Can the Chancellor of the Exchequer tell us what will be the business for next week?

To-morrow we shall take the stages of the Munitions of War Bill, and the Billeting of Civilians Bill.

On Monday we propose to take the Report of the Budget Resolutions.

Tuesday, Supply, nominally the Munitions Vote, but with a view to discussing the liquor restrictions.

Wednesday, Vote of Credit in Committee.

Thursday, the Report of that Vote at a Private Sitting of the House.

What about the Irish statement?

I cannot now say anything definite about that, and I am afraid I shall not be able to say anything about it to-morrow, but I hope to do so at the earliest possible moment.

Does not the right hon. Gentleman think that it would be better to take the Munitions of War Bill when the Finance Bill is in our hands showing the financial provisions in regard to munitions work?

This is not intended to be the only opportunity of discussing the Munitions Vote. We have already promised to have this Vote next week, and I think we must adhere to that.

I think the right hon. Gentleman is under a misapprehension. I put a question relating to the Committee stage of the Munitions of War Bill, which extends the provisions with regard to munitions work to private undertakings, and I suggested to him that it would be more convenient to take that Bill so extending munitions after we have the Finance Bill in our hands, showing how it applies to munitions.

I dare say there is something in that suggestion, but it is necessary for us to get on with the Bill, and, on the whole, I think the proposition which has been made is better for the convenience of the House.

May we take it that no attempt will be made to occupy the time of the House next week with the Criminal Law (Amendment) Bill, in view of the storm of opposition from all the women of the country?

I have already given the business for next week, and it does not include that Bill.

If the discussion in the Private Session is not satisfactorily completed within the limits of a single day, I take it that the Government will not offer any resistance to its further continuance at a later stage?

We shall be quite ready to consider that suggestion. I hope that before Thursday, perhaps either by consultation with me or in some other way, some arrangement will be made as to the form in which the discussion should take place.

With reference to the procedure in the Private Session, will the right hon. Gentleman consider the advisability of having a Question Time at the beginning of the proceedings so that Members can, by Private Notice, submit questions to Mr. Speaker, and that questions can be forwarded to Ministers, in order that they may have time to prepare answers?

I will consider that, and let my right hon. Friend know to-morrow, but on the face of it it seems open to many objections.

Would it not be better to, leave the Secret Session free, rather than limit it to a Debate on the Report of the Vote of Credit?

No, Sir. I have already pointed out that we have a very large programme of business, and I think it is a very good arrangement for this further reason, that it makes it easier, if the House desires it, to have Sessions of this kind without the formality of taking a day specially for them.

Is it right to infer from the fact that the Secret Session is to take place on Thursday that the Irish statement will take place on Friday?

My hon. and learned Friend will realise that if, as I hope may be the case, it is possible to make the statement, Friday will not be an inappropriate day to make it.

Friday next?

Yes.

Ordered, "That the Committee of Ways and Means have precedence of the Business of Supply."

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)."

Resolved, "That this House do sit Tomorrow."— [Mr. Bonar Law.]

I do not think the Chancellor of the Exchequer has had sufficient credit from the public for the powerful success which attended the issue of the 5 per cent. Loan. It was an immense success, but there were great difficulties in his way which had been created by the issue of 6 per cent. Exchequer Bonds and by the raising of the Bank rate of interest to 6 per cent. in the autumn of last year. I believe the opinion of financial authorities was that neither of these steps was necessary, and certainly the issue of 6 per cent, Exchequer Bonds was a very unfortunate experiment. The right hon. Gentleman was pressed by eminent banking authorities in the City to issue his Loan at 6 per cent. He refused, and his patriotic boldness was justified by the immense success of the Loan. It would have been a terrible misfortune for this country if its credit had settled down on a 6 per cent. basis, and it would naturally have made it still more difficult for him to raise the Loans which are staring us in the face, because with £1,650,000,000 to borrow this year, it is clear that it would be unsafe to trust entirely to the issue of Treasury Bills. He will, therefore, have to issue a public Loan, I am afraid, of some kind, and if his basis of credit had already been 6 per cent., he would have found it difficult to go on at that rate, but having established it firmly on a 5¼ per cent. basis, he ought to be able to go on, as he has declared his intention of going on, at not more than that figure. He is therefore to be congratulated on his boldness and courage, and it is a thing which ought to be recognised by the country more generally than it has been.

Having said that, there are one or two questions I should like to ask in regard to the general financial position which were not made perfectly clear by his speech yesterday. One is with regard to interest on the loans which have been made to our Allies and the Dominions. I see "interest on Loans" under miscellaneous headings. I do not quite understand whether those items include interest on these loans which have been made to our Allies and the Dominions, and if interest is not being paid on them, I should like to know whether it is being added and will become part of the capital which will be repayable after the War. It is possible that this has been explained on previous Votes of Credit, but I do not remember the point having been definitely explained, and it is important that we should know what are the facts.

I was disappointed as regards three points in the Chancellor's speech. It is a great pity that he was not able to make some announcement with regard to the double Income Tax. The question has become exacerbated this year by the imposition of a heavy Super-tax in India. That is a point well worth consideration. The Indian Government, in an Act passed by the Legislative Council in March last, imposed a Super-tax, as they called it, which runs up to something like 3s. 9d. in the £ on certain incomes. I do not think the word "Super-tax" was very well chosen in that case, because the Super-tax has always, as far as I know, been applied to the income of individuals. In this case Super-tax is applied not to individuals but to companies and firms, and the principle works with extreme hardship in the case of small participants in those companies or firms. A partner in a firm may be a rich man or a poor man, but to have Super-tax applied to the total income of the firm, when he has only a small share in it and may be a poor man, is an abuse of the word "Super-tax," which really means, or ought to mean, the application of an excess tax where a man is earning a great deal of money. The same argument applies to shareholders in a company. Many shareholders are extremely small people, and to deduct from their income, before they get it, what is called Super-tax on the income of the company is an extreme hardship. Curiously enough the Finance Minister in India did not seem to understand the principle of a Super-tax, because he talks about a Super-tax being imposed in- England on companies and firms, which, of course, is not the case. It is curious that the financial authorities in different parts of the Empire never seem to be able to inform themselves with regard to the facts in other parts of the Empire. For instance, last year our financial authorities on the Treasury Bench talked about the Income Tax in Australia being levied on money no matter where it was earned, whereas in fact it is levied only on money earned in Australia. This is a similar kind of case of want of knowledge on the part of a person who ought to be properly informed in regard to what is done when he talks of taxation in other parts of the Empire.

To return to the question of the Super-tax in India, it amounts at the extreme point to something like 3s. 9d. in the £, which with the existing Income Tax will make a tax of 5s. in the £, equivalent to the Income Tax now existing here, so that anyone living here who has income from India will have to pay 10s. in the £ on it. The double Income Tax and other taxes, such as Excess Profits Tax, when imposed in the Dominions and in this country, amount in many cases to 17s. in the £. That is more than three-quarters and nearly seven-eighths of a man's total income.

