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Commons Chamber

Volume 93: debated on Wednesday 2 May 1917

House of Commons

Wednesday, May 2, 1917

Private Business

Cork Improvement Bill,

As amended, considered; to be read the third time.

South Eastern and London, Chatham, and Dover Railways Bill,

As amended, to be considered Tomorrow.

Local Government (Ireland) Provisional Orders Bill,

Read a second time, and committed.

Ultimus Hares (Scotland) (Account and List of Estates)

Return ordered " of Abstract Account of the receipts and payments of the King's and Lord Treasurer's Remembrancer in Scotland, in the year ended the 31st day of December, 1916, in the administration of Estates and Treasure Trove on behalf of the Crown:

And of alphabetical List of Estates which fell to the Crown as Ultimus Hæres in Scotland, administered by the King's and Lord Treasurer's Remembrancer in the same year."— [Mr. Baldwin.]

Army

Copy presented of Rules for Military Detention Barracks and Military Prisons Amendment [by Act]; to lie upon the Table.

National School Teachers'(Ireland) Pension Fund

Copy presented of Account of Receipts and Payments in respect of the Capital and Income of the Fund for the year 1916 [by Command]; to lie upon the Table.

Financial Statement (1917–18)

Copy ordered "of Statement of Revenue and Expenditure as laid before the House by the Chancellor of the Exchequer when opening the Budget."— [Mr. Baldwin.]

Copy presented accordingly; to lie upon the Table, and to be printed. [No. 75.]

Oral Answers to Questions

War

Royal Indian Marines

asked the Secretary of State for India whether some nine months ago a petition was presented to the Viceroy of India by many senior executive officers of the Royal Indian Marine, pointing out the block which has taken place in recent years with regard to promotion to commander; whether he can say when an answer may be expected to that petition; and what is the cause of the delay?

I was not aware that such a petition had been presented, but the question of the promotion in the Royal Indian Marine is now under consideration.

asked the Secretary of State for India whether he is aware that at a recent investiture an officer of over eleven years' standing as lieutenant in the Royal Indian Marine was placed below captains in the Army, whereas lieutenants after eight years' seniority in the Royal Indian Marine rank with and after majors; and will he cause the necessary instructions to be given so that lieutenants after eight years' seniority in the Royal Indian Marine may be given their correct position at Royal and official functions?

The relative rank of officers of the Royal Indian Marine is laid down in Regulations. Procedure at investitures is a matter for the Lord Chamberlain's office.

asked the Secretary of State for India whether he is aware that lieutenants in the Royal Indian Marine after eight years' service as lieutenants have still to remain on in that rank, whereas officers of the Royal Navy and Royal Naval Reserve after eight years' service as lieutenants pass automatically to the rank of lieutenant-commander; that in the present circumstances all officers of the Royal Naval Reserve, a junior service to the Royal Indian Marine, hold a higher rank after eight years' service as lieutenant than an officer of the Royal Indian Marine; and can he see his way to give to lieutenants in the Royal Indian Marine after eight years' service the rank of lieutenant-commander?

There is at present no rank of lieutenant-commander in the Royal Indian Marine, but a lieutenant of the Royal Indian Marine of over eight years' seniority ranks above a lieutenant-commander of the Royal Naval Reserve. The question of making some changes in the designations of officers of the Royal Indian Marine is now under consideration.

Mercantile Marine

asked the First Lord of the Admiralty if he has been able to get any further consideration to the rule that the Admiralty confidential instructions will only be issued to those masters of British merchant ships whose parents were, at the time of their son's birth, British subjects; and whether he has been able to make any modification in that rule?

The matter has been further considered, and it has been decided to set up a Committee, who shall consider cases in which sufficient reasons are advanced for exceptional treatment.

asked the First Lord of the Admiralty if he will state at what date the Admiralty set free from all naval work shipyards in the United Kingdom and undertook to leave these yards to concentrate on merchant shipbuilding alone; how many yards were thus freed for purely mercantile work; when were they actually able to count on being able to devote themselves to this mercantile work without interruption; and can similar information be given with regard to any marine-engine works engaged on naval work during the present War?

In May, 1916, the possibility of releasing firms for merchant shipbuilding was considered by the Admiralty, and as a result thirteen shipbuilding firms and eight marine engineering firms were surrendered at the beginning of June, 1916.

Submarine Attacks

asked the First Lord of the Admiralty whether the captains, officers and men of the mercantile marine when they are crews of vessels armed for defence against submarine attack assume a status different from that of crews of undefended merchantmen; whether their treatment by the enemy has in practice been different; and whether the guns now being supplied to British merchantmen are of range sufficient to out-range the guns carried by the German submarine?

The fact that a merchant ship is defensively armed makes no difference to the status of the captains, officers, and crews of such vessels. The only difference of treatment by the enemy that has been noticed is that those members of the crew who have been taken prisoners have been treated as combatant prisoners of war and not as civilians. As to the last part of the question, long-range guns are being supplied as fast as they are obtained.

asked the First Lord of the Admiralty whether he has reason to believe that the enemy raiders and submarines which have destroyed, and are destroying British, Allied, and neutral shipping have mostly found their way out from enemy ports through neutral territorial waters; and whether he has considered, in conjuction with the Foreign Office, the advisability of informing the neutral nations concerned that if they cannot effectively preserve the strict neutrality of their territorial waters it will be necessary for Great Britain and her Allies to take effective action?

This matter has been under consideration from time to time. The question of the rights of belligerents in neutral waters is not one which can be dealt with in answer to a question.

Can the right hon. Gentleman say whether there is any evidence that those submarines have taken to sea through neutral waters?

asked the First Lord of the Admiralty whether he can, in Secret Session or otherwise, give accurate information as to the number of British, Allied, and neutral vessels and their gross register tonnage, in whatever service engaged, which have been destroyed by the enemy up to date, dividing the same into periods, and the number of German submarines which can reasonably be claimed to have been destroyed during those periods?

Can the right hon. Gentleman provide this either before or at the Secret Session, so that Members may know what steps have been taken in this matter?

asked the First Lord of the Admiralty whether full and definite instructions are given by the Admiralty to the masters of all British vessels leaving or approaching our shores as to the track their vessels shall keep; whether large numbers of British vessels strictly adhering to instructions have been destroyed by enemy submarines when actually on these Admiralty tracks, and more especially approaching our coasts; and whether he is aware that, in the opinion of the merchant service, these tracks are not sufficiently patrolled and defended?

Full and definite instructions are given by the Admiralty; and although vessels adhering to instructions have been lost, it must not be assumed that the losses would not have been much heavier if these instructions had not been followed. All the available resources of the Navy are employed on the service referred to in the third part of the question.

Is the right hon. Gentleman aware that a merchant ship following instructions of the Admiralty the other day was stopped by a patrol boat, which insisted that it should not be on the coast the Admiralty said it should be on?

I think that is very likely, because, very frequently, after instructions are given, we get information that there are submarines on a particular route, and we then try to divert the traffic.

asked the First Lord of the Admiralty what is the body now charged with the technical study of methods of anti-submarine warfare; is this still the Board of Inventions and Research, or has a Committee of the Admiralty been formed for this purpose; and, if so, will he give the names of the Committee?

The Anti-Submarine Division, the establishment of which was announced in the First Lord's statement on the 21st February, is the body charged, under the Board of Admiralty, with the technical study of methods of anti-submarine warfare, as well as with the duty of advising upon actual anti-submarine operations. The functions of the Board of Invention and Research was, and still is, to investigate definite problems or to undertake general research work agreed upon as likely to lead to valuable results in anti-submarine warfare, as well as other naval activities. The Director of the Anti-Submarine Division is a Rear-Admiral who previously held a flag appointment in the Grand Fleet. He is assisted by a staff of younger officers selected from the Service afloat for this particular work.

I have not got the names of the others. There are several, and if the hon. Gentleman desires the names I shall furnish them.

Military Service

Transfers from Royal Navy

asked the Secretary to the Admiralty if men who have joined the Navy and been anxious to stay with that arm of the Service are liable to be transferred, against their will and without their consent, to the Army; and, if so, whether he will say under what legal provision men are so transferred and on what grounds and at whose suggestion particular individuals are selected for transference from the Navy to the Army?

No man can be transferred from the Navy to the Army against his will. But on the other hand it is open to us, if we come to the conclusion that a physically fit man is not being employed appropriately, to order his discharge, in which case, of course, he would, if of military age, become liable for service under the Military Service Acts. This is what has actually happened in the case of certain auxiliary sick berth ratings —able-bodied men, the character of whose work permitted of its accomplishment by others less physically fit. Of course it would still be open to these men to volunteer for service in the Navy in a rating for which fitness for general service is essential.

Medical Categories

asked the Under-Secretary of State for War whether, in view of the fact that B3 and C3 are not to be placed in a higher category unless on examination their health has improved, he will now state what men in those categories who have now been passed for general service should do if they are still suffering from the very same disabilities as placed them in B3 and C3?

It is not necessarily the existence of a disability, but the degree of disability which determines a man's classification. Thus, varicose veins, if exceptionally severe, might lead to a man being rejected; if less severe, to his being placed in category C3 or C2, and so on. Their mere existence would not debar a man from being placed in category A. They might be quite unimportant. It is not possible to give an explanation of the case or cases to which my hon. Friend refers in the absence of all particulars, but I think it must be clear to him that there can be no general rule in such matters. Each case must be judged by the medical men before whom the case comes on its own merits.

If a man is put in category C3 suffering from double hernia, and is still suffering from double hernia, how can he be put in category A after what my hon. Friend has said in the House?

I promised the hon. Member yesterday that I would place in the Library the instructions given to the medical board. He has referred to a particular case, and if he will give me the facts I will have them inquired into.

May I ask whether a man who has been put in cate- gory B or C on account of some specific disease may be transferred to category A, without examination by a medical board, simply on the examination of a single doctor?

No. I think now that every man will be examined by a board, and I cannot really add anything to that.

May I ask whether a man who has been transferred on the recommendation of a single doctor will be entitled to go before a board to have his decision revised?

Is it not a fact that men are being passed into category A now, although they present certificates from their own doctors and their condition has not improved?

I have no knowledge of that, but if my hon. Friend will give me some instance I will certainly have inquiries made.

Has the hon. Gentleman had an opportunity of investigating a specific case of this kind which I gave him?

Medical Re-Examination Notices

asked the Under-Secretary of State for War whether he is aware that the Hull recruiting authorities sent calling-up notices for re-examination of rejected and discharged men to a firm in Hull with a blank space for the firm to typo in the name of the man; whether 150 of these were called up for the 24th; what was the object of calling 150 for one night; were they medically examined, and, if so, how much time was spent on each man; why did the men not receive, as promised, a registered letter calling them up; and whether such men as have refused to go will be penalised or get their notice in the approved fashion?

I have called for a report on this matter, and will let my hon. Friend know the result as soon as I am in a position to do so.

Will my hon. Friend also take care that the doctors are not asked to examine any such number in so limited a time?

asked if a man medically discharged from the Army and called up again under the recent Act has the right of appeal from the decision of the Army medical authorities?

A man called up and examined by a recruiting medical board under the Military Service (Review of Exceptions) Act, 1917, has no right of appeal against his medical classification by the board. Each man, however, to whom the notice requiring him to be medically examined is sent under the Act has the right of application to a tribunal, within thirty days from the sending of the notice, for exemption from military service on any grounds set out in the Military Service Act, 1916, Section 2 (1), including the ground of ill-health or infirmity.

Well, I said, in the course of the Debate on this Bill, that due regard would be given to any certificate from a family practitioner.

One-Man Businesses

asked the Under-Secretary of State for War whether a rag and bottle dealer named Ashford, who before the War was doing business with a partner in Manor Street, Chelsea, in the door-to-door collection of bottles, which he exported to Austria, has been exempted from military service, and, if so, on what ground; whether his partner, also of military age, has only recently been called up and, if so, on what ground was he previously exempted; whether Ashford has recently acquired additional storage, although he informed the tribunal that he already had a large supply of bottles in storage; and whether this man is exempted from service to enable him to resume export to Austria after the War in favourable circumstances?

Exemptions granted by tribunals are not controlled by the War Office. I understand, however, that Ashford's partner has joined the Colours, and that his business has now been reduced to the level of a "one man" business. The tribunal no doubt had this in view and did not consider it desirable to close the business down in view of the shortage of bottles. I understand that the tribunal did not have before them any suggestion of action past, or intended, with Austria.

British Subjects of Military Age

asked the Under-Secretary of State for War what steps, if any, are being taken to require British subjects of military age, ordinary and temporary residents of the United States of America, to report themselves for military duty in this country; and what steps, if any, it is contemplated taking with regard to such British subjects who, having left this country since the outbreak of War, do not so report themselves?

The position of British subjects resident in the United States has not been lost sight of by the Government, and this question is at present engaging the attention of the British Commission at present in the Uited States.

Exemption Certificates (Orkney and Caithness)

asked the Under-Secretary of State for War if he is aware that a person named McKenzie, whose services were very much in demand in Orkney and Caithness to enable contractors to fulfil their engagements with the Admiralty, and who had received exemption certificates from both local and appeal tribunals, has now been called up; and whether, in view of the fact that the War Office and Board of Agriculture have made a mistake, the calling up of McKenzie will be cancelled?

McKenzie's case was brought before the Central Tribunal, who decided that he should not be exempt from military service. The case has, therefore, been decided by the final authority in matters of exemption, and, as I informed my hon. Friend recently, I am afraid I cannot accept his suggestion that a mistake has been made by the War Office, who cannot interfere.

Malaria

asked the Under-Secretary of State for War whether the cases of malaria among officers and rank and file, now in England, are being generally treated by medical practitioners without special experience of that disease, which has resulted in a loss of man-power to the Army by the prolongation of the treatment; and whether all malaria cases will now be put through a short but stringent course of treatment for the purpose of eradicating their infections immediately and allowing of their early return to duty?

Centres for the treatment of malaria have been established in each command, and officers with experience of this disease have been placed in charge of them. Malarial cases are now being put through a course of treatment with the hope of eradicating the disease.

Bradford Woodman

asked the Under-Secretary of State for War if his attention was called on 5th April last to the case of Ernest Parker, of Springwood Cottage, Esholt, near Bradford, a woodman, who also assists in the cultivation of wheat and potatoes, who enlisted in the Regular Army on 18th October, 1904, but was discharged medically unfit on the following day; if he is aware that the said Ernest Parker was arrested by the police as a deserter at 5 p.m. on 29th March last and tried at Otley Police Court the following morning without being allowed time to arrange for legal defence, and, notwithstanding the fact that on that date Parker was an excepted person under Schedule I., paragraph 5, of the Military Service Act, 1916, he was handed over to the military authorities as a deserter; and, if in order to redress the injustice done to this man by these proceedings, he will restore him to civil life and thereafter permit him to be dealt with in accordance with the Military Service (Review of Exceptions) Act under which he is entitled to appeal for exemption, and under which alone he is liable to military service if he is liable at all?

Inquiries are being made, and I will inform my hon. Friend of the result as soon as possible.

Middlesex Tribunal

asked whether the military representative on the Middlesex Tribunal is of military age; and what is his health category?

If my hon. Friend refers to the Middlesex Appeal Tribunal, one of the military representatives is away from duty on sick leave; the other military representative is about to be medically examined, in accordance with the instructions issued by the War Office and already communicated to the House?

The hon. Gentleman has not informed me whether either or both of these gentlemen are of military age?

Will my hon. Friend go through this list in detail, so as to prevent me being under the necessity of raising more of these personal questions which have come to my knowledge?

I assume, seeing that these military representatives are being examined, that they are under military age. I assume that.

Could it not be arranged, either by the War Office or by some other Department, to see that not only the military representatives, but the members of the tribunals are not persons of military age, in order to secure greater weight to their judgment, and wider acquiescence in their decisions?

Has the hon. Member who asked the question made any inquiry as to whether the military representative of the Middlesex Tribunal is or is not an officer who has been at the front and seen active service?

Employment of Soldiers (Civilian Work)

asked the Financial Secretary to the War Office whether the conditions announced last year that soldiers would only be employed at their trade on civilian work in cases of emergency, and then only for a limited period, are observed or whether carpenters and joiners now being employed at their trade on Army pay only alongside civilians drawing the trade rate are kept so engaged for unlimited periods in other than emergency cases and without special sanction?

The men referred to in the first part of the question were part of the combatant troops. The men referred to in the second part belong to works companies and are doing the work for which these companies were formed.

Is this method of utilising men who are fit for military service not penalising them?

National Belgian Relief Fund (New South Wales)

asked the Secretary of State for Foreign Affairs whether in April, 1916, Mr. H. E. Pratten, a member of the National Belgian Relief Fund, of New South Wales, after visiting England and Holland to investigate the transactions of the Relief Commission in Belgium, issued a Report advising the suspension of contributions to the fund from Australia; whether, in consequence of this Report, a sum of about £44,000, subscribed in Australia for Belgian relief, is now held in Australia to be devoted to other purposes; whether the Report of Mr. Pratten has been considered by the Government; and, if so, what action has been taken in regard to it; and whether during the last twelve months any subscriptions to the Belgian Relief Fund have been received from Australia?

The answer to the first part of the question is in the affirmative, a resolution having been passed by the Executive Committee of the National Belgian Relief Fund of New South Wales to the effect that subscriptions should be discontinued at any rate for a time, but that the money already in hand should be held in trust. Thus, the sum of £44,000 mentioned by the hon. Member has not been "devoted to other purposes." Mr. Pratten's Report was duly examined by His Majesty's Government, who considered it ill-founded and misleading in important respects; a statement contained in it regarding certain matters of administration and control, which appeared to deserve consideration was, however, communicated by His Majesty's Government to the British National Committee for Relief in Belgium. Subscriptions to the Belgian Relief Fund during the last twelve months have amounted, from Australia, to £143,529 5s. 11d., and from New Zealand to £183,456 Os. 9d.

May I ask if this question and answer are not likely to give a false impression in New South Wales? The resolution of 15th December, to which the Noble Lord referred, stated that the money collected and to be collected was to be held in trust at interest—

asked the Secretary of State for Foreign Affairs whether, as stated in Mr. Pratten's Report on the work of the Belgian Relief Commission, the total operations of the Commission up to the end of February, 1916, dealt with a sum of 25,000,000 sterling, of which nearly 18,000,000 represented trading operations, the profit of which was said to have been spent in further relief; and if he will say whether the accounts of these transactions have been or will be published?

Up to the end of February, 1916, the Commission had received in money and in kind the sum of about £24,765,000, of which £19,607,000 was expended for the purchase and delivery in the occupied territories of supplies; £5,158,000 remained in cash in hand or other available credits. Any excesses received in Belgium as surcharges were allocated to the care of the destitute. Accounts are published at regular intervals, and these, with the Annual Report of the Commission, are at the disposal of the public.

May I ask the Noble Lord if the money collected by New South Wales is not to be held in case of need until after the War, and then devoted to the purposes for which it was collected, and not to other purposes?

Is it not a fact that Mr. Pratten, representing New South Wales, investigated the matter, and advised that the money should be held over for such future purposes as might be determined?

I do not remember exactly what the effect of Mr. Pratten's Report was. I can only say that I am glad to believe, and to know, that in point Of fact the Relief Commission has received since his Report considerable subscriptions, both from New Zealand and from Australia.

Government of Ireland

asked the Under-Secretary of State for Foreign Affairs whether the Secretary of State for Foreign Affairs, at present in New York, has informed the Foreign Office in London that President Wilson is of the opinion that the speedy solution of the Irish problem will do more to further the fight for universal democracy throughout the world than any other concession that Great Britain could make; and, if so, will he communicate to the House any communication he has received?

Alien Enemies (Employment by Government)

asked the Under-Secretary of State for Foreign Affairs if two brothers named Marklereiter, alien enemies by birth, are employed as senior clerks in the Foreign Office, and that one is on the Contraband Committee, also the War Trade Department; if so, whether it is considered in the national interests to continue the employment of these gentlemen; and if there are not sufficient men of British nationality to fill posts of such responsibility?

The hon. Member has presumably in mind Mr. C. G. Markbreiter, who has been lent by the Home Office to the Foreign Trade Department of the Foreign Office in view of the need for officials with Home Office experience in that Department. Mr. Markbreiter is the representative of the Foreign Trade Department on the Licensing Committee of the War Trade Department, but he is not a member of the Contraband Committee. He is a British subject by birth, and particulars as to him were given to the House by the then Home Secretary in reply to a question by the hon. Member for Walsall on 22nd July, 1915.

British Blockade

asked the Under-Secretary of State for Foreign Affairs whether he can state who is the expert who has been sent to Washington D.C. to explain our blockade methods; and whether he will ask for an American expert to help the Foreign Office to obtain an effective blockade?

A number of experts from the several Departments of the Ministry of Blockade have accompanied the Secretary of State to Washington, and arrangements for the most effective co-operation of the United States of America with the Allies in the prosecution of the War are proceeding satisfactorily.

May I ask what is the name of the principal expert dealing with the economic aspects of the blockade?

It would be very difficult to say who is the principal expert. I could not repeat the names of all the experts straight off, but I shall be glad to furnish my hon. Friend with the names of all the experts, and he can judge which is the principal one.

asked the Prime Minister whether the information at the disposal of the Government from neutrals, escaped prisoners, prisoners, and deserters points to the probability that the supplies from Scandinavia and Holland are the determining factor as to the ability of our enemies to continue the struggle until the 1917 harvest; and whether he will consider the advantage of forming a council in London with representatives of the United States, the United Kingdom, France, Russia, and Italy to deal summarily with the movements of all cargoes and shipping on the basis of full compensation but no supplies for the enemy either directly or indirectly?

