That is not true now. Our main roads are not county matters; they are national matters, and, being national matters, you ought to put the burden on the National Exchequer. Let me say how exceptionally hard it is as regards a rural district such as that in which I live in the neighbourhood of London. All the small tradespeople one would wish to encourage in the smaller towns and villages near London are being competed with to-day by vans sent down from the central shops, such as Whiteley's, in London, These people use the roads for industrial purposes more than the local people, and they do not pay a penny directly for their upkeep. Nobody desires to destroy every little local tradesman in the country, and they must be fairly treated. You must deal with this question whether a charge is for national and onerous purposes or whether it is merely for local purposes which give a benefit in a particular district on principle.

6.0 P.M.

There is only one other matter to which I wish to allude, and it is one of great interest. I want to say a word with regard to land taxation in connection with rates. I think that has been misunderstood. I admit I was on the side of a Majority Report of the Royal Commission on local taxation at the time, but I have come round since on further consideration to think that the Minority Report was right on this question. Their report, of course, was wholly inconsistent with taking these land improving values and matters of that kind for national as distinct from local purposes. The whole basis of the Minority Report, and it is the proper basis on principle, was that if you are to have these exceptional charges on land they must be not for national purposes, but for local purposes. The Chancellor of the Exchequer himself acknowledged that in the first instance. His idea was that it should be half and a half. The idea of getting it all into his own pockets was, however, too much for him. I think he was quite wrong. I say that with all courtesy to him. If he had taken exactly the contrary view, and, having got what he wanted for his National Exchequer in some other way, he had said, "I made a mistake, and I will give all the money I get from my Land Taxes for local purposes, and local purposes only," then, so far, he would have done the right thing; but he did exactly the wrong thing, and, not only did he do the wrong thing, but by doing the wrong thing he made the ultimate solution much harder, because he has taken away, and deliberately taken away, what ought to be one of the sources from which particular localities could get without further burdening the ratepayers with some assistance as regards the heavy charges they are under at present. Let me point out what I mean by that so that I may not be misunderstood. Take the question of what is called site value. I have in my mind exactly what is said in the Minority Report of the Royal Commission. Suppose you have a site value which has grown, through either industrial or other local development, which has grown owing to the growth of the locality where that particular land is situated, where there has been development, and new streets have been formed, becaue of the advanced policy of the local authority in that particular district. The meaning of the Report upon that is this, and I do not propose to contest it. Suppose under those circumstances, owing to the operation of local development, or very likely from the expenditure of local rates, the site value is enhanced, apart from any question of the buildings upon it — that is an entirely different matter—I agree with what was said by the Minority Report that it is right that the taxes or the rate on the enhanced site value should be in proportion to the benefit the owner has received from the local expenditure which has taken place in that particular locality. That is a perfectly sound and right principle. I am not now mixing this up with the question of what is really industrial development like the Lumsden case. That is quite outside of this point. We had before us on the old Royal Commission the views of Mr. Harper, of Lord Moulton, and of Mr. Costello, who has since passed away, and the Minority Report accepted the view which I have stated, I think that view is absolutely sound. If you get a site value enhanced by expenditure in that particular locality and by the conditions of that particular locality, so far as the extent of that enhancement goes, I see no harm in having a special site rate for local purposes. Mind you, when I say that, I say it is absolutely inconsistent with the principle of the 1909 Budget. You could not do anything more unjust than to do the thing twice over, once for national and once for local purposes. Indeed you could not do it; you would destroy the property from which you are seeking to get the benefit. I do urge the Chancellor of the Exchequer in the strongest way to pay attention to what has been said as regards this matter, and I urge him more in this direction than in any other direction. Do not deal with this as a mere matter of another £500,000, or something of that sort, given from the Exchequer to the rates. That merely leads to extravagance, in my opinion; and as soon as you have done that you would have to get another £500,000, or some other sum, immediately made up. Deal with it on the principle of determining what are local and what are national charges. I want to express my own view, that if you once do that I would put every penny as regards truly local charges upon the ratepayers. Having once separated it, I would say, "You ought to pay this, and it is a proper charge." On the other hand, as regards national charges, every penny ought to be paid out of the National Exchequer. We ought to have that distinction clearly enforced, and until we do we will never get a fair economical and true solution of this question between the local rates and the National Exchequer.

Although on this side of the House we do not at all find ourselves in agreement with the hon. and learned Gentleman's views regarding local taxation, we always recognise what a great authority he is upon the subject. No man has greater experience and knowledge of the problem than he has, and therefore a contribution from him to a discussion on local taxation is a valuable one to anyone who has got to consider the methods of dealing with the subject in the immediate future. For that very reason I gladly welcome the principle which he has laid down with regard to the taxation of site values. And it made me regret more and more his absence from the House at the time when the Budget of 1909 was under discussion, because I do think that such a contribution from him at that time might have been, not merely of great assistance to us, but of still greater assistance to his party. I regret that I cannot follow him in his discussion of the effect of the Land Taxes upon the building trade. I understand there is a Motion to be discussed later on which will probably raise that very issue. My right hon. Friend the Secretary to the Treasury is taking charge of that discussion, and I shall therefore say just this one word upon the subject. So far as the statistics of employment in the building trade are concerned, they are considerably improved since the Budget of 1909 became the law of the land. That is the only index we have got at the present moment of its effect. I have no doubt at all that there is a certain measure of truth in what the hon. and learned Gentleman says that for the moment mortgagees may have been frightened. If they were frightened, they were frightened because the valuation which was made under that Act disclosed in many cases that the properties were very considerably over-mortgaged. I have not the faintest doubt that the permanent effect of that is going to be very healthy and very sound, because anyone who has had experience in building operations and in the conduct of business on behalf of the building trade knows that there is no more fruitful source of disaster, both to the building trade and to the neighbourhood, than to find that money has often been raised out of proportion to the real value of the properties. When we have a valuation conducted on official principles, which has no reference to the interests of any individual, and which simply tries to ascertain what the real value is, it may in some instances have the effect of alarming mortgagees, and therefore temporarily causing inconvenience. But in the long run I am certain that it will be better for sound, real business. That is the effect, and it is coming to be the effect now. That temporary effect is passing away, and there is an improvement in the building trade which has been, and is now being, developed on a sounder basis. I am sure both the building trade and the community will profit in the long run by even that temporary inconvenience which has been caused in such cases.

There is one observation of the hon. and learned Gentleman with regard to these taxes which I find myself in agreement with, although he directed it in the nature of criticism against what I have done—that is his view that the proceeds of these taxes should be utilised for local purposes. I do not challenge that proposition in the slightest degree. I think there should be consent about that, but whether the money should be raised locally or not is another matter. There is a great difference to my mind between raising it locally and raising it as we do now. It is a matter of machinery, but I agree that it should be distributed for local purposes. I am still of opinion that it is better that the machinery should be Imperial, but I agree that the distribution should be of a more local character. By "local" I do not necessarily mean that, in dealing with the money, it should be paid to the area of the immediate town or village where the increment arises, because the increment is very often attributable to the business or trade or commerce of an adjoining city, and therefore, when the increment arises in a comfortable well-to-do suburb, I think it is very unfair that the whole of the proceeds of that tax should be devoted to the relief of the burden of taxes in that suburb where the increase in the value is due to the fact that people are working in an adjoining district. I safeguard myself, when I say I agree with the hon. and learned Gentleman, by making that qualification. I do not understand him to disagree generally with what I say.

I should agree with it, and I think that is a reason for further extension.

The hon. and learned Member went on to say that first of all I agreed to the Amendment providing that the proceeds of the taxes should be divided between Imperial and local purposes, and that I afterwards recovered possession of the half that I gave. May I point out that that was a purely temporary transaction. It was limited by date.

Next year.

That is right—the hon. Gentleman is generally accurate in these things. Next year. It was purely temporary, and it was during the period of what I may call the ripening, the fructifying period of the taxes, the period before the full harvest could arrive, and I do not think that the local authorities can complain of the bargain. It was perfectly clear that, until the valuation was completed, the taxes would not reach any dimensions which would make it worth while for the local authorities to enter into a quarrel with the Imperial Government about them if they got a substantial equivalent, and they got it. I may remind the hon. and learned Member that it was not taken away without something in return, and, as generally happens in a case of that kind, the Imperial Government got the worst of it. We gave far more away than we took from the local authorities. I observe the hon and learned Gentleman smiles, but it was so I assure him. I remember perfectly well how I was bombarded by hon. Members from both sides of the House. I made the best bargain I could for the Treasury, and it was a very bad one for us. The local authorities walked away with the honours of the contest. I do not disagree at all with the principle laid down by the hon. and learned Gentleman that in the main these taxes ought to be utilised for local purposes, and in any settlement which is made, if it is made by the present Government or its successors, that is the line which will be taken, I feel confident.

There is another observation which he made and in which I will not say I am happy to find myself in agreement. But I do find myself in agreement with him in saying that this is a very old problem and that its very antiquity has begun to discourage those who take an interest in it. He reminded us that twenty years ago he was a member of a Royal Commission appointed to deal with this problem, and he also made an observation which shows how wise we are in taking our time over this problem. He said that in the Royal Commission he took a certain line after reflecting for two or three years, but after considering the matter for another twenty years he has now changed his opinion. The hon. and learned Gentleman advanced an argument which I should not have dared on my own initiative to submit to the House of Commons, which shows that we should not rush in these matters. It is a very old problem. During the time I have been in the House of Commons I have seen no end of Motions by hon. Gentlemen taking an interest in the matter, generally, I agree, when Liberal Governments are in power. I was looking through the Parliamentary Reports this morning, after I got notice of this Motion, and I found there was a Motion of the same character moved in 1883 by Mr. Pell, who was also a great champion of the rights of local authorities and of the agricultural interest. He made a Motion in 1883–

"That no further delay should be allowed in granting adequate relief to the ratepayers in counties and boroughs in respect of national services required of local authorities."

He made, I will not say the same speech as the hon. and learned Gentleman, but it was exactly on the same lines. He began his speech by quoting another Motion of the same character—

"That a measure dealing with the whole question of local taxation … is most urgently required,"

which had been passed in this House in 1872. That is forty-one years ago. Both of them were, of course, during the time the Liberal Government was in power. Mr. Gladstone dealt with that Motion, and I think also Mr. Goschen. Mr. Gladstone on that occasion laid down a principle which I commend to my hon. Friend the Member for East Northamptonshire (Mr. Chiozza Money). I do not think he will find himself quite in accord with Mr. Gladstone on that occasion. He regarded the principles laid down by my hon. Friend as a taxation of labour as against a taxation of property. However, I am not going into that at the present moment, for it is much too dangerous a topic to discuss under present conditions. My difficulty was his difficulty, and it is the difficulty which every Chancellor of the Exchequer has experienced who has had to deal with this matter. I do not think there has been a Chancellor of the Exchequer for the last forty or fifty years who has not had to deal with it. The Motion was moved in almost identical terms. It is the difficulty of the Minister who recognises a grievance, who recognises the urgency of the problem, and who is also very much alive to the difficulties of dealing with it. I cannot deny any of the general statement which has been made by hon. Gentlemen on both sides of the House, that this is a very important problem. I cannot deny that it is a very pressing problem. All I can say is it is not the only pressing problem, and that Governments have got to choose in that respect. For instance, the right hon. Gentleman the Leader of the Opposition last night, in the course of his first speech of the Session, pressed other urgent problems for solution this Session. There was the reform of the House of Lords; there was the settlement of industrial disputes; there was housing and redistribution, and there was a fifth—[An HON. MEMBER: "Aeroplanes"]—a national service or the problem of national defence in some form or other. I do not say the right hon. Gentleman advocated conscription. At any rate, they were each of them problems which he urged upon us, and he rather complained that the Government had not indicated their intention of dealing with them in the course of the present Session. Therefore when you come to deal with this question it is really a choice between urgent problems; and I realise the urgency of several of the problems mentioned by the right hon. Gentleman.

On the occasion to which I have referred Mr. Gladstone made an observation which is quite relevant to the present discussion, and which is always forgotten. There is always a demand for a relief of the burden of the ratepayers. Mr. Gladstone said:—

"This is a Motion for increasing taxes."

That side is always forgotten. You cannot relieve the burden of the ratepayer in this country; you cannot make a substantial contribution in any shape or form except by increasing the taxes upon somebody. You may say that there is a certain class of ratepayer in this country who is contributing a larger share to the burden of local taxation than he ought. That means that there is somebody contributing less. I do not deny that that is the case, but I do want everybody to remember that it is a very easy thing to go to the Exchequer and press the Exchequer to grant relief of the burdens on one man. I wonder whether the Exchequer would get the same support in increasing the burden of the other man. That is the experience of every Chancellor of the Exchequer. The moment he grants relief to any section of the community that is quite right; but when he has to replenish the National Treasury in order to make up that amount, well, I dare not repeat in a respectable Assembly the language which is used about it. That is really the difficulty. You cannot do it. After all ratepayers and taxpayers are individual citizens of this country, and it is an adjustment or readjustment of the burdens between two sections of the citizens. [HON. MEMBERS: "Hear, hear."] That commands general agreement, and it is, of course, a perfectly obvious observation. But when we come to the method of doing this the hon. and learned Gentleman made a suggestion with which I will deal later on. His suggestion is that you should divide the services into two definite, clean-cut cate- gories, and say, "Here is a local service; there is a national service." That is his suggestion so far as I could follow it. I wish to point out what I regard as the dangers of that. It is a danger to administration, and a very serious danger—I think a very serious menace. As the hon. and learned Gentleman knows, under the Roman Empire this problem of the adjustment of local and Imperial taxation constantly arose. The municipalities were constantly complaining that the burdens were too heavy for them. They were constantly appealing to the Imperial Exchequer for cash. They got it, but they got it eventually in many cases on the distinct condition that they surrendered the control to the centre. I think that is a very great menace; it would be a danger to embark on a policy of that kind, and I hope we shall consider once, twice, and even oftener before doing so.

The prevailing tone of the Debate has been one of recommending generally subventions from the Imperial Exchequer. I cannot conceive a more futile and mischievous method of dealing with the problem. It hardens the difficulties and swells the difficulties. It does not remedy any evil. The moment you begin to do it you simply find that the local authorities spend more. I do not think they spend it more efficiently, and in a few years, after you have gone on for a year or two, or even before you have gone on for a year, back they come again and say, "This is inadequate; you must give us more." That was the experience of Mr. Goschen. He thought he had settled the problem, and he made a real effort to settle the problem, but in about a couple of years the local authorities came back again and asked for more money. That has been the experience of every Chancellor of the Exchequer who has given Grants. It was the experience of Lord St. Aldwyn. When he started to give Grants he found that the Grants only relieved one section of the community, and the other section—the ratepayers—said, "Where do we come in?" In the course of a very few years the very class relieved by his Grants came and said, "This has already been swallowed up in the increase of rates and we ask for more." I urge, whatever the solution is, that no attempt should be made to solve the problem on that basis. It is the least businesslike method, and it is the most extravagant method of solving the problem. In 1888 Mr. Goschen made a real effort to put the question of local and Imperial taxation upon a better business footing. What happened? He started the assigned revenues, but his principle of distribution is already antiquated. I think that is absolutely agreed. The principle of distribution is on the basis of the then existing conditions in each locality. The Parliamentary Grants were distributed to the counties, county boroughs, and towns, but there has been a complete change in the character of the population in many districts. It is so complicated that two gentlemen—I am not sure whether they were members of the Royal Commission of which the hon. and learned Gentleman was a member—said the thing could not stand a day were it not for the fact that it was so obscure and complicated that nobody understood it. There is a good deal to be said for that.