4.0 P.M.

It is all very well to say that taxes must be inequitable in their bearing, but there are some so glaring that they demand immediate redress, and this appears to me to be one of them. The hon. Member for Bewdley (Mr. Baldwin) in his speech last night told us, and it appears in the White Paper this morning, that with regard to the Excess Profits Tax there is going to be an arrangement by which the Dominions authorities and the home authorities will come to an agreement as to the precise method in which this tax is to be applied, and that whichever has the greatest tax will share with the other its proper proportion of that. If that is possible in the case of Super-tax, I do not see why it should not be possible in the case of Income Tax also, and why there should not be an arrangement come to with the Dominions authorities by which this double Income Tax can be so arranged that each will get the share which is its due on the largest amount of tax which is collected Personally, I do not like this policy of taking whichever is the biggest tax. We had an example of it in the case of the Munitions Levy and the Excess Profits Tax, and the result was that the unfortunate taxpayer never knew where he was. He could not tell whether he was going to be taxed under the Munitions Levy according to one scale or under another scale and another system in connection with the Excess Profits Tax. Happily the Chancellor of the Exchequer is removing that this year, and it is one of the good features of this Budget that this anomaly and this quibbling policy, which is unworthy of a great nation, is to be removed. It will save the Exchequer and the Munitions Department a great deal of expense and a great deal of trouble, and it will save a good deal of trouble, worry, and uncertainty on the part of the taxpayer. I should like to know from the Chancellor of the Exchequer exactly how this is going to be done. There is nothing in the White Paper, and there was nothing said last night, as to the principle on which the tax is going to be levied. Is it going to be levied on the principles of the Munitions of War Act, 1915, or on the basis of the Excess Profits Tax? That makes a very considerable difference, and in order more completely to remove the uncertainty under which the tax-payer at present labours, I wish the right hon. Gentleman would tell us before the Finance Bill comes on for discussion whether the assessment of this tax is to be removed entirely from the officials of the Munitions Department, and is to be put into the hands of the Inland Revenue authorities, and, if so, whether the Inland Revenue authorities are going to apply exactly the same principles as they apply to the calculation of the Excess Profits Tax in the case of establishments not controlled? If the Chancellor of the Exchequer will tell us that, I am sure it will give great satisfaction to persons who are subject to these levies in one form or another.

With regard to the Excess Profits Tax itself, I am sorry that the Chancellor of the Exchequer has thought it necessary to increase it. It is going to give him £20,000,000 more, but the late Chancellor of the Exchequer (Mr. McKenna) said he doubts whether that sum will be wanted. I was very glad to hear the late Chancellor deprecate the increase of the Excess Profits Tax. The Chancellor of the Exchequer said we must remember the history of the tax. The tax was originally imposed, or at any rate a similar tax in the nature of the munitions levy, was originally imposed in order to meet the difficulties of the Labour party in abandoning their rules when they feared that the persons making munitions of war were going to earn greatly increased profits. That was a very reasonable demand on their part, and if this levy could be restricted to the persons making money out of munitions of war or even out of the War generally, then I do not think anybody would have anything to say. There has been a loyal acceptance of that principle, but it has been carried a great deal beyond that. The Excess Profits Tax, which was modelled to some extent on the munitions of war levy, is a totally different thing. It extends this kind of taxation to all enterprises which happen to be earning more money, not on account of the War at all. For instance, take the rubber trade. Everbody knows that seven years ago there was great excitement in the rubber market, and an immense number of companies were started to plant rubber. It happened that a large number of these companies came to the paying stage just as the War began. They had no income before the War, but they began to have an income during the War, not owing to the War, because the price of rubber has not gone up. If these companies had been started ten years before, they would have been paying no Excess Profits Tax whatever. Therefore, this tax comes as an extreme hardship upon companies of that kind. The tax applies to companies of all descriptions which happened to be coming into the developing stage at the time the War began. I know many engineering companies, textile companies, and other companies to which that applies. The money that has been made and on which they are charged Excess Profits Tax has absolutely nothing to do with the War. I am afraid that in this House, and certainly outside, there is great misconception in regard to the justice of this particular tax. I freely admit, as I did at the time, that it would be exceedingly difficult for any Chancellor of the Exchequer to have devised any plan by which he could have strictly defined the persons who were making money during the War and not owing to the War. I am sure he would have done it if he could, but he gave up the job in despair, and I do not think anybody who has studied the subject wonders at that.

This is a very important matter. What is the effect on all the companies concerned? Practically all their profits are taken away from them by raising this tax to 80 per cent. They have practically nothing left with which to make reserves. The conditions of their business have become increasingly hard as the War has gone on. You cannot now conduct a business on a pre-war scale, with the capital which was sufficient for it before the War, because labour has gone up immensely, materials have gone up immensely in price, and the restrictions of the various Departments which, after two and a half years' war, are not yet properly co-ordinated, prevent these concerns shipping at the time when they want to ship and when they are ready to ship, and prevent them getting materials when they are ready for them and when they ought to be able to get them, and could get them if it were not for these restrictions. Sometimes engineering firms have to wait four or five months before they can get permission for obtaining a necessary piece of material, and even after that, they are not sure about it because some Department or other comes along and says, "We want that particular material, and we must have it." That may be necessary, but the result is unfortunate. I know of concerns which were perfectly easy financially before the War which are now very much hampered, and the position will be more serious after the War when the demand for capital will undoubtedly increase. I am not one of those people who expects a depression after the War, at any rate for some years. Owing to the scrapping of material all over the world, and bearing in mind what the Chancellor of the Exchequer said that he trusted new methods would be employed and new machinery would be employed—that is undoubtedly so, and he was absolutely right—all that will require money. Where is the money going to come from? It is being taken away by this taxation. It cannot be accumulated. Very large provisions have to be made by the companies for the payment of this Excess Profits Tax. In some cases they will be able to borrow from the bankers, and in some cases they will not. It depends whether their banker is sticky or not. Sometimes he is liberal and sometimes he is not. They will want enormous increases of capital. In regard to the increase of working capital, as the right hon. Baronet (Sir F. Banbury) knows well, the clearing bank in England does not lay itself out for giving working capital. It will advance money on orders which are actually got, but it is not readily disposed to advance money for increase in working capital. Where is the working capital to come from? The Chancellor of the Exchequer will not let us keep it. He will not let us save against the day which is even now upon us and which will be a much more threatening day and a day much more thunderous in the course of a few months or years. He says he cannot let us keep the money for that purpose.