The answer to the first part of the question is in the negative. The suggestion made in the second part, so far as I understand it, would not, I think, work very efficiently.

Empire Resources Development Committee

asked the Secretary of State for the Colonies whether his attention has been drawn to the programme and propaganda of the Empire Resources Development Committee; whether, in view of the fact that this Committee includes five Ministers of the Crown and that part of its programme is that of exploiting the vegetable oil palms of the Dependencies in the interests of the Home Exchequer, he will immediately inform the Governors of the Dependencies that no official action will be taken without the fullest inquiry in each Dependency?

A statement of the aims and proposals of the Committee has been brought to my notice. I do not consider it necessary to make any communication to the Governors of the Dependencies in question in the sense suggested by the hon. Member, as it is clear that no action could be taken without full consultation with the local authorities.

asked the Secretary of State for the Colonies whether he has noticed that a body called the Empire Resources Development Committee is in existence, one of whose objects is the exploitation of our Colonial supply of oil and cocoanut palms in the financial interests of this country, the War debt being specifically mentioned; whether he is aware that the official controller of these products in this country is a member of the Committee; and whether, on grounds of public policy, steps will be taken to prevent the controller from retaining connections which might lead to doubt being cast upon his impartiality by the natives or others interested?

The answer to the first part of the hon. Member's question is in the affirmative. With regard to the last part, I see no sufficient ground for his apprehensions.

Convalescent Homes for Officers

asked the Under-Secretary of State for War if there is any shortage of convalescent homes for officers near London; and whether the Secretary of State for War will consider requisitioning one or more of the hotels at Brighton or other seaside places and use them for the purpose of convalescent homes failing provision of sufficient suitable accommodation by other means?

I can assure my hon. Friend that steps are being taken to meet all necessary needs.

Officers' Promotion (Royal Garrison Artillery)

asked the Under-Secretary of State for War whether he is aware that the discrepancy in the promotion of the heavy Artillery is now worse than it was last year; whether in the Infantry, Cavalry, Field Artillery, and Engineers officers of fifteen years' service have been automatically advanced to field rank; whether captains of the Indian Army are also to receive this step; and why captains of the Royal Garrison Artillery of sixteen years' service are still debarred from the promotion, in spite of the work done by that branch of the Service in the recent fighting?

Officers in the British Service are only promoted automatically after fifteen years' service, if they belong to the Infantry. In all other arms promotion depends on vacancies. Promotion in the Royal Garrison Artillery has been comparatively slow, and the question whether the position can be ameliorated is under consideration.

Did the hon. Gentleman not promise consideration some four months ago, and cannot he expedite the consideration?

Yes, but as my hon. Friend knows, the question is a very difficult one.

Petrol Shortage

asked the Under-Secretary of State for War if he is now able to state what steps the Army is taking to avoid any waste of petrol in connection with Army cars?

The attention of all concerned is constantly called to the necessity of economising petrol and reducing mileage as far as possible. All cars have log-books, in which issues of petrol are entered daily. While it is not possible to give exact figures, considerable economies have been effected.

Is it not the case that many of the motor drivers employed by the Army are now idle, and would it not be possible to prevent this waste of labour?

I do not quite understand the question. As far as I know, motor transport drivers are not idle.

Will the hon. Gentleman be prepared to consider cases which I can put before him of men and women who have been employed as motor drivers and who are now not employed at all?

Naval and Military Pensions and Grants

asked the Under-Secretary of State for War whether his attention has been called to the case of Private T. Mitchell, No. 11900, 3rd Battalion Royal Highlanders, who enlisted on 1st November, 1915, making an allotment of 3s. 6d. per week from his pay for the benefit of his grandmother, who was totally dependent on his earnings prior to enlistment; whether he is aware that Private Mitchell's grandmother received nothing until 21st January, 1916, though 6d. per day was actually deducted from Private Mitchell's pay from the date of his allotment, and that arrears of allotment were only paid up after the grandmother had been put to the expense of employing a solicitor to act for her; whether he is aware that separation allowance was at first refused the grandmother on the ground that Private Mitchell had not made an allotment at enlistment, but that the same was eventually paid her but only from 22nd August, 1916; whether he is aware that Private Mitchell denies the statement that he did not make an allotment, which denial is corroborated by the fact that 6d. per day was actually deducted from his pay; whether he will state on what ground the arrears of separation allowance due to Private Mitchell's grand- mother are withheld; and whether he will take steps to have such arrears paid without further delay?

The Army Form signed by Private Mitchell on enlistment shows that he did not wish to make any allotment from his pay, and made no claim to separation allowance. He claimed, in January, 1916, and the allotment was then paid, and when it was ascertained that the amount had been deducted from his pay, arrears of allotment were issued. But as the claim had not been made within the month of enlistment, separation allowance was not admissible until it was authorised by an Army Order issued on 1st September, 1916, with effect from 22nd August. The matter has already been fully explained to the hon. Member in a letter, dated 9th March last.

Air Services

Anti-Aircraft Men (Leave)

asked the Under-Secretary of State for War whether the War Office will increase the opportunity of leave for anti-aircraft service men enlisted under the Derby scheme, for the most part married men, who have sacrificed remunerative positions from patriotic motives and who, under present circumstances, are rarely allowed to revisit their homes more than once in ten months?

Leave is granted to these men whenever possible, but it depends on the availability of spare men. It is easier to grant leave during the summer than the winter without impairing the efficiency of the Service, and I hope that during the coming summer more opportunities may occur.

Surveyor-General of Supply

asked the Financial Secretary to the War Office the precise functions which have been taken over by the new Surveyor-General of Supply?

I would refer my hon. Friend to the answers which I gave on this subject to the hon. Member for South Down on 26th April last and yesterday.

Did the Government find this new Surveyor-General of Supply in Scotland or Wales? You might give an Englishman an odd job occasionally.

Questions

Isle of Man

asked the Prime Minister whether his attention has been called to the repeated complaints, by the people of the Isle of Man as to the system of government in that island, the absence of direct taxation with consequent taxation of the poor, the failure to take steps to deal with the present distress on the island, the absence of old age pensions, and many other grievances; and whether he will at once set up a Commission to investigate all the matters complained of?

My right hon. Friend has asked me to reply to this question. I would refer the hon. Member to the answer given on 9th November last to a question on the same subject by the hon. Member for North-West Lanark. I am not aware of any general complaints by the people of the Isle of Man. As stated in that answer, provision has been made by the Insular Government to meet the distress brought by the War on one section of the community, and, apart from this, the island has not been adversely affected by the War. On the contrary, the presence of the internment camps has been a very substantial advantage. So far as regards taxation, all classes are more lightly taxed than in the United Kingdom. The question of making provision with a view to the establishment of a system of old age pensions after the War has been under the consideration of the Island Legislature. A very thorough inquiry was made into the conditions in the island by the Committee of 1911, and the Government sees no reason for the appointment of another Commission.

Have the recommendations of the Committee of 1911 been carried into effect?

I do not think so, but if my hon. Friend gives notice of a question I will look into it.

What is the good of quoting the report of a Committee if you do not carry out its recommendations?

I have an answer to a further question which, I think, the hon. Member will probably consider a partial reply to that.

Is the hon. Gentleman aware that the Isle of Man is in enjoyment of Home Rule?

asked the Prime Minister whether he is aware that by public meetings and by petitions to Parliament the inhabitants of the Isle of Man have repeatedly demanded the recall of Lord Raglan as Governor-General; whether, if the Government has any doubt as to the unpopularity of the Governor-General, they will cause a plebescite of the inhabitants to be taken; and, if the Government has no such doubt, whether they will, in the interests of good government and with a view to securing that the system of government will be one that will commend itself to the people, arrange for Lord Raglan's recall?

The Secretary of State has received one or two resolutions to this effect purporting to have been passed by public meetings, but there is no reason to suppose that they express the views of the general body of inhabitants of the Isle of Man. It is not proposed to take any action in the matter.

Is my hon. Friend aware that a petition has been presented to this House, signed by over 100,000 inhabitants of the Isle of Man; is he also aware that the people who get up these meetings of protest are immediately thrown into prison by Lord Raglan?

My hon. Friend, who is a Home Ruler, will know that there is a local Parliament in the island which may be the medium for communicating these matters.

Is it not the fact that Lord Raglan, as Governor-General, controls the Isle of Man, and that he is acting the part of a despot all the time?

Have resolutions on the subject of this question not been received from the trade and labour councils of the Isle of Man?

As I have stated, one or two resolutions have been received. If my hon. Friend desires a reference to any particular resolution and he puts a question down, I shall endeavour to answer it.

My hon. Friend has not answered that part of the question as to whether it is proposed to appoint a Commission to inquire into this matter?

Food Supplies

Sugar

asked the Prime Minister whether, with a view to economising time, labour, and material and also the saving of cost, sugar at present sent to refineries will in future be offered for sale to the public in its raw state under control of the Sugar Commission; and, if not, will he state what are the objections to this course being adopted?

I have been asked to reply. The Food Controller has already considered this proposal most carefully, but having regard to the physical condition in which the bulk of raw sugar is received in this country and the high percentage of impurities which it contains, he is not prepared as at present advised to adopt it. The impurities consist of sand and clay, and specimens of the sugar louse.

Was that answer suggested by the representatives of the refineries who are on the Commission, and is it not the case that the real opposition comes from them? Are there not many experts who have examined this sugar for years who are prepared to declare that it is quite fit for human consumption?

No, Sir. The matter has been most impartially investigated by the Ministry of Food, including, amongst others, by myself; and I might perhaps add that this plan of a reduction in sugar is preferable to putting an impure product upon the market which might seriously affect health.

Canadian Wheat Crop

asked whether any communications passed in the autumn of 1916 between the late Government, through the Colonial Office, and the Government of Canada with the object of securing for the British Government the exportable wheat crop of Canada; whether an arrangement of this kind was made last autumn with the Commonwealth Government of Australia; and whether he will lay upon the Table of the House the communications, if any, which passed between the British Government and the Canadian Government?

As regards Canada, I will communicate to the OFFICIAL REPORT the correspondence to which I presume the hon. Member refers. With regard to the second part of the question, an arrangement has been made with the Commonwealth Government for a large purchase of wheat and flour.

Does the correspondence referred to not show that an arrangement similar to that made with the Commonwealth of Australia could have been made with Canada had the Canadian Government accepted it?

I think the hon. Member had, first of all, better read the correspondence, and then, if necessary, put down a further question.

In this correspondence shall we have full particulars of the whole policy in the earlier part of the War in regard to food supplies in the Dominions and the Commonwealth?

I would suggest that the hon. Member should read the correspondence which has passed about the matter, and then, if necessary, put down any further questions.

Slaughter of Cows and Heifers

asked the President of the Board of Agriculture whether Regulations can be made to prohibit the slaughter of cows and heifers, in view of the certainty of a scarcity in the supply of milk?

The Board have this subject under careful consideration, and, as soon as the full particulars of the present situation in regard to the slaughter of cows and heifers have been collected, they will be in a position to decide whether and what further State action is necessary.

When does the right hon. Gentleman expect to issue any Regulations on this important matter?

Does the right hon. Gentleman realise that, in view of the minimum price fixed for oats and the continual increase in the price of cattle food, in the course of the next three weeks a very large number of cows and heifers may be slaughtered?

If the hon. Member will suggest any way in which we can regulate the slaughter, which can be quite easily evaded by the farmers, I shall be very glad to receive the suggestion.

Is the right hon. Gentleman clear that in all the circumstances of the case slaughter ought to take place in these cases?

I have already said that when we have sufficient material we shall decide whether and what further action is necessary.

Is it not a fact that the right hon. Gentleman has already indicated that such slaughter ought to take place?

No; I beg the hon. Member's pardon. We have indicated that as regards other cattle, namely, milch cows, it might be necessary, but there is that broad distinction.

Killing of Sparrows

asked the President of the Board of Agriculture if he is still of opinion that cruelty is not demoralising to children when committed under the supervision of school teachers; and whether, in view of the public indignation at the formation amongst children of clubs to kill sparrows for pay, he will withdraw the recommendation of the Department and leave the defence of crops against sparrows to adult agriculturists?

Teachers are called in not to supervise cruelty, but to prevent it. The assumption in the first part of the question is, therefore, unfounded. The second part of the question is incorrect. No recommendation has been issued that children should be formed into sparrow clubs. Adult agriculturists can be better employed at the present time than in bird's-nesting. I think the matter can be safely left to the local authorities, who have been authorised to organise the destruction of sparrows, which is necessary in the national interests.

Fishing Restrictions (Firth of Forth)

asked the President of the Board of Agriculture if his Department have yet come to a decision re the removal of the restriction of fishing by trawlers of these waters, within the three-mile limit of our shores and the Firth of Forth, where an abundant supply of valuable food may be secured?

There is no general restriction of trawling within the three-mile limit off the coasts of England and Wales. Fishing within English and Welsh territorial waters is regulated by local by-laws made by the local sea fisheries committees, subject to confirmation by the Board. The Board have been in communication with these committees with a view to the relaxation of their by-laws restricting fishing operations of local craft. With regard to Scottish waters, I must refer my hon. Friend to the Secretary for Scotland. If there are any specific points on which my hon. Friend requires information, I will do my best to supply him with it.

Wheat and Oats Production

asked (1) what was the average cost of production for a quarter of wheat in the years 1911, 1912, 1913, 1914, 1915, and 1916; (2) what was the average cost of production for a quarter of oats in the years 1911, 1912, 1913, 1914, 1915, and 1916?

No average cost of production for either wheat or oats for particular years are ever prepared officially. The hon. Gentleman will, I am sure, understand that the actual cost of production of any given crop is not easily calculated, because the effects of the cultivation and manuring for other crops in the rotation have to be brought into the account. As the cost of production will also vary with the soil, the season, the skill of the cultivator, and the size of the holding, only a very general estimate of the amount can be made, and even that would be the subject of considerable controversy.

Feeding Stuffs

asked the Minister of Munitions what action has been taken, in view of the depletion of dairy herds, to reduce the price of cakes and other foods for milch cows; and whether he is aware that a milk famine in the coming months is a practical certainty?

I regret that I am not yet in a position to say what effect the Order issued yesterday fixing the prices of certain oils will have on the price of feeding cake, but I hope that it or subsequent Orders will cause a reduction in price.

Potatoes

asked the Parliamentary Secretary to the Ministry of Food whether he is aware that under an Order of the Committee of the House in force since the 1st of April last no potatoes have been served or consumed in the House of Commons' restaurant since that date; whether he is aware that a like Order has been made and enforced in the Carlton Club, the Reform Club, and generally in all the leading London clubs; and whether, in view of the dearness and scarcity of potatoes, and the necessity of preserving the depleted stocks for feeding our fighting forces and for seed, an Order will now be made prohibiting consumption of potatoes in all clubs, hotels, and restaurants, and otherwise restricting their consumption elsewhere until the new crop is assured?

I am aware of the facts stated by my hon. Friend, and I agree with him that the example set by the leading clubs might with advantage be generally initiated. The restrictions, however, already imposed upon the use of potatoes in public eating places are so considerable that in view of the lateness of the season, and the extreme scarcity of the remaining supplies, it would not be worth while to make them more severe. As the hon. Member is no doubt aware, potatoes can only be served in such places on two days out of seven.

Compulsory Rationing Scheme

asked the Parliamentary Secretary to the Ministry of Food Control whether the scheme for compulsory rationing is now ready; and whether, having regard to the recent reconstruction of the scheme for National Service and to the announced intention of the Food Controller to defer the institution of a system of compulsory rationing to the last possible moment, when any breakdown of the system or machinery of rationing might give rise to a situation of grave national peril, he will immediately communicate to the House full details of the scheme, in order that there may be ample time for imperfections, if any, to be pointed out and remedied in advance of its coming into force?

The Compulsory Rationing Scheme is now before the War Cabinet: If and when approved, the scheme will be published and instructions will be issued to the local authorities for setting up the necessary machinery. The interval which will elapse before it comes into operation will admit of its discussion in the House, if deemed desirable, and will in any case give ample time for any imperfections to be pointed out.

Will the hon. Gentleman say if it is proposed to set up machinery for the scheme before this House has had an opportunity of seeing the scheme itself?

We propose to initiate the setting up of machinery for the scheme. It will take some time before it can be put into operation.

Blood Sausages

asked the Parliamentary Secretary to the Ministry of Food Control whether any sausage factory in Great Britain and Ireland is engaged in the manufacture of blood sausages; and, if not, whether he will give instructions that this shall be done in order that the present waste of ox blood in slaughter houses may be diverted to the useful national purpose of providing a nutritive article of diet for German prisoners and other persons who may have learned to like blutwurst in the Fatherland?

Blood sausages are in fact already made by several factories, and the possibility of extending their manufacture is being investigated. I should, however, point cut that it involves the use of considerable quantities of flour.

Wheaten Products

asked the Parliamentary Secretary to the Ministry of Food Control, with a view to economising the staple food of the poor and in order to remove any cause of suspicion that the interests of the poor may be sacrificed to those of the more fortunate, whether he will issue an order that no food containing wheaten products shall be consumed in any house, hotel, restaurant, or club of which the rateable value exceeds a specified limit of, say, £50 a year, until the present food stringency has been relieved?

Paramount consideration is given, and will continue to be given, to the special needs of the poor in the matter of staple foods. It is not, however, deemed desirable to adopt the suggestion of the hon. Member, as individuals of all classes require varying amounts of breadstuffs for the maintenance of their physical efficiency, and the latter is of national importance.

Does not my hon. Friend appreciate the fact that the paramount consideration has little effect upon anyone?

Is it not the fact that the amount of food required for each individual depends to a large extent upon his physical dimensions?

Bread

asked the Parliamentary Secretary to the Ministry of Food Control if, in view of the fact that restaurants and tea shops, hotels, etc., can supply their customers with unlimited quantities of cakes and sweets and, in view of the fact that poor people are suffering from lack of bread, he will restrict the sale of bread between the hours of 3 p.m. and 6 p.m., and thereby avoid the necessity for bread tickets or compulsory rationing?

I must refer the hon. Member to the answers already given to him on this subject. The suggestion made by him cannot, I fear, be regarded as in any way an adequate alternative to the introduction of compulsory rationing.

Is my hon. Friend aware that Mrs. Peel and Mrs. Pember Reeves, directors of the Women's Advisory Committee to the Ministry of Food Control have passed a vigorous protest against the consumption of bread at afternoon teas by well-to-do persons?

Yes; I am fully aware of that. I consider their advice quite excellent, and I hope that it will be adopted by as many persons as find it possible to do so.

asked the Parliamentary Secretary to the Ministry of Food Control whether it is permissible for bakers to sell loaves of bread otherwise than in pounds and multiples of pounds; whether he is aware that in Bradford additional ounces are being charged to the customer, as for instance loaves weighing 2lbs. 1½ozs. are being sold at 7½d. each, although 41b. loaves may be purchased at 10d., and in Woolwich at 9½d. each; and if, having regard to the hardships at present inflicted on poor people by the increase in the cost of the bare necessaries of life, he will take steps to limit the price at which bread may be retailed to consumers all over the country?

The Bread Order prescribes that loaves shall weigh 1 lb. or an even number of pounds. The practice described in the second part of the question of selling loaves with a charge for additional ounces is, accordingly, illegal. I have already informed the House that steps are being taken to regulate the price of bread through the price of flour; and the control of the flour mills is the latest of these steps.

Questions

Nobel Trust (Norwegian Parliament)

asked the Prime Minister whether application was recently made by the Nobel Committee of the Norwegian Parliament for a number of publications for their consideration under the terms of the Nobel Trust; if so, whether the War Office Censor has refused leave for the transmission of a number of those asked for; and whether, out of courtesy to a neutral Parliament, the Government will reconsider their decision and permit the whole of the documents asked for to be sent?

My right hon. Friend has asked me to answer this. The National Peace Council applied for permission to transmit certain publications for the purpose mentioned, and were informed that the export of some of them was prohibited, and that the remainder should be submitted for examination before a permit could be issued. I think it is possible that the Nobel Committee of the Norwegian Parliament may prefer to revert to what was, I understand, their original intention, and leave the publications in this country till the end of the War, rather than to give a guarantee that specified works will not be accessible to those who would use them against the interests of this country.

Who are the officials whose duty it is to prevent the propagation of ideas, standing like intellectual eunuchs at the gate of a seraglio?

British Delegates to Russia

asked the Prime Minister whether the declaration of war aims made by the delegates sent by the Government to Petrograd that, after consultation with the Workmen's Council, they had decided to accept the formula of peace without annexations or indemnities, and that we want only the restitution of the territory occupied by Germany and the countries ruined by her rehabilitated, and that such must be the object of the War, has the sanction of the British Government?

I have seen no such statement as that attributed by the hon. Member to the delegates in question.

Will the right hon. Gentleman look at the "Daily Chronicle" for last Friday, where he will see the statement?

asked the Prime Minister whether, in view of the fact that the Provisional Government of Russia has declared for peace without annexation and that the delegates sent by the British Government to Russia made a declaration to Petrograd journalists on 24th April for the purpose of announcing that, after consultation with the Council of Workmen's and Soldiers' Delegates, they had decided to accept the formula of peace without annexation, he will take steps to bring the War aims of all the Allies into conformity with the declaration made by the Provisional Government of Russia and accepted by the delegates of the British Government?