What happens in regard to these subventions? The one difficulty of dealing with the problem now is that you create vested interests; not vested interests in individuals, but in localities. There is one locality which is very well treated, and there is another which is very shabbily treated, but if you begin to readjust the sums of money which are distributed between these localities, you will find that you have created a vested interest in locality "A," which is well treated, and you cannot very well reduce the amount of the Grant given to it because you increase the rates by doing so. Supposing you increase the subvention without having a complete change in the whole principle upon which You are dealing with the problem, you simply create fresh vested interests, which will make it More difficult in future to deal with the problem. Therefore I do hope that before we take that step we shall, at any rate, consider some very drastic change in the relations of local and Imperial finance, and of the method of raising the revenue for local purposes.

The hon. and learned Gentleman made another observation, and here, again, I find myself in agreement with him. He said, "Whatever the Government do, I hope they will not tinker with the problem; I hope they will deal with it thoroughly." The hon. and learned Gentleman is absolutely right there. But what does that mean? Will the House consider for a moment what dealing with the relations of local and Imperial finance means. My hon. Friend one of the Members for London said that London is very harshly treated, and is not getting her fair share of the Grants. Then comes an hon. Friend of mine from Scotland, who says that London is treated uncommonly well as compared with Scotland. Then comes another Member from another district who says that both are treated infinitely better than Salford. The suggestion was that each of these districts should somehow or other get more cash. The Londoner wanted cash, and the Scotchman naturally wanted more cash, and my hon. Friend wanted more money for Salford. It is not really as simple as all that.

What are the questions which have to be settled before you really can deal with this great and complex problem? If there are going to be increased Grants is there going to be increased control? That is a most vital question. In my own judgment I think there ought to be more control. I think there ought to be more central control upon the finance of local authorities. There are many ways of doing it. For instance, are Grants going to be paid in proportion to population? That is one problem. Are you going to say, "We will give you so much money in proportion to either your population or your rateable value upon some automatic principle which will depend upon statistics," or are you going to say, "If your education system is efficient, if you are looking after the housing problem in your district thoroughly, if the problems of public health are attended to, then your Grants will be upon a different scale from what they would be upon if you neglected your duties?" Is that to be one of the elements? I think it has got to be considered. What is the basis of the distribution of the funds? Everyone agrees that at the present moment the basis of distribution is a thoroughly wrong one. The basis of distribution of Grants now is very often in inverse ratio to the need. Take education. The gigantic Grants distributed for education are not in proportion to the burdens of a locality. They are not in proportion to the capacity of a locality to bear the burden. There has been some attempt, in a crude way, to meet that difficulty by creating something which is called a necessitous area Grant, but that is really tinkering after all with a very great problem. It does meet the pressing needs of a few exceptional areas where the rateable value is low and the expenses are high. But you ought to be distributing these Grants upon some definite and clear principle which ought to apply to the whole of the United Kingdom and the nature of the neighbourhood, the poverty of the neighbourhood, the question of whether it is necessary that you should render greater aid than to another district which is better situated—all these elements ought to be taken into account in the distribution of your Grant. Then the hon. and learned Gentleman puts in another enormous question which I have referred to you already: Are you going to separate the services into local and Imperial? Are you going to say education is an Imperial charge? I do not know what you call a local charge. The Poor Law is called a local charge.

I should take the distinction which was drawn in the Royal Commission itself. There the Poor Law was said to be a national charge.

I am obliged to the hon. and learned Gentleman for giving us an idea of what he meant by local and Imperial charges. The Poor Law, education, police, and roads, would be national charges. Just see what that means. Take education to begin with. If it is a question of building schools, is the whole burden to be charged upon Imperial taxes? At present you have this check at any rate on extravagant buildings, that the locality knows that it has to bear a share of it. [Interruption.] That is sometimes the case. I cannot say it is the case in London. The complaint I have heard is just the other way, but I do not know. But just conceive what will happen afterwards. The demand in the district will be for more building and for larger buildings. There is no check from the point of view of economy. Every Member of Parliament would be pressed by his constituents to urge the Education Minister to spend more money upon buildings, and there is no local control and there is no local check, and, therefore, whatever the cost of education is now, in a very short time it will be doubled without getting twice the result you are getting at present. That is a matter which has got to be considered very carefully. The same thing applies to roads and to the Poor Law, and before the House of Commons commits itself to the principle that all these great services are to be administered and paid for imperially, I hope they will reflect upon the effect which that vital change of policy will have upon the national expenditure.

Here is another question which we shall have to consider. The right hon. Gentle- man (Mr. Hayes Fisher) rather jibed at something I said about broadening the basis of taxation. I think you will have to consider that when you come to deal with the question of local and Imperial taxation. At the present moment, as has been pointed out over and over again, there is only one means by which a local authority can raise funds, and that is by putting on a 1d. or a 2d. rate. I think a local authority ought to have its choice of two or three subject-matters of taxation. What those subject-matters should be I do not propose to indicate at present. I have in my own mind an idea as to what you might very well allow local authorities to impose taxation upon. Mr. Goschen was at one time in favour of a local Income Tax. I think he dropped it, and any man who looks into that question twice will come to exactly the same conclusion as he did. A local Income Tax would simply destroy the Imperial Income Tax as a means of raising money, and would not produce anything like the results which have been anticipated by those who have advocated it. I remember going into it very carefully. I find that in Germany in many respects it has not been a very great success. A man who has a very large income enters into a bargain with the local authority, and says, "If you are going to assess me at my full income I am going to live just across that river. If you assess me at so much, I will stay here." Then there is a bargain between him and the local authority as to what his income is going to be. That is bound to be the case if you are going to have a local Income Tax, and, on the whole, I think it is infinitely better that you should raise Income Tax imperially and distribute the proceeds among the local authorities.

Here is another question which has already been raised in the course of the Debate. To what extent are you going to relieve improvements from rates? I do not think you can dismiss that altogether and treat it as purely a question of a single tax. It is a totally different question. An improving landlord now contributes more towards the rates than a man who neglects his duties as a landlord. A landlord who builds good farm buildings is instantly, I do not like to use the word penalised, but I do not know a better word, by paying more to the rates. The local assessor comes along and says, "You have spent £1,000 on improving the farm." At 5 per cent. that is £50. He will add that to the gross estimated rental, and then there is a reduction, so he has to pay heavier rates because he has done his duty by his tenant and by the community. That is a bad principle. That has got to be considered very carefully There ought not to be a system which, pro tanto at any rate, directly discourages improvements upon property. I have heard many manufacturers say the same. The moment you have a manufacturer who has got modern ideas and wants to improve his machinery and bring his premises up to date, down comes the local assessor and increases his assessment. To that extent it is discouragement of improvement, whether in agriculture or in any other industry. That is a question which has to be considered very carefully, and I am perfectly certain it is worth the while of the House of Commons to consider whether there is not some system which at any rate does not directly discourage a man from spending his capital upon improving his property.

There is another point which I think is very vital. Before you can settle the question of local and Imperial taxes you must have definite and clear ideas on these points. There is the question of areas. The right hon. Gentleman never said a word about areas, but he must know what a vital question it is. To what extent are you going to confine the expenditure and the raising of your revenues to the present areas? The Education Act of 1902 dealt with that problem to a certain extent because it widened the areas, and widened them to a very considerable extent. It took the county area, where under the old School Board system you had a very much more limited area. To that extent it undoubtedly did meet this problem. But education is not the only question, and I am not sure that the Act of 1902 has completely settled the question of areas even in education. Then there is the police. I believe the Home Office are of opinion that in many districts the police area is much too small, and therefore expensive. The same thing applies to the Poor Law. I am not sure whether it was the Majority or the Minority Report that recommended that the areas should be very much larger than they are at present. The question of areas is a vital question because here you have two contiguous areas. A working class population lives there and a suburban population lives here. It is practically the same community. They are dependent upon the same industry entirely, and yet they are separate areas for the purpose of taxation. Then the working class areas have to pay a much heavier rate because the education rate is heavier and the rateable value is lower in proportion to the population, and those who live in the contiguous area, dependent upon the same industry, are let off with paying one-half or one-third of the rate. That is a problem which demands the most urgent consideration.

The right hon. Gentleman complained that this Committee has not reported. I would infinitely rather not receive a report from a Committee which has not considered the whole problem. It would be of very little use to any Government, and if the right hon. Gentlemen were sitting here dealing with this problem, unless he meant merely to put down £2,000,000 on the Estimates, to be distributed in a haphazard fashion amongst the local authorities, there is not one of these points which I have mentioned which would not have to be considered very carefully. He says that the Cabinet should consider this. I still say that for the Cabinet the right course is to take the opinion of men who are undoubted experts on the whole of these questions. The Committee have already had, I think, over eighty sittings, and they have considered most of those questions. They are now, I think, considering the question of areas—a very vital and important question—and I hope that they will give full consideration to it, for I am sure that no Government will deal with the question of local taxation without having full light on that most important problem. I know that the right hon. Gentleman takes up a certain position with respect to the solution of the problem. I think he quoted a passage in which I gave expression to my opinion on that subject, I think we could have dealt with it a couple of years ago if circumstances had been favourable, but I wish to point out that we were thrown into very great confusion at that time, and the Government came to the conclusion, apart from that, that it was necessary to appoint a Committee to recommend the best method of solving the difficulties of the local taxation question. But we have done something. The right hon. Gentleman was not quite fair to the Government when he referred to that side of the question. The scheme of old age pensions has certainly been a great relief to the local rates. On 31st March, 1906, the outdoor paupers in this country over seventy years of age were 168,000. There were only 9,530 outdoor paupers over seventy years of age on 1st January, 1912. That is an enormous reduction. That in itself is a great help to the local authorities. I do not wish to say what the amount of the charge would have been upon the local authorities annually if the old age pensions scheme had not been in existence, but to that extent the burden has been taken off their shoulders and put on the shoulders of the Imperial Exchequer.

The right hon. Gentleman said something about roads, and I should like to say a word on that subject in relation to local taxes. The right hon. Gentleman said that London has only had £4,000 or £5,000 from the Road Board. A very good answer to that has been given by the hon. and learned Member for the Southern Division of Buckingham (Sir A. Cripps). Although these motors are registered in London, they tear up country roads, and it is not merely the pleasure motor, but the business motor that does so. To an increasing extent you will find everywhere that they are tearing up the roads, and I think there is something to be said for the adjoining counties as to the question of road maintenance. Let me put another point to the right hon. Gentleman. It is a question of policy for the Road Board, and there has been some discussion regarding it. The money was to be spent not merely for maintaining roads. It was also to be used for fitting them for motor traffic, and where necessary making new roads. The right hon. Gentleman knows that the Road Board are considering the question of a fresh outlet from London which the Metropolis is very much in need of. They have accumulated very considerable sums of money which they hope to use for that purpose. I should regard it as bad policy to say to the Road Board, "You must spend the whole of this money for improving roads, Do not accumulate a penny." I think it is worth their while considering whether—not here in London—it is not desirable that new roads should be made in some areas in the United Kingdom where there is a real demand for them at the present moment. I had a letter from the Secretary for Scotland pointing out that there are districts in the Highlands where roads of that kind might be made. The Commissioners are a judicial body, and it is for them to recommend to the Government the making of such roads, and I hope no pressure will be brought to bear to scatter these funds merely on maintenance of roads.

The funds may be useful from another point of view. The Road Board are to take into consideration the state of employment, and when periods of unemployment come, as they will come in every country, instead of giving a Grant of £300,000 or £400,000 to be spent on schemes which there has been no time to think of, it is very much better that schemes should be thought out years in advance, so that the money will be properly spent if the time should unfortunately come when it is necessary to spend money in this way on account of the badness of trade. It is perfectly clear that we could not this year deal with the matter of local taxation. Nothing but another Autumn Session could possibly enable us in the matter of time to deal with it.

Why cannot the right hon. Gentleman give us an interim Grant?

Really, I think that would be a most unwise proceeding. What would it mean? It would undoubtedly mean taxation if you are going to give Grants. The right hon. Gentleman said that when I introduced the Budget in 1909 I stated that I hoped there would be cash available for the purpose of relieving the burden of local taxation. To a considerable extent that hope has been realised, for the burden of paupers has been taken over under that Budget. I am speaking from memory, and I think the amount is about £2,000,000. I must also say that if I have not had the margin I hoped to have for the purpose of further reducing local taxation, it is because there has been an unexpected demand in respect of armaments owing to the condition of affairs in Europe. The pressure on the Government has been such as could not be resisted, and therefore money which would otherwise have been used for the purpose of reducing local taxation has been devoted to armaments, and that is an expenditure which we did not anticipate in 1909. Whenever the problem comes up to be dealt with, I hope it will be dealt with comprehensively. I hope it will be dealt with in such a way that Chancellors of the Exchequer will not have to get up year after year to resist demands for mere Grants-in-Aid, which simply increase and encourage local extravagance. I hope it will be dealt with in such a way as will involve a solution which will improve the efficiency of local services, and make it possible for the Imperial Exchequer, where the duties of national services are undertaken, to render those services more effective and more economical than they are at the present moment.

The Chancellor of the Exchequer has made an extremely interesting speech, but I am afraid what he has said will carry cold comfort to the minds of the ratepayers, who are so largely interested in this question The right hon. Gentleman commented on the various difficulties which must beset every one who attempts to solve the problem of the proper relation between local and Imperial taxation. Let me remind the House that those difficulties have already been examined by a Royal Commission which sat for many years. They are not new difficulties to those who have studied this problem. They have been engaging the attention of a large number of persons for a considerable number of years, so that they are not new difficulties which we have to face for the first time. The Chancellor of the Exchequer congratulated my hon. and learned Friend on his change of opinion since he signed the Majority Report of the Royal Commission. I hope he is not going to wait until every member of the Royal Commission has changed his opinion, because, if he does, I am afraid we shall have to wait until the crack of doom before this question is dealt with. He referred to the difficulties which any Chancellor of the Exchequer is bound to find himself in when approaching this question. I think that every fair-minded man must agree with the genuine character of the grievance disclosed this afternoon. The right hon. Gentleman said it was very difficult for any Chancellor of the Exchequer who realises the difficulty and gravity of the problem to find the money. We all sympathise with the difficulty which the right hon. Gentleman finds himself in, but I think that what he and the House of Commons ought to remember is that it is largely in consequence of the various Acts of Parliament passed by Parliament under the aegis of the present Government that the burden of rates has increased so heavily during the past few years. Broadly, the action of the Government in the House of Commons has added to the gravity with which the right hon. Gentleman finds himself confronted. I think he cannot leave that out of account, and I wish to refer to it very briefly.

7.0 P.M.

The right hon. Gentleman reminded us of a maxim with which I think we are all familiar, namely, that you cannot take the burden off one man in these matters with out putting it on somebody else. I think you might do something to spread the area from which you draw your contributions. The right hon. Gentleman says you cannot substitute a local Income Tax for our present system of rating. I think it is true that everyone who has inquired closely into the question of local Income Tax is forced to admit that however unattractive it may be at first sight, there is no reason why we should not make some innovations of our system with a view, at any rate, of bringing into contribution a larger portion of property which now escapes altogether. It was only in the concluding portion of his speech that the right hon. Gentleman really touched the Amendment which has been moved by my right hon. Friend. He came to the question of subventions, and he ruled it out of consideration altogether in a single sentence. He regards subventions as bad, and, as I understand him, will have nothing to do with them. I think it is worth while to consider how we are going to get what we want. We are going on passing measures of social reform, and more and more we hesitate ourselves to find the costs. Undue burdens are placed upon local authorities. We leave them to pay for the administration of Acts passed by the House of Commons. That is not a good way of carrying out social reform. It is bad because we have no close estimate as to the cost of the reform when we are passing the Act, and it is bad from the point of view of the reform itself, because either the money is made available with difficulty by the local authorities or else it is not forthcoming at all. In either case the reform which we are passing or desire to see carried out fails to come to fruition.