Where is the money to come from? The bank will not give it. What kind of chance is there of getting it from other sources? I do not think that the public, which will be more or less pinched, will be very free to subscribe capital for increase of working funds or for new concerns, which capital will be urgently necessary. It is absolutely necessary for the country to increase its production if it is to bear the staggering burden of taxation with which it will be faced after the War. The existing production will not do. You must produce more wealth in order to bear the burden. Where is that money to come from? So far as I can see, the only method will be for the Government to come behind the industries and furnish the money. The Chancellor of the Exchequer deprecated that. He said he would rather raise additional taxation than add to the National Debt. That has been very sound in normal times, but we are not in normal times, and you may have to add to the National Debt after the War if you are to make necessary provisions for increased production in this country, if the money for keeping up that production cannot be obtained by any other means than by trenching upon Government credit. I do not see how the manufacturers of this country are going to have the capital which will be necessary to keep up production and to engage in the powerful commercial fight which is going to come after the War unless somebody or other finds them the money. If the Chancellor of the Exchequer will not allow companies to save their money, and if the capitalists cannot furnish the money, then the Government must find the money and add to the National Debt for the purpose. The French Government which has imposed an Excess Profits Tax after our example has to a certain extent provided for the point I am elaborating. It allows the companies to deduct before calculating excess profits, the amount earmarked for improvements or expansion of the business. In that way the levy comes less severe, and at the same time the Government gets a very good share in money, because in France almost everybody is making munitions of war. Engineering firms and others are making munitions far more than in this country. Both in France and in Italy practically every concern is making munitions of war, and many of them are earning very large profits. The Government very properly is taking a part of those profits, but it allows the company to earmark certain amounts for the purpose of the expansion of its business or the betterment of its work, and that is allowed to be deducted before the Excess Profits Tax is calculated. I hope that before the Finance Bill comes on the Chancellor of the Exchequer will see whether he cannot make some provision of that kind here, so as to enable companies which foresee the necessity of increased working capital to save a portion of what they are earning for the purpose of the great industrial fight after the War.

The German Government has not increased direct taxation of any kind so far as I know—at all events it has not increased Income Tax, or imposed any Excess Profits Tax; and I know from the balance sheets of many great German concerns that immense sums have been accumulated for the commercial war which is going to ensue on the declaration of peace. The Allgemeine Electricitäts Gesellschaft, which is the largest of all electric companies in Germany, had accumulated, according to the balance sheet to the end of 1915, a sum of £7,500,000. The Siemens Schäckert Company has accumulated £2,500,000 in cash, and the Bergmann Company has accumulated £1,500,000 in cash. I have no doubt that other great German concerns have done the same thing. Companies in this country doing similar work find it impossible to make any accumulations such as the German companies are making, and these German accumulations will be used against them after the War in an economic war more savage and more unscrupulous than any which the Germans have hitherto waged. Some people are inclined to doubt whether there will be such a thing as an economic war, and they are inclined to make deprecatory remarks about a war on trade. But, going on the experience of what has happened, and especially on the knowledge which we have gained since the War began, we know that there has been a most unscrupulous war on the part of Germany against the trade of the world.

I know of one German firm which exists also in Germany which has lost £1,000,000 during the last ten years in keeping prices low in England in order that its English competitors might not be able to fight it abroad. It definitely decided on that policy ten years ago, and has kept its factory going all that time, and during these ten years it has had this loss of £100,000 a year for that purpose and for that purpose only. If they had been conducting that business on ordinary commercial principles they would have been shut up long ago. Nobody goes on losing £100,000 a year for nothing. He must have some reason But he will lose it if he thinks that he is going to make £200,000 somewhere else. That is what was happening. The result was that in that particular trade the business in foreign neutral countries was entirely in the hands of the Germans, because our poor manufacturers in this country could never get their heads above water. They were kept down in their own country by these low prices quoted by the Germans, and they were unable to get on their legs and provide fighting funds for extending their busi- ness abroad. That is the kind of thing that is going to go on, and all that will require money.

There is another point on which I was rather disappointed with the Budget. It did not make any attempt, certainly not by any taxation proposals, to catch the large amount of money which is being wasted in this country. I do not mean wasted by the Government—that is beyond hope—but the money which is being wasted by private individuals. We have had the walls covered with posters asking us to avoid extravagance and to save, and all the rest of it. The hon. Member for North-East Manchester made an interesting speech, in which he pointed out that there was a heavy addition to taxation in the form of a rise of prices. That was rather a misnomer, because I do not think that you could call a rise in prices an increase in taxation. But he said that taxation and the rise in prices pinch the person who has got to pay, and he pointed out that in the case of large numbers of persons in this country—he is acquainted with the textile trade—the margin is exceedingly small or non-existent. I am sure that is so, but it is not by any means generally the case. It is my duty to go round the country and look at the branches of my bank to see how they are getting on. I have been absolutely astonished during the last few years to see the vast amounts of money which are being earned and spent.

I take the case of a little branch of my bank in the suburbs of London. People in that district have never been so prosperous since the beginning of the War as they are now. They have never spent so much money. A case was told me of one old customer, a woman in a £30 house, who paid in cash just before Christmas sixty guineas for a fur coat. So far as these expenditures mean improved living and better conditions of life, no one can quarrel with them. I am sure that it has been an immense advantage in that way, for instance. Another case in a neighbouring branch is that of a butcher who before the War had been doing a business of about £400 a week, a Saturday evening trade and a general evening trade in scraps and eggs and that kind of thing, and he was selling fine joints to munition workers all through the week. Sometimes he could sell a fine joint to one family three times in the week. He was paying into his bank £1,000 a week, which was an increase of 250 per cent. in his business. That represents improved living to a great extent, and so far as it does it is a very good thing, but a great deal of that money has been spent on pure luxuries, such as sixty guinea fur coats and jewellery. All the small cheap jewellers around London have been doing an enormous trade. It would be an advantage to the country if the Chancellor, who has had a difficulty in keeping up the exchange, were to have some of that gold. I suppose that much of it is not more than 10 carat gold, but still it consumes a fair amount of gold, and it would be a good thing if the Chancellor could manage to get it into the Bank of England where it would be protected, instead of going on the persons of the young ladies who are earning money in the munition works. I do not object to an improvement in conditions. It is in every way an enormous advantage that the standard of life should be improved, but there is a limit, and I hope that these restrictions which, the Prime Minister has indicated, are about to be applied to imports in future to the extent of some 6,000,000 or 7,000,000 tons, will take heed of the necessity or desirability of applying these restrictions to such imports as are pure luxuries, such as these fur coats and silks, and so forth, in which the money of the munition workers, who are at the present time earning more owing to the conditions of War, is being invested.