I have no information to bear out the statements of the hon. Member on the subject, and I do not think anything is to be gained by a public discussion of the questions alluded to.

Is the right hon. Gentleman aware that a verbatim report of this statement, or what purports to be, has appeared in the Press of this country, telegraphed from Petrograd, and, in those circumstances, will he do nothing to support the action of his delegates?

Reconstruction Committee

asked the Prime Minister how many English, Irish, and Scottish Members of Parliament, respectively, have been appointed on the Committee to advise the Government on the national problems that will arise after the War; whether this is the Committee which is known as the Reconstruction Committee; and what are its terms of reference?

The following Members of Parliament are members of the Reconstruction Committee, which presumably is the Committee referred to in the first part of the question:

The terms of reference are as follows:

May I ask whether it is the case that on this Committee, which is to consider the reconstruction problem of the whole of the United Kingdom, there are five English Members of Parliament, one Irish, and no Scottish?

I will look into that, but I presume they are chosen with a view to their knowledge and ability. I do not think the problem in Scotland is very different from that in the rest of the Island.

Is the real reason that my right hon. Friend could not find a tame Scottish Member?

Timber Supplies

asked the Prime Minister what were the names of the Departments in charge of home-grown timber supplies in England and Wales during the years 1915 and 1916, and the names of the Ministers directing these Departments?

In 1915 the three agricultural Departments of the United Kingdom dealt with forestry matters, but they were not concerned with providing supplies of timber. In November, 1915, Lord Selborne, then President of the Board of Agriculture and Fisheries, set up the Home-grown Timber Committee under the Chairmanship of my right hon. Friend the Member for the Camborne Division. This Committee was charged with the provision of supplies and continued until last March, when its functions were taken over by the Director of Timber Supplies of the War Office.

No; the Home-grown Timber Committee was set up by the President of the Board of Agriculture. The Director of Timber Supplies took over the duties of the Home-grown Timber Committee last March—a month ago.

Munitions

Iron Ore

asked the Prime Minister whether, in view of the fact that the Ministry of Munitions was the only Department with any authority over and responsibility for the output of ores mined in the United Kingdom during 1915 and 1916, he will state whether the Ministry arranged for a large increase in the production of this ore in 1915 and 1916, in order to set free tonnage for the carriage of wheat to this country; if not, on what grounds was it not done; and who was responsible for the omission?

I have been asked to answer this question. The Ministry of Munitions have never lost sight of the importance of increasing the output of iron ore in the United Kingdom, and active steps have been taken for overcoming the difficulties arising from the scarcity of labour by the provision of appliances and by the adjustment and extension of plant adapted to utilisation of a larger quantity of basic ore. It is not, and never was, the province of the Ministry of Munitions to forecast the tonnage requirements for wheat.

Military Working Party (Morecambe)

asked the Minister of Munitions whether a number of men of the 7th Highland Light Infantry, in medical category C2, have been employed as a working party under the Ministry of Munitions at Morecambe; how long has it been so employed; whether many of these men who are skilled workmen have been employed on unskilled labour; whether the men themselves and their former employers have made repeated applications to be released for munitions work in their own trade; whether some of these men have now been transferred to Class W (T) Reserve, and have had their pay and their wives' separation allowances stopped; how long were these men left without any payment; and why have they not been allowed on their transfer to Reserve to return to Glasgow to work at munitions in the trades at which they are skilled?

The inquiries promised in answer to an identical question by my hon. Friend on Monday last are not completed. I regret that I am not yet in a position to add anything to the answer then given.

Can he say within what date he expects to be able to give an answer upon this matter which was raised months ago?

No. The particular point in this question was not raised months ago. The point raised was on an individual case, and it will be necessary to make inquiries into every case, and I hope we shall have the result this week.

Munition Workers (Pay, Etc.)

asked if the Government have any proposals under consideration for the equal treatment, as regards pay, bonuses, and holidays, of munition workers and Government employés in Great Britain and Ireland; and if he is aware that women workers and labourers in the shell factory, Dublin, are being paid less wages and bonuses than those paid in Great Britain for similar work?

On the general question of the remuneration of munition workers in Ireland I would refer my hon. Friend to the answer which my right hon. Friend gave to a similar question on 23rd April. The Return then promised is nearly complete, and I will let my hon. Friend know the action taken upon it. The wages of labourers in the Dublin National Shell Factory compare quite favourably with those paid in similar establishments in Great Britain. A bonus system has been instituted for the women workers, which at full output will yield a substantial addition to their earnings. I am in communication with the board of management on the question of the women's time rates.

I do not accept the assumption in the question, but I am not in a position to make a definite statement.

Questions

Poland

asked the Prime Minister if he has noticed that the last sentence of his reply to the question on Poland put to him on the 26th ultimo by the right hon. Member for East Fife, in which he said that no statement on the subject could be complete unless he recorded the deep admiration both of His Majesty's Government and this House for the way in which the Russian democracy has extended its own recently won liberties to Poland, has been omitted from the OFFICIAL REPORT; and whether he will see that it is restored to the final issue?

I had passed the draft of the answer, but on reading it again just before going into the House I thought that the last sentence was redundant, and after consultation with my right hon. Friend the Minister of Blockade we decided to omit it, but by an oversight the original draft was given to the Press. It was merely a question of drafting, and there was no intention of weakening in any way the expression of our admiration for the action of the Russian Government; but since the additional sentence has been published, I think it is right that it should be added to the official answer, and I shall have this done.

[The following was the sentence referred to by the Chancellor of the Exchequer:

No statement on this subject would, I feel, be complete without a simultaneous declaration on the part of His Majesty's Government and of this House, of their deep admiration of the manner in which the Russian democracy have marked the attainment of their own ideals by a declaration which extends these ideals to the Polish nation.]

Metric System

asked the Prime Minister if he will state the names of the members of the Sub-Committee of the Reconstruction Committee who are considering the question of the adoption of the metric system of weights and measures and a decimal coinage; whether this Sub-Committee has invited representative individuals or bodies to give evidence; if so, whom and what bodies; and whether, in view of the urgency of the question, the Sub-Committee has been requested to report within a specified time?

The question of the adoption of the metric system of weights and measures and a decimal coinage is under the consideration of Lord Balfour of Burleigh's Committee on Commercial and Industrial Policy after the War. I understand that the Committee is taking a considerable amount of evidence on the subject, but I am unable to give a list of the witnesses. The Committee is fully aware of the importance of the questions involved.

Income Tax (Children's Education)

asked the Chancellor of the Exchequer if he will consider the advisability of permitting parents to make a deduction from their Income Tax assessments for the expenses of the education of their children?

Where the taxpayer's total income does not exceed £700 there is already an Income Tax allowance of the tax on £25 in respect of each child under the age of sixteen.

British Trading Corporation

asked the Chancellor of the Exchequer whether he will withhold authority or, if already granted, revoke the authority for the raising of the capital of the new British Trading Corporation until the House of Commons has had an opportunity to discuss the matter, in view of the fact that no business is possible, the Board of Trade refusing permits for the importation of goods from abroad, and the Munitions Department refusing licences for the export of goods, it is impossible for the new company to start business, and also in view of the fact that old-established companies have been refused permission to increase their capital even by small sums?

As the Charter has already been granted, after full consideration of all the aspects of the case, I regret that I cannot give the undertaking asked for.

Are we to understand that this important step in policy is decided on, and there is no possibility of raising it; that the House of Commons has no power to discuss it, and that this Charter was granted during the Recess so as to preclude discussion in this House?

The last statement is entirely unfounded; there was no such intention. The subject has been under consideration for a long time, all aspects have been taken into account, and the decision arrived at is the one I have announced.

Would it not have been more usual to have allowed the House of Commons to have a voice in this very important matter?

I do not think it has been customary in cases of this kind, but, so far as I know, if the House of Commons decide against the action of the Government, of course that decision must be effective.

As a point of fact, has the Government any legal right to take this step without the authority of the House of Commons?

Will charters of a similar character be given to other organisations without consulting this House?

Is this new trading corporation to be under any obligation in return for the privileges conferred upon it by the Charter?

I believe so; but the President of the board of Trade has already undertaken to lay the Charter before the House of Commons.

Death Duties

asked the Chancellor of the Exchequer whether his attention has been called to the hardship involved in denying to the brothers and sisters of officers killed in war the relief in respect of Death Duties now extended to widows, lineal descendants, and lineal ancestors; and whether he will take steps to remedy this grievance?

This matter has been before the House on more than one occasion, and it was felt that the considerations which led to the concession granted by the Death Duties (Killed in War) Act were not applicable to the class of case to which the hon. Member refers.

Corn Production Bill (Minimum Prices)

asked the President of the Board of Agriculture if he will lay before the House the facts and figures upon which have been based the minimum prices for wheat and oats set forth in Clause 2 of the Corn Production Bill?

It would be difficult within the limits of an answer to a question to set out the arguments and facts upon which were based the minimum prices proposed in the Corn Production Bill. The Committee stage of the Bill will furnish ample opportunity for the discussion of these points.

Is the right hon. Gentleman aware that the minimum prices guaranteed under Clause 2 to the growers of wheat and oats for their produce during the next six years will put into their pockets at least £54,000,000 more than they realised upon their crops during the past six years?

Ministry of Food Control

asked the Parliamentary Secretary to the Ministry of Food Control if he is aware that in paying off an employé on the 20th April the accountant, although instructed by the staff officer to pay in full, deducted a day's pay of 7s.; that, on being threatened with legal proceedings, he promised payment on the return of a form of receipt which was returned on Tuesday, 24th April; whether such payment has yet been made; and whether the accountant will be reprimanded and instructed not to repeat such conduct?

In the case to which the hon. Member no doubt refers. the accountant of the Ministry of Food when paying off the employ£ was uncertain whether notice of dismissal had been given on the Thursday night or on the Friday morning. He, therefore, paid her up to the Thursday night, with an additional week's wages in lieu of notice, but declined to pay her a further day's wages for Friday until he had ascertained whether the money was in fact due. On this being ascertained, the amount in question was paid on 24th April, as soon as the employé's receipt therefor had been obtained through the post. The conduct of the accountant in this matter was perfectly proper.

asked the Parliamentary Secretary to the Ministry of Food Control if the services of Dr. E. T. Spragge were enlisted by the Food Controller; and if it is proposed to adopt the suggestions formulated by him restricting persons to three meals a day?

The hon. Member refers, I imagine, to Dr. E. I. Spriggs. That gentleman has written articles on food at the request of the Food Controller, in one of which he stated that three meals a day were sufficient for healthy persons. He did not, however, propose any compulsory restriction in the number of meals.

Greece

( by Private Notice )asked the Chancellor of the Exchequer whether his attention has been called to the extremely unsatisfactory and conflicting telegrams from Greece which have been allowed to appear in the Press during the last few days, and to the great and growing public uneasiness and bewilderment over the situation in Greece; and whether, in view of this condition of things, he can now see his way to afford an opportunity for a public discussion on the Greek situation and the position of the Salonika Expedition?

The answer to the first part of the question is in the affirmative, but in my opinion any public discussion of either of these subjects would be against the national interest.

May I ask whether any private discussion can in any way tend to allay public anxiety on this matter?

Public anxiety is important, but there are other considerations which in time of war are even more important.

Is it not a fact that the Government have saved the dynasty and lost the Balkan campaign?

House of Commons (Grille in Ladies' Gallery)

I wish to ask you, Mr. Speaker, a question concerning your jurisdiction over the structure of this House. A Debate took place yesterday in respect of the removal of the ladies' grille, and in the course of that Debate the First Commissioner of Works (Sir A. Mond) said:

"Technically, I understand that I have the authority to remove the grille on my own action. [HON. MEMBERS: 'Oh!']. Yes, that certainly seems to be the case."—[OFFIICIAL REPORT, lat May, 1917, col 281.]

I submit that the question was settled by you in 1906, when the Permanent Secretaries, or rather the staff advising Ministers, proposed to remove from what I will call the "democratic" end of the House to the "official" end. It was then established by you that you have complete power over the structure of the House, and are the interpreter, at any rate, of the will of this House, and if any method of gathering the will of this House—for instance, as to putting ballot boxes in the Lobbies is resorted to—it must be by your permission. The First Commissioner of Works has not got any powers such as he claimed in the Debate yesterday.

I am not quite sure how the matter stands. The hon. and gallant Gentleman did not give me notice that he was going to raise the question, or I would have looked it up. Speaking on the first blush, I should say that all structural alterations come within the scope of the First Commissioner, but the question of removing the grille of the Ladies' Gallery, I think, would be one upon which the House should itself be asked to pronounce its opinion. I should be very sorry to take the responsibility upon myself.

New Member Sworn

Herbert Nield, Esquire, K.C., for the County of Middlesex (Ealing Division).

Orders of the Day

Business of the House

Could the right hon. Gentleman tell us whether the House is to sit on Friday, and, if so, what business is going to be taken?

Yes, Sir; we propose that the House shall sit on Friday, and probably the business will be the Munitions of War Bill, but I will say definitely to-morrow.

Ordered, "That the Proceedings of the Committee of Ways and Means, if under discussion at Eleven of the clock this night, be not interrupted under the Standing Order (Sittings of the House)." — [Mr. Bonar Law.]

Ways and Means

Considered in Committee.

[Mr. WHITLEY in the Chair.]

Financial Statement

In each succeeding year of the War the British Chancellor of the Exchequer has had imposed upon him the duty of presenting to the House of Commons a financial statement on a scale that has never been heard of or dreamed of in any country in the previous period. These gigantic figures are not the subject of rejoicing, though there is ground for thankfulness that we are able to bear the financial strain that is laid upon us. These figures represent a part only of the price, and not the biggest part, which we as a nation have to pay for the greatest act of madness-for the greatest crime which has ever been committed in the history of the world. Looking at it, not from the point of view of what seemed right at the time, but looking back after the experience of nearly three years, we as a nation can still say on our souls and consciences that it is a crime in which we have no share. In these circumstances this is not an occasion for rhetoric, and I propose to follow, to the best of my ability, the example set a year ago by my predecessor, and present to the House of Commons a plain statement of our financial position as clearly and as briefly as I can. In doing this, I shall deal first with an examination of the finances of last year; I shall then enumerate the new taxation which I think it necessary to impose, and, finally, I shall examine the Estimates for the current year. It is a tradition that the Treasury is always able to present fairly accurate Estimates of taxation, however small the available data may appear to be. But at a time like this, when the expenditure, especially for Army supplies. depends not upon any fixed quantity demanded, but on the powers of production of the country, and when the Revenue is influenced on every hand by restrictions imposed on account of the War, it was hardly necessary for my right hon. Friend to claim the indulgence which he did, and to ask the House to receive all his figures as, at best, more or less intelligent guesses.

Expenditure, 1916–17

Last year the Estimate of expenditure was put by my right hon. Friend (Mr. McKenna) at £1,825,380,000. The actual expenditure was £2,198,113,000, that is, an excess of £372,733,000. This excess is almost identical with the excess on the Votes of Credit, which was about £373,000,000. It is hardly necessary for me to explain, because it has been done on every occasion on which a Vote of Credit has been moved, that this expenditure was largely due to two causes—the increased cost of munitions and increased advances to our Allies and Dominions. I need not justify to the Committee the expenditure on either of those heads. The result of the increased expenditure on munitions is seen in the position of our Armies in France and on every front to-day. As regards the other advances, the British Government from the first has considered that this was one War, in which the interests of all the Allies were alike, and that it was our duty, to the extent of our ability, to use our resources, financial or otherwise, in aid of our Allies in precisely the same way as if they were spent upon ourselves. With this explanation I should like to add that the Estimate for loans to Allies and Dominions has been exceeded by something like £100,000,000. It is a satisfaction to me, as I am sure it is to the Committee, to know, as regards the Dominions, that they not only have had the will, of which there was no doubt, but that they have had the power to supply so much from their own resources that there has been no increasing strain upon the British Exchequer from that quarter.

The Committee will be interested to know the total amount of those advances, and here I give the figures which represent the obligations to the British Treasury, that is, including interest or discount and not the actual amount expended. Last year the total advances to Allies amounted to £540,000,000, and to the Dominions £54,000,000, making a total of £594,000,000. From the beginning of the War the total advances are: To Allies, £828,000,000, and to the Dominions, £142,000,000; total, £970,000,000.

Revenue, 1916–17

If we turn to revenue, we find a different picture and a more satisfactory one. The estimate of Revenue was £502,275,000. The actual Revenue exceeded that amount by £71,153,000. In view of the restrictions of all kinds, the Committee will have anticipated, indeed, they will have seen from the figures, that there has been a deficit in the case of Customs and Excise. Taking the two together, that deficit amounts to £9,059,000, and it extends, as might be expected, over almost every branch of those two services. The main exceptions are tea, in which there is a surplus of over £1,000,000, which, however, is almost entirely represented by forestalments, and tobacco, in which there is an excess of about £1,500,000.

4.0 P.M.

If we turn to Inland Revenue there is a different picture. There the total excess amounts to £66,039,000, and I shall show the House the main source of that excess. The largest is the Excess Profits Duty, the total amount of which was £139,920,000. The excess over the Estimate is £53,920,000. I need not remind the House that a large part of that excess, between £30,000,000 and £40,000,000, was due to payments in advance carrying interest, which was not arranged for at the time the Budget statement was made, but which was put later into the Finance Bill. Another large source of additional income was the Income Tax, which exceeded the Estimate by £7,930,000, and Super-tax by £2,103,000, making altogether an excess of upwards of £10,000,000. I am not going over the other branches of revenue, but it may interest the Committee to know that there has been an excess in the case of the Stamp Duties. That excess over the Estimate amounts to £878,000, and over the previous year to £1,114,000. That is interesting, because a large part of the excess. is due to stamps in connection with Stock Exchange transactions, and shows that, in spite of the War, as compared with the previous year, there has been a considerable revival of business in that connection. There is another fact in connection with stamps which will interest the Committee. The total amount collected by penny stamps exceeds £2,000,000, and is, indeed, a larger sum than previous to, the War. That is, of course, largely due to cheques, and shows, what we might have expected, that the use of cheques as a form of currency has increased during the continuance of the War.

Balance Sheet, 1916–17

With this brief explanation of revenue and expenditure, I come to the balance sheet. The actual issues were £2,198,113,000, and the receipts were £573,428,000, leaving to be raised by loan a sum of £1,624,685,000. In Table 3 of the Paper in the hands of Members, particulars are given of the way in which this cash was raised. I think it will interest the House to have fuller particulars than it was possible to give before, of the War Loan of this year In that table the amount from the recent War Loan appears less by £157,000,000 than the actual figure, the balance being due to instalments which fell due after 31st March; but in giving the figures which I now put before the Committee I shall treat it as if these instalments had all been received. The 5 per Cent. War Loan subscribed, including Treasury Bills, amounted to £966,048,000. Conversions of 4½ per Cent. Loan produced £821,005,000, and of Exchequer Bonds £282,792,000. The total amount (Stock and Bonds) converted is £1,048,612,000, but as the Loan was issued at a discount this is represented by face value in 5 per cent. stock as £1,103,797,000. I will now give the figures of the 4 per Cent. Loan. Applications, including Treasury Bills, produced £22,658,000, the 4½ per Cent. and Exchequer Bonds converted, £28,726,000, making a total of £51,384,000; and though I thought it right at the time to give investors the option of a tax-compounded loan, I was not sorry, and I think the Committee will not be sorry, to see as an indication of what the future is considered likely to be that this Loan has not been taken advantage of to any very great extent. The total amount converted of the 4½ per Cent. Loan was 97½per cent., leaving only something like £20,000,000 unconverted. Even that amount is larger than I expected, for I thought there were few holders of that Loan who would not have thought it was in their interest to take advantage of the opportunity which was given them in connection with the Loan. As regards the Exchequer Bonds, the amount of 5 per cent. converted is 61.9 per cent. But the Committee will not be surprised to find that those who held 6 per Cent. Exchequer Bonds were not so ready to convert them, and the total amount converted was only 12.9 per cent.

Floating Debt

The position of what is called the floating debt at the end of last year must be regarded as satisfactory. The total amount of the Treasury Bills outstanding was £463,705,000. Though in this connection Exchequer Bonds are often spoken of as if they were floating debt, that is in no sense true. The earliest of them falls due in 1919, and the amount falling due then is only £18,000,000. The balance falls due in the two subsequent years. In the statement which appears in the Table, to which I have referred, there is an amount of £72,750,000, which comes from War Savings Certificates, and in my judgment there is nothing in connection with the financing of the War which is so satisfactory as the way in which men of small means have contributed to the expenses of the War through this medium. I am very glad to tell the House that the boom which was given to War Savings Certificates at the time of the War Loan has not spent itself. Of course, it could not be expected to continue on the same scale, but some idea of the growth of this form of saving will be formed when I say that the total amount contributed from 22nd February, 1916—the date at which they were started—to 31st December was £54,664,000, whereas the total from 1st January to the end of last month was nearly £46,000,000; and I am informed that it is even more satisfactory than this, because the subscriptions now consist almost entirely of small individual applications, with very few applications for the larger amounts as occurred in connection with the War Loan.