That is a bad way of doing business, and however attractive it may be to the Government of the day or even to the tender conscience of the House itself, it is bad business. I do not believe that we should adopt that system of carrying out any of our measures of social reform if we were in closer contact than we are with the ratepayers who have to find the money. I think there is a quickly growing and very prevalent feeling of dissatisfaction with the heavy burdens which the ratepayers have to hear for what are in reality national services. It was only last week, I think, that this feeling found expression in the elections to the London County Council. I have several friends who moved about among the ratepayers in that contest, and as far as they were able to judge the one thing which really moved the minds of the ratepayers and influenced their votes was the desire for economy. That was the really deciding factor in the result of the elections. There was a great deal to lead to another decision on the part of the ratepayers. There was the natural desire for a change after one party had been in office for six years, and there were the telegraphic efforts of the leading organs of the Press identified with the party opposite, which I hope brought a full and adequate return to the revenue of the Department over which the Postmaster-General presides. Then there was the intervention of various Members of the Cabinet, including the President of the Local Government Board (Mr. Burns). I can only say that it was a singular and very noteworthy development of his remarkable activity, and I hope that it is not going to be regarded as any part of the proper functions of the President of the Local Government Board that he should intervene in contested municipal elections. However, if he is satisfied with the result of the county council elections I will not say anything further to discourage his peace of mind. I only referred to that because I believed that we were coming to a time when the ratepayers will refuse to bear further burdens.

Already in the counties they are insisting upon returning Members who are pledged to economise rather than carry out in their fullest development the various measures of social amelioration which the House of Commons insists upon thrusting upon them. I am confirmed in this view by what has happened in connection with the provision of sanitorium benefit for uninsured persons. The House of Commons will remember that the local authorities are empowered to confer this benefit because it is borne half by the State and half by the local authority itself. As far as my recollection serves me there is no county council in the country that is providing this benefit at the present time. I am very sorry for it. I regard it as a most admirable object. Why is it that the county councils will not take it up? It is, I believe, solely on account of the cost. It is very desirable that this question should be tackled at the earliest possible moment. The consumptives of to-day are just as worthy of treatment as the consumptives of to-morrow. National health is just as important to-day as it will be next year. This is not a party question, because the Radical county councils are just as backward as the Tory county councils. But when we ask why is it that the county councils are doing nothing it is, I believe, solely because they know that the ratepayers will not face the cost. We have now got to a time when the ratepayers look with a jealous eye at any proposal which they think will throw a burden upon them, and it is because they believe that this question of the eradication of consumption is really a national matter which ought to be undertaken as a national matter that they are reluctant to undertake it. I remember that my right hon. Friend the Member for East Worcestershire (Mr. Austen Chamberlain), when discussing this question of sanatorium benefit in Committee of the Insurance Act, expressed grave doubts as to whether it ought to find a place in the Insurance Act at all. He took the view, though he did not insist upon it, that the crusade against consumption was really a national matter which ought to be undertaken by the nation as a whole, and not merely as part of the Insurance Act. I am bound to say that I think that what is going on now in the country shows that the great majority of people, at any rate, have ranged themselves behind the view which my right hon. Friend has expressed.

If you look at the increased burdens that were thrown upon them in connection with education and the upkeep of roads and other matters of local administration, which are really national in character, you cannot wonder at the outcry which is being raised at present. I do not want to elaborate these matters, because they have been dealt with very fully by my hon. Friends and hon. Gentlemen opposite, and have been alluded to by the Chancellor of the Exchequer; but there is one matter which arises in reference to roads which one cannot leave out of account altogether, and that is the freedom from contribution on the part of those who have done the most damage. Perhaps the House will allow me to give my own personal experience. My home is in one of the Southern counties, and my house is exceedingly close to the main road out of London in that direction. Day and night my house shakes and quakes on account of the heavy and rapid traffic which pours by in a never-ending stream. I allude to that because it is a thing which one knows about from one's own observation, but my experience is just the same as that of all the people who live along that road, the people who have to pay for the upkeep of the roads to which these motor 'buses and heavy steam lorries drawing enormous weights at rapid rates do enormous damage, and to the maintenance of which they make no contribution. That is one of the problems which we shall have to face, but I think it is only fair to those who live in the locality that, at any rate, something should be done to help them out of the difficulty in which they are at present. There has been general agreement expressed in the House this afternoon that something ought to be done, and done now, to meet the difficulty to which Member after Member has alluded.

My right hon. Friend, in his Amendment, asked for increased subvention from the Exchequer. The hon. Member, I think for one of the Glasgow Divisions, said that there was no use in tinkering with the question in that way, that these subventions would be no use, that what you have to do is to reform our rating system root and branch, and that ameliorative measures are no earthly good unless you go in for a wholesale revision of our system. My right hon. Friend himself, in the beginning of his speech, said that that was what he desired to see. If I remember his phrase aright, he said he wanted to look on the rating system with a modern eye. We want to bring it up to date. We cannot continue to wait. What we want to do now is to give the people who are loud in their outcry as to the heavy burdens which they now bear some relief, and give it soon. The right hon. Gentleman the Chancellor of the Exchequer said that in all these matters it is a question of how much you give and where control is centred. You obviously cannot have local control if the fund is coming from the Exchequer. I quite agree that you cannot divorce control from contributions, but while you have local contributions the amount of control ought to bear some relation to the amount of contributions. The control should be real and not merely nominal. Take the case of the Education Act. The amount of contribution is real enough, as it is over 50 per cent. of the total cost of education. The local control is largely a myth. The main lines on which education has to be administered are laid down in a code to which the local

I beg to move, as an Amendment to the Address, to add at the end thereof,

"But humbly regrets that no legislation is foreshadowed which will have the effect of bringing the methods of valuation of urban and agricultural land pursued under the Finance (1909–10) Act, 1910, into harmony with the intention of this House and the declarations of Your Majesty's Ministers when the Act was under discussion."

The intentions of this House and the declarations made by Ministers on the point which I desire to bring before the notice of hon. Members are perfectly clear on a perusal of the debates which took place when the Finance Act was under consideration. Those discussions went to show that the site value of all land in this country had to be ascertained, that is, the original site value as at the 30th April, 1909. That site value had again to be ascertained on what is called "the occasion," the occasion being either the sale of land or the lease of land for over fourteen years, or on the death of the owner of the land; and on each occasion the new site value as ascertained on "the occasion" is to be compared with the original site value as ascertained on the 30th April, 1909. Any increase taking place in the site value is increment on which under the provisions of the Act 20 per cent. is to be paid, less an allowance of 10 per cent. on the original site value. The statement which I have made with regard to the ascertainment of site value and the imposition of the Increment Tax, which was imposed for the first time by the Finance Act, was that it was to be a land tax pure and simple, a tax on any increase in the site value of the land apart from any buildings or other improvements. That statement, I am confident, accurately interprets the statement made at the time by His Majesty's Ministers, and also correctly interprets the construction placed on the Act by this House at the time. There never was the slightest suggestion from beginning to end of the discussion which took place that this Increment Tax would be a tax on buildings or on occasional profits and fortuitous windfalls. It was to be a tax on the increase in the site value of the land, and therefore a land tax pure and simple. In January, 1911, in a White Paper, instructions were issued to valuers, and it is in consequence of the methods directed to be put into operation by valuers acting on those White Paper instructions that for the first time it, became manifest that if those directions were followed by the valuers, and they have been followed by them, this Increment Tax was to be a tax not only on any rise in the site value in the land, supposed to be attributable to the community and not to the enterprise of the owner of the land, but it became known that the Increment Tax was to be a tax levied not only on land, but on houses and buildings and fortuitous profits, as the Chancellor of the Exchequer described them, and on every sort and description, and claims of that character since those instructions were issued have been made and are being made daily.

I do not propose to trouble the House with any technicalities. The Amendment regrets that the methods of valuation are not in harmony with the intention of the House and the declarations of His Majesty's Ministers. I, therefore, simply propose to show this evening what the declarations of His Majesty's Ministers were, and that the method of valuing and of taxation under this Act are not in accordance either with the declarations of His Majesty's Ministers or in accordance with the understanding of the House. A claim of this character on builders' profits, or fortuitous windfalls, as described by the Secretary to the Treasury and by the Chancellor of the Exchequer, was recently made in a case which has been the subject of Debate in this House, namely, the Lumsden case. That claim was upheld by Mr. Justice Horridge, before whom it recently came. I do not propose, and it would not be right for me, to enter into the merits of that case, or to consider whether the decision is right or wrong, nor do I propose to question the legality of the White Paper instructions. I am concerned to-night simply to show that the methods of valuation and the claims for Duty made in consequence of those White Paper instructions are wholly inconsistent with the intentions of this House and the declarations of Ministers. In order to make it quite clear what the nature of those claims are and how they are made, I propose to explain some details of the two cases which have been before the House.

First of all there was what is known as the Richmond case, in which there was no profit whatever made, and in which there was a claim for Increment Duty. It was the case of a small shop which was bought thirty years ago for £500. On the death of the owner it was valued at £500 and Probate or Estate Duty on that sum was paid. On the death, in 1910, the house was sold for £500, which was the sum given for it by the testator. Some months after the house had been sold an official valuation was made under the provisions of the Finance Act, and the house was valued at £380, having already been sold for £500. Thereupon a claim was made for Increment Value Duty on £120, the difference between the price of the Government valuation and the price actually fetched, namely, £500, on the ground that the house had been sold for more than it was worth. I mention that case because it differs from the Lumsden case in that there was no profit on the transaction. Farther than that, if the house had been sold for £450 instead of £500, then there would have been a loss, but there would still be a claim for Increment Value Duty under those White Paper instructions. The Lumsden case differs a little from the Richmond case because there was a profit in that case. It was again the case of a small shop, built, I think, by a speculative builder. The shop was sold for £750, and had not then been valued under the Finance Act. The official valuation was made four or five months after the sale, and it came out at £625, or, £125 less than the house had been sold for. Thereupon the Government made a claim for Increment Value Duty on £125, the "fortuitous windfall," the house having been sold, as they said, for more than it was worth. They valued at £625 as on the 30th April, 1909, while its value in 1911 was made on the same day. In that case the owner had made some profit on the house, the Government thought that he was making too much, and they wished to share that profit, and they said to him, "You can have some part of it, but we must have 20 per cent. of that part which represents the purchase price in excess of what the real value of the house is. The real value of the house, of course, is, as the right hon. Gentleman opposite (Mr. Masterman) knows, the value placed upon it by the Government valuer. The price obtained for it has nothing whatever to do with the real value. Under the provisions of the Finance Act we are left in the hands of the Government valuers to say whether a house has been sold for its proper value or not. The purchase price has got nothing to do with it.

I think it will be an eye opener for a great many people when they learn that whatever price they get it rests with somebody else to say whether they sold for the value or not. It may have fetched a particular amount in the open market or by public auction, but it does not matter, the same thing applies. The Government valuer may come down and say you have had a "fortuitous windfall," and it happens somebody who wanted the house gave more than it was worth and "we must have 20 per cent. of the difference." That is the claim which is made under the provisions of this Act, and that is the claim which I say and maintain never was authorised by this House knowingly, and never was referred to or explained by either the right hon. Gentleman opposite or the Chancellor of the Exchequer or any of his colleagues, and no reference to any claim of that description was ever made in the whole course of the debates on the Finance Act when it was under consideration. I should add, of course, that in both those cases there had been no rise in the site value in the value of the sites. The Government valuer and the valuer for the owner both admitted that in those two cases there had been no rise in the value of the site. It is only after there had been a rise in the value of the site, according to the statement made by the Chancellor of the Exchequer when the Bill was under consideration, it was in that contingency that a claim for Increment Duty was to be made. That contingency did not occur in either of those cases, and yet a claim was made and substantiated and ordered to be paid by the Court. That is a sum of money which represents the difference between the price obtained and what the Government considers is what I suppose is called the statutory site value on the occasion. Mr. Finlay, in the Lumsden case, acting as counsel for the Crown, made these remarks with reference to site value on an occasion:

"Site value is a term which is interpreted in a very special way in the Act. It is not site value as you would ordinarily understand it or as anyone else would ordinarily understand it—"

Certainly it was not as the House of Commons understood it—

"and of course as the witnesses understood to whom the question was put. It is the site value as defined by the Act."

Your own counsel admits that it is not the site value which any person would ordinarily understand as site value. That being the state of affairs, I ask the right hon. Gentleman whether he or the Chancellor of the Exchequer ever took the trouble to explain to this House of Commons that they were not dealing with a site value which any average person or ordinary person would understand was site value, but that they were dealing with something which neither the witnesses nor the judge nor any ordinary person would understand to be site value at all? It is no wonder that there has been a little mistake about it, and that this House was totally misled. It never understood for one moment that it was authorising the imposition of a tax on buildings, builders' profits, fortuitous windfalls, and houses, whether belonging to small owners or rich people. It thought that the tax was solely on any increase in the site value of the land attributable to the action of the community. In order to show what were the declarations of His Majesty's Ministers on the subject when the Bill was under discussion, I naturally refer to the speeches of the Chancellor of the Exchequer, whose measure it was. He called it the People's Budget, and it has been known by that name. In introducing the measure on 29th April, 1909, the right hon. Gentleman said:—

"The valuations upon the difference between which the tax will be chargeable will be the 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."—(OFFICIAL REPORT, 29th April, 1909, col. 538, Vol. IV.]

It was never hinted to the House that there had been any change whatever, and the whole discussion, from beginning to end, took place on the basis of that understanding. On 4th May, 1909, the Chancellor of the Exchequer said:—

"We begin by valuing the land in its present position, and we say that whatever increment is due to the money which the owner spends on the development of his property will be credited to every penny, but whatever is due to the industry and enterprise of the people we ought to have one-fifth of it for the people who made it."—[OFFICIAL REPORT, 4th May, 1909, col. 1002, Vol. IV.]

Did the people make the profit on the sale of these two small shops? In one case there was no profit at all, and in the other case the builder made a profit by getting a covenant released in order to use the building as a shop instead of as a private house. On the 22nd October, 1909, the Chancellor of the Exchequer said:—

"They will not be taxed in the slightest degree on any value which they themselves have created, but will only be taxed on the improved prairie value, after every value which they themselves create has been deducted."—[OFFICIAL REPORT, 22nd October, 1909, cols. 687–8, Vol. XII]

I do not think the right hon. Gentleman can suggest that either of the claims which I have mentioned or any of the claims made under the White Paper instructions are taxes only on the improved prairie value of the land. It is the prairie value or site value of the land with which these taxes have now nothing whatever to do. They are simply taxes on the commercial profit of any transaction. They are wholly opposed to the statements made by the Chancellor of the Exchequer, and they have no relation whatever to the tax sanctioned by the House of Commons. I need not trouble the House with any further quotations. I could give any number if I wished, I turn to the provisions of the Act itself. To any average mind the very opening Clauses bear out absolutely what the Chancellor of the Exchequer said this tax was to be. Section I provides:—

"There shall be levied on the increment value of land a duty called Increment Value Duty."

There is no suggestion of profit or of fortuitous windfalls. Section 2, which defines Increment Value Duty, says:—

"Increment value shall be deemed to be the amount by which the site value on the occasion of collection exceeds the original site value."

Hon. Members when they saw those Clauses were perfectly satisfied that they carried out the statements of the Chancellor of the Exchequer, and they would have done but for a few words which follow. Those words are:—

"As ascertained in accordance with the general provisions of this part of the Act as to valuation."

What those general provisions as to valuation were I am quite sure that hardly any Member of the House ever understood in the slightest degree. But, at any rate, they thought they were safe. Having laid it down that the tax was to be on site value only, they felt that no general provisions as to the methods of valuation would override the direct orders of Sections 1 and 2 of the Act itself. I propose to refer next to a letter written by order of the Chancellor of the Exchequer on 27th September, 1910. This letter shows that even at that time the right hon. Gentleman's views were precisely the same as they were when introducing the Budget and during the whole time the Budget was under consideration. It was only when the White Paper instructions were issued that this new departure was made. The letter states:—

"With reference to your letter of the 20th instant I am desired by the Chancellor of the Exchequer to explain that Increment Value Duty is a charge leviable on the excess of the site value of the land on the occasion of the collection of the duty."