I do hope that the Chancellor will try to get something out of that class, or find a way of bringing into the Treasury some returns for these great sums which it is disbursing in the way of wages, and which are being disbursed in the War. I do not believe that it was absolutely necessary to raise all the wages as the Government Departments did. I think that a great dell of the responsibility for high wages is owing to the improvident methods which were employed—for instance, paying contractors on a 10 per cent. basis, which gives no inducement to the contractor to save money, but on the contrary gives him an inducement to spend as much money and to spend as much on wages as he possibly can. That is the kind of way in which the Government helps this process to a very considerable extent. There is one thing which I have wanted done for the last two years. I was sat upon and snubbed for several months, but I kept hammering away at the Chancellor of the Exchequer, the Minister of Munitions, the Prime Minister, and the late Prime Minister on the subject. That was the appointment of Commissions, after the French fashion, to enable us to inquire into expenditure, but it was always turned down and it has been turned down by this Government, though I hope that the efforts which are now being made will have a favourable result. If such Commissions had existed it is quite impossible that the standards which have arisen in regard to the expenditure of money could have continued. The way in which the French people themselves—

I must point out to the hon. Gentleman that that subject hardly comes within our purview to-day. The Committee of Ways and Means deals with the raising of money. It is on another occasion, in the Committee of Supply, that the hon. Member can deal with the question of economy in expending the money.

I apologise. One naturally gets drawn from one subject to another. I hope that before the Finance Bill is introduced the Chancellor will consider whether he can introduce some taxation which will tend to counteract the waste which is going on, and that he will take into reconsideration this question of the increase of the Excess Profits Tax. I receive every day letters on the subject. I know that its effects are being felt all over the industries of the country and that it will form a very serious hindrance to our position after the War, if some means are not provided for assisting that position. It is not only a question for the manufacturers themselves, and the distributors of goods, but it is a question for labour. Labour very naturally disliked the prospect of very large profits while labour was sacrificing its rules, but it has come to a point now when labour will suffer too if there is no money to employ it. It will not be able to earn the wages, for industries cannot stand the burden of taxation which can only be borne when there is a great increase of production in the country.

On one point in these Debates there is little difference of opinion. It is generally agreed that more money must be obtained by taxation for the cost of the War, and there are, I think, two main problems for the Committee to consider. First, what amount of revenue should be raised by taxation on account of the War; secondly, how should that amount be raised—that is to say, how should the burden be divided amongst the various sections of the community? I propose to deal with these two problems in order. In regard to the first one, that is the amount of revenue which should be raised by taxation on account of the War, the Chancellor of the Exchequer proposes to levy new taxation this year to the amount of £27,000,000, making in all a total revenue of £638,600,000 in a full year. That is a very large sum, but I am bound to submit that this Budget does not make sufficient provision to meet the real necessities of the country's financial position, and my view is that a further £30,000,000 of taxation should be imposed at once. I will give my reasons for thinking that this should be done, and will submit a series of figures all leading up to the final conclusion that the permanent revenue to be obtained from this Budget falls short of the requirements of sound war finance by £30,000,000. It is true there is no scientific principle by which we can determine what proportion of the cost of the War should be met by taxation during the currency of the War, but I hold that at least such an amount should be raised by permanent taxation now as will make the annual revenue of the country equal to the estimated peace expenditure when the War is over. It seems clear that at least such a sum should be raised, and raised by permanent taxation now; otherwise, it will be necessary to impose fresh taxation when the War is over, whereas, in all previous wars, the heaviest burden of taxation has been borne during the currency of the War.

Moreover, the present time, when the War is still in progress, is the most favourable opportunity for imposing new taxation from the point of view of the willingness of the people to pay, and this reinforces the case for imposing at once the further £30,000,000 of taxation which I think should be raised. In order to prove that this amount should be levied, it is necessary to form an estimate of the expenditure of the country after the War is over, and this I will proceed to do. The expenditure of the country in the year before the War was, in round figures, £200,000,000, and it is, of course, impossible to say with any certainty what it will amount to when the War is over, as so much depends upon the duration of the War. But I will assume, and will give my reasons for this assumption, that the future expenditure of the country will show an increase of £300,000,000 over the pre-war expenditure of £200,000,000, making a total expenditure, after the War, of £500,000,000. This sum of £300,000,000 for increased expenditure will allow for three main items: First, interest and sinking fund on the war debt; secondly, cost of war pensions; thirdly, a margin for other items of increased expenditure which will have to be met. I will deal with these three items in detail: First, interest and sinking fund on the war debt. This will be the biggest charge due to the War. On 31st March last the total National Debt was, in round figures, £3,850,000,000, but this included £650,000,000 of, pre-war debt. Deducting this amount of £650,000,000, the actual war debt of 31st March last was £3,200,000,000.

To arrive at the War debt at the end of the War, I will assume, like the Chancellor of the Exchequer, that expenditure at the rate of slightly over £6,000,000 a day will continue during the present financial year, that is, until 31st March next. Even if the War should be over considerably before that time, say, next autumn or early winter, there will still be a large expenditure for winding up and disbanding the troops. And if the War should not be over before Christmas, a high rate of expenditure must continue well after 31st March next. Therefore, to proceed on the basis of an expenditure of slightly over £6,000,000 a day, continuing until 31st March next, seems a moderate assumption. On this basis the addition to the National Debt would be £1,650,000,000, the total expenditure for the financial year being approximately £2,290,000,000, from which must be deducted £638,600,000 to be raised by taxation during the year, leaving, in round figures, £1,650,000,000 to be added to the war debt. If this sum of £1,650,000,000 is added to the war debt of 31st March last of £3,200,000,000, the total war debt would be £4,850,000,000. This, it is true, will include a large sum, by that time well over £1,000,000,000, for advances to the Allies and Dominions, and it is to be hoped that in time the interest on this amount will not be charged on the taxpayers of this country. But in the meantime, although no doubt the Allies and the Dominions will do all that is possible to pay interest on the money advanced to them, yet all countries have suffered severely from the War, and it would seem to be sanguine to expect payment of interest on the whole amount until, at any rate, a long time has been allowed for recuperation after the War is over.

I will, therefore, assume that at least until a considerable period has elapsed, interest will not be paid by the Allies and Dominions on their whole indebtedness, but on, say, £500,000,000 of the amount advanced to them. If this sum of £500,000,000 is deducted from the total estimated War debt of £4,850,000,000, there remains a sum of £4,350,000,000, which I may call the net debt of this country on which the British taxpayers will have to pay interest. Taking interest and sinking fund together on this amount of £4,350,000,000 at a rate of 5½ per cent., the charge against the future peace Budget would be £240,000,000 in round figures. The second item is the cost of war pensions. This can only be a matter of guess work, but I imagine the Chancellor of the Exchequer will be agreeably surprised if the final sum required should prove to be anything less than £30,000,000 a year, and it may be much more. However, I will take the figure of £30,000,000 for the purpose of the estimate I am making. The third item is a margin for other increased expenditure which will have to be met. This will include—and it is to be welcomed—more money for education. It will also include—and this is not to be welcomed—a heavier cost than before the War for many branches of the Civil Service. There has been an enormous growth of officials of all kinds during the War, and I am afraid it will take a long time to break loose from the shackles of bureaucracy. Then money will be required for subsidies and compensations of various kinds, as, for instance, in the subsidy to farmers. I hope, too, that some money will be available for social reforms, because they will be very much needed. Then I am afraid that there will be a larger expenditure than before the War on a standing Army, though I hope not. For all these and for other items, which I need not enumerate, I think a total sum of —30,000,000 should be allowed.