National Debt

There is another aspect of this question in which I am sure the House will take the deepest interest, and that is the position of the National Debt. The Debt was increased last year by £1,714,000,000 (net). It stood at 31st March at the sum of £3,854,000,000; but from that, in estimating what our position on a peace basis will be when the War is over, we are entitled to deduct the advances to our Allies and the Dominions. My right hon. Friend last year gave, in my judgment quite correctly, this standard of our financial position, that at the end of each financial year we should be able to show a surplus of revenue, not including the duties which will come to an end when the War closes, which will provide us with the amount necessary to carry on the service of the country, including a reasonable provision for the paying off of the debt which has been incurred. I have had the balance-sheet examined from that point of view, and this is the result. Our total revenue is £573,428,000. If you deduct Excess Profits Duty and other non-recurring revenue, and interest from the Dominions and Allies, the amount of which is, roughly, £157,000,000 there is left a total revenue of £416,108,000. The pre-war expenditure, without debt charges, was approximately £173,000,000. If you add£and it will not be less for pensions and education£the amount of £30,000,000, and if you take the debt charge at the rate of 5¼ per cent., which would pay it off in from forty-two to forty-three years, at the amount of £153,700,000, on this basis, at the end of last year there was a balance in our favour of upwards of £59,000,000.

There is another point of view which to my mind is equally important, and that is the extent to which this gigantic expenditure is being met out of taxation and not from borrowed money. The result for last year is as follows: Our total national expenditure during the War has been £4,318,000,000. Of this £1,137,000,000, or fully 26 per cent., was provided out of revenue, and there it no belligerent country which by any possibility could present a figure so satisfactory as this.

Rate of Money

The average rate of interest which we have to pay on debt is approximately 4¾ per cent., and this suggests to me a subject to which, since I went to the Exchequer, I have given a great deal of thought, and in regard to which there is a great difference of opinion—that is as to what the rate of money at home ought to be. There is one school of thought which desires money to be at the lowest possible level, there is another which thinks that a low level is bad. There are two grounds for the latter view. One is the economic ground that low money means unreal expansion. There is no doubt a great deal of force in that view, but under present conditions I am somewhat of a sceptic in regard to it. I quite recognise its force, but there is a check against this inflation in the restrictions which are imposed by the War, and you have to put one advantage, or disadvantage, against another. We realise that if the rate of money had been as low as home conditions would have made it if left to themselves, we should have had an immense saving per year in the rate of interest that we have to pay both now and in the future, and that has to be set against the economic argument. But there is another aspect of it which does not permit of its being dealt with in that easy fashion. It has been absolutely necessary that our exchange position should be kept right, and to do that it is also necessary that the rate of money here should be distinctly higher than on any other money market in the world. That is essential, for, though possibly if we had been compelled to go off a gold standard some method would have been found of doing financial transactions, yet I do not think there is anyone who has given any thought to the matter who does not realise that such a result would have been serious, and possiblyfatal, to the whole credit of the Empire. All that I wish to say further in that connection is this: if anyone is inclined to compare the rate of interest which we have had to pay and which, on the whole, I think very low, with the rate, for instance, in Germany, they have to bear in mind that the exchange there has been given up and they have only the home conditions to consider. If we had been in that position I do not doubt that we would have got money 1 or 2 per cent. cheaper than we have actually had to pay. That is all I think it necessary to say about the National Debt.

Additional Taxation

I now come to the new taxation which I think it necessary to impose. I need not tell the House that this is a subject which has given me the greatest anxiety and has occupied the largest amount of consideration I was able to give to the Budget. On the one hand, the burden of taxation already is extremely heavy, and, however necessary it may be, no one can doubt that in whatever form that taxation is raised, it diminishes the capital that may be available at the end of the War. To that extent, whatever the form, it is a handicap upon trade after the War. On the other hand, it is equally true that an immense National Debt after the War will equally be a burden upon our trade and industry. We have, therefore, to decide between the two. So far as I am concerned, after carefully considering the, matter, if the expansion in the existing taxation would have enabled us to fulfil the two conditions laid down by my predecessors and given a right margin at the end of the year after paying not a smaller portion out of revenue than in the past—if the expansion of the existing taxes would have given that result I should have been prepared to leave it alone and to suggest no additional taxation to the Committee. But the position is not so favourable. There is another aspect of taxation at the present time. The Committee, I think, will be surprised, and many hon. Members, I am sure, will be disappointed, when I tell them that I do not propose to add any new taxation whatever, and that I only propose to make additions in the case of three existing taxes. I recognise as fully as anyone that at a time like this the ordinary rule which should guide the Chancellor of the Exchequer that taxation should be for the sake of revenue, and for that alone, does not apply. At a time when we are desirous of cutting down unnecessary expenditure in every direction it is right, if it can be done effectively, that the Exchequer should be used for that purpose also. I may tell the Committee that from that point of view I have considered, and very carefully examined, a large number of proposals, and I began that examination with the desire to carry them out. In every case I have rejected them, and I do not believe that any Member of this House, either in his mind or in Debate, is likely to suggest any form of taxation which I have not considered. I have rejected them all for two reasons. The first was, and it is the less important, that as you went into details of each of the suggestions for cutting down unnecessary expenditure, it was found that the amount of gain in proportion to the trouble and cost of collection and the disturbance they would create made it not worth while to go on with it.

There was another reason which was even stronger. The staff at the disposal of the Treasury is not sufficient to enable us to cope with new taxation. I know that that is a view which is always accepted by the House with a certain amount of scepticism. We have always found in the past that when the Chancellor of the Exchequer decided upon taxation the machinery to collect it was there. The conditions are not the same now, and when I tell the Committee that from the Board of Inland Revenue alone upwards of 3,000 men have gone to join His Majesty's fighting forces, when I remind them of the immense increase of taxation which has already occurred during the War, and of the labour involved in it, arid when I call their attention to this further, that my advisers have told me—and after trying to judge it for myself as well as I can I have accepted their view—that to attempt to use the existing staff for new duties would not give a large revenue, and would produce results that are problematical, and in any case could not be large, it would simply mean that we would lose a larger amount of revenue in the collection of the big taxes than we would gain by attempts in this direction. I confess to the Committee that in the case of some of these proposals I was myself very much in doubt. It is quite possible that someone else in my place would have tried some of them. All that I can say is that I considered them to the best of my ability and the decision to which I have come is that which, on the whole, I think is right in the circumstances.

Entertainments Tax

I now come to the additional taxation. The first is a comparatively small item, and that is the Entertainments Tax. That duty was put on by my predecessor, and he estimated that we might obtain in a full year a revenue from it of something like £5,000,000. The revenue last year was about £3,000,000, but it is only due to him to say that he guarded himself in regard to this duty with even more care than with regard to the other estimates which he put before the Committee. I think that this form of taxation can contribute a little more to the Treasury without disadvantage to the State. In saying this I

"The man n ho always toils can never have a sound judgment. He never gives himself time to cool."

I think that is true universally, and it is our duty not to prevent the nation as a whole having time to cool in the midst of its arduous duties. I have said this to show that I have no puritanic feeling in regard to theatres, and that the addition which I propose to this tax is because I feel that it can fairly bear it. It is not a very heavy addition. The total amount which I anticipate from it is something like £1,500,000 additional, but all this is not due to the new tax. I shall not give the Committee in detail the scale which I propose, which will appear in a Paper which will be in the hands of Members very shortly, but perhaps it is right to make two observations. The first is that I do not think it is right to raise the scale of duty charged on the penny and two-penny tickets for admission. That is at present one halfpenny, and I am leaving it at that. The second addition, and I am sure it is one which will commend

Tobacco Duty

The next tax to which I propose to make an addition is the Tobacco Duty. It is a curious thing, though I am sure there has been no leakage in the Treasury, that the Press has defined in advance exactly the additional taxation which I propose. I think there is good reason for this additional taxation. It is justified by the simplest method of reasoning—that it is a revenue-producing tax. Last year, in spite of the heavy addition, and in spite of the fact that a large proportion of the population is serving abroad, where they get their tobacco, I am glad to say, without paying duty on it, there has been no falling off in the consumption. That is in itself a justification from the revenue point of view of putting on an additional burden. Tobacco, I suppose, is a luxury. [HON. MEMBERS: "Oh, oh!"] Personally there are few necessities which I would not rather do without. For that reason also we are entitled to put an additional duty upon it. What I propose is to make the same addition which was made last time—ls. 10d. a pound. I have not arrived at this figure solely because it was the same as last time. I have been in consultation with those acquainted with the trade, and I have satisfied myself that that figure as well as any other, and better than most, will enable the burden to be passed on to the consumer without the middle man getting more as his profit out of the additional taxation which we propose. This additional burden is estimated to bring to the Treasury £6,000,000 in the current year. It may interest the Committee, for it surprised me, to find what is the proportionate way in which tobacco is smoked. Seventy per cent. of it is, I am told, smoked in a form of which I have never been able to see the attraction, namely, cigarettes. Five per cent. goes in cigars, and the balance in pipe tobacco.

Excess Profits Duty

I now come to the source of taxation from which I expect the largest amount of revenue. I propose to make the Excess Profits Duty 80 per cent. instead of 60 per cent., as it was before. [HON. MEMBERS: "Hear, hear!"] The Committee, or at least some Members of it, have cheered that statement, but I must say frankly that if the need of revenue had not made a large addition to our revenue necessary, I should have been very glad to leave that tax where it was left by my predecessor. From the point of view of fairness, there is nothing to be said. No one, I think, can consider for a moment that it is unfair to take so large a share of the profits which accrue in consequence of the War, profits which arise out of the War. Of course there are many cases, though not by any means a large proportion on the whole in my opinion, where the profits are not due to the War, but even there, from the point of view of fairness, when we consider what privations, from the point of view of income as well as in other directions, the great bulk of the population is undergoing, I cannot consider it unfair, or consider that anyone is badly used if he gets a larger income during the War than he got before. But that is not the only point of view which we have to regard. We have to consider the effect on our national interest, and especially on the trade position after the War. I received a number of deputations of those. who were against an increase of this tax. I heard all their arguments, I recognised the force of most of them, and I think that I understand them completely. The Committee will readily understand that it is not so simple a proposition as merely to say that you are going to take 80 per cent. of a man's excess profits, because the increase of profits means a large increase of expenditure for working capital, and I know that on account of that large increase many of the firms are not able to pay this duty except by borrowing money or stopping their trade. I recognise all that, but the additional revenue is necessary, and so far as my judgment can lead me, I come deliberately to the opinion, and I think the Committee will agree with me, that there is no other form of taxation which, on the whole, would be fairer or less detrimental to national interests.

Then there is something more which I have to say in connection with this tax. One of the things which you would all wish to avoid if possible is to make a tax retrospective I propose that this new rate of duty should begin as from the 1st of January of this year. That seems to me, and I think to most of the representative firms chiefly affected, to be perfectly fair. The Prime Minister intimated in this House a few days before that date that the Government would raise this duty, so that fair warning has been given.

Another thing is proposed in connection with this tax. From the 1st of January the munitions levy is to be merged in the Excess Profits Tax, and both will be collected by the Board of Inland Revenue. That brings me once more, if I may go back on a subject with which I have dealt already, to one of the considerations which made it so difficult to get me to look at new taxes—that additional work would be thrown on the staff. The House remembers the history of the munitions levy. It was imposed, rightly and necessarily, partly for revenue, but mainly for this reason, that you could not expect working men to do their best if they had the feeling that their work was being used to make a private profit. That was the reason for the imposition of this duty, and at the time it was imposed the Excess Profits Duty was not imposed. There was a special charge for this class of work, and the duty was of necessity, so far as I can judge, arranged in the best way at the time. But the munitions levy had this great disadvantage, that once a certain amount of profit was made nothing more could be made in consequence—that is to say, all incentive beyond a certain point was taken away. By merging both duties in one the incentive, though they may think it so very small, still remains, and I do not consider it an entirely negligible quantity.

I do not agree that the system which I have described was bad entirely. The Committee knows that a great deal has been said about the way in which money has been spent on advertisement and in scrapping works and machinery, and that there is no longer any inducement in this direction. But that is not all lost. It remains; and in my opinion one of the greatest hopes for the future of this country after the War is to be found in this, that, as the result of the way in which munitions have been produced in this country, we have revolutionised our whole industrial processes. We have scrapped not only old machinery, but old methods, and when the War is over there will be plenty of demand for any production which is available, and in my deliberate opinion the rapidity of the recovery of this country after the War will depend on the use we make of the new methods and the new machinery which have been introduced, and will depend above all upon the extent to which the old hostility between capital and labour can be removed, so that both can work together to get the best possible output in the national interest.

I have one or two further remarks to make about the Excess Profits Tax. It does tell very unfairly, and it is inevitable that it should. Equality is the ideal of all taxation, but I know of no tax in which, taking all the circumstances into account, rigid equality is secured. It tells unfairly against one trade as against another trade. In many cases it tells against particular methods of carrying on trade as against other methods of carrying on the same trade. I recognise all that. In dealing with the Excess Profits Tax I have adopted the same method which I tried when issuing the Loans. I have made concessions which I consider will be useful and which will not cost the Treasury much money. The most important of these is in regard to the rate of interest on new capital put in since the War. That is one of the greatest grievances in connection with this tax. Of course, the Committee knows that the value of money has risen enormously since the War. It would not therefore be reasonable to say that money used before the War should have a higher rate of remuneration, but in our own interests as a nation it is right to encourage the employment of new capital when it is required and as war emergency demands it. The rate allowed previously was 6 per cent. I propose to make a great increase on that rate. I propose to allow an additional 3 per cent. for new money put in during the War, and I am making another concession. An allowance of 1 per cent. was made to private firms as against public companies. I have examined this as carefully as I can, and I do not think that that allowance is quite sufficient, and I propose to make an allowance of 1 per cent. additional. That is to say, for new capital 4 per cent. more will be given to private firms and 3 per cent. to public companies. It is necessary to explain further that, in order to get rid of some of the most obvious hardships of this tax, a Board of Referees was set up which has allowed a higher rate of interest on money of this kind. I propose that this additional 3 per cent. should be allowed in every case, where the referees have given a higher rate than the 6 per cent. Of course, the additions will apply only to accounting periods where the increased rate of taxation also applies. There will be some other modifications, which are very slight, introduced into the Finance Bill. None of them will cost the Exchequer much money.

Shipping Profits

In connection with the Excess Profits Tax there is one particular branch of industry of which I must say something—that is, the shipping trade. Public opinion, opinion in this House, an opinion which I share, is that there is no trade probably which has made such big profits during the War, profits which have been so directly due to the War. For that reason this trade is now being treated in a special way. It is easy to be wise after the event, and in my opinion we delayed too long in taking over the control of the shipping. I am not going to blame anyone else in connection with this matter. I was myself a member of the Government, and, more than that, if I may say so as a leader of one of the parties in the Coalition, I had as much right as anyone to press my own views, and though I think that we have made a mistake, I say frankly that I do not suggest that anybody was more responsible for it than I am. I do not think that the Excess Profits Duty fairly met the situation. At the time I said to shipowners—many of them are my acquaintances; none of them have agreed with me, but I still hold this view—that merely putting on an Excess Profits Duty, when there is something like a monopoly, will almost unconsciously have this effect, that the rates would be raised in order to increase profits in consequence of the tax. I think that that must have happened to some extent—at all events shipowners have had a very good time—but there is no industry which will be more important to this country after the War than ship-owning, and the last thing that this House or any Government should do would be to deal with a question of that kind on grounds of prejudice. It is quite true that they have had excess profits, but they have acted precisely in the same way as any other business men would have acted, and nothing would be more futile or unfair than to accuse them of any special lack of patriotism, or any special degree of weakness in taking advantage of the situation. But we have thought it necessary to deal with this trade in a special way. The method in which we are dealing with it, both in bringing it under control and in regulating its Profits, is, to a large extent, by requisitioning. I wish to make this matter as plain as I can to the Committee. At the present time, of all the ships of 1,600 tons and upwards, 90 per cent. are either requisitioned or have had notice that they are going to be requisitioned as soon as they can be got hold of.

We cannot requisition them all. To whatever extent it is possible they will be requisitioned. I know that the House imagines, and it is true, that the requisitioning at Blue Book rates allowed a large margin of profits. At the beginning that was so, but the additional cost in every direction of running the ships, especially the additional insurance, made that no longer true. I have myself something like a score of accounts of typical ships—and that is a kind of examination that I really can make on my own account—and in not one of these cases was it possible for them, under the requisition terms, to make anything like pre-war rates of profit. I wish the House to realise that.

Many of them showed a loss. But my point is that it is impossible, under the requisition terms, to make the pre-war rate of profit. Then, in addition, as to the requisitioning of ships, where it is not possible to requisition the whole of them, the Shipping Controller has control of the rates of freights. By that means, also, the shipping profit, as well as the use of ships, is under the control of the Government. That is the position. It is not by Excess Profits Duty that we propose to deal with shipping, but by the method which I have described. But there is a type of ship which it is impossible to requisition, and those are the very small coasting steamers—steamers under 500 tons. We cannot requisition the whole of them, or anything like the whole, for our purposes, of this class of steamers, of which there are between 4,000 and 5,000 The nation depends on their being used to the utmost, and I am advised, and it seems to me reasonable on the face of it, that it will be absolutely impossible for any Government Department, or by any means, to attempt to run that class of steamer. They must be run by their present owners. What does that mean? The rates of freights must be controlled. As I have said, we are dealing with ships by the methods which I have described, and not by excess profits. But over and above that, there were ways which were open to me for dealing with this, and one was to fix a definite scale of profit beyond which they should not be allowed to go, without reference to excess profits. As a matter of fact, by the arrangement I have described, that is done already in the case of the great bulk of ships. That was the method which I intended to adopt. But I have had to abandon it, for a reason which seems to me conclusive, and it is this: In the case of these small steamers which you cannot requisition, you would take away all incentive when once you fix a scale of profit, and they must be run by their owners. There is the consideration which applies to every trade—for we are all human—that people are not very likely to work when they are not to get anything out of it. There is this further consideration, that in the case of many of these small steamers the master is the owner, and, therefore, besides expecting him to run his ship for nothing from the money point of view, you would also expect him to run his steamer at the risk of his life. Taking all that into account, I came to the conclusion I could not adopt that measure. But there is something else that I have the right to do. I have pointed out that the shipowners cannot make the pre-war rate of profit, but under the Excess Profits scheme, if a profit was made last year and a loss or deficiency is made this year, there is a provision which is quite fair, that the duty on this year's deficiency below the pre-war standard of profit shall be made up out of the Excess Profits Duty, and thus will be made good. That is a perfectly fair position. Look what the effect of that would be upon the shipowners! They paid last year a large amount in taxation, but if that provision were allowed to continue it would mean, in spite of the restriction imposed, by the method I adopt, that they would get back, at the expense of the Excess Profits Duty, the whole of what they had already paid, up to the pre-war standard. I have no feeling of prejudice against shipowners, and I believe they are as patriotic as other people, and I have found, perhaps I may be allowed to say, that there is no class of the community which tried more to help us in arranging the War Loan than the shipowners did. But the fact remains that they have got unduly large profits, and I do not think it would be right that they should make up their profits practically to the pre-war standard now out of the taxes previously lost. I propose in the case of shipowners that this provision as to the Excess Profits Tax shall not apply, and that they shall not be entitled to get back the amount necessary to bring the present year's profits up to the pre-war standard. These are all the new taxes that I ask the Committee to impose.

The estimate of the additional Excess Profits Duty this year is £20,000,000.

My hon. Friend asks me whether the farmers are not to be taxed under Schedule D. I carefully examined that proposal with the desire to carry it out, but I found that to come to anything like a reasonable figure it involves something like 50,000 assessments. If I confine myself to farms of £400 and upwards it would mean 12,000 assessments, and the total amount of yield would only be £300,000. I came to the conclusion that with the large system for collection which would be necessary, £300,000 would mean a loss. That is only one of the many questions which I have considered from the same point of view.

Expenditure, 1917–18

This brings me to the Estimates for the current year. I shall then give the final balance sheet for the current year. The total estimated expenditure is £2,290,381,000. I shall refer to some of the items in that expenditure. First, there are the debt charges, £211,500,000, of which £41,500,000 represents the amount of interest on the debt to be created in the year. The next item in the Estimate is one on which I should like to claim the indulgence which my predecessor was granted, and to say that these Estimates must be largely guesswork. The estimate for the Vote of Credit is £1,975,000,000, of which the three War services amount to £1,438,500,000. The amount of miscellaneous war expenses from the Vote of Credit is £136,500,000, bringing the expenses out of the Vote of Credit to £1,575,000,000. When we come to form an estimate of the amount of advances to our Allies and Dominions the Committee will understand how difficult it is to arrive at an estimate. The entrance of the United States into the War has altered the financial situation. We know that to the extent of their ability the Government of the United States will help us in relieving the burden of our Allies. To what extent we can count upon this we cannot at present say, but I have put in the Estimate the figure of £400,000,000, which is £150.000,000 less than the amount expended last year, and of course the Committee will understand that the increasing stringency of the conditions of Allied countries and Dominions has made their demand upon us a growing demand. I hope that this amount will not be required, but if it is, it brings the total of the Vote of Credit to £1,975,000,000. The total expenditure this year per day is £6,275,000; last year it was £6,022,000.

But let us look at these Estimates from another point of view. If we take the items under the Vote of Credit applicable to our own War expenditure, leaving out our Allies and the Dominions, the rate per day will be £4,315,000.