I need not read the whole of the letter. The important words are:—

"If, therefore, when you sell your property, the value of the bare land has not increased over the corresponding value on the 30th April, 1909, by an amount exceeding 10 per cent. of the latter value, Increment Duty would not be payable."

Could anything be clearer than that? This letter was written by order of the Chancellor of the Exchequer some months after the Budget became law, three months before the White Paper instructions were issued, and just before the election. Although this question has been raised several times, I have not heard the Chancellor of the Exchequer personally declare that the claims now made for duty under the White Paper instructions were contemplated when the Budget was under consideration. I very much regret that the right hon. Gentleman is not present this evening, because I am sure he would have made a plain statement on the subject. When the question has been raised, the Chancellor of the Exchequer has not taken part in the discussion; but the Secretary to the Treasury has many times told us perfectly plainly that this scheme was perfectly well known to him, to the House, and to everybody else, and that it was always understood that these claims would be made. The Chancellor of the Exchequer, however, up to the present has not said so, and if the Secretary to the Treasury is in a position to speak for his right hon. Friend I hope he will make some statement on the subject to-night. I had intended to ask the Chancellor of the Exchequer how it was possible to reconcile the claims now made by the Commissioners of Inland Revenue with the statements and the letter which I have quoted. I allege that no public statement was made while the Budget was under discussion, either in or out of the House, by any responsible Minister, which showed any clear intention of valuing property in such a way that an Increment Tax could be imposed on buildings or builders' profits, or fortuitous windfalls. I challenge the Secretary to the Treasury or any other Member to point to a single utterance in contradiction of my allegation. I cannot prove a negative. I say that no such statement was ever made. I could not give absolute proof of that unless I read the whole of the Budget discussions from beginning to end. But the right hon. Gentleman affirms that statements to that effect were made. Therefore it is perfectly competent for him to quote the statements to which he refers. We have frequently asked him to do so, and he has replied in a general way, "Of course it was understood"; "there was no doubt about it"; "I myself made the point perfectly clear over and over again"; "I referred to fortuitous windfalls"; "I had to give definitions"; and so forth. But the right hon. Gentleman has never given a single reference bearing out the statements he has made, I ask him to-night if he will be good enough, when he replies, to take up the challenge, and to point definitely to the clear statements which he says have been made that Increment Value Duty was intended to be charged on buildings, builders' profits, and fortuitous windfalls.

I never said anything of the kind.

The right hon. Gentleman says that he never said anything of the kind. I have put one or two questions on the point. For instance, on 5th February, 1913, I asked the right hon. Gentleman if he would give the House a definition of a "fortuitous windfall," and the reply was:—

"We very fully discussed it when the Finance Act was tinder discussion. I think I had to submit some definitions myself."

I then said:—

"Does the right hon. Gentleman suggest that the term 'fortuitous windfalls' was ever mentioned when the Act was under discussion?"

The right hon. Gentleman replied:—

"That term, or its equivalent, was mentioned in very many debates by myself."

My hon. Friend the Member for Ayr Burghs (Sir G. Younger) chimed in with this question:—

"If the expression was used at all, was it not in connection with contradictions of any intention to tax windfalls?"

To this the right hon. Gentleman replied:

"It was used for the purpose of asserting that fortuitous windfalls were a legitimate subject for taxation."

I ought not to have interrupted, but as I did interrupt, perhaps I may explain. When I stated that I never said anything of the kind I referred to the hon. Gentleman's assertion that I had said that buildings and builders' profits were to come under the Increment Tax.

I am aware that the right hon. Gentleman says that builders' profits are not now taxed. I leave that to the House to decide. He says, "We allow the builder all the profit he ought to have, but we are not going to give him all that he has gained. We are going to tax him on that part which we think is a fortuitous windfall." That is the way the right hon. Gentleman gets out of it. I understand his argument. He has always maintained that builders' profits are not taxed, but I do not think that any other Member of the House will agree with him. Certainly no builder agrees with him. Every builder imagines, and rightly so, that he is being taxed on his builders' profits. They are all writing to the papers. I have had letters from some hundreds of them, to the effect that they have been taxed on their builders' profits. The Builders' Associations, as my hon. Friend the Member for Chelmsford mentioned the other day, have passed a resolution protesting against being taxed on builders' profits. They all think they are being taxed on builders' profits. The right hon. Gentleman appears to me to be the only man in the country who thinks that builders' profits are not being taxed. But I cannot pursue that topic any further. I hope that the right hon. Gentleman this evening will tell us when the term "fortuitous windfall," or its equivalent, was mentioned in the debates by himself. He says it was mentioned many times. He said that it was used for the purpose of asserting that fortuitous windfalls were a legitimate subject for taxation. I would ask him to be good enough to give us the references in these debates. I asked the Chancellor of the Exchequer, on the 29th January last, whether he suggested that on the first Budget debates any statement was made by a Member of the Government that it was intended to tax fortuitous windfalls and other profits of the builder's business. He replied that that question had been asked and answered repeatedly; that it had been the subject of debate repeatedly; that he had no doubt it would be again; and that it could not be discussed by question and answer.

That is the reason I have referred to the matter this evening. I admit that we cannot discuss it by question and answer. I hope the right hon. Gentleman will state quite clearly when he himself, or the Chancellor of the Exchequer, or any other Member of the Government, announced their intention in this House, during the course of the Budget debates, to tax either fortuitous windfalls or builders' profits. The fact is that about the end of the year 1910 the Government began to realise that there was very little money coming out of this Increment Tax. Thereupon the White Paper instructions were issued, which enabled them to get this tax. No doubt it will be a very exceedingly heavy one, and large sums of money will come in—most unjustly if this tax is allowed to continue. Building will stop. There will be very few houses built. Any discussions which have been in this House, since the Budget was passed, have all tended to show that of hon. Members on both sides, none of them realised that anything but the rise in the value of the site was to be taxed. I only refer to one discussion which took place on 20th June, when the hon. Baronet the Member for Mansfield—it having been suggested by myself that there would be a tax on buildings—made this observation:—

"According to what was said during the debates on the Budget there was to be a tax on land values only."

That was his impression and recollection of what took place during the Budget debates. I think I am right in saying that is the recollection of every Member of this House. All I want is to throw out this challenge to the right hon. Gentleman—which I now repeat: to ask him to point to any single statement made by himself or any other Member of the Government during the course of the Budget debates, that this Increment Tax was to be on buildings, houses, fortuitous windfalls, or commercial profits; or indeed that it was to be on anything except on any increase in the site value, pure and simple, of land.

I beg to second the Amendment.

It is a perfectly simple and straightforward one. Apart from any question as to the merits or the justice of the Land Takes which were imposed by the 1909 Budget, the question raised by the Amendment is that these taxes, as imposed, do not carry out the intention of the House when they passed the Budget. If that is so, then it seems to me perfectly clear that we ought to have some definite assurance on the part of the Government that legislation, or some different method, is necessary to bring the valuation and collection of Increment Duty into harmony with the intentions of the House. Otherwise it seems to me quite clear that these valuations are being carried out and the Increment Duties are being imposed quite unjustly, and quite contrary to the intentions of the House when the Budget was under discussion, and indeed quite contrary to the method which the House sanctioned. I am pretty sure, although I was not a Member of the House at that time, that 99 per cent. of those Members who voted in favour of that particular part of the Budget which sanctions the valuation and the collection of Increment Duty were under the impression that those Increment Duties would not be charged except on the pure addition to the original site value as it was affected by the action of the community and not by the efforts of the individual owner. I believe, moreover, that the vast majority of Members of this House, and indeed certainly of the people outside, are still of that opinion. I entirely agree with my hon. Friend in the remarks which he made with reference to his regret that the Chancellor of the Exchequer is not present. I understand he made a long speech earlier this evening. Consequently, I suppose, that is the reason why he is not present now. I think it is necessary that the right hon. Gentleman should be here, because, as a matter of fact, as my hon. Friend has reminded the right hon. Gentleman opposite, he has, in answer to questions put to him across the floor of the House, absolutely repudiated the definite statements made by the Chancellor of the Exchequer with regard to the valuation and the Increment Duty charged thereupon. The right hon. Gentleman tells the House that the methods now adopted were those which were intended by the Budget when it was passed in 1909, and that the valuations were to be charged on the site value, including the buildings thereon. That was entirely contrary to the statements made by the Chancellor of the Exchequer and the writings of the right hon. Gentleman, not only when he introduced his Budget, but subsequently when letters were addressed to him asking him his opinion on the question.

There is just one other point which was not referred to by my hon. Friend. We have been told, and led to believe, that these valuations, at any rate on agricultural land, are to be made entirely upon the bare prairie value of that agricultural land. I have never been able to understand myself what the object of these valuations is; but no doubt if the land values group have in the future the same influence with the Government that they have had in the past we shall find out what is the object of these valuations on agricultural land. If the present methods of valuation are carried out and the land values group were to have their way, these methods would have a very far-reaching effect upon the future of agriculture and those employed in agricultural industries. We were led to believe that these valuations were to be made on the bare prairie value of agricultural land when the buildings and improvements had been taken from them. I understand that at the present time in the valuations on agricultural land the value of the buildings and live fences is deducted. But I am quite sure that in the valuations such things as sea-walls, dead fences, and drainage are not deducted from the valuation. If that were so the land would be found in very many cases to have no value at all. There is no question at all that the country, and indeed the House of Commons, has been grossly misled, and the object of our Amendment is to ask the Government to make it quite clear to the House and to the country that by this Budget they do not now mean what they led the House and the country to believe they did mean when the Budget was passed. Surely it is reasonable, in an important question of this kind, to ask the right hon. Gentleman to give us a clearer and more definite answer as to whether he still adheres to the statements which were made, and which have been frequently made by the Chancellor of the Exchequer, that the Increment Value Duty would be charged purely and simply on the difference in the bare original site value as made on 30th April, 1909, or on occasion, and on the increased bare site value of that land owing to any action of the community and not owing to any action of the individual owner? I think, no doubt, it would not be proper this afternoon to discuss in this House the now famous Lumsden case, because I understand it is the subject of appeal, but we are entitled to make reference to it because it is a very good instance of what my hon. Friend called attention to when he brought the matter forward so lately as the occasion of the Adjournment of the House, as it shows the effect of this kind of taxation upon the building trade. If the effect has already been so great upon the building trade as the figures he quoted show, what, indeed, are we to expect will be the effect upon the building trade for speculative builders, upon whom we depend for small houses for the working classes so much needed at the present time? What are we to expect will be the effect when builders realise that it is the intention of the Government under the Finance Act, not only to tax them if they make a profit, but that they are to be liable for taxation on the occasion of a sale on which they only make a loss? It seems to me that the speculative building trade would then be far more paralysed than it is even at the present time. Therefore I hope the right hon. Gentleman will to-night, at any rate, give us a clear and definite answer, so that we may know what the intention of the Government is as to the future land valuation increments which are to be imposed upon this valuation.

I have heard that a great deal of misunderstanding exists one way or another on this matter. I myself had great difficulty in understanding how this Increment Duty came to be levied, because I have been unable to associate in my own mind any distinction between value and price. It seems to me that price determines value, that price is fixed in the case of houses by the ordinary laws of supply and demand, and consequently what a house sells for is its value, and therefore I have been unable to understand how this Increment Duty came to be levied. But a few words which fell from the hon. Member for the Sleaford Division enabled me, I think, perhaps to arrive at an understanding. To begin with, to use his own words, he took all this as an ordinary commercial transaction. He said the builder made his profit as a builder, and then he referred to the removal of a restrictive covenant. Perhaps that is what really arose here. Here is a colliery company, with an area of land round the colliery. Buildings were erected. The builder was offered the land on lease, but a restrictive covenant was inserted preventing the erection of shops. The builder erects the buildings and then he got released in respect of some buildings from this restrictive covenant. If that is the case the builder would be in this position as landowner: No other building in this whole area can be used for shops. Therefore, from the statement of the hon. Member, this building had a monopoly value during the ownership of the whole area by this one man, and consequently I say, if that is the case suggested by the hon. Member, it is most unfair to treat it as an ordinary business transaction in the ordinary supply of cottages, and it is to scare the building trade to suggest that such cases will constantly arise. I hope, when the right hon. Gentleman the Secretary to the Treasury replies, he will deal with this aspect of the question, which seems to suggest a solution of this trouble.

As one of those who took part in the Debates upon the Budget on the question of the imposition of these taxes, I should like to say a few words in support of the Amendment moved to the Gracious Speech from the Throne. I am in agreement with what my hon. Friend has said. The hon. Gentleman opposite undoubtedly picked out one particular feature of the Lumsden case which probably calls for some explanation. I certainly heard the Chancellor of the Exchequer say, over and over again, in the course of these Debates with regard to the actual expenses of another owner of property, that any particular acuteness of brain power which led any man to make any sort of an arrangement which would increase the value of the site would, of course, not be charged. What did the builder do in this particular case? He built ninety-two houses and created a trade for this particular shop; therefore by the exercise of his ingenuity and enterprise together he created a value on which he is now taxed and on which the Chancellor of the Exchequer always said he should not be taxed. I do not think there can be any doubt in the mind of any man who took part in these Debates in 1909–10 that the case against the existing system of valuation for increment is the case made out by my hon. Friend who preceded me. Over and over again in the House and from every Radical platform, and particularly by the right hon. Gentleman the Lord Advocate, we beard speeches pointing out that the merit of the claim for Increment Duty was where the site value had been largely or considerably added to by the enterprise in expenditure of the community. That is a proposition which in regard to feuing in Scotland I have repeatedly advocated where a large feuing rate was obtained for ordinary agricultural land, because it was a reasonable thing that it should be taxed for local purposes in the interests of the locality which had created that particular value.

We were told over and over again by the Lord Advocate that the work of a man's hands should never be taxed at all, and that rivers of gold would ultimately flow from this taxation. Those rivers of gold have not turned up, and consequently some new scheme had to be found of progressive taxation to meet the progressive demands of expenditure. Most curious cases have arisen out of this system of valuation. We are now having an abstraction in all cases, and the Government is endeavouring to convert that abstraction into pounds, shillings and pence. Even the Lord Advocate has said that all these valuations are the mere guesswork of valuers, many of whom have had very little experience, and who are now gaining their experience at the expense of the public. They have had to gain that experience, and have been setting themselves up against the market opinion of value which is, of course, declared in pounds, shillings and pence, a value which is entirely ignored by them as not being the type of site value which this precious Budget says has to be the valuation on these occasions. Even hon. Members opposite do not agree with the propriety of having an Income Tax levied in the manner in which it is levied in the Budget. They want an Undeveloped Land Duty and all taxes on site value, and so forth. This never was any part of their scheme, and I should think hon. Members entertain just as strong an objection to the system of the Government as we do, because undoubtedly you are taxing the work of man's hands in charging Increment Duty as we are now doing. Hon. Members ought to join with us in demanding from the Government the fulfilment of pledges which were unquestionably given in this House, and which have been proved by quotations from speeches which have been made in this Debate. Some amending words ought to be introduced into the Finance Bill of this year to make this system of taxation not only just and fair, but in accordance with what this House believed it was passing when the Budget of 1910 was carried.

The position of the Scottish feuar and the speculative builder in Scotland now is a very harsh one indeed. I think hon. Members opposite will agree that we owe very much in Scotland to the enterprise of the Scottish feuar and the speculative builder. By our system of law in Scotland, the moment a man feus his land and builds his house upon it, he practically becomes the real owner subject to a Feu Duty, and the landlord almost disappears altogether. Therefore these men in the past have been doing a real service to the community by risking their money in this particular form of speculation instead of investing in bank shares or other similar investments, where the increment comes quite naturally by the work of other people. Under this system the man who deliberately takes this risk in the interests of the community is penalised, while people who invest their money in the way I have described escape altogether. If you are going to charge an Increment Duty in such cases, where are you going to stop? You will be bound to make a similar charge on all investments, whether they are Marconi shares or other shares, because they are in exactly the same position, and if you penalise one you ought to penalise the other? I know something about the position of matters in Scotland, and I think it is a deplorable thing that speculative builders who take up this enterprise in districts severely cramped for lack of small houses for the working classes should be discouraged in this way because they do not see the justice of a system under which, if they make a loss, they have to suffer themselves, and if they make a profit the Chancellor of the Exchequer takes a large slice of it.