All these estimates are necessarily speculative; they may possibly be too liberal. I hope they are, though the strong probability is that on balance they err on the side of moderation; but I prefer to err, if at all, in that direction. However, taking them for what they are worth—that is £240,000,000 for interest and sinking fund on the War Debt, £30,000,000 for pensions, and £30,000,000 for other increased expenditure — we arrive at a total increased expenditure due to the War of £300,000,000. As I have said, the expenditure of the country in the year before the War was, in round figures, £200,000,000, and I want to make it quite clear that this included the debt charge—that is, interest and sinking fund on the pre-war debt of £650,000,000. I should mention that this debt charge on the pre-war debt will be increased, as a large amount of Consols has been converted and is now receiving interest at a higher rate. However, I do not propose to take that into account: I will content myself with the figure of £200,000,000 as the pre-war expenditure. If this amount of £200,000,000 is added to the estimate I have given of increased expenditure, due to the War, of £300,000,000, we arrive at a total postwar expenditure, for the purpose of a future peace Budget, of £500,000,000. Against this the estimated revenue on the basis of the present budget in a full year is £638,600,000, but this includes £200,000,000 from the Excess Profits Tax. This amount cannot be regarded as permanent revenue, and the Chancellor of the Exchequer recently stated that it will disappear when the War is over, though I hope that perhaps a proportion of it may continue in one form or another for some time; but, to be on the safe side, I think anything which may be done in this way should be left out of account, for, on the other hand, there is almost certain to be some decline in the yield of the Income Tax sooner or later, after the War is over, owing to adverse trade conditions, industrial crises, and so forth, for these things are likely to come about as time goes on.

If, then, the £200,000,000 to be derived from the Excess Profits Tax is deducted from the total revenue of £638,600,000, which the Chancellor of the Exchequer expects to get in a full year, there remains a permanent revenue to be obtained from this Budget of £438,600,000—say, £440,000,000 in round figures. But yield from beer, spirits, and wine duties and some other taxes in this Budget is very low owing to the great restrictions on consumption, and we may probably look for a further £35,000,000 a year in all from these sources when the War is over and conditions are more normal. Then there is the item of £15,000,000 from Income Tax, of which the late Chancellor of the Exchequer spoke yesterday as Income Tax coming from interest on new War debt to be created. Taking the £35,000,000 from Customs and Excise and this £15,000,000 of Income Tax, there is a sum of £50,000,000 to be added to the £440,000,000 which I have just given as the permanent revenue. That gives a figure of £490,000,000. But in this Budget there is probably £20,000,000 abnormal, miscellaneous, non-tax revenue which cannot be counted on after the War is over. That ought to be deducted, bringing the amount down to £470,000,000. That is the final figure. It seem reasonable, therefore, to suppose that the permanent revenue to be obtained under the machinery of this Budget will be £470,000,000. If, then, the permanent revenue is £470,000,000 and the post-war expenditure is £500,000,000, as I have estimated, there will be a deficiency as between post-war revenue and post-war expenditure of £30,000,000, and this is the basis of the proposition which I set out to establish that further taxation of £30,000,000 should be imposed at once so as to make the post-war revenue and post-war expenditure balance. If this total sum of £500,000,000 should prove to be more than is actually required, that will be all to the good, and any balance could be used for social reform or for some remission of taxation. If, however, which I am afraid is more probable, the sum of £500,000,000 should not be sufficient then further taxation will have to be imposed later on.

The second problem I wish to discuss is how this vast total sum of £500,000,000 of permanent revenue should be raised on the soundest and most equitable basis. I hold strongly that in the Budget proposals the indirect taxes on food are too high, and that this should be rectified and the balance made good by increasing direct taxation and increasing indirect taxes on luxuries and so forth. In discussing this problem I hold that we should take into account not only the burden and incidence of the new taxation levied during the War, but also be mindful of other burdens due to the War, and especially have regard to the increased cost of living and to the probability that sooner or later, after the War is over, there will be an amount of unemployment and distress. We are starting a new era in the social conditions and national finance, and in imposing War taxes we are really budgeting for many years to come and, therefore, we should take into account all relative considerations as far as possible and in particular we should have regard, especially in taxes on food, to the maxim of ability to pay. This maxim is largely overlooked in many quarters at the present time owing to the widespread belief, which the hon. Member who spoke last shared, that the workers are much better off than they were before the War.

I said only some of them.

The general belief seems to be that the great majority are much better off not only in actual earnings, but in real income. I have more than once expressed the view that this opinion is by no means so well founded as is commonly supposed. It is surely a mistake to regard the working classes as one body, as one homogeneous whole, for there are a great many grades of income and position amongst the working classes just as there are amongst the middle and upper classes. No doubt many of the workers are at present getting high wages, but when over £130 a year is being earned the recipient is liable for Income Tax. [MR. BRYCE: "Do they pay it?"] Further, where the position of the workers has improved, that is in no small measure due to the fact that overtime is being worked under great physical strain, or to the fact that more members of the family are in employment. Such additional income will probably only be temporary, but the taxation in this Budget on this class will be more of a permanent than of a temporary character, and is likely to continue long after the present artificial prosperity has passed away. The prosperity is likely to pass away, but the taxes are much more likely to remain, and they are, therefore, quite different to the Excess Profits Tax. Whilst I am glad to think that the position of many of the workers has improved during the War, it is certain on the other hand that large sections of the poorer classes are distinctly worse off than they were before the War, I mean worse off in real income owing to the great increase which has taken place in the cost of living. Amongst these are the old age pensioners, who number near a million persons, some sections of the industrial workers, particularly in the printing and building trades—[MR. BRYCE: "The cotton trade!"]—and in many branches of the textile trades; many railway men, Post Office servants and municipal employés, and the vast majority of the clerk and shop assistant classes and lodging-house keepers, and tens of thousands of widows and spinsters and people with very small fixed incomes, and also, though by no means last in importance, the families of many of the better-paid artisans who have gone to the War; for in the case of the better-paid artisan the Separation Allowance does not equal the wages previously earned. Owing to the high prices at present ruling, many of these persons have been driven below the level of subsistence, yet they are being called upon to pay very heavy taxation on sugar and tea, taxation which normally will amount to about 1s. 3d. a week on the working man with an average family. It does not require very much imagination to realise that such taxation is a serious hardship for the households of the poor where every penny has to be considered. Sugar is certainly a necessity of life, and it is an academic view to regard tea as a luxury, because there is nothing which the working class can drink which is cheaper and, therefore, a reasonable amount of tea is really necessary.