Revenue, 1917–18

5.0 P.M.

When we turn to the Revenue this is the result: the total estimated Revenue is £638,600,000. Of this the Tax Revenue is £569,700,000. Customs and Excise, in spite of the additional taxation to which I have referred, will show a diminution as compared with last year. The Income Tax and Super-tax is estimated to show an advance of £18,967,000. The Excess Profits Tax will show an addition of £60,000,000. If hon. Gentlemen will look at the Non-Tax Revenue they will see a diminution in every branch-Post Office, Telegraph, and everything of that kind—it is not necessary to explain that, it is obvious to everyone that it is what might be expected. There is only one item in which there is an increase, and that is in miscellaneous revenue. That increase is accounted for, and more than accounted for, by the contribution so generously promised by the Government of India. They have undertaken responsibility for a contribution of £100,000,000. We do not know precisely how much they will actually be able to raise by loan, but they accept liability for the balance. The amount which they expect to raise from the Indian Loan is provisionally estimated at £10,000,000, and if you add to that interest on £90,000,000 of our loan, for which they would become responsible, during the year it comes to a figure of over £13,000,000, which is more than the increase of the miscellaneous estimate. I have not gone into details because the figures will be in the hands of Members to-morrow morning.

Balance Sheet, 1917–1918

I shall now give the balance-sheet as we estimate it at the end of this year. The total expenditure will be £2,290,381,000. The total revenue is £638,600,000, leaving a balance to be provided by loan of £1,651,781,000. Now I wish—and this is the last word I shall address to the Committee—I wish the House to consider what our position will be at the end of this year on a peace basis, dealing with it in the same way as I dealt with the same figures at the end of last year. As regards the contributions out of revenue, the figures which I have given show that it has not fallen off—that we shall still have considerably more than a quarter of the whole expenditure provided for out of revenue. I have calculations here, but I shall not repeat them to the House. If we make a calculation, precisely on the same basis as I made it for the end of last year, when there was a very large balance, the result is that we shall have a balance in our favour of only £22,000,000; but I am glad to say that that is a result much more favourable than I anticipated when I began to prepare the Budget, and it is a result which I think the House has every reason to be satisfied with. It gives a small margin, but I leave out of account in that margin any expansion of revenue from Customs and Excise after the War. I leave out of account expansion of revenue in many other directions in which it has fallen behind. There is also another item which is not available this year, but which will be available then, and that is the Income Tax, which has been deferred in connection with the War Loan by not deducting it at the source. Then, in addition, there will be large arrears of Excess Profits Duty to be collected, and—and this is the most important of these items—although Excess Profits Duty will, I hope, come to an end, the Committee will remember that Income Tax is not charged upon Excess Profits Duty; and if, by good fortune anything like the same profits are made after the War, there would be Income Tax available upon it which, at the rate of 5s. in the £, would be equal to £50,000,000 sterling.

I have kept my word and tried to confine myself entirely to a plain statement, and I am satisfied that the result I have just given to the Committee justifies me in the statement which I made in my first speech as Chancellor of the Exchequer, that though we could not go on indefinitely on this scale of expenditure, yet it is certain that it will not be the want of money which will prevent our victory, and that we shall be able to go on from this point of view longer than our enemies.

Continuation of Duties (Customs)

Motion made, and Question proposed,

1. That the following duties of Customs imposed by Part I. of the Finance (No. 2) Act, 1915, and continued by Section seventeen of the Finance Act, 1916, until the first day of August, nineteen hundred and seventeen, shall continue to be charged as from that date until the first day of August, nineteen hundred and eighteen, that is to say:

Duty

Section of Finance (No. 2) Act, 1915.

Increased duty on tea

1

Additional duties on dried fruit

8

Additional duty on motor spirit

10(1)

New import duties

12

And it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.— [Mr. Boner Law.]

The speech to which we have just listened will be memorable for the magnitude of the figures dealt with. It will not be less memorable for the ability and lucidity with which it was delivered. I venture to congratulate my right hon. Friend warmly upon his statement. If it discloses on the one hand the prospect of an immense expenditure it reassures us on the other by the account of our gigantic resources and of the courage and spirit with which our people have shown themselves ready to meet the financial strain. In one respect, my right hon. Friend is in a much happier position than were his predecessors at the Treasury. From the beginning of the War the main problems confronting successive Chancellors of the Exchequer has been that of making payment for our immense imports and for the advances for the foreign purchases of our Allies, for which we made ourselves responsible. In war the normal balance of trade cannot be maintained. Imports no longer can be paid for by exports, and the preservation of our foreign exchanges became a task as difficult as it was important. For upwards of two and a half years we have by the adoption of various schemes with which the House is familiar maintained the American exchange at practically a constant figure. Now my right hon. Friend is relieved from all further anxiety in this respect. The immense resources of the United States, under the wise guidance of President Wilson, are now being used directly in the service of the War, and in no field are the beneficial results of American co-operation, great as they are, so certain and so immediate as in the field of finance. As the question of exchange is no longer one of predominant importance, it is open to my right hon. Friend, as he has told us now, to devote his attention to the simple problems of internal finance without being troubled by the same external anxieties which beset his predecessors in office.

And himself. At the conclusion of my right hon. Friend's statement he told us that his Peace Budget at the end of the present financial year would disclose an estimated balance in his favour of £2,000,000. It was quite right for my right hon. Friend that he should take a conservative view of his revenue and his liabilities. If I had been in his place I think I should have taken the same estimate as he has taken, but it is open to us to take some grains of comfort from considerations which he thought it hardly safe to present to us. If I understand his statement aright, he has struck off from his peace balance the whole of the Excess Profits Duty—the whole of what we might term war taxation, which will come to a close at the end of the War—and he has allowed nothing for the restoration of our revenue from peace taxation, which will Inevitably occur when peace comes. His estimate, therefore, of £2,000,000 only is an estimate which, to say the least of it, is a little unfavourable to the prospective taxpayer. I would ask him, for instance, has he taken this Income Tax item into account? He will in the course of the present year borrow £1,651,000,000. Those will be the borrowings which he estimates he will have to make during the current financial year. He told us that in making up his final balance sheet he estimated the charge upon that borrowing at 5½ per cent. When he looked at the revenue side of the Income Tax account, did he bear in mind that his assessments for Income Tax would be automatically increased by the amount of the interest on the new debt which he was going to make? If he did not, he clearly ought, in a less conservative calculation, to estimate not 5½ per cent. on the debt which he is going to raise, but the amount of interest which he will actually pay after deducting his Income Tax. On that basis the true amount which he ought to have reckoned is not 5½ per cent., but 4½ per cent.

That alone will give him an additional revenue of not less than £16,000,000. When we look at the items to which he called our attention, the items of Income Tax on excess profits when the Excess Profits Tax is no longer raised, and when we take the £16,000,000 to which I have just referred, and look forward to the complete revival of revenue from Customs and Excise, I think I am justified in saying that his estimate of £2,000,000 is an estimate which errs on the conservative side.

We are entitled to take this grain of comfort at a time when my right hon. Friend, for reasons which he has frankly and fully given to the House, and I think satisfactorily, did not think it possible to extend materially the scale of taxation. My right hon. Friend gave us the daily expenditure he anticipates for the present year. He put it at just over six and a quarter millions. I would like for a moment to call the attention of the Committee to what has taken place in the past with regard to our national expenditure. In the first year of the War, 1914–15, the total of our daily national expenditure was just over £2,000,000 per day, that is for the period from the beginning of the War up to the 31st March, 1915. From the 1st of April, 1915, to the 31st of March, 1916, it rose to four and a quarter millions. Last year it was upwards of six millions per day. We have scarcely recovered from the shock of learning that we exceeded our Estimate last year by upwards of one million a day when we have to face a new Estimate, which is even higher. Nor is this all. Every Estimate which has been made in the past with the single exception of the Estimate in September, 1915, of prospective expenditure has proved to be mistaken. Every Estimate has been greatly exceeded, and I am very much afraid if the main cause of the excess continues in operation my right hon. Friend's Estimate for 1917–18 must prove no more correct than the Estimates made by his predecessor. What is this main cause of error to which I refer; it is the steady upward trend of prices. No matter what calculation we make to-day as to the cost of the War, before three months or six months are over, we find that 10, 30, 40, or 50 per cent, has been added to all the prices, and consequently the national expenditure is enormously increased.

I do not know if this is an opportune moment to make a suggestion to my right hon. Friend. I know I should not be in order in going into the general question of prices, and I do not intend to do so now. I merely want to consider this from the point of view of national expenditure. It is impossible to limit prices except in the case of commodities which are of domestic origin. You may put a limit on such articles if you choose. I think you can put a limit on with advantage in those cases, but in the case of imported articles or articles made from imported raw materials, it is practically impossible to limit prices. The price is then determined by the international competition with intending purchasers. Now a new phenomenon, a new event, of the greatest significance has happened in the War. The great supplier of the world has become a combatant. It is possible now to enter into arrangements and to consider ideas for arrangements which were absolutely out of the question in the early stages of the War. It is obvious that on any limitation of prices the exporting country must lose profits. Let me remind the Committee that this country has not hesitated in the past to face that loss. We put a limit on prices of exports to our Allies. We put a limit on the cost of the ships they used and on the cost of the coals we supplied them. Therefore if we now propose to consider the possibility of an international agreement for the limitation of prices we at any rate can make the proposition in the character of a nation which has itself done it to its own loss. I venture to put forward this no more than as a matter for my right hon. Friend's attention, whether the time has not come to enter by negotiation into an agreement for a limit being placed upon the main commodities which the Allies require for the carriage of those commodities and for their distribution amongst the different Allies according to their individual requirements. The United States Government have shown an earnest desire to help the Allies in every respect that I feel confident that a proposal of this kind would not be ill-received by them.

If we may assume that my right hon. Friend's Estimates can he realised both as to revenue and as to expenditure I do not think we have any occasion to be alarmed about the future. Perhaps I might be allowed to say a few words upon the new tax of the Excess Profits Tax, for which I was responsible eighteen months ago. The revenue derived from that tax has been enormously in excess of the Estimate. I desire to thank my right hon. Friend most warmly both for his reference to myself and for his cordial acceptation of general responsibility for what has happened in the past. My right hon. Friend called attention to the fact that a very large part of the excess over the Estimates was due to a change made in the procedure under the Budget after the Budget statement was originally made. There were two factors in doubt when the estimate of revenue from the excess profits was formed. There was no doubt about the immense nature of the profits, but we did not know how fast they could be brought in. It is only fair that attention should be called to another factor which has greatly facilitated the operation of the tax. One of the elements of great doubt was the settling of the disputed questions by particular trades as to what their allowances should be in the way of interest. The settlement of that question in regard to each trade was referred to a body of referees set up and presided over in the first instance by my right hon. Friend the Irish Secretary, whom I am glad to see in his place. The very great ability and celerity with which that work was done far exceeded the anticipations which were formed at the time, with the result that the Treasury had been able to collect not far short of double the amount which we estimated would come in in April last. My right hon. Friend, I am very glad to see, proposes to incorporate the Munitions Levy in the Excess Profits Duty. Perhaps at some other time he will give us the amount which has been collected under the Munitions Levy since its first adoption as far back as July, 1915. I venture to say that the Committee will find—I do not know the figures—that the amount collected from all the controlled firms is practically negligible.

I do not say that. I will explain why I think you have not been able to collect it from the controlled firms. Practically the whole of this enormous revenue of 140 millions of Excess Profits Duty has been gathered from firms other than controlled firms, and all the profits which might be called purely war profits have so far paid almost nothing into this gigantic revenue. What is the reason? The Munitions Levy proceeded upon the main principle of taking everything from the taxpayer after a certain amount of profit had been made. There was no inducement left, on that principle, for the employment of further capital, or far the exercise of greater energy and industry.

Or economy. It was so obvious that if that principle were left to free operation that there would be very little gathered in at all, that modifications were introduced giving discretionary allowance for additional output and for other particulars both of expenditure and of work, with which I need not now trouble the House. What has been the result? Instead of having a simple, direct, and easily understood tax you had a tax which became so complicated that while apparently it was going to raise much more revenue it has in fact hardly raised anything at all. I only mention this as an illustration of a plea for taxation to be simple and certain, so that the taxpayer may know what he has to pay, however much it may be. I am sure my right hon. Friend will agree with me, as it was my experience at the Exchequer, when I say that I found a wonderful willingness on the part of the people of this country to pay taxation on two conditions: first, that they must understand it, and secondly, that they must believe it to be fair. If those two conditions were satisfied, there was a limit to what they were prepared to do in what they believed to be the exigency of the State.

I am glad to think that the Munitions Levy is going to be absorbed in the far simpler tax of the Excess Profits Duty. I am not quite sure—I only hazard the opinion—that my right hon. Friend will find it to the advantage of the revenue to have increased the Excess Profits Duty from 60 to 80 per cent. I put this forward as an opinion in all humility. It is a matter upon which no man can form a judgment with any certainty. One would have said to take 60 per cent. of Excess Profits Duty and another 17 per cent. in Income Tax and Super-tax, would have left no sufficient inducement for a manufacturer, merchant or shipowner, to go on risking additional capital. I thought 60 per cent. was the maximum. Perhaps I did not allow enough for the willingness of the employers and others in this country to undertake risks and sacrifices without a sufficient profit return. Perhaps my right hon. Friend is right when he pushes the principle further and goes up to 80 per cent., but I am sure he will agree with me that there is a limit beyond which you cannot expect anybody to risk his capital if he is to get no return, and if I were he I should feel grave hesitation whether one has not gone beyond the limit in putting it up to 80 per cent.

However, I am sure, whatever conclusion he comes to and whatever proposals he puts forward for taxation in the name of the Government to meet the emergencies of the State at the present time, whatever they may be, while he would expect us to call his attention to any points which seemed on the face of them to require reflection, he may rely upon this, that he will have nothing but wholehearted support in hiss endeavours to finance the War. I know his difficulties, and I know his anxieties, and I know how many troubles he has to meet and what devices he is bound to adopt in order to avoid difficulties which would otherwise be insuperable, and I can assure him that throughout the course of this Bill his task will not be rendered more difficult by any cavilling or captious criticism on my part, and I am confident that I can equally say that on behalf of all my Friends. We will give him, as we would give the Government, the fullest support in all their financial endeavours to carry through this War to a successful end. The task which this naton has undertaken has been borne in a manner without precedent in history, and far beyond what any one of us could have dreamt was possible. I for one should never have anticipated that a revenue of this magnitude would have flowed into the national coffers without apparently the slightest injury to our trade or business credit or commerce. I should have deemed it incredible that we could have performed this great task without a tremendous disruption of our whole business system. It has been accomplished in the past, and it will be accomplished in the future, and all that is needed is that this House should show the same public spirit which they have shown throughout this War, and we need have no doubt or fear as to the issue.

I am quite sure the whole Committee will wish to congratulate both the Leader of the House on his statement this afternoon and also the right hon. Gentleman who has just sat down on the result of this revenue. It is a matter of very great congratulation to them, as, also to the taxpayers of the country, that the revenue has come out so magnificently. It is principally due to two items. It is due, as far as £10,000,000 go, to the Income Tax and Super-tax, and, as far as £54,000,000 go, to the Excess Profits Tax. The expenditure has come out at something like £38,000,000 decrease on the last Estimate. It was made in the autumn, so that as far as that last Estimate is concerned, that also is a matter of congratulation. As the right hon. Gentleman has said, the question is, Are we at present raising sufficient by taxation towards the expenses of the War? The Chancellor of the Exchequer told us just now that about one-fourth was being raised by revenue towards the War. I think that is an ample allowance, and it is a rather remarkable fact that that one-fourth corresponds with what was considered to be one-fourth of the national income before the War. The whole national income of this country before the War was considered to be about £22,400,000,000, so that what we are raising now will be about one-fourth of the national income. I should like to congratulate the right hon. Gentleman on another thing. No doubt he was tempted to raise the Income Tax. I know he was persuaded by certain financial papers in this country that the Income Tax ought to be raised. I think if he had done that, he would have made a very great mistake—firstly, because the Income Tax and Super-tax payers have come forward so willingly with their money towards the national revenue, and secondly, because the Income Tax payers were probably the very large majority of the people who lent their money for the War with such great success in the last Loan. For these two reasons, I think it would have been a very great injustice to the Income Tax payers to have raised the Income Tax when they are already paying 5s. in the £. I think the right hon. Gentleman would probably have endangered his next Loan. You cannot have the money both ways. You cannot raise the money by taxation and by loan at the same time. You must do one or the other. If the taxpayer thinks he is paying too much on Income Tax he will be very careful how he subscribes again to another War Loan. I am rather afraid the right hon. Gentleman will want another War Loan, unless, as he suggested in his speech, the United States of America are so ready and willing to meet us in that way that it will not be necessary to do it. There is a third reason against raising the Income Tax, and that would be that it would certainly cause a greater scarcity of money; and raise the rate of money, and send up the price of all securities.

The relation between direct and indirect taxation is one which has often been discussed by this House, and it is rather a remarkable fact that the proportion of direct taxation has gone up very much indeed in the last few years. Looking back to the year 1907–8, the proportion of direct to indirect taxation was 48 per cent.; by the year 1913–14 it had gone up to 54 per cent.; in 1915–16 it had got to 58 per cent.; and last year—this present year which has just closed—it is as much as 65 per cent. [An HON. MEMBER: "Seventy-five per cent:] If you included the Excess Profits Duty it would he 75 per cent., as my hon. Friend suggests, but I am taking the Income Tax, Super-tax and Death Duties as direct taxation, and Customs and Excise as indirect taxation. I think the right hon. Gentleman has probably solved the question. He is proposing to raise by the three new taxes which he is putting on to old taxes—the Tobacco Duty, the Excess Profits Duty, and the Entertainment Duty—£27,500,000 more. If you add that to the present revenue of £573,000,000, you get about £600,000,000. The other day the "Times" newspaper put in their leading article the problems which the right hon. Gentleman had to solve, and the words were so good that I took them down. They were as follows: duties, but you can do it. Other countries do it, and therefore it could be done by. us.

Now I want to mention the Excess Profits Tax. Last year I endeavoured in Committee on the Finance Bill to carry an Amendment, the effect of which would have been to exclude the controlled firms under the Munitions Levy from the operation of the Excess Profits Duty. A long Debate was raised in this House, which went over the night and into the next day, and there was great sympathy expressed with that view. The feeling of the House was that it was not a proper administration of the Government to have two taxing authorities taxing the same people. My view was that there ought to be, as the right hon. Gentleman has done to-day, a merging of the two duties and the two offices. That view was very largely taken up on all sides of the House, and unfortunately we had to go to a Division afterwards. No less than seventy-two went into the Division Lobby with me in favour of that proposition. It shows really the opinion of the House on that matter. Probably, had the Government Whips not been put on, my Amendment would have been carried. I will not say anything further about that. To-day the right hon. Gentleman has taken a right step. He has merged the Excess Profits Duty. I take it from his statement that the machinery for dealing with both sets by the Treasury will he the same. He did not actually say so, but I understand that the machinery of the Munitions Act and of the Finance Act will be combined. At present they are different. The statements are different, and are made to start differently. The arrangement for depreciation and allowances is different; in fact, it is this difference which has caused all the delay. The right hon. Gentleman opposite has just said that the greater part of this money last year was received from uncontrolled firms. May I tell him that there is, owing to the great delay which has been incurred, a very large balance due by controlled firms. The moneys are due. They have been put aside. In the balance sheets they have been brought forward, and allowance made for this duty to be paid. But the allowances have not been settled by the Government Departments; therefore they have been put on deposit in the bank, and the money will be paid in due course.

I should like to ask the hon. Gentleman who represents the Treasury, Are these allowances for depreciation and of capital expenditure on account of work during the War going to be the same both for controlled and uncontrolled firms? In his speech the right hon. Gentleman did not say so. Then; again, there is the question of wear and tear, and obsolescence. There has been far too much cutting down and haggling. The Departments have not been free. They have been skinny, if I may use that word. Instead of being liberal in their allowances they have really cut down the necessary allowances to provide against the necessary wear and tear. It is not good policy. We must, as has been said this afternoon, remember that after the War we shall have great competition both from the enemy and from other countries. Hon. Members should bear in mind that in Germany and the United States of America traders are at the present time making their allowances for depreciation and for wear and tear. They are strengthening their position. If we are not in the same position when the War closes we shall be handicapped. I hope that the right hon. Gentleman will see to it, when he is administering this Finance Bill, that due allowance is made for heavy depreciation. I may just quote one instance, only one. It is a remarkable instance. It refers to the firm of Krupps in Germany. I have their balance sheet for 1915–16. The gross profits were 96,000,000 marks. I suppose that would be about £4,500,000. Before arriving at that 96,000,000 marks, 55,000,000 marks had been written off for depreciation as well as 30,000,000 marks for special war (capital) expenditure. Then out of the net profit no less than 9,500,000 marks were set aside for special reserve, and half of the 12 per cent. declared dividend was not paid, but kept by the company as a loan. During the three years of the War the firm have not raised their dividend, which has been stationary at 12 per cent. For the last year they paid only 6 per cent., and, as I have said, kept the other 6 per cent. as a loan.