I know that from this cause rents are being advanced in certain towns in Scotland, where they are putting as much as £3 upon the value of houses rented at £12 or £14 a year, because nobody will build such houses owing to the effect of this Budget and to the want of confidence they have in the future on account of the risk of further taxation and what I venture to call spoliation. Therefore, we have stagnation and the working man has been called upon to pay more for his house. I was told that this was entirely our own fault because we had so exaggerated the effect of the Budget that we had created this erroneous belief in the minds of the people. I think that is a statement which will be found very difficult to prove. When we come to consider the manner in which agricultural land has been valued, then we arrive at an absurdity. Some sort of valuation has been put upon the register, but what that is it is impossible to say. It is not the value of the bare land, nor the value of the land as it stands with the buildings upon it equipped for agricultural purposes. Part of the expenditure upon that land which makes it useful is deducted before the value is arrived at, and sometimes the most valuable part is left and roped in with the site value.

When this matter was being discussed I protested vigorously against the Definition Clause which the Chancellor of the Exchequer inserted in connection with this particular kind of valuation, and I pointed out that he was leaving in a great deal he had no business to leave in, and which the Land Values (Scotland) Bill never proposed to leave in. When hon. Members found that in the case of most of the agricultural land in Scotland there was no valuation at all apart from the value of something in it which was not land, then they changed their tune and realised that if they were to have anything as a basis they would have to rope in something which was the work of man's hands and man's enterprise. We have those evidences of what I believe is a most unfair system of taxation. I do not say that in the case of agricultural land valuations have been made upon a principle which differentiates from that which I understood the principle to be when the Clause was passed. I realised at the time that it was not a fair valuation of agricultural land at all, but something more than that. With regard to increment, the case is entirely different. Nobody in the House of Commons, not even the Chancellor of the Exchequer, had the slightest idea that the Increment Value Tax was going to be imposed and operate in the manner in which it has operated, and if the right hon. Gentleman has any regard for his own statements, and if he feels that unconsciously and unwittingly he misled the House, I think he ought to see that something is done to put this matter right. If there is any honour in Parliamentary statements at all, it is time he took some steps in that direction. The whole of this land taxation has been very onerous and burdensome to everybody. It has involved everybody in a great deal of trouble and annoyance, and has given the minimum of result.

I am not at all surprised that some kind of attempt has been made to gain a certain return, which obviously was not, in ordinary circumstances, to be expected from taxation of this kind. I am not surprised that we are having this attempt made to bolster up the Increment Value Duty. There are very serious commitments to meet. There are increased charges for the Navy which the Chancellor of the Exchequer never anticipated, and there are increased charges for insurance which he said these taxes were going to meet, but which they are obviously not going to meet. The money has to be found somewhere, but it ought not to be found here. If you are going to make an alteration in the system of charging Increment Value Duty, then you ought to come straightforwardly and give the House of Commons an opportunity of discussing it and expressing its opinion upon it. If the House of Commons is going to say it is quite right to tax commercial profits of this kind, then they should say how far they are going to carry that principle in taxing other profits. You have no right to tax commercial profits as you are doing without the House of Commons being thoroughly acquainted with the fact that they were authorising it when the Budget was passed. We were perfectly entitled to believe the system of valuation embodied in the Act was the system of valuation which accurately and fairly and justly carried out the statement of the Chancellor of the Exchequer as to the intention in creating this tax and the manner in which it was to be levied. It appears to me it might almost be suggested that someone or other, probably knowing the subject better than the Chancellor of the Exchequer did—I think he did not disguise the fact that he had a great deal to learn about the question—and realising perhaps there was not much in the Increment Tax, so constructed the measure that even the Chancellor of the Exchequer himself did not know what he was doing. I do not blame him at all for doing it intentionally. I do not believe he knew this was the system which the Act enacted, or that such a White Paper as that which was ultimately issued was the system upon which the duty would be charged. Others must have known it, or at all events they ought to have known it. We are now left in the position of having as I said an unjust and unfair burden placed upon certain people wholly without the knowledge of the House of Commons and diametrically opposed to the assurances which were given.

I am surprised we have not had an answer from the right hon. Gentleman the Financial Secretary to the Treasury.

I am perfectly willing to answer at any time when the House desires the Debate to come to a conclusion, but I think I should hear the whole charge first.

I would only point out one thing which I think goes to the root of the whole matter. It is very important. It seems to me the question is whether you are taxing profits in connection with buildings or not. I would ask the right hon. Gentleman to devote his attention to this. If a man sells land and buildings for a price which a valuer says is too much, is there anybody on earth who can say whether the purchaser has paid too much for the land or too much for the buildings? The Solicitor-General, in the course of his argument admitted that nobody could tell. I should like to hear the right hon. Gentleman to-night give us his views as to whether anybody could possibly say whether the purchaser has given too much for the land or too much for the buildings. The Solicitor-General said nobody could say. Will the right hon. Gentleman contradict that statement of the Solicitor-General? Does he suggest anybody could say whether the purchaser has given too much for the land or too much for the buildings? If you cannot tell that, then I say you are taxing the buildings just as much as you are taxing the land. You have no more right to say "you are only taxing that which has been given too much for the land," than I have to say "you are only taxing that which has been given too much for the buildings." You are taxing that which has been given too much in the opinion of the valuer for a composite subject, and there you are going contrary to the principle on which the House proceeded in connection with this tax. It is perfectly clear you are putting the tax on this composite subject when you cannot disentangle the two items. That seems to me to go to the whole root of this question.

This case has only been decided in the Court of first instance, but for the purposes of discussion we are bound to regard that decision as right. I should like, however, in order to test the matter, to ask the right hon. Gentleman whether, supposing the Court of Appeal reverses that decision, he would come down to the House and say that decision failed to carry out the intention of this House, and ask the House to amend the Act by taxing these builders' profits? Does he think he could get any majority in the House to do so? That seems to me to be precisely the point. If the right hon. Gentleman says this decision of the Court of first instance carries out the intention of this House, then, if that decision were reversed, it would be his duty to come down to the House and say, "The Act does not carry out our intention; give us power to tax these Profits." If he came down to the House with any such suggestion, I venture to say he could not get even the most docile majority to support him. The right hon. Gentleman admits it was part of the system on which the tax was based that there should be no tax on the work of a man's brain. Part of the ingenuity a man exercises is in making a good sale and finding a good buyer. If you are able to sell at a profit it is the result of exercising your business of selling land. When a man is selling stock on the Stock Exchange it is his business to try and sell it for as good a price as he can get. That is part of the business out of which he makes his profit. It is part of his ingenuity to find the man who will give him the best price. I think that was admitted in the Court, because counsel called it "a cleverly won profit." If it is a cleverly won profit, how can it be said that the profit is not the result of the work of the man's brain?

I do submit to the House that this is a very serious question, which goes to the root of the whole subject. I am quite confident that the great majority of this House never understood that people were going to be taxed simply because too much had been paid for a building in the opinion of the valuer. We all know what an uncertain matter valuation is. That a man should be taxed 20 per cent. because this is an extra Income Tax of 4s. in the £ on profits, without taking into account any losses that might be sustained, is a vitally important matter to builders, and it is also a vitally important matter to this House that so grave a question as this should be raised, and that taxation should have been imposed merely through the way in which the Act is worded being contrary to the real intention of this House. I do not suggest bad faith or anything of that kind; we all know how these things happen; but if we can prove that the wording of the Act did not represent the real intention, then I say it is the first duty of the House and the Government to introduce legislation to put right such an injustice. It imposes an additional Income Tax. The builder pays ordinary Income Tax like anyone else, he pays Death Duties, and he may even pay Super-tax if he earns it, but wherever it happens on the sale of land and building together, so that you cannot distinguish between the price given for them, and it happens that they are sold for something more than the Government valuer says they are worth, there is this tax put upon him, which amounts to an extra Income Tax of 4s. in the £, without allowing to be placed against that a single case in which he has made a loss. I do think it is a case of extreme hardship which deserves very serious consideration from the Government, and I hope the right hon. Gentleman the Secretary to the Treasury will address himself to it in that spirit. It is quite true we have not got very crowded benches here to-night, but at the same time I think the subject is deserving of very full consideration. More than anything else it depends upon this point, where too much is given for a composite subject-matter, how can you distinguish whether a person has paid too much for one part or too much for the other? There is no more reason for treating a builder in this way than for similarly treating any speculator upon the Stock Exchange.

I am extremely sorry that I have not been able to be here earlier in the Debate. I feel certain that on this particular subject we on these benches are very much in agreement with hon. Members opposite. There are two definite complaints we have to make. I do not know whether it is against the carrying out of the Finance Act of 1909–10 or against the wording of that Act itself, but certainly the results of that Act have been in two directions very detrimental. First, on this question of Increment Duty. Here you have case after case where Increment Duty is practically being charged when there is no increase in the land value at all. It is really a recovery of building value or a purely accidental value. A whole street of houses may be sold off at a price which is not according to the market, but according to accident, and on some of these houses Increment Duty will be charged, and on others no Increment Duty will be charged at all, where as a matter of fact the value of the land has not changed in the least. That is not carrying out the spirit, whatever may be the letter, of the Increment Tax, but the hon. and gallant Gentleman (Mr. Pretyman) opposite will realise that we on these benches are opposed to the Increment Duty altogether. We do not believe that Increment Duty is at all a desirable tax. We supported it when the Budget of 1909–10 was going through on certain definite grounds. It was the only means of getting a valuation of the land. Owing to the action of the House of Lords in refusing to pass in two Sessions in succession a fair valuation Bill we had to get our valuation of the land of the country via the Finance Act of 1909–10, and having got that valuation we shall be glad if the Government will take the earliest steps possible to put an end to that Increment Duty altogether.

The hon. Member does not suggest that the valuation of the Budget which he supported was the same as the valuation of the Scottish Land Values Bill.

That is the second point which I was coming to. Having said that we hope that this Increment Duty will he abolished at the earliest possible moment, let me go on to the question of the valuation itself. In full site value you have more or less the same valuation as you have in the Scottish Bill to which the hon. Baronet refers. But so far as agricultural land is concerned, you have not got the same value. You have, under full site value, included with the valuation, a great many improvements which we on these benches are particularly interested in getting exempted from rates in any further change of taxation. Therefore we urge the Government to bring in as soon as possible legislation by means of a Revenue Bill, or otherwise which will put that valuation right so far as agricultural land is concerned. It must be understood that in full site value of agricultural land there is included—I am afraid I may be repeating what the hon. Member for Lincolnshire (Mr. Royds) has already said—the value of fences, roads, drains, and manuring. All these are improvements which we, on these benches, desire to see encouraged in the best possible way, and therefore we regret that all these agricultural improvements find themselves lumped up together in the full site value of agricultural land. That can easily be put right, and it is just as well perhaps that the demand for it to be put right has come from the agricultural land-lords opposite. We, as well as they, desire to see in the full site value of agricultural land, merely that which was in the full site value of agricultural land as defined in the Scottish Bill which was sent to the House of Lords and unfortunately rejected. We want to see it brought absolutely on all fours with that valuation, and it can be done by a simple Clause in a Revenue Bill introduced by the Government, if they will do so.

I must say that until they do that I think the agricultural interests in this House will have some ground for complaint, if we exempt all improvements in towns and still leave in the country districts certain improvements penalised by putting rates upon full site values, and therefore I think this Debate will be of service if it induces the Government, not only by criticism from hon. Members opposite, but by speeches from this side, such as those of the Member for Hanley (Mr. Outhwaite), to bring in legislation which will put this matter right. I hope the House will understand that we on these benches are as anxious as anybody else to see Increment Duty put an end to altogether and the full site value of agricultural land made true site value and not a value which at the present time includes these improvements in the site value. I cannot help feeling that all these Debates are more or less in the air, until we come down to practical politics and explain what it is we are after in getting this valuation through. I should be out of order in dealing with that point now, but hon. Members know perfectly well that this land campaign, about which we have heard so much, is intimately connected with this valuation, and I hope an opportunity may be given to hon. Members opposite, or to Members on this side of the House before long, to debate this question thoroughly on some Friday afternoon or upon some Tuesday or Wednesday evening.

I beg to move, "That the Debate be now adjourned."

I think by the custom of these Debates on the Address it is usual for the Minister to rise in his place and answer the case made by the Mover and Seconder of the Amendment, and it is then the right of whoever is representing the Opposition to answer him. That is the course which was adopted on the last Amendment. The right hon. Gentleman shakes his head. He will deny anything if he denies what occurred before his nose earlier in the evening. He knows perfectly well that the last Amendment was dealt with in that way. I consider that we have so much right to complain that I move the adjournment of the Debate in order to mark our opinion of the action of the right hon. Gentleman in refusing to rise in his place to answer the questions asked from this side of the House and from the other side of the House.

I have no wish to appear discourteous or to take any unfair advantage. I took steps to inquire of those who had the right to speak what was the correct position. I understood that on all the Amendments the final reply is made after the charges have been made, in order that the representative of the Government, who is only allowed to speak once, may be able to give a reply to them all. I think it will be found that that has been the case. I think the hon. Gentle- man will find to-morrow, when the Front Bench Amendment is moved, that the Government will reply. That is the only reason why I asked him to continue the Debate, and not to break through that tradition.

I think it is the invariable practice in all these Debates that when the subject has been thoroughly ventilated a Minister should state the case for the Government. It may be perfectly true that some other representative of the Government may have a right to sum up the Debate, but if the Government on important subjects see fit to provide themselves with only one spokesman it is not their fault if the unfortunate Minister finds himself in an unfortunate position. I think it lamentable on this occasion that the right hon. Gentleman, with whom I think we have some natural sympathy as men, if not as politicians, should be in this isolation to-night, but all the same it is not right that the whole case of the Opposition should be stated, that then he should get up and make his reply, and then, as is not the case in Committee, no further statement of the case of the Opposition is possible. I quite admit the right hon. Gentleman is in an unfortunate position. That is not our fault. He must not take advantage of the unfortunate position he is in to put us in a more unfortunate position.

I am anxious to discuss this subject, and there is no reason why there should be any difficulty whatever. The hon. Member (Mr. Pretyman) is under the impression that I am breaking from the rule. I still think I have the right on my side, but it is for the Government to give way in matters of this kind. If he will withdraw his Motion for the Adjournment I will reply.

I do not wish to make more of the matter. I shall be happy to assist the right hon. Gentleman by withdrawing my Motion if he will reply now. If the Chancellor of the Exchequer were here himself he would naturally have the right to reply to me. I am perfectly certain that, as the case has been made from this side so fully in several speeches, we have an absolute right to ask for a reply from the Government Bench, and I have the right on our side to answer that reply. The Government have then a right, if they like, to make a further statement. I desire to withdraw the Motion.