5.0 P.M.

These then are food taxes, and it is quite indefensible to impose them on the classes I have named, for if we are to get down to first principles in levying taxes, we ought to exempt from taxation of necessities those who are below the level of subsistence. This doctrine is not based solely on humanitarian grounds. The truth is that it is against the best interests of the State and is opposed to the national welfare to reduce by taxation the miserable pittance of those who already have not got enough to live on. It cannot be too strongly insisted that it is economically unsound to levy taxes on the food of the poorest classes of the community, and, as the Committee is aware, this principle has been laid down by nearly all eminent authorities on taxation, and I do not think it can be disputed by the Government, but I regret to say they entirely overlook it in the Budget proposals and apparently quite fail to realise the present position. What is that position? Before the War the general subsistence level for the working man with an average family, that is a man, his wife and three children, was put, after most searching inquiry at about 25s. a week—that is to say, that 25s. a week was only just sufficient to keep a man and his family in health and proper working capacity, and any reduction at all meant injury in these vital respects. But owing to the War, there has been a great increase in the cost of living and the subsistence level, which was 25s. a week before the War, cannot now be put at less than 37s. a week, or about £96 a year, and there are, of course, a great many families comprising many millions of persons are below that level. Moreover, prices are constantly rising, and it is virtually certain that before long the subsistence level will be well over £2 a week. Indeed, there is only too much reason to fear that before the War is over the subsistence level will not be much below the Income Tax limit of £130 a year, and to apply these considerations to the taxes in the Budget, my contention is that the heavy duties on sugar and tea should not be levied at all on those below the subsistence level. I am not complaining of the taxes on luxuries, although, as a matter of fact, the poor really have nothing to spare for luxuries. Still, taxation of luxuries comes into a different category. It comes in the category of voluntary taxation; but to levy the food taxes on those below the level of subsistence is unjustifiable, and even on those slightly above the subsistence level, the present food taxes press heavily. I wish to point out that the contention I am advancing is not vitiated if and when the cost of living falls after the War, because my point is that these taxes are much too high, and a great injustice is being done now. If the cost of living falls that only means that rather less injustice will be done, not that the matter will be put right by any possible decline in prices.

I know it will be said that all classes should contribute to the cost of the War, but that statement should be qualified by excepting from taxes on food those who are below the level of subsistence. If the food taxes could be imposed for the period of the War solely on the better-paid workers, well and good; but that is pre- cisely what cannot be done, and it is the inherent vice of these taxes that they fall alike both on those who can afford to pay and on those who cannot afford to pay. Although, then, it is urged that in equity all classes should contribute to the cost of the War, the simple truth is that these taxes are creating much more inequity than equity, and that remains true whatever the emergency. The fact that we are at war is not a reason for disregarding first principles in taxation. It is indeed, all the more reason for conforming to them. The successful prosecution of the War depends in no small degree upon the productive output of the country, not only in munitions, but in practically all other industries being as large as possible. We should, therefore, conserve the physical condition of the workers as well as that of the troops. Both classes are necessary for the prosecution of the War. Yet these heavy taxes on food are being imposed, and are reducing the efficiency of many of the wage earners at this critical juncture, just when it is most important that the physical capacity of the workers should be maintained at its maximum strength. Moreover, let me point out that these are not war taxes in the sense that they will come to an end at the conclusion of the War. I repeat, we must continually bear in hind that we are budgeting, not only for the present year, but in all probability for many years to come. For my part, I see small prospect of any substantial reduction in any of the war taxes which have been imposed until a long period has elapsed, and, therefore, it is all the more unsound to impose on the poorer classes these heavy burdens, burdens which will remain when very lean days have come upon us. To impair the physical efficiency by food taxes is, then, doubly wrong. It is injuring the prosecution of the War now, and it is going directly counter to what should be the right post-war policy—that is, to build up the strength and physique of the people as much as possible, in order to repair the ravages caused by casualties to hundreds of thousands of the strongest and most fit of the country's young manhood. There is, I think, all the more force in this in view of the fact that many schemes of social reform for bettering the health and condition of the poor are now indefinitely postponed, and, therefore, one of the chief directions in which the interests of the workers can still receive some attention from Parliament is in the character of the taxation imposed upon them. As we cannot expect to have constructive social reform for some time to come, I maintain that we should make the taxation on the food of the poorer classes as light as possible. I recognise, of course, that money must be got for the prosecution of the War. As much money should be raised from revenue as can wisely be obtained, but, however great the emergency—and it is very great—money may be got too dearly if it is raised at the cost of injuring the national physique. The alternative to raising money by taxing the necessities of the poor is higher direct taxation and increased indirect taxation of luxuries and so forth. I am satisfied that the amount in question and a good deal more can be obtained by this means. As regards taxation of luxuries, I think, in view of the War, that the Entertainments Tax might be further increased and a still larger revenue obtained from tobacco. I support the increase of these taxes if the Sugar and Tea Duties are dealt with. The right hon. Gentleman said that he had so many suggestions as to taxes that he thought it was impossible to make any other. I will try. I should like a new luxury tax—to have a tax on titles. There should be a heavy tax on all titles from dukes downwards. This tax would conform to sound principles. A good sum of money could be got from people who could well afford to pay, and if the owner of the title preferred not to pay the tax he should be permitted to secure exemption by relinquishing his title. Then landowners ought to pay more. The taxation of land values should be put into operation, and the taxation of mining royalties should be increased. Surely it is little short of a scandal that many owners of mining royalties should escape so comparatively lightly! Also, I think, the scale of Death Duties should be increased. I am aware of the difficulties at the present time in realising securities; nevertheless, I believe that a productive revision of the scale of Death Duties is both practicable and right. But in the main, apart from such taxes, the money must be got by higher direct taxation in the form of increased Income Tax and Super-tax. It is true it used to be deemed necessary to maintain a certain balance, formerly half and half, between amounts raised in our Budget by direct and indirect taxation, but this theory is not based on any scientific principle whatever; it is, in fact, a fetish which had been abandoned in practice prior to the War, and it has been abandoned still more since; therefore, this particular objection to higher direct taxation may be left out of account altogether. Sound taxation should conform to three principles. It should be equitable, economically sound, and productive. These are the principles which should govern the taxation system quite irrespective of how the proportions between direct and indirect taxation may work out in the results. Taxation in itself is not a blessing to anybody. It is at best a choice of evils, and what we have to do is to decide between the relative hardships and disadvantages of direct and indirect taxation. That is the problem, and as we have to choose between various evils let us be sure we choose the lesser rather than the greater. Ever since 1909 prophecies have been made as to the harmful results which would follow from high direct taxation, and of this school of thought the right hon. Baronet the Member for the City (Sir F. Banbury) is, I think, the high priest. In my opinion, these lugubrious prognostications have not proved to be correct. Even if that is not admitted it cannot be denied that the alleged harmful consequences of high direct taxation are only conjectural, while the injury done by taxing the necessities of the poor is certain. The only arguments of the opponents of high direct taxation which ever seemed to me to merit much consideration were that a high Income Tax may tend to discourage enterprise and tend to lessen the accumulation of capital. For my part, even before the War, I was never much impressed by these objections. During the War new enterprise is not desirable, nor scarcely possible, while after the War enterprise will not be unduly discouraged unless the Income Tax were to be permanently raised to a higher level than anything I have in mind, and the argument that a high Income Tax tends seriously to lessen the accumulation of capital is not really tenable, because it presupposes that if the money taken by high Income Tax were not so taken it would otherwise be saved and put into productive enterprise; whereas the truth is that in the great majority of cases this particular proportion of the income of the wealthier classes has not been saved, but has been spent on luxuries of one kind or another which could quite well have been dispensed with, and this form of expenditure should not for a moment be countenanced now.