There is a little grievance I should like to mention. I hope my hon. Friend below me will make a note of it, and perhaps be able to say a word upon it in Committee. Last year by the Finance Act, Section 30, it was provided that in the case of soldiers and sailors whose total earned income did not exceed £300 that Income Tax should only be 9d. in the £. That was the intention of this House. I note my hon. Friend below the Gangway who has taken a great interest in this. Let me tell him and other hon. Members that there were some words slipped into Sub-section (2) which practically takes away with the one hand what the Committee gave with the other. Those words are these: "that the deductions and abatements on small sums shall be made primarily from the pay." But if you take them from the pay, the pay is gone. The consequence is that the rate charged by the Surveyor of Taxes has not been 9d., but 2s. 3d., the higher rate. The balance of income was earned income other than pay because the latter had gone. It is not, perhaps, a very large matter as far as the money goes, but it is a matter of importance to those young subalterns and non-commissioned officers, who really cannot afford in these days to do with a less amount than that to which they really are entitled. I thank the Committee for the kind attention they have given to me, and I would just like to say this in conclusion: All classes in this country have united in a most magnificent way to win the War. Not the least class is that class that has the means to give. War Loans have been taken up; taxation has been paid willingly and not grudgingly. I am perfectly certain that though men and women have striven, yet if they had not had at their back the people with the money this country would have been in a very different position to what it is now. We shall see this matter through—the classes who have provided the money in the past, the financiers, the bankers, and the public, both rich and poor. As tile right hon. Gentleman has told us to-day, large amounts have come from those who only subscribed their money through War Savings Certificates. All honour to them. They have united with other people to win this War, and we shall remember them.

I desire to raise a point concerning the Property Tax upon dwelling-houses and the manner in which income from these houses is assessed. My hon. Friend the representative of the Treasury present is fully seised of the nature of the point I wish to raise, and I, therefore, have complete confidence-though they Chancellor him- self is not here£in his ability to deal with it. I hope it will receive sympathetic consideration from him. The business of supplying dwelling-houses is one which has been very severely affected by the War, and in a number of ways. It has been affected because there is no new building. For obvious reasons, therefore, the supply as compared with the growing demand is severely limited. It has been affected in another way, owing to the action of the State in limiting and in preventing any increase of rent. It has been affected in a third way by the growing and serious increase in the cost of repairs and maintenance. The point I wish to raise is the allowance which the owner of property is allowed to set off against his revenue by way of maintenance and repairs. He is not in the same position as a man engaged in business, or deriving his income from other sources. That man is entitled to set against his gross revenue the total costs of his business. He is in the position of paying Income Tax upon the net revenue which he receives and enjoys. That, however, is not the position occupied by the owner of house property. He is not permitted to set off against his gross revenue the total cost of the repairs and maintenance. These are a very serious item.

6.0 P.M.

There was an inquiry into the position of house property in Scotland in the early days of the War, in regard to the crisis which had arisen in connection with the rent. A Departmental Committee was appointed by the Scottish Office to inquire into the whole subject. That Committee reported that in the days before the War in relation to small houses there was satisfactory evidence to show that the cost of repairs and maintenance in many cases amounted to 25 per cent. of the revenue. But the amount which an owner of property may set off against his revenue is arbitrarily limited to one-sixth of the rental value. It does not matter how great during the year is the cost of repairs and maintenance. It may have absorbed half of his income from his property. He must, nevertheless, pay Income Tax, not upon his real revenue, but upon the money which he has spent upon the repairs to that property. That was the grievance before the War. The Committee to which I have referred reported that in many cases the cost had been shown to be 25 per cent., one-fourth of the annual value, yet the owner was only allowed to deduct one-sixth. It was very apparent that before the War the hardship of this and the legitimate grievance of those concerned was recognised by the Treasury, and to a certain degree relief was granted in the case of very small property. Where the annual value was not more than £12a year the owner was allowed to set off against his revenue the actual cost of repairs and maintenance up to one-quarter of the annual value. Here is a very grotesque anomaly—if one may put it so: You may have two landlords side by side. The one owns small property bringing in a rental of £12 per house per year. The other owns property which brings him in a rental of over £12 per house per year. The man who owns the smaller property is allowed to deduct from his revenue, before paying Income Tax, the total cost of repairs and maintenance up to one-quarter of the value. His neighbour next door, with the larger rental from his property, is not allowed to deduct from his revenue more than one-sixth for repairs and maintenance, however much more it may have cost him. He has to pay Income Tax from the revenue which he never receives, and never enjoys. He has got to pay Income Tax on money which he has spent, instead of upon that which he receives. I have three proposals to put before the Treasury in the way of securing relief. In the first place, there is the ordinary and obvious expedient of putting the owner of house property in the same position as the owner of any other business—the shipowner, trader, or manufacturer—and allowing him to set against his revenue the total cost of repairs and maintenance in any year. That would be just; it would be equitable; it would be the simplest and easiest method of dealing with the matter. I would urge that in the first place. But if the Treasury cannot see their way to accede to that there is the alternative of removing the arbitrary limitation of the £12 rental. Why should the man who has property below £12 in value pay Income Tax upon his net revenue, while the owner of property over £12 has got to pay Income Tax upon revenue which he never receives? The figure of £12 is a purely arbitrary one. There is nothing in the nature of the business which gives any logical reason for selecting £12 as the dividing line. Let that limit be removed altogether and let the owner of house property set off against revenue maintenance and repairs up to one-fourth instead of one-sixth. If the Treasury cannot go so far as that, let the boundary line be raised from £12 to £30 or some level which will give a larger measure of relief. I have really mentioned the third alternative, which is to raise the amount of relief granted from one-sixth to one-fourth. The three proposals are: Remove the restrictions altogether; in the second place, abolish the rental limit; and, in the third place, extend the relief from one-sixth to one-fourth. I urge these very strongly upon the Treasury just now. I urge them not in the interests of the owner of that property as a class. The relief is just as much in the interests of the occupiers of these houses. The restrictions which at the present moment weigh so heavily upon the house-providing industry operate to the disadvantage of the occupier. They limit the supply; they limit the accommodation; they limit the improvements and repairs which are effected upon the property which is occupied. The problem was one which demanded redress before the War. It has been greatly intensified by the conditions since the War, and I very strongly urge upon the Treasury that in the Revenue Bill when it is introduced they should afford some measure of relief for this very real grievance.

I only desire to raise one point in this Debate, and that is not in connection with anything the Chancellor of the Exchequer said, but in connection with something to which he omitted to refer, and that is a question which is exercising a very large number of people, good British citizens, in respect of the double Income Tax, in some cases treble Income Tax, which is at present being borne by Dominion citizens who happen to be resident in this country, and who have property in other parts of the Empire. In this connection, until comparatively recently, there was no very real grievance. Although the principle may not have been a correct one, nevertheless we were in this position, that our Income Tax was so comparatively low in this country, and the Dominions had fortunately not had to have recourse to any considerable Income Tax, so that the matter was not really one of very serious discussion. Even until the War the levy was so moderate that the burden was not felt to any grave extent. But since the War the whole of this problem has under- gone a change, and I do hope that in the discussions on the Finance Bill, which will be coming on later, the Chancellor of the Exchequer, who is regarded as one whose sympathies are not confined solely within these islands, and who has a somewhat broader vision than is the case with permanent officials at the Treasury, will be able to see his way to do something to mitigate what is an undoubted hardship, and which, I believe, the House of Commons almost unanimously feel ought to receive the early attention of the Chancellor of the Exchequer, and it is a matter which ought to be recognised.

The whole position has changed on account of the War. Double Income Tax now operates in a very large number of cases, and in many cases there is a treble tax, and all the increased burdens from which the citizens of the Dominions are suffering at the present time are on account of the same War, the same Army, the same expenditure—all on behalf of the same race. I desire to point out in connection with this taxation—and I am going to instance the case particularly of Australia, although India, South Africa, and other Dominions are also affected, though not to the same extent—that in the case of this war taxation—because it is nothing else—the Dominions are paying the whole cost of the troops which they are supplying for the common defence of the Empire, the whole cost of transport, and the whole cost, I believe, of food. The net result of the double taxation which these Imperial citizens are suffering is that the burden has become almost intolerable. As the Committee is aware, the Mother Country at the present moment—the figures we have just heard bear this out—is staggering under a very great burden, the like of which we have never dreamt, and the consequence is we have to place upon our people this extremely high burden of taxation. We have had to raise our Income Tax to a very considerable extent; but Australians also are staggering under a great burden of the War, and they have had to impose a War Income Tax of a similar amount, and actually a greater amount, in order to contribute their share to the common cause of defence. The result is that citizens of Australia dwelling in London are having to pay not only the increased war taxation in this country for the same War, the same Army, and the same cause, but are having to pay a similar heavy burden of taxation in Australia.

I believe that the vicious principle of double Income Tax arose out of a declaration of the Treasury in 1896, in which it was said that it was not inequitable that a person possessing property in one country and spending income in another should be taxed in both as he required the protection of two Governments. That is perfectly true if it is a question of having property in the British Empire and living in China or Japan, or conversely, but surely that principle cannot be true at the present moment! Surely you cannot regard different parts of the Empire as separate countries, when they are actually fighting in the same War and in the same Army, under the same commander-in-chief. My answer is that the defence and the protection of the two Governments in this particular case are one and the same, and that the ruling laid down so long ago cannot possibly apply to citizens of the Empire who are making this double and treble contribution at the present moment. We have only to consider for one moment what is the position of the Imperial Armies at the present time to see how this principle affects the issue. Canadians, Australians, Indians, South Africans, New Zealanders are all fighting together in one great Army, and their contribution in man-power has been entirely sustained by their own particular Dominions. To come along and suggest that, because they belong to a different country, they ought to bear this double burden is, I believe, a principle which the House of Commons will not tolerate any longer. May I just analyse the case of Australia very briefly? First of all, the citizen of Australia who happens to be resident in this country pays 6s. 3d. Commonwealth Income Tax on any property which he has in Australia. On top of that he pays 2s. State Income Tax, and then he pays 5s. Income Tax in Great Britain for precisely the same income; or, in other words, he is paying 13s. 3d. without Super-tax, or without any regard to excess profits. I have purposely omitted other taxation which he has to suffer in the Commonwealth of Australia which cannot properly be regarded as Income Tax. It is not very difficult for hon. Gentlemen to see that in many cases a so-called rich man in Australia may be paying 14s., 15s., 16s., or 17s. in the £ owing to this double war taxation. It seems to me that this is not the moment to be unreasonable, and to ask impossible things, and I believe it may be said to the credit of all these citizens who are dwelling in this country, but who have property in the Dominions overseas, that they have never asked anything unreasonable, that they really do feel they have a joy in sharing in the burdens of taxation, but they do feel that it is monstrous that they should be asked to pay once, twice, three times over on precisely the same income. New Zealand adopts this proposal: she says all income already taxed within the Empire and not earned in New Zealand is exempted. They may not be the actual words, but that is the effect. I submit that that is a proper principle, and it is in sympathy with the modern trend of Imperial thought in this country. The right hon. Gentleman the Member for Monmouth (Mr. McKenna), at the conclusion of the Debate last year, said he was only asking the House to do what is done in Australia. I believe that is entirely contrary to the fact. Doubtless the right hon. Gentleman had not given a great deal of thought to this question. The fact is, Australia adopts almost the same principle as New Zealand. The whole principle there is that the money should be taxed where it is earned. It has been suggested that this is an agitation got up by a few wealthy people, and that it really does not affect a large number of persons. It does affect people of very moderate means, such as retired Anglo-Indians, who come to this country to finish their lives after a long period of public service. It also refers to citizens of the Dominions who come here in order that their children may be educated in this country, after having done their share in building up the Empire overseas. These people are all subject to this double tax on their incomes in the same Empire. It practically means that we are imposing a Poll Tax upon those who return to the Mother Country because of their loyalty and love for this country. For this we impose upon them a heavy burden which has the same effect as a Poll Tax. Surely it is the desire of this country to see a free flow of individuals between this country and the Dominions. This very heavy levy is a direct incentive to the people of this country to take their money out of Australia and away from our Dominions and invest it in foreign countries where high Income Taxes do not operate.

Yes, that is so; but these people happen to be Australian citizens. It has always been our desire to see a free flow of capital from this country to the Dominions, but this taxation must inevitably bring that abruptly to an end, because you will dry up the flow of money at its source from the fact that this taxation has reached such an unbearable limit. I think in the end the Chancellor of the Exchequer will find that he is going to lose far more than he gains by this policy, because no capital will flow outwards when it is subjected to a tax of 70 per cent. I think the right hon. Gentleman would be the first to endeavour to mitigate this evil, and I hope he will look at this question from the broad Imperial point of view, and not simply from the point of view of this country. There are companies in this country operating in the Dominions, and the mere fact that they are operating from this country means that there is a great deal of sympathetic trade which goes out from this country, such as machinery and articles manufactured here which go to the Dominions simply because the headquarters of those companies are in this country. We are driving those companies away, because at the present rate of taxation no company, if it can see any alternative course, will continue to operate in this country if taxation continues on these lines.

How can this question be dealt with equitably? All those Dominion citizens feel that they are members of one country, and the British Empire is, after all, not made up of hostile competing countries, and they feel very strongly that the same income earned under the British flag ought not to be taxed twice. They feel that wherever they move in the British Empire they are still Empire citizens, and ought not to be taxed twice. I do not think they are making an unreasonable request in this connection. The point of view which I submit is a fair one, is that they are quite ready, whilst still maintaining the principle that any double charge on the same income is unfair, to go on paying the taxation which they were paying prior to the War—that is to say, they are ready to bear the ordinary burdens imposed upon citizens of this country prior to the incurring of war burdens here. They are now paying in increased taxation, especially in Australia, an Income Tax of 5s. in the £, and in addition to that they are paying other taxation, and they submit that it is not fair that they should have to pay a double war tax in this country on precisely the same income

Yes, but it was a very small one, and the fact remains that at the present time these citizens, through no other fault than that they prefer to dwell here, are having to bear these excessive burdens. I believe the Chancellor of the Exchequer himself will agree that there is nothing more detestable to him, when he sees the sacrifices being made by the Overseas Dominions of our great Empire on every front, than to think that because they have poured out their treasure just as freely as they have poured out their blood in sustaining these great Expeditionary Forces, they should have to pay a similar amount to keep up the British force. I hope the Chancellor of the Exchequer will be able to do something in this connection. He will probably say that the time to do this is a very difficult one, and that this is not the time to lower any taxation. I think, however, that the House of Commons will have the same sort of feeling in this connection as it had in regard to the slave trade, and knowing that this is really wrong in principle they will agree that it ought not to be tolerated, whatever the cost. Probably the right hon. Gentleman will say that he has no other means of getting the money, but I think there are other means. One criticism I should like to make in regard to the Chancellor of the Exchequer's most interesting speech is that we are now in this country paying such a vast proportion in direct taxation that it has become a very great burden, and this emphasises the whole of the arguments I have used with regard to the double Income Tax. Are we quite right in believing that taxation is really equitable in this country at the present moment? It is an unpopular thing to say in this country, but I suggest that there is a very considerable proportion of the population of this country who are better off than they have ever been in their lives at the present time, and there is nothing in the right hon. Gentleman's statement which taps that source of new wealth, with the exception of those who are affected by the increased Tobacco Duty. There must be ways of broadening the basis of taxation so that a larger number of people will be able to contribute.

The right hon. Gentleman has told us that it is vital to the interests of this country that we should know where we are at the conclusion of hostilities, and he mentioned two essential points, but one essential he forgot to mention, and that is security. British manufacturers at the present moment do not know where they are and they want some indication as to how they will stand at the end of the War, in order that they may make preparations accordingly. I quite appreciate the grave difficulty of making changes affecting controversial matters in time of war. I hope the right hon. Gentleman will look around in order to prepare for making arrangements now so that his machinery may include a wider circle of people in the coils of the Exchequer who are well able to bear burdens at the conclusion of hostilities. Before this discussion goes much further I hope the right hon. Gentleman will be able to give some encouragement to hon. Members of this House, who all feel that the principle of this double Income Tax is a vicious one, and I trust he will give us some encouragement, not only to show that he is willing to do what he can to relieve Dominion citizens of these burdens, but also that at the conclusion of hostilities he will really make a great effort and not simply make promises like his predecessors to examine this question from the Imperial standpoint and put an end to what is becoming an abuse.

I desire to offer my warmest congratulations to the Chancellor of the Exchequer for the most admirable and lucid statement he has made to-day in introducing the Budget, which, I believe, as far as money goes, is the largest Budget that was ever introduced in any country or Parliament in the world. Gigantic though the figures are, showing an estimate of £2,290,090,000 for the expenditure in 1917–18, I am bound to say, so accustomed have we grown to these enormous figures which come constantly into every financial statement made in this House, that we no longer regard such figures with surprise. I congratulate the right hon. Gentleman upon having made so clear a statement to-day in regard to the result of the War Loan. Before considering the question of expenditure and the revenue for the year 1917–18, we must not overlook the fact that although the War Loan was a great success, inasmuch as there were £1,053,000,000 of short-dated Treasury Bills floating when this Loan was issued, and only £1,000,000,000 of new money, including £130,000,000 of converted Treasury Bills was raised, the new money available with which to discharge £920,000,000 of these floating short-dated Treasury Bills was only £870,000,000. Therefore, the real position is that there was a deficit. even after the whole of the new money was exhausted, that was furnished by the great Loan of £50,000,000 of Treasury Bills and of £276,000,000 of comparatively short-dated Exchequer Bonds, not including the War Savings Certificates.

Recently we have had altogether, I suppose, about £200,000,000 of new Treasury Bills issued, and to-day the amount of Treasury Bills already accumulated, with only £177,000,000 of War Loan money yet to come in, is no less than £531,000,000. With an expenditure in this connection of £6,000,000 per day, or £2,290,000,000 per year, it is clear that unless we have another Loan, which we cannot anticipate for some time, with an expenditure of £40,000,000 per week at least, this amount of Treasury Bills will rise again rapidly, and it will not be many months before we have still floating £1,000,000,000 of short-dated Treasury Bills. Those Treasury Bills were never intended to be issued in this wholesale fashion, but only in anticipation of revenue that was coming in, and which would be sufficient to liquidate them. All the same, I do not see what alternative there is, and I certainly desire to say how splendidly my right hon. Friend engineered the recent War Loan.

I rejoice to know that the average rate of interest that we have paid is only ¾per cent. I protested in this House more than once against the issue of 6 per Cent. Exchequer Bonds, and 6 per Cent., which really meant 6¼1 per cent., Treasury Bills. I did not believe that it was necessary, in order to get the money to carry on the War for the British Government, unrivalled among the Governments of the world in credit, to pay this large percentage. I rejoice that the present Chancellor of the Exchequer took his courage in both hands and determined to issue a 5 per cent. loan. The result has abundantly justified the courageous action which he took, and to-day we are in a much clearer financial position in consequence. The estimated expenditure in the year 1917–18 is £2,290,000,000, and notwithstanding an estimated revenue of £638,500,000, which is a splendid revenue, we are told that we shall have to borrow in respect of the year a further sum of £1,651,000,000. We are told that the Debt on 31st March was £3,854,000,000. Add to that the borrowing that will have to take place this year, and we arrive at the gigantic total of £5,505,000,000 as the Debt at the end of the financial year 1917–18. Even we who are accustomed to such enormous figures feel staggered when we contemplate that we shall have to pay interest and sinking fund on that amount long before the age of the natural life of most of us. The country, however, is prepared to make any financial sacrifice to carry this War to a successful issue, and we rejoice that the United States of America have at last ranged themselves alongside us in this fight for human freedom and justice. We know that will afford us financial relief, and it strengthens our position. We can, therefore, face the future with confidence. The taxpayers of this country, however, need to feel, if they are to cheerfully and willingly bear these enormous burdens, that the taxation is fairly and equitably levied.

With regard to the new taxation, the increase of the Entertainments Tax is perfectly fair and reasonable, and no one can complain of the addition to the Tobacco Duty, but the Chancellor of the Exchequer will agree with me that the Excess Profits Duty is most unequal in its incidence. Speaking personally, I have been a strong advocate of the Excess Profits Duty and of the principle that no one in this country should be allowed to enrich himself out of the War. I adhere to that fully, but I should have liked the Chancellor of the Exchequer to have stated, when he is raising the Excess Profits Duty to 80 per cent., that it would be of universal application. I regret greatly that he has limited it, and still excludes the professional classes and farmers. Why should nut farmers be taxed exactly the same as people engaged in every other business and industry? I will give a case in point. One farmer averaged £1,500 profit for the year ending 31st December, 1915. In 1916 he made a profit of £5,000, but with the exception of his Income Tax on his rent he does not pay any Income Tax on the balance, nor does he pay Excess Profits Duty or Super-tax. No one can justify that. It is absolutely unfair. We know perfectly well also that some men of the professional classes are making substantially increased incomes during the War. Doctors in some cases, because other medical men are away at the front, have had their practices doubled. There are men in the Law Courts, some in particular, who can be singled out as having largely increased incomes because other well-known legal men are no longer there. Why not adopt the absolutely equitable principle of making this Excess Profits Duty apply universally to everybody who has an increased income as compared with pre-war years?