As regards the Chancellor of the Exchequer, I do not think there is any precedent for a Minister taking part in two Debates in one day on the Address, I am quite sure there is no precedent for Ministers taking part in a Debate again between eight and eleven o'clock. However, let us get on to the real subject. I can assure the hon. Gentleman that it was no conscious realisation of my inability to reply to the arguments that have been advanced, nor any conscious fear of the result of his criticism of my speech, which led me to any reluctance to rise on this occasion. The Amendment moved to the Address is made up of two parts, and complains of two things. The first item of which it complains is the methods of valuation which have been laid down in the Finance Act, which I think have not been challenged in the Courts, which were certainly fully debated in the House when the Budget was passed, but which in the opinion of certain Members who have spoken, including my hon. Friend the Member for Newcastle-under-Lyme (Mr. Wedgwood), will not produce the kind of valuation that they desire for purposes other than the Budget of 1909. One hon. Gentleman opposite, who was not present in the Debates during that long discussion, stated that the valuation was not discussed, and that the particular nature of the valuation of site value in connection with agricultural land was not understood by the House when it was passing that Budget. I think it is a pity, if I may say so with the utmost respect, that so many hon. Gentlemen who have taken part in this discussion upon the other side should have been so dogmatic about what happened during those discussions, although they were not actually present when those discussions took place. In regard to this particular charge, the hon. Member for South Northamptonshire (Mr. Fitzroy) was answered by the hon. Baronet the Member for the Ayr Burghs (Sir G. Younger), who not only was under no delusion, but asserted that the House was under no delusion in respect to this valuation. He mentioned the debate in which he took a very prominent part, and which I certainly remember equally clearly, in which he put the same point he put to-night, and on which the House voted with the clear knowledge of what it was voting about. The speech of the hon. Member for Sleaford (Mr. Royds) did not make a painful impression because it was dogmatic or because it was truculent, or because it was both dogmatic and truculent, but it made a painful impression because it was dogmatic and truculent on a subject he obviously knew nothing about, that was the actual discussions in this House and the intentions of this House and of the Government during what I suppose has been the longest and most detailed discussion ever carried on in this House on any Bill since this House was first reared. I am speaking in all sincerity, in reference to the hon. and learned Member for West St. Pancras (Mr. Cassel), whom I have always looked upon as one of the acutest critics I have to deal with in dealing with any Bill, whose acuteness and criticism I wish he had sometimes turned to positive suggestions for improvement, when I say that if he had been in the House during that time he would have known as well as I know, and everyone knows who sat through the debates day and night, that not only was the difference in valuation of site value of agricultural land from that in towns clearly understood by all those concerned, but also that, from the first words the Chancellor of the Exchequer said in outlining the Increment Tax in his great speech in introducing the Budget on 29th April to the last word on the Third Reading of the Bill in November, there never was any doubt at all that the measure of the Increment Tax on consideration was different from the measure on death, and different from the measure in the periodical valuations of corporate land in every fifteen years. While in the case of death and in the case of corporate land the measure was from the value of the land, as from a willing seller to a willing buyer, the substance from which the deductions were to be made in the case of sale or of lease was the actual price paid. That is the whole controversy between us, because the only controversy that has existed in connection with the Lumsden case or with any other case, as far as the assertion that we are taxing buildings or builders' profits is concerned, is the suggestion that it would be legal, and that the House had decided, that in the case of sale or lease deductions should be from the total value instead of from the price paid.

I will return to that. For the moment I am going to answer my hon. Friend (Mr. Wedgwood) and the hon. Member (Mr. Fitzroy), who in conspicuously courteous terms asked me to explain or to repent of our valuation. Both these Gentleman confessedly are considering a valuation which has nothing whatever to do with the Land Taxes at present imposed. My hon. Friend, with his usual candour, asserted that he only supported the Increment Tax because he thought it was the only way of getting a Valuation Bill through the House of Lords. The hon. Member opposite was complaining that this valuation might be used, not for the purpose for which it is used under the Bill, but for some future purpose, and if it was used for this future purpose, it would not be fair to the owners of agricultural land. All I can say is that the valuation as it stands at present is a valuation for the purpose of levying taxes, and was passed by this House for the purpose of levying taxes—the Undeveloped Land Tax and the Increment Tax—in order primarily that a datum line should be drawn as from 30th April, 1909, from which increment in future should be calculated. If we had, as a matter of fact, for the levying of Increment Tax, done what the hon. Member desired and what the hon. Baronet (Sir G. Younger) desired—that is, place the conditions of the valuation for the assessable site value of agricultural land under the same conditions as the assessable site value for urban land—we should have done a very considerable injustice, as I think, to the present owners of agricultural land. We should have made deductions from the original site value of agricultural land. The original site value in April, 1909, would have been placed at a lower level than it has been placed at present to the extent of those deductions, and the result would have been that when the land was sold as building land, and you came to calculate the amount of increment, you would be calculating more increment than you will calculate from the datum line as it stands at present, by the amount of those deductions.

But you make the same deductions now.

If this alteration had been made in the Act, you would not have made the same deductions, and so far from this being passed through without knowledge, I remember defending the lowering of the datum line for this very reason, that we gave an advantage which we might, on the strict principles of the Act, not have given to the agricultural interest. Otherwise the alteration would not affect the tax. The Increment Tax does not tax agricultural land, and the Undeveloped Land Tax does not tax agricultural value. When my hon. Friend says we want the valuation for another purpose, there is no difficulty at all, so soon as the House has made up its mind what purpose it wants it for, in adjusting the valuation for that purpose. Nor is any of the work which is now being done redundant.

Yes.

No, I do not think so. We are finding the real site value. We are not making deductions. In the case of land in the cities, the owners claim deduction. There would be no difficulty, if the House desires, in the future, deductions for agricultural improvements as well as urban improvements, in passing a Bill allowing the agricultural owners also to claim deductions for agricultural improvements so soon as the House has decided under what conditions those deductions would be desirable, and how far back they should go. The valuation is pressing on as fast as it can, and the values being obtained are real values, and it is quite unjust to say that it is a false valuation. It is a true valuation, but without a column containing deductions for agricultural improvement, and there is no difficulty at all. It is a true valuation both of the total value and the site value, and the only thing that is not given is not a valuation of site value at all, but a deduction of improvements which have been made in the past and which have helped to make that site value. I am informed by the Valuation Department that if such information is required very little extra work would be needed in order that it should be obtained.

Let me pass from the valuation to the question of the Increment Value Duty, and once more I find myself in the rather unpleasant position of discussing a case which is more or less sub judice. I appealed to the hon. Gentleman, when he first brought up this case and when he triumphantly announced that the case was going from the Referee to the High Court, not to discuss it until the High Court decision had been given. He refused to respond to that appeal, he discussed the case in full. He was so confident that his Land Union was going to win that he made statements which look very foolish to-day. He wrote letters challenging me in the "Times," which I thought was a rather absurd method of carrying on a controversy which might be carried on between Members in the House, saying that my desire, as he put it sarcastically, for the case to go to the High Court would be fulfilled, and protesting against this waste of money in being compelled by the Inland Revenue to take cases to the Court, where obviously the Inland Revenue would be beaten. The Inland Revenue was not beaten. I have never seen a more flimsy case than that presented by the Land Union against the Lumsden decision. Once more the Land Union say they are going to take the case to a Higher Court. Once more they have insisted on discussing it to-night, therefore once more I shall claim the right to make a few remarks.

It was not a legal point at all.

There is no legal point as far as I can see. We will discuss the subject and not the legal point. The legal point is as clearly laid down as anything could be in the Finance Act of 1909. Before I deal with that case, let me clear away the absurd contention which has been made over and over again, mostly by men who were not in the House when the discussion took place, as to the interpretation of the Government and of the House itself in connection with Increment Value Duty. There was never any doubt at all—and I cannot imagine how many times the case was stated—that on occasions the like deductions were to be made from price as had been made on the original valuation from values, and that the difference was the measurable increment. Not only so, but the Chancellor of the Exchequer took what pains he could to illustrate the method, not from land value taxation in other countries, though he said something about that, but from the Increment Tax abroad. I remember him discussing at, length, in a Debate in which I think the whole House was interested, the German system, especially manifest in Frankfort, where the increment is definitely measured as from price to price, and not from value to value, and where after certain deductions are made from the price, what remains is increment value. The hon. Gentleman opposite has quoted a portion of the Chancellor of the Exchequer's speech in introducing the Budget. What could be clearer than the statement made by the Chancellor of the Exchequer at that time?

"You get increment on two bases. You get 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 as ascertained by comparing what he receives with the valuation made immediately after the passing of the Finance Bill—the price he receives, small or great."

When I consider what an acute and active part the hon. and gallant Gentleman took in those Debates, I am amazed that he should come down and back up what I can only call the ignorance of Gentlemen who were not here, and state that he was not clear in his own mind that the deduction had to be made from the consideration—that is, from the price received and not from the total value as measured in the case we are dealing with His words are—

"The light hon. Gentleman's basis is that if a piece of 1and is sold to-morrow, it is that price which has to be compared with the value of to-day."

Here is another statement by the hon. Member for one of the Divisions of Liverpool:—

"The increment is what is going to he paid upon, and that is the difference between the low valuation now made and the price which is subsequently realised."

There we have definitely laid down what is the nature of increment. The hon. and gallant Gentleman says that windfalls were never mentioned in the Act.

Will the right hon. Gentleman tell me where windfalls are mentioned in the Act?

If the hon. Gentleman will be a little less excitable, I will endeavour to answer him. The Home Secretary, in summing up the Debate on the Third Reading of the Finance Bill, said that the Act levying on coalowners the Coal Duty had been defended by the Conservatives as being an Act levying a tax on windfalls. He said if that was a real defence, how much more was the tax now levied on windfalls justified than in the case of the tax on coal.

Has that any reference to Increment Duty?

The Home Secretary was referring to the Increment Tax, and he stated that the great ground urged in support of the Coal Duty was that coal-owners had made exceptional profits, that they had a windfall, and that they might be justly called upon to contribute to the national revenue. The right hon. Gentleman defined the Increment Tax as one easily ascertainable, and one which conformed to the Coal Tax, and every principle on which the Coal Tax had been based. If I have said enough on that point, let me pass on to the actual charge now made in regard to the levying of the Increment Tax. I find that the hon. Member for Lincolnshire takes up a remarkable line of argument. He referred to the White Paper, which states the conditions under which Increment Value Duty could be collected, and he seemed to think that the White Paper was issued because the Increment Duty could not be obtained in any other way. He seemed to think that it was issued in opposition to the law as laid down in the Act. As a matter of fact, the Law Courts declared that it was in accordance with the law as laid down in the Finance Act of 1909–10. The White Paper was issued after this particular Lumsden case had arisen.

The hon. Gentleman says that builders all over the country are being deprived of the money which they might justly have hoped to get, and that consequently they have stopped building. Would it interest him to know that so far as I have been able to trace not a farthing of tax has been asked from or paid by any builder in the country with the solitary exception of this case, although the number of cases settled with builders numbers tens of thousands. Would it interest him to know why this remarkable result took place in the Lumsden case? The Chancellor of the Exchequer was quite correct in saying that in general this did not take place in connection with increment value. The actual gross value of the property, as between a willing seller and a willing buyer, acknowledged by the seller himself as being the gross value of the property, was something like £125 less than the amount he obtained. A speculative builder sold a shop to a person who wished to develop his trade in the district. The facts as to the various values defined in the Finance Act were hardly disputed, and they were settled by the Referee. And here once more I must protest against the evil suggestion, if it goes outside this House, that the total values of these properties are simply made at the caprice, and tyrannically, by those who the hon. Baronet opposite (Sir G. Younger) suggested are very inadequate judges of values.

I said that some of them were not very experienced.

There is hardly a case in which the value is not settled under agreement with the parties concerned. If they are not settled in that way, this House has provided full apparatus for an impartial judgment by which these values can be settled. It is intolerable that persons should be led to believe, especially builders and others engaged in the work of building, that, whatever they do, a man will come down from Somerset House and lay any sum he likes on a building and take away a large portion of the builder's legitimate profit. There is not any resemblance in what is done to such procedure as that. The property in the Lumsden case fetched £750. In consultation with the land valuer of the Inland Revenue, Mr. Lumsden agreed that the value of the property, as by a willing seller to a willing buyer, was £625. A great amount of evidence was brought before the Referee's Court to show that, if anything, our valuers had put an outside value upon the value of the property. The sum of £625 far exceeded the price of the land, the price paid for the various deductions which had to be made, and the cost of building; and amounts to well over £100 were allowed as value, not of the price of the building, but in addition to the price of the building as builders' profits. That value was also allowed for what they call landlords' profits. That is the kind of profit which the hon. and learned Member for St. Pancras mentioned when he said the landlord expected to get a profit from the sale of the land over and above the value of the land, though very often he was unable to do so. He did so in this case and it was allowed.

What I said was that where a man got more for the property than the value which the valuer placed upon it, it was perfectly impossible to distinguish what was paid too much for the building and what was paid too much for the land.

That is another point.

I do not think I made the other point.

Anyhow, it was an amount allowed for profit, legitimate profit on a speculative business in land, and all the profits in this case could be attributed not merely to the value of the building, but to the value of the building as it stood on this piece of land. Then the question arose why, if the selling value in the open market was £625, was it sold actually for £750, and we have the point raised by the hon. Member for Hanley (Mr. Outhwaite). I cannot honestly say what the truth about the matter is, because there is a conflict of evidence, but the man who bought the property states that he bought it on the explanation that he would be given a monopoly value for the shop, and that the extra amount over and above the proper amount at which it would have sold only represented to him a guarantee of the monopoly value. If that guarantee had been carried out—I will not say whether it was given or not: it was on the property it was said to be given, and he was very furious about the whole transaction—and if the land had been valued by our valuers under the condition of the guarantee, then without a shadow of doubt the total value would have been the same as the selling value. You would have had £750 as the fair value, and there would not have been a farthing of Increment Duty. But as it was not so, and the man paid a consideration for monopoly value, as he says, in addition to the value of the shop and land, I think we are perfectly justified in interpreting that as the monopoly value of the land, because evidence was brought before the referee. One builder stated that on a similar piece of land he was prepared to build a similar building, including builders' profits, for £300. Under those circumstances it is evident that the fact that the man thought that there was a restrictive covenant for him was a reason for his giving the higher value. I submit it is perfectly legitimate that the builder himself in those conditions should contribute a fair proportion towards the increment value.

Not only so, but I would point out to the House that this man owning the shop has paid £750 for the land and house, and the land and house are franked to the extent of £220 as being an assessable site value, and on that the builder has also his profits. If the builder had paid nothing, and the man who had bought the land, finding the conditions were not what he thought they were, had sold the shop for £750, and the other conditions had remained the same, then that man would have had to pay the £22 Increment Value Duty for which now the land is franked, and the builder, besides obtaining this large amount of profit above builders' profits, owing to a misapprehension on the part of the man, would also have transferred his Increment Value Duty from himself on to the man whom he has already treated in that manner. That seems to be a monstrous proposition for any hon. and gallant Gentleman opposite to get up and state. I know of no other case in which the price paid has been over the total value and in which our valuers challenged the price paid as not being the value under the Act and took this money except where there was some monopoly value of the land itself, and I submit that the statements made by the Chancellor of the Exchequer to the builders in giving the interview to them on this subject in October, 1909, have been carried out.

"This is one of the points on which I want to be quite clear to the builders, and which I do not think that they have quite apprehended up to the present moment. It is not the money they spend which they can deduct. It is the value which they create, which is a very different thing. You may spend £500 and create a value of £1,500 if you put brains and intelligence into it. Another man may spend the same money and not create a value of £300."

In all these cases if the builder builds with ingenuity and skill every farthing of the value of the building must be in the definition of the Act attributable to the value of the building, and under those circumstances must be deducted before the increment value is paid. But there are cases where the definition of the total value of a willing seller to a willing buyer is broken through owing to the seller endeavouring, solely because of the location of a particular plot of land on which the building is, to hold up that building against that buyer who must have that building on that bit of land.