The great need of the State at the present time is money, and by a higher Income Tax the State would secure money in one of the least harmful of ways. It is a sort of compulsory saving. Luxurious expenditure would be checked, saving would be compelled, and by checking luxurious expenditure a high Income Tax would cause a transfer of labour to a certain extent from non-essential into essential occupations. If the incomes which enable people to live luxuriously were cut down by taxation a large amount of labour would be freed and would necessarily be diverted into other and more useful occupations. I believe that a higher Income Tax would, at any rate to some extent, offer an alternative to schemes of industrial conscription which, in my view, are utterly wrong in principle and unworkable in practice, and will do far more harm than good. Again, a higher Income Tax would do something to make conditions approximate more nearly to that ideal of equality of sacrifice of which we have heard so much and seen so little. There appears likely to be conscription of nearly everything in the country except wealth, although the right hon. Gentleman the Member for Barnard Castle (Mr. Henderson) said that the corollary of industrial conscription—and virtually we have, in my opinion, conscription of industry now—was conscription of wealth; but he added that if a Bill were introduced into Parliament to enact both the War would be over before it could be passed. That, at any rate, is candid. If it is true, I hope we shall hear no more talk about equality of sacrifice, but I hope that, at any rate, we shall have a higher Income Tax. His words enforce the arguments for a higher Income Tax, because the vast majority of the wealthier classes who pay Income Tax at the higher rates, and who pay Super-tax, are men over military age, and, therefore, it is just this class which ought, in common equity, to be called upon to make very heavy financial contributions to the War. Even so, their sacrifices will be very small compared with that made by those who are enduring the hardships and dangers of military service. Moreover, they are safeguarded, because if from any cause the income of the Income Tax payer is reduced, there is corresponding relief from liability to Income Tax. I am not complaining of that. It is only just. But it is very different with the indirect taxes on sugar and tea These taxes go on all the time, however much income is reduced. They cannot be evaded by diminishing consumption in accordance with falling income. They are a heavy burden on the poor now and on the families of many of our soldiers who have gone to the War, and they will remain a heavy burden for many years to come, and will have to be paid by the troops when they return from the War; that is, they will have to be paid by the men who have already made such enormous sacrifices.

In my view, then, the cumulative objections to these taxes are sufficient and final, and, to sum up, my contention is that more money should be got from direct taxation and taxation of luxuries and so forth, and less from taxation of food. Everything I have urged can be accomplished by increasing the Entertainments Tax and increasing the Tobacco Duty, by imposing a tax on tithes, by putting into operation taxation of land values, increasing the tax on mining royalties, increasing the Death Duties, by raising the general Income Tax to 6s. 3d. in the £, by lowering the Super-tax limit to £1,500 a year, and increasing the Super-tax scale on the bigger incomes. If the general rate of the Income Tax were increased to 6s. 3d. in the £, the rates of those with incomes below £1,000 would, of course, owing to abatements be much less than 6s. 3d. in the £, just as the rates of those incomes is much less than 5s. in the £ now. But if the tax is raised to 6s. 3d., some further abatements on small incomes might be made. Even so, I expect it will be said that it cannot be done; that the general Income Tax and Super-tax would be too high, and so forth. But it is precisely these things which were said years ago, long before anybody anticipated an Income Tax of 5s. in the £; yet that has been done, and just as that has been practicable, so would this further increase be found practicable. If the War should go on longer than any of us hope or expect, or if there are larger items, of increased expenditure to which I have referred, it will be absolutely necessary, if we are to pay our way, to increase the Income Tax to the level I have proposed, and I dare say even higher. If it could be done then, it can be done now. In conclusion, these various means which I have suggested a further permanent revenue of £265,000,000 a year could be obtained, and that would be sufficient to provide the £30,000,000 of new taxation of which I have spoken, and also to abolish the Sugar and Tea Duties altogether—and that is the logical conclusion of my argument. It is what I should like to see, for I am against these taxes altogether, and it is my firm conviction that if these various changes which I have outlined were carried out they would make the tax system more equitable and economically sound, and would, therefore, conduce to the national welfare.

The hon. Gentleman who has just spoken has made an interesting speech, and if I could agree with him that the Chancellor's present task is to budget for future ages and not for the next twelve months I should be much tempted to follow him in the matters he has opened up. As it is, I can only say that no one will have any difficulty in agreeing with him that no attempt should be made to tax the wages of subsistence. I do not think he has made out his case against the present proposals of the Chancellor in such a way as to convince anyone that the Chancellor is offending against that maxim. I listened to the remarks of my hon. Friend the Member for Inverness (Mr. Bryce) with respect, because I know he is a practical banker and merchant and speaks out of the fulness of knowledge. I do, however, suggest that he rather lost sight in his speech of a sense of proportion. I agree with him, and I do not think anyone can differ from him, when he draws our attention to the importance of manufacturers and merchants having capital with which to conduct their businesses five years hence. I would, however, remind him that the amount of money involved between the 60 per cent. and 80 per cent. was taken. by the Chancellor at no larger a sum than £20,000,000 sterling, the other £40,000,000 resulting from ordinary expansion. I do not think my hon. Friend will suggest that £20,000,000 sterling will make all the difference to the whole fund of capital required to carry the burden on British trade and commerce in future years. I am afraid that if he were to develop that argument he would be obliged to contend that the Excess Profits Tax was very bad from top to bottom, and I think he would do himself more justice if he adopted that ground.

I did.