I welcome the merging of the two taxes, the tax of 80 per cent. on controlled works and the 80 per cent. on Excess Profits Duty, provided that all are treated alike in regard to depreciation and allowances. I understand that in controlled works enormous expenditure has taken place on machinery and extension of works out of revenue. Whilst I wish them to be treated with generosity and absolute fairness, seeing that they are working to provide munitions for our War, I also wish other traders, those engaged in other industries in the country, to be treated on the same lines in regard to depreciation. I take a coal mine. They allow us to make no deduction whatever for the depreciation of the value of our property by the exhaustion of our coal. Nothing could justify that. Therefore, I would invite the consideration of my right hon. Friend to the question whether he could not make his net wider and bring under the Excess Profits Duty all those in the country who are enjoying increased incomes as compared with pre-war years. Talking about unequal incidence, I have a case of my own. In the case of one business in respect of 1916 we shall pay 5s. 5d. in the £ Excess Profits Duty, but in connection with another business we shall pay nothing, because in the one case the profits in the pre-war years were large and in the other case they were small. What the result? I derive from one business interest twice as high as from the other. I question whether it is equitable or fair. I do not know how that could be met, but, in view of the high cost of living and of every other increased expenditure, it strikes me that to derive 20 per cent. from one business and only 5 per cent. from another, although the business from which one gets the 5 per cent. is making more than the business from which he gets the 20 per cent., is hardly a perfectly equitable form of taxation.

We are told that the estimated expenditure is £2,290,000,000. I would ask the Chancellor of the Exchequer whether, in introducing a Budget for that enormous amount, we should not have had from him some indication of the need of rigid economy and of getting value for our money in every Department of the State? Not one word did my right hon. Friend say as to the need for economy or as to the efforts that are being made—and there is a general feeling of uneasiness in the House in regard to the lack of oversight of expenditure and the lack of examination and investigation—to cut expenditure down to the lowest possible point. We should like in the course of our Debates on this Budget to have some assurance from him and some account of the careful and active and strenuous steps that have been taken to ensure that we get something approaching value for our money when we are bearing this enormous burden of taxation. I should like to know whether the Estimate of naval expenditure cannot be reduced. It may seem strange to advance a question of that sort, but is not money to-day being spent on "Dreadnoughts" and large cruisers which apparently are comparatively useless when our Fleet is so strong, and ought not some of the expenditure upon those big vessels to be stopped for a time—ought we not to concentrate upon the provision of submarines to meet the German submarines on equal ground and to multiply our destroyers?

The hon Member is going beyond the limits proper for a discussion in Ways and Means on raising money. A general reference to economy, of course, is in order, but he is now dealing with the subject in a manner which is much more relevant to Supply.

I apologise. I understood that the expenditure included the whole of the naval expenditure, and that, therefore, this question was open for discussion; but, of course, I submit to your ruling. I might, however, be allowed to remind my right hon. Friend that at the present time our shipbuilding capacity is being utilised for naval construction to the extent of 65 per cent., and if that could be reduced, and the labour and materials turned on to our mercantile marine and ships for the transport of food to this country, it would be a great advantage. I regret that there is not a further reduction prophesied in this Budget in connection with Excise. Personally, I had hoped that the Chancellor of the Exchequer would announce that we could expect practically no more income from Excise, as the Government had determined that materials that could be used as food for man and beast could be no longer turned into alcoholic liquor. I do think that the position in which we stand to-day as a nation, with the alarming danger that confronts us, ought to make the Government give further consideration to that most important question of the non-use of food materials for the manufacture of alcoholic liquor. It would do something to relieve the situation. The Budget, as a whole, is one to which, if certain changes are made in regard to the application of the Excess Profits Duty so as to make it fair all round, no serious objection will be raised. The nation will bear not only this but any other demands made upon it to secure success in this great world struggle.

The Chancellor of the Exchequer had such an extremely difficult task before him that I do not wish in any way to offer any criticisms upon What he has proposed beyond this, that I should like to have seen the basis of taxation broadened, if it had been possible to do so. I quite recognise the difficulty, and must admit that I did not expect that anything in that direction would be done, but when one remembers that, speaking in round figures, something like three-quarters of the revenue of last year was borne by the Income Tax payer, the Death Duties payer, and the Excess Profits Duty payer, it does seem that it is a very large and heavy burden to put on one particular class of the community. It is all direct taxation, and practically is all put on one particular class. However, I do not want in any way to criticise the Budget, because I recognise that at the present moment the raising of the taxation is extremely difficult, and, on the whole, I do not think there is very much of which to complain. I agree with the hon. entleman who has just sat down (Sir J. Walton) in regard to one portion of the Budget. I do not know whether the Committee as a whole—I am sorry that there were not more members present when the hon. Gentleman was speaking—have noticed that if the War continues for another year, we shall have to borrow £1,600,000,000 more. That is a very important point. I do not want to suggest that that is impossible, but we have to look these questions in the face, and it is not at all wise not to meet them, under the impression that by not meeting them we are doing something patriotic or concealing something that must come out sooner or later. The sooner it comes out and steps are taken to meet it the better. We shall have to meet this £1,600,000,000 in some way, probably by Treasury Bills to begin with, but there must be a Loan later on. I do not think there can be any doubt about that. In my opinion and in the opinion of a great number of people the great mistake made by the last Chancellor of the Exchequer was that he had too many Treasury Bills. A Floating Debt is a very good thing, provided you do not have too much of it, and when he got to, I think, eleven or twelve hundred millions he got too far. I hope my right hon. Friend will not object if I suggest to him that he should, while availing himself of Treasury Bills for at any rate some considerable time, not follow the example of his predecessor and get too big an amount owing in that particular form. I should be doing well if I emulated the example of my right hon. Friend, who introduced the greatest Budget of modern times in an hour and twenty minutes, which was a great feat, and if I compress my criticism within five minutes. I hope the shortness of my remarks will not prevent my right hon. Friend from paying attention to both parts of it, first, the broadening of the basis of taxation, and, secondly, the bearing in mind that sooner or later—I am afraid it will have to be in a not very long time—we shall have to face another Loan.

I am disposed to say that I, too, on the whole, have very little objection to offer to the Budget placed before the Committee this afternoon.

Notice taken that forty Members were not present; House counted; and, forty Members being found present —

The right hon. Baronet (Sir F. Banbury) very good-humouredly accepted the burdens which this Budget imposes upon a class for which he has a special right to speak, and because of that I address to the Chancellor of the Exchequer, with all the more reluctance, a few considerations relating to points which I fear he has overlooked. It is true that war conditions require that every class of the community should bear its share of the burdens of the War, but that share should be borne in proportion to ability to carry that burden. The Committee will be convinced, when I recall the fact, that there is a class in the country which is now carrying too heavy a burden as an indirect consequence of the War. This burden does not arise from the imposition of taxation; it has grown out of war conditions. I was at a meeting in Staffordshire upon Monday night this week, at which the business was the question of wages, and one man, a plain working man, declared that, in his judgment, the working man could not now bring up a family and maintain a home on 23s. a week. Twenty-three shillings a week now is of no more value than was about 11s. 6d. before the War. The sum has only to be named to the Committee to convince everyone that men who are in that position must be at a level of extreme distress and unable to purchase the daily means of existence. The class of work is one that has given the workers only a very slight advance upon their normal wages before the War. I rose chiefly to impress upon the Chancellor of the Exchequer that there are a few million people in this country—the ordinary wage-earning classes—whose level of subsistence is still so low and whose wages are so inadequate, in view of the cost of commodities, as to make it undesirable that any additional imposts should be placed upon them by this Budget. The burden of taxation which this section of the working classes has now to carry as a result of the War is taxation in the form of the high cost of living. Taxation cannot be got out of them in any other way, so far as direct taxation is concerned, but the additional taxation, partly indirect and partly direct, which the Chancellor of the Exchequer proposes to place upon this class, in my judgment imposes a burden which this Committee ought not to call upon them to carry.

7.0 P. M.

The first tax to which I would offer objection is the Entertainments Tax. I welcome what the Chancellor of the Exchequer said, and particularly the sympathetic and humane terms in which he expressed himself with regard to the necessity of the people of the country periodically seeking some escape from the agonies and distresses of the War. The fact that there are many hundreds of thousands of people who every week can afford no more than ld., 2d., or 3d. to obtain for themselves some kind of amusement is a reason for regarding that class as deserving some exemption from taxation relating to the amusements of the country. I know that in the case of the 1d. and 2d. tickets no addition is imposed, but I suggest that in the case of the 3d. and 4d. tickets there is a sound claim for total exemption from any kind of direct taxation for the class which is limited to that kind of entertainment. It would not mean any very great cost to the country, and the Chancellor of the Exchequer could very well find some other source from which to make up any deficiency that might occur on account of a remission of that kind. Similarly, I suggest that some arrangement should be made in the case of the Tobacco Tax. The addition of 1s. 10d. a pound in the case of the cheaper tobaccos is a very serious thing indeed to men earning below 30s. a week, or even £2 a week. There is still a very large amount of that class of tobacco consumed by the lower class of wage earners. In practice, this tax means that a man will have to pay three halfpence more for every ounce of tobacco he buys. That in the course of a week will mean quite a substantial reduction in the wages of that class of worker. This may appear to be a piece of special pleading and quite unnecessary grumbling on behalf of a class well able to look after itself; but that conclusion would be formed because of the delusion that all the workers in the country are at the present time doing very well out of the War, that wages have considerably increased, and that all are more or less employed upon war services or munition work and are in receipt of good pay. I can assure the Committee that it is not so. I had a question on the Paper to-day relating to a large section of operatives in the Lancashire cotton trade, who number collectively more that 200,000. I agree that most of them are women and 7.0 P.M. are not concerned in this tax, but their total advance during the whole of the war period has been only 10 per cent., and I feel certain that the value of that 10 per cent. has been lost to them by short time and by frequent stoppages due to the difficulties with which the trade is confronted. But this argument of low wages and increased cost of living during the period of the War applies not merely to these women in the weaving sections of the textile trade, but to the many hundreds of thousands of working men engaged in any form of manual labour. I would suggest, then, that as 70 per cent. of the revenue from the consumption of tobacco is derived from cigarettes it would be no very heavy loss to this source of income if he gave friendly consideration to the two suggestions which I make with regard to these two classes. The fact is that these people are at a lower level of subsistence that I am certain any Member of the House would like to see the working classes at, and, as they have not a sufficient weekly income to provide them with the barest necessaries of life of the humblest character, it is unfair that during the War additional burdens should be imposed upon them, whilst so many others of us are still able to bear heavier charges than the country has yet called upon us to pay.

I congratulate the Chancellor of the Exchequer upon his conversion to proposals which were first made from these benches when we first had occasion to deal with the question of the taxation of war profits. It was then proposed that the tax should not be less than 80 per cent. That level has now been reached. It is justified, because no one of us is entitled to make a profit out of this War, and so far as incidental profits come to us through the operations of trade and business from our attention to the provision of raw materials, the State has a right, if not to the whole, at any rate to very nearly the whole of the profits that accrue. But if it is the right hon. Gentleman's intention to make this new addition apply to the co-operators in the country, he has not been fair to them; and I gather that it is his intention. I put in this plea for the co-operators on the ground that they are not engaged, as are other manufacturers and men in commerce, for any purpose of private gain. They do not in the ordinary sense of the term make profits at all. Any gain which accrues to a co-operative society through the ordinary processes of its trading is not gain of the ordinary character of profit, such as is made by private traders. It is not fair to tax in a double sense the incomes of this class of the industrial population. So far the co-operators have had to submit to this Excess Profits Tax, which has been imposed upon them, and they will feel it to be not merely an additional burden, but a very serious injustice, in- deed, if it is now proposed that co-operators, who engage in trade and business only for the purpose of supplying themselves with the necessaries of life and not for profit, shall be placed upon the same level as the ordinary private trader. I also think the right hon. Gentleman might have thrown his revenue net a little farther, so as to include quite a number of things which appear up to the present to have completely escaped. It is plain to all of us who move about and observe the immense private gains which are being derived in so many occupations and businesses, that there is a considerable number escaping altogether the taxation upon war profits; that in short only some war profits come within this net, and despite the difficulties of administration some attempt should be made to terminate this inequality, and to make the burden as even as possible for every section of trader in the country.

I cannot say that I can look forward to any prospect of the hopes being realised which were expressed by the hon. Baronet (Sir J. Walton). He spoke of the necessity of this House keeping a more watchful eye upon expenditure in order that we should economise. I have every sympathy with that view, but I am driven to the conclusion that every one of these establishments would have to carry its charge, and that every one of these steps we take in regard to the employment and engagement of it may be thousands of officials—each step along this road must bear its expense. It is true, indeed, of the small items of expenditure as well as the large that expenditure or economy, as the case may be, is determined by policy, and when you propose to pursue a certain policy, you must bear the cost of it. Our soldiers must, until the War is brought to an end, be paid and fed and provided with all the necessary apparatus for making their services successful. These charges cannot be reduced, and I think no one can turn to the Civil Services of our country and expect that any serious economy can be effected by reductions in salaries or in the cost of management. It was my privilege some time ago to act upon the Commission which dealt with the whole of the Civil Services of this country, relating both to our home and foreign services, and I came away from that task convinced that, while there were a few people who might be too highly paid according to their value to the State, the great mass of servants in all these different branches of civil employment were paid not above but, if anything, below their actual worth to the State at large. Who would suggest that the 500,000 or 600,000 postal servants, or the 200,000 or so teachers in the community should have less salaries or wages than they receive now? On the contrary, we have all recently agreed that these great branches of the Civil Service are entitled to better pay and not poorer. So that, much as I sympathise with the views that are expressed with regard to economy, if they can be effected, I see no hope of an actual realisation of any serious change in that direction. I am driven to that conclusion because so long as it is seen that many people are doing well, not by design or through their own seeking, but as an incidental outcome and by-product of the War, others will naturally say, "I think I ought not to be called upon to work free or to give my service for less pay than others." I hope the right hon. Gentleman will have regard to the tightened and distressed position of the two classes to which I refer, and should he be able to see his way to give some relief in regard to the cheaper kinds of tobacco and the cheaper tickets which are purchased by the very poorest sections of the community, I think that class would have no cause to complain of the right hon. Gentleman's proposal.

With a great deal of what the hon. Member has said I agree, as regards the increased cost of living of the lower-paid workers and those in receipt of fixed incomes, such as pensioners, for instance, and if the Government can see their way to lessen this burden by reducing the taxes on food, more particularly sugar and tea and those things which press hardest upon that class. That ought to receive consideration and support. I wish to refer to an observation made by my right hon. Friend (Mr. McKenna), that the Government will now be entirely relieved from the necessity of maintaining the exchange, more particularly with America. While we all rejoice at the accession of strength which America will bring to us, I am quite unable to follow how that gets rid of the exchange difficulty. Surely our exchange difficulty with America is due to our indebtedness to her, and if we intend, as I understand we do, to increase that indebtedness still further, surely the problem of maintaining the exchange still remains! It is really due to the enormous indebtedness which we have to pay in some form or other, either by securities or exports, or gold. The problem has been accentuated by the methods adopted by the late Government and still pursued by the present Government. I should be glad if we could be given some more definite information as to the total amount outstanding of the present 5 per cent. War Loan. I asked a question on the subject, and the Chancellor of the Exchequer said he hoped to deal with it in his financial statement, but I did not notice that he gave the aggregate amount. On that amount depends the Sinking Fund, which is part of the bargain which the Government made when they issued the Loan, and it would be very interesting if he would state specifically and definitely what is the total amount now of the 5 per cent. Loan when you add up all these various conversions — Treasury Bills, Exchequer Bonds, and 4½ per cent. Loan. I would like to add my congratulations to the Chancellor of the Exchequer on the very clear and lucid statement he made. Whilst saying that I must offer some criticism which I hope will be accepted in the spirit in which he generally accepts criticism. As the right hon. Member (Mr. McKenna) said, no one proposes to utter any cavilling criticism in any sense of the word. We are united in this House and in the country in the one desire to bring this War to a speedy, honourable, and successful close. Therefore, any criticism I offer will be offered in that spirit. I should like to congratulate the Chancellor of the Exchequer on his decision not to broaden his basis of taxation, as has been suggested, and to confine himself to existing taxes and increase those rather than indulge in any new form of taxation. As he has well said, to do that would involve additional machinery and additional expense. In one of the passages of his speech he referred to the comparatively light task with which the country would be faced when peace was attained in getting rid of the National Debt. On a previous occasion I note that he referred to this most specifically. Speaking in Committee of Supply on 13th February, he said:

With reference to the estimate of about 26,000,000 per day as our present expenditure, it has been said that the reason why so often these Estimates were falsified, was because we invariably found that with the ever advancing rise in the price of the commodities it was impossible to estimate correctly what the expenditure was likely to be. The other day the Chancellor of the Exchequer gave a reply to the hon. Member for North Westmeath, to which I would like to call attention. The hon. Member for North Westmeath (Mr. Ginnell) asked the Chancellor of the Exchequer whether he is aware of the unreal inflation of the price of Irish land caused by the debasement of the currency through the use of paper money without an equivalent gold reserve; that Death Duties are levied on the fictitious prices; that some persons are unable to take up farms from inability to pay the Death Duties? I was amazed that, in reply to that question, the Chancellor of the Exchequer expressed the opinion that he entirely disagreed with the view that the issue of paper money had anything to do with prices. That is an amazing statement to come from anyone occupying the position of Chancellor of the Exchequer. Whatever may be our views as to the desirability of emergency circulation of notes for financing the War, I think that most people are of opinion that it does affect the prices of commodities. I have quoted the late Lord Goschen on that subject, and I may say that other distinguished Chancellors of the Exchequer before him, and great economists like the French economist Bastiat, and present-day economists like Professor J. Shield Nicolson, Professor of Political Economy in Edinburgh University, and all the leading economists of the day, and the leading Finance Ministers of the belligerent countries, including America, Russia, and France, are agreed on this subject with regard to any great issue of paper money. It is very difficult to avoid that in carrying on a great war. I should imagine that the right hon. Gentleman might have paid some deference to these authorities, and to state, as he did the other day, that he did not agree that this issue of paper money had any effect upon prices, is a most amazing statement to come from anyone occupying the position of Chancellor of the Exchequer.

We know that there are at this moment in this country alone £150,000,000 worth of Treasury notes, and, with the submarine menace and the War generally, there is withdrawal of commodities from industries, with the result that the supply is limited with regard to most commodities. I think most people will agree that, seeing that practically all the belligerents have engaged in this issue of paper money, it has had and will continue to have an influence upon the prices of every commodity dealt with in this country and throughout the world. I felt that I ought to draw attention to that fact, because, although the right hon. Gentleman apparently does not believe in these principles, they are the ordinary principles of finance, and many of the bankers in the City and elsewhere must have read the right hon. Gentleman's statement with considerable disquietude and distrust They feel that as the Treasury has this power of issuing these notes, while there has been some contraction there is still a disposition to use the printing press freely, and there is no very appreciable intention of gradually contracting and redeeming this large amount of outstanding paper money. The right hon. Gentleman, when arguing the rate of interest, said that it was necessary to maintain a high rate of interest in this market because of the exchanges. That again seems to me to be a contradiction in terms. If he is interested in keeping up the rate of money here as compared with other countries, because of the fact that he desires to maintain the gold standard and to maintain the exchange, he must agree with me that if he is anxious to do that on the one hand, if he has other machinery at the Treasury which is engaged in still further diluting the currency, surely that will artificially reduce the value of money and the rate of interest, and cripple the action of the Bank of England and those who are anxious to maintain the rate of interest in the market.

Some reference was made by the hon. Member for Barnsley (Sir J. Walton) to the question of economy, and I wish to offer my support to what he said in that direction. I recognise that it is impossible, or almost impossible, to economise in everything, because you must get your material, whatever it is, at once; but I do think that a great deal could be done in economy even in war-time. My hon. Friend the Member for Greenock (Mr. Godfrey Collins) has taken an active part recently in getting the opinion of many Members of this House in favour of a Committee for examining and overseeing this vast expenditure. I hope that that movement will grow and that it will receive favourable consideration from the Government. It seems to me that it is a very proper and very admirable suggestion and it is in the nature of a support of the Government rather than an attack. If the hon. Member and those associated with him succeed, I shall be very glad. I am only too pleased to support him and I hope he will be successful in getting such a Committee, which would surely be in the interests of efficiency and also in the interests of a successful carrying on of the War. I should like to know what is happening to the Estimates Committee which was formed some time ago for this very purpose and which ought to be operating now.

With reference to my previous remarks about the total amount outstanding on the 5 per cent. War Loan, the object in trying to arrive at that figure is to find out what will be the Sinking Fund which the Government have incurred under the last Loan for supporting the price of that Loan. Assuming, as I have not got the exact figures, that £2,000,000,000 is the total amount of the Loan outstanding, 1½ per cent. equals £30,000,000 per annum, which the Government will have to raise for supporting the price of that stock if the stock falls below the issue price. On a previous occasion I endeavoured to show—and I hope I did show—that that fund is largely illusory in a time of war, when your expenditure very largely exceeds your revenue. It was tried by Pitt and others in the Napoleonic Wars and withdrawn because it was unsound. I should like to know from the Chancellor of the Exchequer if this fund will operate over the total amount of the Loan. If we have that Loan amounting to £2,000,000,000 or £3,000,000,000 we can readily calculate what the charge will be and the expense involved by this circuitous method of borrowing by Treasury Bills, which are now being placed on a 5 per cent. basis. You borrow at 5 per cent. and pay off a loan of 5 per cent., and there is the expense of the bankers and the brokers, which come upon the taxpayers. This has no real permanent effect upon the price itself. The only real sinking fund is when you have a surplus of revenue over expenditure, and it would be far better to state that straightforwardly than to delude people with the idea that it is possible to have continuous borrowing on the one band for the financing of the War, and to support the Loan which has been issued by such a process as I have referred to.