The seller has got more brains.

it has nothing to do with brains. It is only due to the fortuitous demand of people in that district for that piece of land. I gave a case the other day where a hospital home had to expand in a street where all the houses were of the same value, but the house next door was held up against the hospital because the hospital had to have the house next door, and could not do with a house down the street, and that is a legitimate subject for Increment Value Tax. It is a land value, and it is a monopoly value. You cannot do this with tea and sugar because you can carry them about from place to place. If you could carry houses about in a wheelbarrow it would not affect them either. If there was another shop next door or opposite to Mr. Landsmen's shop there would have been no monopoly value. As he possessed the monopoly value that monopoly value is taxed, and this House always knew that that value would be taxed. The hon. Gentleman threw scorn on us because we had only drawn a small amount of Increment Tax during the years that have elapsed since the passing of the Budget. At one moment it was explained that we were drawing enormous sums on builders' profits, and afterwards it was made a matter of reproach to us that we were only drawing a small sum during all the years the tax has existed. Why has only a small sum been drawn, and why have the estimates made by my right hon. Friend and myself when this was passing through the House been up to now altogether out of proportion to the results obtained? It is due to one cause and one cause alone. It is not due to the fact that there is no increment or no unearned increment, or that in many cases all over this country land is not steadily going up in value, not through the exertions of the owner, but through the general development of the community. It is due to the concessions which we gave when the Bill was being passed; and, above all, to the concession which allowed a 10 per cent. reduction from the site value before any increment could be obtained. Hon. Gentlemen opposite always reproach us with not collecting enough money, and they seem to think that the Act has been a failure. There is an easy way in which we can collect money, entirely within the intention of Parliament in passing this Act, and by which the Act can be made quite simple, without any reference to the alternative and larger scheme which my hon. Friend for Newcastle-under-Lime (Mr. Wedgwood) outlined, and the way is to remove the 10 per cent. and to remove some other deductions which were made, not, I think, entirely in response to demands for justice but in response to appeals for mercy. Certainly, if we could obtain any general agreement as to the desirability of fully charging unearned increment upon owners, making all the allowance possible for deductions which could be made owing to their own foresight, their own skill, their own appreciation of what may be demanded in the future in connection with building, I think there would be no difficulty between the two parties in this House dealing with the matter. May I repeat a statement made by my right hon. Friend the Chancellor of the Exchequer and other Members of the Government during the Debate on the Budget in 1909? The hon. Baronet the Member for Ayr Burghs (Sir G. Younger) asked, Why not tax other increments? I agree. Why not tax other increments? I believe it is far fairer, if you can define them, to tax increments which are not increments due to the foresight and skill of persons, but which are made by the community as a whole, than to levy taxes on the poorest of the poor. Just compare the condition of Increment Tax as it stands at present in the records of Parliament with the case of the Tea and Sugar Taxes. There is no definition made with them of a 10 per cent. reduction before you have done anything with a certain amount of tea or sugar—

I think the right hon. Gentleman is going rather wide of the Amendment before the House, which has reference to the methods of valuation under the Act passed in 1909.

I quite agree that I was going too far in answering the challenge made by the hon. Gentleman opposite.

I simply asked why single out this? I did not develop the point.

If the hon. Baronet will single out other forms of unearned increment, I shall be pleased to give them most fair consideration. In conclusion, I submit that I have shown that the collection of the Increment Tax is, first, from the value of the site, from the initial valuation, but afterwards is from the price at the sale, and that was clearly before the House all through the Debates in 1909. I have shown that so far from taking the builder's profits, not a single builder has been asked to pay a farthing Increment Tax except in those special circumstances in connection with the Lumsden case. I have shown in connection with Lumsden's case we taxed what in the narrowest sense of the word we have a right to define as profits obtained from the monopoly value of the land, and I have shown, and I think the Court has shown, too, that so far from our doing that through the Inland Revenue against the law, as we were so fiercely charged with doing all through the summer, the Inland Revenue were merely carrying out both the plain statement of the case in the Budget Act, and also the intentions of Parliament when that Budget Act was passed.

I am not at all surprised that the right hon. Gentleman in his reply has shown a certain amount of heat. My hon. Friend who moved this Amendment, perhaps made with more force than in any other part of his speech, a direct challenge to the right hon. Gentleman opposite, to produce chapter and verse for the claim being made, or the suggestion being made, or the principle being put forward to this House, that at the time of the Budget Debate the duties were to be charged upon windfalls or upon profits from selling house property. My hon. Friend behind me asked for facts or quotations from statements made on that side of the House, especially by the Chancellor of the Exchequer, who is responsible for the Budget, which would prove the statement which had been made generally, and on several occasions, that that princple was laid before the House, and that that was the principle on which the Increment Tax was imposed. The hon. Gentleman opposite produced one statement in which the word "windfall" was mentioned, on the Third Reading of the Finance Act of 1909–10 by the Home Secretary, and the word "windfall" in that case was really mentioned as a comparison with the duties on the export of coal. That is the sole justification which the right hon. Gentleman has been able to advance. I think I may leave it to the judgment of the House whether he has made his case good when he says that this duty was to be levied upon fortuitous windfalls or builders' profits. That was the only point. The right hon. Gentleman used a good many adjectives which are not of much use in debate of this House, but we have the perfectly definite statement which was made by the Chancellor of the Exchequer, and which was referred to by my hon. Friend behind me. It is a perfectly plain letter from the Chancellor of the Exchequer, in which he states in so many words that where there have been no increase in the value of the bare land Increment Duty would not be charged. The right hon. Gentleman has wandered all round the hat. He has repeated ad nauseam general statements which were made in novel terms, and which were totally incomprehensible to the lay mind at the time of the general discussion.

But the real point which appeals to the country, which appeals to the builders, which appeals to the owners of house property, and which I hope will appeal to this House now is, Are you or are you not charging Increment Value Duty nominally upon an increase in the value of the land when you admit, in so many words, that there has been no increase in the value of the land at all? As my hon. Friend the Member for Ayr Burghs reminded the House, it was just before we were going to a General Election. It is perhaps well to recall the circumstances that then existed. This Budget had been passed, and it was understood, I am quite sure, by every Member of this House who was present at those Debates, that the whole principle which the country was asked to approve was the simple principle that there was in many parts of the country a large increase in the value of land which was not due to any action of the owners of the land, and which had nothing to do whatever with house property as such, and had nothing whatever to do with the fortuitous profit which could be obtained in any commercial industry carried on in this country, whether the building trade or any other, but that if there was an increase in the value of the land due to the growth of the community as a whole that the object was to obtain one-fifth of that increment due to the growth of the community, in the form of Increment Value Duty. Am I not within the recollection of the House in saying that that was the definite claim and definite proposal on principle laid before this House and accepted by it? Not one word, direct or indirect, was ever said by the Chancellor of the Exchequer to lead us to suppose that he was going to tax fortuitous windfalls on the sale of house property. In the autumn of 1910 came the issue of Form IV., the next stage in this long controversy. It brought home to the people of this country what the nature of this tax was likely to be. The building trade were alarmed, and them were deputations to the Chancellor of the Exchequer, I think on his own invitation. It became clear to the Chancellor of the Exchequer that it was necessary to reassure the building trade and owners of house property throughout the country, if he was to obtain any support from those quarters for the General Election. He gave the necessary assurances in very explicit terms.

Amongst the people who interviewed the Chancellor was Mr. Smithers, a Liberal and the chairman of the National Builders' Federation. He received the assurances from the Chancellor of the Exchequer which the right hon. Gentleman has just read to the House. Those assurances were so satisfactory to him that 6,000 circulars were issued by him officially to the building trade that they need not anticipate any injury to their trade from the Increment Value Duty or the taxes in the Budget. Now the Horridge judgment in the Lumsden case has shown what the claims of the Government really are, and it is only a very short time ago since I heard Mr. Smithers state that the assurances which the Chancellor of the Exchequer had made had not been fulfilled, and that the Lumsden case, and the claim which it revealed, was a very serious blow to the whole building industry, and he announced that he was strongly opposed now to the entire policy of the Increment Value Duty, as exemplified in that particular case. So that it was not our statements, our "alarmist statements," which turned Mr. Smithers' opinion contrary to the facts. On the contrary, it was the facts which convinced him. The right hon. Gentleman says that he has not levied this tax upon any other builder. Perhaps he will allow me to say that those very large and wide negative statements which he makes require a little proof before we can accept them without any challenge. May I remind the right hon. Gentleman that my hon. Friend referred not only to the Lumsden case, but also to the Richmond case? This Amendment does not refer only to the building trade; it refers to the whole method of levying taxes on the sale of house property generally. I do not know what may be the particular claim which may have been made against builders, but I do know that a very large number on this very ground have been made on the owners of small house property after they have sold that property in the market.

How does the explanation given on this Amendment fit in with the facts of the Richmond case? Hon. Gentlemen opposite cheered when the right hon. Gentleman said this claim was only made when there was a monopoly builder's profit owing to the particular situation of this land. How does that apply to the Richmond case? In the Richmond case you had a piece of land bought for £500, with Death Duties paid on £500, and sold for £500. The Valuation Department come down and put a value of £380 on that property. That becomes its statutory value. I was much interested to hear the hon. Member for Hanley (Mr. Outhwaite) get up and say—and this is our whole contention—that he was of opinion that the price which the property fetched in the markets was a better test of its value than a figure put on it by a Government valuer. I think every common-sense man in the House will agree that there is no better test of the value of property than what it fetches in the open market when it it put up for auction. Remember the instructions that were issued. The right hon. Gentleman was particularly careful not to refer to the instructions or even to mention them. They say nothing about a monoply value of the land. They simply say that Increment Value Duty is collectable whenever the unit of valuation, that is the house as well as the land, is sold for more than it is worth at the time. What does that mean? It means that what the statutory worth of the property is at the moment is what the valuers have placed upon it. What the property is not worth, according to that, is what it fetches in the open market, and the wider the difference between the statutory value which is arbitrarily placed on the land by the Government valuer and the price which that property has fetched in the open market, the bigger the tax levied on the unfortunate owner. Surely it must be perfectly clear that those valuers are not infallible. The right hon. Gentleman attributed to the valuers very great sagacity and accuracy in the method of making the valuation. May I suggest to him that the ordinary practice of valuers in this country is to value for clients, and may I also suggest that every property in this country has a considerable margin? There is the highest value which it may fetch under ordinary market conditions if three or four people want it, and that which it may fetch when very few people happen to desire to possess it.

The margin is very considerable, and if you want proof let us take a concrete case as to how these valuers value when they are valuing for the Government on both occasions. The facts are known and have been the subject of question and answer and are admitted by the Chancellor of the Exchequer. There was a gentleman named Mr. Gough, who owned a ten-acre field just outside Chatham, at Chapeltown. The War Office desired to purchase, and had power to take the field compulsorily. They put on a valuer to value the land for compulsory purchase. It was agreed that it was not necessary to hold an arbitration. The Government valuer valued the land at £450. They adhered to that, but sooner than go to arbitration they eventually agreed to give £500. The valuer valued according to the ordinary practice, and in valuing for his client, the Government, he put the value upon that land which he considered was the lowest value which that land would he likely to fetch under unfavourable conditions. That was in 1909, after the date at which this Act came into operation. In December last the time came for valuing the land under the provisions of the Finance Act. The valuers were unaware of the War Office having purchased the land. Another Government valuer, also valuing in the interests of his clients, which was to get as high a value as possible in order to obtain Undeveloped Land Duty, valued these same ten acres of land and served a valuation of £845. So that you have one Government valuer, when the Government want to buy a piece of land, valuing it at £450, and another Government valuer, when the Government want to obtain Increment Value Duty, valuing it at £845. It is upon a valuation carried on on that principle that the unfortunate owner is liable to be mulcted to the extent of 4s. in the £ on the difference between the two figures.

10.0 P.M.

There are innumerable cases. There is the case of two acres of land near Wakefield. That land was put up for auction, with a reserve of £400 upon it. The reserve was not reached, and ultimately, with great difficulty, the land was sold in the open market for £350. This is bare land without any buildings. The Government served upon the owner a valuation, which became the statutory value by the lapse of sixty days. The right hon. Gentleman did not explain that these valuations are served upon people who do not understand them, and that by the mere effluxion of time, without the people having any say in the matter, those valuations become statutory and represent the value upon which the Increment Value Duty is chargeable. In this case a valuation was served for £975, and the market value which the land has actually fetched in the open market is £350. That is the method upon which these valuations are being conducted. We have it definitely in black and white from the Chancellor of the Exchequer that no duty will be chargeable unless there is an increase in the value of the bare land. What is happening? The question we are now discussing is part of an even larger and more important question than that which has been brought before the House. It is a question of departmental law-making. Legislation in this House has been carried on under pressure, and it has become the habit of the Government, whenever they have met with a difficulty, not to submit that difficulty to the House, to allow the House to hear both sides, to adjudicate upon it, and to settle the difficulty in express terms available to the Courts of Law, but to pass the matter by and to leave it to a Government Department, not only to administer the law made by this House, but to make the law itself. That habit has so grown upon the Departments that they do not appear to be satisfied with making the laws really left to them, but they make laws of their own. I think we have some right to complain to-night of the absence of the Chancellor of the Exchequer, because, to some extent, his personal honour is at stake. He has made the definite statement that no duty is to be levied unless there has been an increase in the value of the bare land. Mr. Howell Thomas, Deputy Chief Valuer for England and Wales, stated in the Lumsden case that, in his opinion, there had been no rise in the value of the land, but that he thought the amount of Increment Value Duty had nevertheless been correctly ascertained. Mr. Howell Thomas is an officer of the Treasury.

There is no doubt the proceedings of this House are conducted under very curious conditions. Statements are neglected and matters which previous Houses of Commons would have considered it absolutely necessary to investigate very closely indeed are passed by as of no account. Taxation is, or ought to be, the principal care and responsibility of this House. We are bound to make our taxation, not only just and clear, but comprehensible to the people upon whom it is levied. We have the statement made by the Chancellor of the Exchequer that no tax is to be levied upon owners of house property unless there has been a rise in the value of the bare land. I have also read the definite statement by one of the officials of the Chancellor of the Exchequer that there has been no increase in the value of the bare land, and that yet the tax has been correctly levied. That is a serious matter, and yet the Government Bench is unoccupied, except for the Secretary to the Treasury, who has done his best, and who has our sympathy in attempting to defend an indefensible case. It is for the Chancellor of the Exchequer himself to come here and reconcile the statements in his letter with the claims now made by the Valuation Department. It is a scandalous thing that when a statement is made by the Chancellor of the Exchequer himself on a matter of taxation it should not be his duty to come to this House and make good the pledges he has given, but the duty, and the very expensive duty, of a private organisation and of private individuals to test in the Courts of Law whether this procedure is legal. Because that is the position of the Chancellor of the Exchequer: "Can I legally break the pledges which I have given to the House and the country?" His pledges are being broken, and it is surely a point of honour of which he should take cognisance.

If the law is being rightly interpreted under the recent judgment, it is the bounden duty of the Chancellor of the Exchequer to make good his pledges, and to announce that he proposes to introduce a Clause altering the law. That would cost nothing. The present position is that he does not consider it necessary even to be here to answer the charges made against him, but he leaves the Law Courts, at the expense of private individuals, to find out whether this claim, which we have definitely proved to be contrary to the pledges he has given, is legal. Where shall we be, supposing this is legal? The Chancellor of the Exchequer will still be levying duties contrary to the pledges which he has given to the country and to this House. If they are legal they are none the less dishonourable. On the point of public policy, is it not perfectly clear that it is contrary to the feeling of the House? No House of Commons would ever sanction the placing of a duty upon fortuitous windfalls that come to one particular industry in the country when all the other industries are entirely free? In the matter of the actual increase of the value of the bare land, the claim was made, and was fought out over and over again in this House. It was decided by a majority, against the will of this side—and, of course, we have to accept the decision of the majority as law until it is reversed—that where there has been an increase in the value of the bare land due to the growth of the community a tax should be levied upon that particular subject. But it has never been passed by this House, and I do not think it ever would be, that fortuitous windfalls and chance profits in any trade of the country should be taxed when the other trades escape altogether! Surely, if there is a trade or if there is a market in which there are less fortuitous windfalls than to any other trade or market in the country, it is in the ordinary market of house property and of the development of land by builders? In this particular Lumsden case it is worthy of note that no less than ninety-two houses had been constructed by this particular builder. It was no doubt the provision for a customer of a shop by Mr. Lumsden that was mainly responsible for the profit which he obtained upon that one single transaction. In the building of the ninety-two houses there was only one that was eligible for a shop. I think it is rather remarkable that the Government, in dealing with this matter, have two lines of defence—one for the House of Commons, and the other to take into the Court of Law. It is rather remarkable that the justification which the right hon. Gentleman has just given, and the facts upon which he based that justification in regard to the Lumsden case—the facts which he stated as to a monopoly value, the removal of restrictions, and so on—that not one of those points was brought before the Court of Law in any shape or form. It is good enough for this House, where it is not subject to cross-examination, where it is not evidence, and where ex-parti statements of a political character can be made to provoke cheers from the benches opposite. But we should think a great deal more of a defence of that kind if the right hon. Gentleman had dealt with the defence and justification which were made before the Court of Law. Not one word of it, so far as I read it—and I have been pretty carefully through the case—not one word of the justification was brought before the Courts. On the contrary, the justification that was given to the Court was simply that it is a fortuitous windfall.