While I agree with the right hon. Gentleman in his principle of not imposing fresh taxation and of having a big increase in the tax on excess profits, yet some consideration must be given by the Government to the question of the divisible amount of that profit. There is something to be said for the view that if you go to too great an excess you embarrass the success of many industrial companies in this country by taking away from them too much of their floating capital. They will have a hard struggle in many cases after the War, and some rebate might be made on profits which are not divided, which are put to reserve or appropriated for reconstruction after peace is restored. I support what was said by the hon. Member for Christchurch (Brigadier-General Croft) with regard to the question of double Income Tax. The great difficulty is to find out on what principle to go. Where the income is earned, for example, by a company dealing partly in Australia and partly in this country, it is very difficult to discriminate as to how much of the profit is made there and how much is made here, and I sympathise with the Government in their difficulty in deciding what is a fair and equitable tax. At the same time, some discrimination should be made, because the Colonies and Dominions unquestionably have made enormous sacrifices in this War, and there can be no interference with the principle of autonomy. They must be allowed to arrange their taxes as they think fit, either through the Imperial Conference or by some other method. The various Treasuries of the Empire might meet together and arrange a method of dealing with the matter. There seems to me to be a case in equity for some compromise, and I hope that it will be met. While rejoicing in the fact that the right hon. Gentleman has imposed no new taxation, I do again express the hope that he will recognise the supreme importance of getting more for the cost of the War from taxation rather than from borrowing. The piling up of loans does for the moment deceive us as to our actual position, and if a more equitable way can be arrived at whereby a greater proportion of the enormous cost can be derived from taxation than from loans, it will lead to a sounder position and one which we will all desire.

I desire to support what was said by the hon. Member for Christchurch in regard to double taxation. The hon. Member spoke from the point of view of Australia. I naturally speak from that of India. It is very hard on the officers in the Indian Army and on officials of the Government of India who are able to invest, say, some of their hard-earned savings in Indian loans, to think that when they come home they have to pay not only the Indian Income Tax but the British Income Tax in addition. All servants of the Government in India have a very hard time to make ends meet. Married men find it extremely difficult, and in many cases can hardly educate their children. I do not know whether this point has been brought before the Imperial Conference, which is attended by Indian delegates, but I hope that consideration will be given to it, and that some allowance will be made on this double Income Tax.

A second point to which I desire to refer, the Income Tax on officers' pay, has been referred to already by the hon. Member for the Ecclesall Division of Sheffield (Mr. S. Roberts). The officers now get no separation allowance. Many of them have a terribly hard time to live. They had far greater incomes before the War than they have now. They have already paid their war taxation in giving their lives or their limbs to their country in the fighting line, and this levy of war taxation is an extra levy which comes harder on them than on us who are living here in safety in this country. The question is well known, and the right hon. Gentleman understands it thoroughly, but I hope that he will consider the incidence of this taxation on officers, especially the younger officers who are now fighting for their country, and not levy from them what is really a double war taxation. They are all willing to pay the taxation levied on them before the War, but some allowance should be given on the war taxation that has been put on the pay of officers since the War began.

I would like to support what the last two speakers have said about double Income Tax. I know cases myself of very great hardship. I know one case of a wool broker with fourteen different offices in different parts of the world, whose income has been almost entirely taken from him lately under the new Regulations about wool. His business has been taken from him. He has several sons fighting at the front. Such income as he has left is taxed, both in Australia and in this country. I think that that is very unfair. I want most strongly to impress this on the Chancellor of the Exchequer. He is the first Colonial Chancellor of the Exchequer whom we have had. The Colonies must be proud of him. I am proud of him to-day, because I consider that he has made a very good Budget speech with as few objectionable points as it is possible to have in Budget proposals. But I would urge, in the interests of the unity of the Empire, the abolition, or at any rate the very great modification, of this double Income Tax, which discourages men from having houses of business both in this country and in the Colonies. Several customers of my firm, Australian firms, have houses of business in London, and it is very unfair that they should be discouraged from having houses of business here by having this double Income Tax. I am very glad that the Chancellor has not raised the Income Tax particularly on people who are living on the interest of small fortunes, ladies and others, whose fixed income has been diminished in value because of the rise in the price of commodities. I know several people on whom the Income Tax, modified though it is by the graduated system, is very hard, and it would be a great shame to impose extra Income Tax on them.

I congratulate the Chancellor on having raised the Excess Profits Duty from 60 per cent. to 80 per cent. As one of the guilty parties who have some of this Excess Profits Tax to pay, I should be ashamed of myself if I were not willing to sacrifice all the extra profit which I have got from the War. I do not think that any man ought to feel that he is in any way being robbed by having to pay 80 per cent. of his profits, and for my part, though many business men no doubt will have to borrow money and will have to pay a higher rate of interest to the banks and so on, and though there are some things against business men at present, yet at a time when other men are giving their lives for their country, I think that it would not be right for us to object to the taking of all our extra profits. But while this is so in principle, yet as a matter of expediency I do think that the time has come when the Chancellor should not push it any further. The figure I should have gone to if the decision had rested with me is 80 per cent. I do not agree with the principle of allowing limited companies a lower rate of interest on new capital than private firms. There are three classes of people carrying on business in this country. There are the great public limited companies, railways, banks, and so on. Their rate of interest last year was, I believe, 6 per cent. Private firms were allowed 7 per cent., but there is another class of people carrying on business—private limited companies. It does not seem to me fair, when there are two sets of people carrying on business in the same town, one a private limited company and the other a private firm, and both are doing practically the same business, that one firm should be allowed only (speaking of last year) 6 per cent., while the other gets 7 per cent., just because the former has changed its name and become a private company. The difference is now exaggerated and is made 2 per cent. I do not see the fairness of allowing that. The origin of it was, I suppose, that the services of members of private firms are paid for to them, by way of a share in the profits, whereas in the case of limited companies the directors and managers are paid salaries according to the supposed value of the service. There should be some consideration shown for these business firms which are, to all intents and purposes, private firms, managing their own business, and now known as private limited companies. It does not seem to me fair that because some, not all, partners in private firms, are accustomed to take remuneration, not in salaries but in a share of profits—whereas the managers and directors of limited companies take their remuneration in salaries—you should draw a line between them and private limited companies. I am sure the Chancellor of the Exchequer will give that point his full consideration.

I do not like to look a gift horse in the mouth, or to throw any concessions back upon the Chancellor, but I frankly confess that if I were in his place I should not give such a large extra amount as 3 per cent., which is 50 per cent. above the previous rate of 6 per cent. I think it is rather a large advance, and I fear will look rather curious to other taxpayers. But there is one point to which I wish to call the attention of the right hon. Gentleman in connection with this increase of percentage, and it relates to men who had begun business in 1913 or 1914, and were just getting their business to show a clear profit when the War broke out, and the Excess Profits Duty took all that away. It may be that the Chancellor of the Exchequer, in giving an increase of 3 per cent., has that in his mind as one means of meeting the case to which I refer. I would suggest that these firms which had just started business before the War should have even greater consideration, and that it should be recognised that the profits they have made are not all excess profits. I think some modification on that point is needed, for it seems to me that a large advance is being made to what I may call the old-established excess profit payers. The firm with which I am connected made a very large extension of their business before the War; but we are an old-established firm with a fair income already, and I do not think we would have grumbled if all the excess profits had been taken. In raising this point, however, I am only speaking of people and firms who were struggling to get a footing at the time the War broke out—an unfortunate time for them, no doubt, and one which has worked out very unfairly for them. I respectfully put their case before the Chancellor of the Exchequer, and I hope he will give it his full consideration.

I am very glad that the right hon. Gentleman has taken the cheap and easy way of raising the revenue. He has not gone into the costly and cumbrous ways of indirect taxation. When I first spoke in this House, about seventeen years ago, I remember that I opposed the doctrine, then almost a fetich, that indirect taxation should be kept about the level of direct taxation. The effect of the War has been, with the Excess Profits Tax, to make direct taxation in to-day's Budget 75 per cent. of the whole of our taxation. I hope that those who study finance will take to heart the lesson in finance which has been afforded by this War and that we will choose as the least cumbrous, the least costly, and the least difficult way of raising additional revenue the direct method of taxation and not the indirect. That is what the Chancellor of the Exchequer is doing and what the late Chancellor of the Exchequer did, and the method of direct taxation does not interfere unnecessarily with the operations of trade. In a War like this the Government has to make use of this and to lay hold of that, and I fear that there are not very many commodities left that the Government has not appropriated or taken over themselves. That may be quite right in the circumstances in which the country is placed, but surely we can go too far in that direction, and I believe that there is already growing in this country a reaction against too much Government interference. Inquisition into what a man is doing in his private business, except for the good of the workpeople or something of that sort, is not desirable, and I think the less the Government interferes with the operations of business men, except for the purposes of taxation or interests of the workpeople the better it will be. I am very grateful to the Chancellor of the Exchequer for bringing forward this, as I think, very sound Budget to raise revenue in a way that will interfere as little as possible with the people.

I am sure my right hon. Friend has little cause to be dissatisfied with the reception which has been given to-day of his Budget. There have been two or three points of some importance raised by various Members about which I might say a few words, and there are two or three points that we propose to deal with in the Finance Bill which will appear upon the White Paper to-morrow morning-upon which the Chancellor of the Exchequer omitted to make a statement, but upon which perhaps I may be permitted to say a few words. I should like to refer, in the first place, to some of the remarks that fell from my hon. Friend the Member for the Ecclesall Division of Sheffield (Mr. S. Roberts). He expressed the fear which I have often heard put on behalf of the controlled firms of this country, that they would suffer by being taken out of the hands of the Ministry of Munitions for the collection of the Munitions Levy and being put into the hands of the Board of Inland Revenue for collection of the Excess Profits Duty. He expressed some anxiety as to whether controlled firms might expect the same treatment in regard to depreciation for wear and tear, and for obsolescence of machinery. I assure him and those interested in this point that full power is given to the Board, under Sub-section (3) of Section 40 of the Finance (No. 2) Act of 1915, to deal with these matters on liberal lines, and I can assure the Committee that the controlled firms, so far as the question of depreciation of the plant that is being worked during the War is concerned, will be as generously dealt with under the Board of Inland Revenue as they have been under the Ministry of Munitions. There is no desire at all on the part of the Administration to treat them otherwise in this respect than they have been already treated.

8.0 P.M.

With regard to the double Income Tax, I am afraid it is impossible for me at this stage to give what would be a satisfactory reply. The solution of this problem has puzzled the keenest brains in this country, and the matter was under discussion at the Imperial Conference, where they came to the unanimous conclusion, as recently as Wednesday of last week, that they realised on going into this question that it was quite impossible during the War to light on any solution that would be fair to the taxing authorities both in this country and in the overseas Dominions. They recognise to the full the hardship under which certain individuals suffer, and must suffer, during the continuance of the War, but they resolved that the matter should be taken in hand immediately after the conclusion of the War, and that an amendment of the law should then be made to remedy the present unsatisfactory position. The Treasury were in full agreement with that resolution, and it is the intention of the Government, as has been, I believe, announced on more than one occasion, that the whole question of the Income Tax will be referred to a competent Committee as soon after the expiration of the War as possible. I am glad to say that although it has been found impossible to go beyond what was done last year with regard to the double Income Tax, it has been found possible to meet to some extent the difficulty with regard to the double Excess Profits Tax; and there will be in the White Paper a paragraph which states that where excess profits is chargeable both in the United Kingdom and in the Dominions it is proposed to insert a provision in the Bill enabling the Imperial Government to enter into an arrangement with the Dominion Government under which the higher of the two duties will be collected and apportioned between the two Exchequers. A provision of this kind already exists in the New Zealand Excess Profits Duty. Another question on which several Members spoke was that of the incidence of officer's Income Tax. This hardly the place, perhaps, to pursue that question at great length, and there will be an opportunity for discussion and for the moving of such an Amendment as may be deemed fit when the Finance Bill comes before the House, and any proposal that may be put forward will receive the careful consideration of the Government. I should not make any more definite statement than that this evening. My hon. Friend the Member for Radcliffe (Mr. T. C. Taylor) spoke on the increase of the statutory percentage on capital, and seemed to think that the increase which has been promised by the Chancellor erred on the generous side. I should like to tell him, and possibly to reassure him, that this matter gave my right hon. Friend a good deal of trouble, and he went most carefully into it and consulted the Board of Referees on the matter as a body who have given special attention to the question and who have had unique opportunities of judging the equity both of the statutory rate itself and of the difference of rate as allowed to the public and to the private company. I may say that the Board of Referees themselves urged on the Chancellor of the Exchequer the desirability of making a substantial increase in the statutory rate. All their experience, has led them to think that such an increase would be fair, and their experience also has told them that the larger rate of difference between the private firm and the limited company would meet more fairly the difference between those two classes of business which does undoubtedly exist.

My right hon. Friend (Mr. Bonar Law) reminds me that they only advised on the question of the raising of the statutory rate. I do not propose to say anything this evening, and the Committee would hardly expect me to do so, on the question of economy. We shall have plenty of opportunities of discussing that when the Vote of Credit arises, and on the Consolidated Fund Bill which will follow that. I should like, for the benefit of my hon. Friend the Member for Coventry (Mr. D. M. Mason), to give the complete figure of the 5 per cent. War Loan. It is £2,069,845,000. I will pass on now to a proposal which has been made, and which appears on the White Paper, with reference to liquor licences. Broadly speaking, the Government propose, in view of the restrictions which have been put on the sale and delivery of liquor in this country, to make such a reduction in the amount of Licence Duty payable as will be equivalent, as near as may be, to the trade that will be sacrificed, partly by restricted hours of trading and partly by the restricted amount of liquor that will be for sale. The Committee will remember that a rebate up to a maximum of one-fourth of the full duty was in 1914 allowed to holders of on-licences, and that a year later the maximum of one-fourth was converted into an all-round allowance, and extended to certain holders of off-licences. It is proposed that in respect of the new restrictions an allowance of three-fourths will be given, and that it will run for the same period as these restrictions are enforced.

Does that mean a total remission of three-fourths of the licences originally paid?

Yes. Then there are one or two small concessions. It is proposed that in the case of officers and men of the merchant service and fishing fleets the same relief from Death Duties will be given to them as is accorded to officers and men of the Navy and Army under the Death Duties (Killed in War) Act, 1914, and Section 46 of the Finance (No. 2) Act, 1915. There is one more point upon which my right hon. Friend has had some discussion with representatives of labour, and which I think is a point that although it has not been mentioned to-day must be in the minds of many hon. Members. That is to extend the provision which sanctions an allowance of the tax in respect of each child under the age of sixteen years, to cover cases in which a child has been adopted, with due precautions against a double allowance for the same child. Each of these points I have just mentioned to the Committee will be found upon the White Paper in the morning, and there will be a further opportunity of discussing them as and when the Finance Bill is introduced. I do not know whether the Committee will be prepared to take the Resolutions which you, Mr. Chairman, have before you, but if they are I would suggest, with respect, that we should pass all the Resolutions except the last one, which will afford us a substantial opportunity on which to found any discussion thought desirable on the resumption of the Debate.

May I ask the hon. Gentleman whether he is able to make any statement on the point I raised?

I am afraid the hon. Gentleman cannot expect me to make any statement now, but I think it is a very fair matter for consideration when the Debate on the Finance Bill is before the House, but if the hon. Gentleman raises it then we shall be prepared to discuss and consider anything that may arise. I cannot say any more than that.

Question put, and agreed to

Continuation of Duties (Excise)

Resolved, (2) That the following duties of Excise imposed by Part I. of the Finance (No. 2) Act, 1915, and continued by Section eighteen of the Finance Act, 1916, until the first day of August, nineteen hundred and seventeen, shall continue to be charged until the first day of August, nineteen hundred and eighteen,. that is to say:—

Duty.

Section of Finance (No. 2) Act, 1915.

Additional duty on motor spirit

10 (2)

Additional medicine duties

11

And it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Tobacco (Customs)

Resolved, (3) That the additional duties of Customs on tobacco imported into. Great Britain or Ireland imposed by Part I. of the Finance (No. 2) Act, 1915, and continued by Section seventeen of the Finance Act, 1916, until the first day of August, nineteen hundred and seventeen, shall, as from the second day of May, nineteen hundred and seventeen, be doubled, and shall continue to be charged at the doubled rate until the first day of August, nineteen hundred and eighteen.

And it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Tobacco (Excise)

Resolved, (4) That the additional duties of Excise on tobacco grown in Great Britain or Ireland, imposed by Part I. of the Finance (No. 2) Act, 1915, and continued by Section eighteen of the Finance Act, 1916, until the first day of August, nineteen hundred and seventeen, shall, as from the second day of May, nineteen hundred and seventeen, be doubled, and shall continue to be charged at the doubled rate until the first day of August, nineteen hundred and eighteen.

And it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Entertainments Duty (Increase of Rates)

Resolved, (5) That on and after the first day of July, nineteen hundred and seventeen, the rates of Entertainments Duty shall be increased so that the rate shall be—

Where the payment exceeds

3d. but does not exceed 6d.—2d.

6d. but does not exceed ls.—3d.

1s. but does not exceed 2s.—4d.

2s. but does not exceed 3s.—6d.

3s. but does not exceed 5s.—9d.

5s. but does not exceed 7s. 6d.—1s.

7s. 6d. but does not exceed 10s. 6d.—2s.

10s. 6d. but does not exceed 15s.—3s.

15s.—1s. for every 5s. or part of 5s.

And it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Entertainments Duty (Free Admissions)

Resolved, (6) That on and after the first day of July, nineteen hundred and seventeen, Entertainments Duty shall be charged in the case of persons admitted without payment of the amount ordinarily charged to any entertainment to which other persons are admitted on payment, as if a payment had been made for admission similar to that made by other persons.

And it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Income Tax

Resolved, (7) That—

(a) Income Tax shall be charged for the year beginning the sixth day of April, nineteen hundred and seventeen, at the rate of five shillings in the pound, and the same Super-tax and additional Income Tax on the income from certain securities shall be charged for that year as were charged for the year beginning the sixth day of April, nineteen hundred and sixteen;

(b) the like provisions shall have effect with respect to the Income Tax so charged (including Super-tax and the said additional Income Tax) and the annual value of property as had effect with respect to the Income Tax charged for the year beginning the sixth day of April, nineteen hundred and sixteen, and the value of property during that year; and

(c) it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Income Tax (War Loan Securities)

Resolved, (8) That where the interest on any securities issued in connection with any Government loan is made exempt from liability to Income Tax, but is not made exempt from liability to Super-tax, then, for the purposes of Super-tax and for the purposes of any relief from Income Tax which depends on the total income from all sources, the income derived from such interest shall be treated as if the amount actually received represented net income after deduction of Income Tax at the highest current rate.

Excess Profits Duty

Resolved, (9) That—

(a) Excess Profits Duty under Part III. of the Finance (No. 2) Act, 1915, as amended or extended by any subsequent enactment, shall, unless Parliament otherwise determine, be charged for any accounting period ending on or after the first day of August, nineteen hundred and seventeen, and before the first day of August, nineteen hundred and eighteen; and

(b) Excess Profits Duty shall be an amount equal to eighty per centum instead of sixty per centum of the excess profits for any accounting period commencing on or after the first day of January, nineteen hundred and seventeen, or in the case of an accounting period which has commenced before that date but ends after that date eighty per centum instead of sixty per centum of so much of the excess profits as may be apportioned to the part commencing on that date; and

(c) the Excess Mineral Rights Duty under Section forty-three of the Finance (No. 2) Act, 1915, as amended or extended by any subsequent enactment, shall be an amount equal to eighty per centum instead of sixty per centum of the excess rent for any accounting year commencing on or after the first day of January, nineteen hundred and seventeen, or in the case of an accounting year which has commenced before that date and ends after that date eighty per centum instead of sixty per centum of so much of the excess rent as may be apportioned to the part commencing on that date.

Excess Profits Duty (Shipping)

Resolved, (10) That in computing the Excess Profits Duty of any trade or business deriving profits from shipping the provisions of Part III. of the Finance (No. 2) Act, 1915, or any other enactment, as to the repayment or setting off of deficiencies or losses shall not apply in relation to any deficiency or loss in any accounting period commencing on or after the first day of January, nineteen hundred and seventeen, or, in the case of an accounting period which has commenced before that date but ends after that date, in relation to so much of the deficiency or loss as may be apportioned to the part commencing on that date.

Depreciation Fund

Resolved, (11) That it is expedient to authorise the issue out of the Consolidated Fund of such sums as may be required for the purposes of any depreciation fund established in connection with any loan raised for the purposes of the present War, and to authorise the Treasury to borrow money for the issue of such sums or the repayment thereof.

Redemption Expenses

Resolved, (12) That there shall be charged on the Consolidated Fund any sums which may be required for any expenses incurred in connection with the redemption of any securities issued under the War Loan Act, 1916.

Resolutions to be reported To-morrow; Committee to sit again To-morrow.

War Pensions Bill

Lords Amendments considered, and agreed to.

Billeting of Civilians [Salaries and Expenses]

Resolution reported, "That it is expedient to authorise the payment out of moneys to be, provided by Parliament of Salaries, Remuneration, and other Expenses payable under any Act of the present Session to make provision for the Billeting of Persons engaged in work of national importance for the purposes of the present War."

Resolution agreed to.

The remaining Orders were read, and postponed.

Whereupon Mr. DEPUTY-SPEAKER, pursuant to the Order of the House of the 12th February, proposed the Question, "That this House do now adjourn."

Question put, and agreed to.

Adjourned at Twenty-one minutes after Eight o'clock.