Where do we stand? What is going to be the consequence of this? The claim is now made that that part of the profit which is a fortuitous windfall is liable to a tax of 4s. in the £. There has been another such decision in the Court of Session in Scotland a few days ago, where it was decided that part of the profit which was made by the sale of some real property was a sentimental profit, and that sentimental profits are not liable to duty. So now, whenever there is a sale of a piece of house property, this investigation has to take place. A certain percentage of the profit of the sale is legitimate, a certain percentage is sentimental, and a certain percentage is a fortuitous windfall. That part which is sentimental and that part which is legitimate are not taxable. That part which is a gratuitous windfall is subject to a duty of 4s. in the £. It simply means this, that every poor man who has to oppose a claim of that kind has got to pay because he cannot fight the Government. The rich man who has capable legal and other advisers at his disposition will be able to fight the case and the probability is that the duty will rarely be levied upon him. The expense and trouble to the individual levied caused by this indeterminate form of claiming duty is endless. Surely we have the right to know when a man is buying a piece of house property the kind of burden he has got to bear in connection with that property? All he knows is this: if he makes a profit it will be the cause of litigation in some form or another as to whether he has got to pay Increment Value Duty or not.

Although I do not wish to transgress the rules of order, and I do not want to go into the question of the tea and the sugar tax referred to by the right hon. Gentleman, still I am entitled to point out what the consequences of levying taxes upon this basis are to the very poorest of the population. The indirect, effect of these taxes is to-day, and must be more so in the future, the raising of the rents which are charged for small house property. That is already happening. Hon. Gentlemen opposite are always telling us that the consumer pays. There is nothing truer than to say that this Increment Value Duty which we are now taxing is simply nothing less than a heavy tariff duty, an Excise Duty, placed upon every transaction in renting house property. In every transaction there is, at any rate, a guinea for getting the Increment Value Duty stamp affixed, even if there be not a farthing of duty charged. In an answer, we were told some six months ago that no less than 403,000 Increment Value stamps had been affixed costing 403,000 guineas, and that the total amount of the increment obtained had been £6,000. In face of that the right hon. Gentleman says how can we on this side of the House suggest at one and the same time that these heavy burdens are being placed upon owners of house property, and yet sneer at the ridiculous yield of the tax? But the right hon. Gentleman and his Friends have accomplished the impossible! They have succeeded in inventing a tax which is really a heavy and onerous burden upon the owners of property, and yet which produces little or no revenue. Here you have the concrete instance that I have mentioned. It is perfectly clear that the burden upon property is not the £6,000, but the 403,000 guineas, with other burdens that are additional. There are two sets of people who pay this. First of all the working classes who are obliged to pay higher rents which this tariff adds to the burden upon the consumer in this country—[HON. MEMBERS: "Hear, hear"]—surely nobody has denied that if you put a heavy tariff upon articles produced in the country, if you put an Excise Duty on whisky, that you are going to raise the price. Here you are putting an Excise Duty on house property, and of course you are thereby raising the rent to the poor people who are to live in the houses. And there is another class of people who suffer, and these are the ratepayers, who will have to dip their hands into their pockets to build houses which the builders do not build on account of the taxes placed upon them. The economic action is perfectly plain and simple. You restrict building; it cannot be denied that building has been restricted; the speculative builder does not carry out his normal functions to cope with one-tenth of the demand for houses, and consequently there is not the proper proportion of empty houses there should be in a district to keep rents down to the proper level. The whole cost of this duty and this legislation is not measured even by the four hundred and three thousand guineas. Any speculative builder who desires to borrow money to-day has got to pay 1 per cent. more for it than before this legislation, and that 1 per cent. increases the cost of building the house and the rent to the man who is going to occupy it. I did not intend to go into this economic aspect of the question because this Amendment is confined to the pledges of the Government, and I must apologise to the House for being led away by the line taken by the right hon. Gentleman opposite in defending himself. But I did not wish the House to think that our case was less strong on the economic and general ground than on the speeches of the Chancellor of the Exchequer. On both these grounds, though I know it is difficult to ask hon. Members opposite to vote for an Amendment to the Address, I hope there will be, as the result of this Debate, such an expression of opinion not only in the House, but in the Lobbies as well, as will force the Government to recognise their responsibility to carry out the pledges they have given, and which should be carried out, unless the building trade on the one side and the honour of the Government on the other are to be very seriously jeopardised.

The hon. Gentleman who has just sat down said it would be difficult for anyone on this side of the House to vote for this Amendment. I have no hesitation or doubt as to the way I shall cast my vote, and that way will be in favour of this Amendment, and I wish to give my reasons for taking that course. I have no investments in land. I think it is necessary for me to say so because these are times in which every vote seems to be measured by one's interest in particular investments. I will be acquitted of having any particular interest in the vote I am going to give this evening. I represent an industrial constituency which is composed practically of 95 per cent. of working men. A very large number of these men, by self-sacrifice and by thrift and industry, have bought small pieces of land and have become their own land lords. At the autumn meeting of the Liberal Association, at which I was not present—an association composed entirely of working men—men who had voted Liberal all their lives, there was expressed a feeling stronger than any feeling expressed during the whole time I have been connected with the constituency against the system of valuation the Government has adopted under the Finance Act. What the owners of small property say is, "Here we buy a piece of land, say, for £50. We build a house upon it costing £150, and the composite subject is £150. The Government valuer places the composite subject at £150." That has happened in several instances. My people say, "It is all very well to say to us, as you did at the last election, that there will be no Increment Duty paid except upon that which is due to a rise in the price of the land, but how can the Government valuer differentiate as to whether the land or the house has risen in value?" In point of fact is that possible? The hon. Gentleman opposite complained that the Chancellor of the Exchequer was not present, but I think the Financial Secretary to the Treasury is far more astute on this point. I have had a long correspondence with him, which I have forwarded to the members of the Liberal Association in my Division, and they have all said that the letters of the right hon. Gentleman are very polite, but they do not deal with the problem which they are faced with. They say, "You made a definite statement during the passage of the Budget and at the General Election that Increment Duty would only be charged in the event of there being a rise in the price of the land." The right hon. Gentleman is not correct in saying that during the course of the passage of the Budget the word "windfall" was never used. I have not refreshed my memory by looking up the Debates, but I remember asking my right hon. Friend a question on this point, and I believe he did use the word "windfall" when I tried to extract from him whether any duty would be paid on the composite subject other than the occasion when there was a rise in the value of the land. I think my right hon. Friend then said that there would be a duty levied on this fortuitous windfall.

I do not think it can be said that the House was not aware that there would be some sort of Increment Duty, and I am still in the dark as to how this tax is levied. Let the House examine the position in which the working man finds himself. By self-sacrifice he puts all his savings into a house, and he buys the house he wishes to live in. He wishes to sell it or give it to his children. As a rule he sells it, or after he dies it is sold for the benefit of his children or dependants. See how this man is prejudiced when he wants to sell. He has paid, say, £200 for a house which stands in the Government valuation at £150. Suppose that man wishes to raise money. He cannot raise the amount it has cost because they are always valued below the actual cost of building. I have received a flood of letters on this subject. A man wrote to me from Mansfield saying, "I bought a piece of land in June, 1910, and I built a house upon it. I got into it by the 1st August, and I received a demand from the Treasury for 1s. 11d. for Undeveloped Land Duty." He had not then actually got into the house, although he was in it in August. When I wrote to the officials they said, "We will alter the date, and this man, instead of paying duty from 1st June, shall pay from 1st July." "But," they said, "we beg to point out this constituent of yours has not paid what he ought to have paid. He has been wrongly assessed. He ought to have paid Undeveloped Land Duty for the year 1910, but by an oversight this has not been charged. Therefore, instead of the duty being is. 11d., it will be 3s. 6d." My Constituent, therefore, got out of the frying pan only to find himself in the fire. It is a very small sum of money, and may not be thought to be worth troubling about; but, after all, it represents a day's work of that man. He has, in the first place, a valuation put upon his property lower than he has actually paid for it. In view of the unsatisfactory position in which I find myself in connection with these Land Duties, seeing the Chancellor of the Exchequer putting his hand into the pockets of working men in my Constituency who have accumulated small savings out of their hard-earned wages and built their own houses, I intend to vote for the Amendment.

I happen to have spent fifteen years of my life in the building trade, and I have taken a great interest in it ever since. I am not competent to speak of what was the exact view held either on one side of the House or the other in 1906 for the simple reason that I was not here, but it was understood throughout the building trade, and I believe by the general public, that the intention was to tax the value given to the land solely by the growth of the community apart altogether from any value attributable either to the enterprise or to the brain or to the industry of the owner. That was what was generally understood throughout the country after all the exhaustive debates in this House on the subject, and I am, therefore, right in assuming that was the clear view put from this side of the House. That was not the gist of the right hon. Gentleman's argument in this matter of the Lumden case at all. He had to admit there was in this case a tax upon the profit that was derived by the builder from the transaction. His contention was that it was not a legitimate profit. If that is the line of argument he thinks good enough to put before the House of Commons, it is very curious that was not the line of argument adopted by the counsel who was briefed in order to put before the Court the case for the Government. They were successful in that case, and it is, therefore, somewhat curious to find the right hon. Gentleman putting before the House a wholly different line of argument. I want to read just a line or two of the actual words of Mr. Finlay, in which he put forward the case as he understood it in this matter of profits. He said:—

"My friend put it to one of the witnesses that this was a legitimate profit. I perfectly agree. If Mr. Lumsden was so fortunate to find Mrs. Stobie who would give more than the place was worth, it is perfectly legitimate. I do not criticise it in the least. What I do say is that the Government under the scheme of the Act is entitled to a share of the profit as increment, and I say that in taxing that we are not putting a sixpence on the value of the property; we are putting it on the increment. I hope that Mr. Lumsden will find many other Mrs. Stobies, and when he does that he will not in future, after the explanation given in this case, object to share a little of his most well deserved and ingeniously won profit with the Government."

I cannot conceive of anything clearer than that, and, considering that that is the case which was put forward by the counsel for the Government in this very case which has been discussed on the Amendment, I cannot understand how it is that the right hon. Gentleman the Secretary to the Treasury, who is the sole representative of the Government in the House, comes down to put an entirely different case before us. He says, in effect, "It is admitted that part of the profit of the builder was charged with Increment Duty," but he says it was an illegitimate, and not a legitimate, profit, and it was said to be due to a monopoly in one grocer's shop. That is perfectly common in the building trade. Mr. Lumsden erected ninety-two houses. He was doing something to solve the housing problem which the Budget is not doing. An incident of this large transaction was that he got this particular concession, this grocer's shop. The Government then stepped in and said in the words of the Secretary to the Treasury, "This is not a legitimate profit. It is a builders profit it is true; but it is a profit you ought not to have made; and therefore we are entitled to charge Increment Duty upon it." Now, I hold that if it is part of a legitimate profit it must be due to the brains and enterprise of the builder himself, and if so, it clearly comes within the definition which the Chancellor of the Exchequer gave. That was precisely what was to be entirely exempt from Increment Duty. There was a conference representing the whole building trade, with the National Federation of Building Trades Employers. It was held on 6th October, 1910, and I have here a verbatim report of the proceedings. At that conference Mr. Smethhurst, the president of the National Federation, Mr. White, the vice-president, and another Mr. White, the secretary, were present. The Chancellor of the Exchequer said:—

"But if there is one thing more than another that they appreciate it is that it is not merely the money the builder has spent, it is the value he creates with the money, which means with the help of Ins brains."

The vice-president then said:—

"Of course, he may not only be a builder but a developer of the land, would he be then in exactly the same position?"

The Chancellor of the Exchequer said:—

"Certainly, Anything which is due to the expenditure or the brains of the persons who are creating the value is not to be taxed at all."

That, surely, is quite clear, and I think we are entitled to say that here is a case where it is undoubtedly a part of the builders' enterprise and brains which has created this value. I say from my experience in the building trade that the difference between failure and success in erecting any kind of house property consists in three or four things. The first three things which are essential to success are to know when to build, where to build, and what to build If a man succeeds in these three things he is using brains and enterprise, and making a legitimate profit and a legitimate success; but there is a fourth thing which is absolutely necessary in order to succeed in any building speculation, and that is to know who to put the property before when you have got it built—to know how to put it in front of the right buyer who is likely to pay a profitable sum for it. In this case it was simply knowing where to build, when to build, and what to build, and then having the ingenuity to find the right class of person to buy the property and to make a profit. In this particular case the builder was successful, and the Government step in and say, "You have made a profit; whether it is legitimate or not does not matter for the moment. You have made a profit through your enterprise. We will charge upon you what was supposed to be a tax purely upon an increment value, something over which the person had no control; which was not due to him in any way. Although that was the purpose and object of the Act, yet we will charge you an increased Income Tax of 4s. in the £ upon the top of the usual 1s. 2d. on profits, or 9d. if it is a smaller profit derived from trade." What is the justification the Government put forward for this? They say that this is a fortuitous windfall, or use some expression of that kind to try to disguise what they are really doing. They only apply that theory to the profits of one particular industry, and it is because they do that that they are producing effects out of all proportion to the amount of the tax collected from that particular industry.

Where ought this legitimately to end? I see the Solicitor-General in his place. Everyone who pursues his profession must make a beginning, and the first fee any barrister receives, if there is anything in life which is a fortuitous windfall, it must he that. I wonder if he will agree that all the fees chargeable by learned counsel, particularly the earliest fees, for they are the most important because they are most fortuitous, should pay 4s. in the £ duty above the ordinary Income Tax. The greater the success, as in the case of the right hon. Gentleman, the larger is the windfall, but the less fortuitous. I suppose that on the same theory on the salary he at present enjoys, if the builder is to be taxed on these fortuitous windfalls, he ought to contribute the same proportion, and so on right through the profession. There is no logical end to this theory. If you appoint certain Government officials to say what a thing is worth, to go behind the haggling of the market, which settles the value of everything in this world, and to say that there is some other perfectly artificial measure of the true value of an article, whatever it may be, which is to be applied only in the case of the building trade, and that someone with superhuman knowledge beyond that possessed by the whole building trade and the public is to say that there is a certain hypothetical imaginary value, which corresponds to nothing in heaven or earth or anywhere else, and which everyone knows does not exist, and upon this you recover a special Income Tax, can the Government be surprised if it produces some effect upon the construction of house property in this country? I only want to draw the attention of the House to the fact. I say it is largely brought about by the uncertainty that is created both in respect of people who have money to lend upon mortgage, and of people engaged in the building trade, particularly small speculative builders. It does in large measure account for the fact that in 1911, the first year of the operation of this beneficent Budget, only 10 per cent. of the number of small houses of £20 annual value and below

I beg to move, "That the Debate be now adjourned."