I believe my hon. Friend did; but I do not think that is very practical ground to adopt just now, and as one who has always supported the tax I could not be with him. I do not think that his reminder of the arrangements Germany is making for her financial needs was very helpful. It may be the case—I understand it is—that many companies in Germany have accumulated large sums and have the prospect, as they have the wish, to use these to compete with us on more successful terms after the War. At the same time, I am not very sure how substantial these sums really are. We have seen statements regarding them in the papers, but I suspect they are of a somewhat insubstantial nature when we come to consider whether they will really be available for the purposes for which they are at present intended. Then, again, one must look at the financial arrangements of a country as a whole, and while we have a heavy excess tax here we have not had any forced loans. Germany has had forced loans, and if I had to choose between heavy excess tax and no forced loan and a forced loan and no excess tax, I would prefer the British position. I think the prospects for the British merchant who is in search of capital five years hence is much more attractive than that which appears to be at the disposal of his German rival.

It depends on who wins the War.

Of course it does, and that is why I think the argument drawn from Germany is not convincing. While I have always supported the Excess Profits Tax, I have never concealed from myself the view that if the War were to last for ten years the tax might very likely topple over and become unworkable. At the same time, looking forward to a period of twelve months, I see no attraction in the suggestion that one should object to the increase of the tax to the 80 per cent. level. I must say, though, that if the Chancellor of the Exchequer had suggested at present an increase in the Death Duties I should not have had much feeling of objection. At the same time, as the right hon. Gentleman has not thought it necessary to increase the Death Duties now, on the whole I think we should congratulate ourselves that we have, if necessary, such a device in reserve. I wish something more definite could be said about the statements that are circulated concerning the enormous profits that are made by the shipping trade. I was told the other day of a case in Scotland of a firm of shipowners who had made a clear profit of £1,500,000 sterling, and that these people had gone out of business altogether. I do not make the statement on my own authority; I do not know whether it is true or not; I am inclined to think it is, but I certainly think it would be a good thing if the Treasury could make a statement to the public giving some information on a point like that, because I will say that if such a statement is true, then if I were, say, a Clydeside riveter, working even for £3, or £5, or £6 a week, I should feel considerable irritation at such a statement. I do not think anybody who makes a million and a half in that way, and, instead of keeping the money to be used for the benefit of the country in trading now or after the War, takes it out of the business and puts it into a bank and keeps it, could feel aggrieved if he were subjected to an extremely stiff rate of Death Duties at the end of the day. One danger the Excess Tax certainly has. When it was brought forward in the first case the great increase in the cost of food and other necessaries was not foreseen, and in a way the tax appears to have had a reflex action on the back of the working man which was not originally foreseen. I think that is an argument which should be taken into consideration very carefully by him, and another point which requires his attention is the fact that, as it is true that lack of capital might eventually lead to unemployment, any suggestion to deal with the tax more drastically should be looked at rather askance by the working man in his own interest. It is perfectly true that one of the considerations that made the House of Commons support the tax originally was that it was linked up with questions of labour and the earnings of the working classes. It weighed with me a great deal. At the same time, a point may come when the employment of the working man himself may be placed under a pretty direct threat as the result of various circumstances, of which the Excess Tax is one, and from that point of view I think the working man and the wage-earning class should, before the end of another financial year, consider very carefully whether some measure of modification in the Excess Profits Tax should not be given effect to.

In his clear and far-reaching Budget statement the Chancellor of the Exchequer said 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. In view of the Resolution which is the basis of the present discussion, the Resolution empowering arrangements to be made for taxation of various kinds, I would take this opportunity of suggesting to the Chancellor that the Resolution should be in as wide terms as possible to enable him to do what can be done in making various Amendments in the Income Tax under Schedule A, in order to do what we can in that way to promote food production in this country and facilitate it in a way in which it has never yet been facilitated. To those who are engaged in developing the land in various ways, encouragement should be given by extending the relief which was given by the present Prime Minister in the case of the repairs and maintenance of cottages in 1910, and which was still further extended by him in the Finance Act of 1914, in order to promote the development of agriculture in its various branches by giving relief in respect of buildings and other works for the maintenance and repair and development of labourers' cottages, of agriculture, horticulture, intensive cultivation, and the keeping of live stock. We want, as far as possible, to remove at least some of the difficulties that stand in the way of these very desirable developments, and what we see on every side is that if farm buildings are enlarged or glasshouses are put up, up goes the assessment and up goes the tax, and we contiue year after year to impose a fine upon those persons who are doing the very things which we are at present urging them to do.

I put forward this on this particular occasion as an emergency measure—I advocate this relief as an emergency measure. I do not want to trouble the Committee by going into details of how this tax may be carried into the remote future or how it may be made retrospective so as to cover existing improvements of that kind. What I want to do is to press the Government to take deliberate action now along these lines and to go as far as they can and to act as rapidly as possible, because it is of the utmost importance that we should do at once all that we can to promote agricultural and horticultural production throughout the country. It may be said, of course, that if you make these exceptions you will be sacrificing revenue. For my part, I feel sure that the immediate sacrifice of revenue which might be involved would be as nothing compared with the great increase of production to which the removal of these penalties would give free course. The present system of imposing taxation on this kind of thing and preventing the development of the country in a most obvious way is really to kill the goose that lays the golden eggs, at a time like this, when the golden eggs are specially required. It would be a very great thing for production throughout the country if all those who make these improvements could know clearly that from now onwards for any improvement they made they would not be penalised or fined. Even if it were only extended to future improvements that would be a very great thing, and that is, of course, all that one can suggest in putting it forward as an emergency measure. If the point is made that too much revenue would be sacrificed—I do not think for a moment it would be—why not make the revenue up in another way? One of the scandals of this War has been the difficulty which we have had in dealing with idle land, not land that cannot be used, but that land which is wanted for use, but whose owners are not using it themselves and are not willing to let other people have it on fair terms. The Government themselves have made elaborate preparations for such cases in England, in Scotland, and in Ireland by their Regulations under the Defence of the Realm Act, and these Regulations reappear in systematised form in Part IV. of the Corn Production Bill that they are proposing. Yet the procedure that is adopted is unsatisfactory in various ways, because it involves going into special cases and making selections, and it means special action, and sporadic action, instead of some general treatment of the subject as a whole.

What is wanted is that general economic pressure should be brought to bear upon these gentlemen who are withholding the land, and the Government have got a very excellent precedent, because my right hon. Friend the late Chancellor of the Exchequer (Mr. McKenna) imposed, as we all know, a penal tax on those dollar securities which the Government required to equalise the exchange, and which people were withholding. Supposing that same principle were applied to this land, and that people were taxed upon this land upon a fair basis, you would find that they would relax their grip just as the holders of the dollar securities that were wanted by the Government relaxed their grip under that economic pressure. The question, I know, is how this should be done. That seems to me in the first instance rather a matter for the Government to consider, but if I may throw out one or two suggestions I would say this: One of the suggestions is the application of the Undeveloped Land Duty, from which, as the Committee will remember, land of capital value under £50 an acre was exempt, and also agricultural land worth more than £50 an acre was exempt in respect of the first £50. It might have been practical politics to propose to bring that up-to-date, and to remove these exceptions, but I am faced on that particular suggestion with the fact that the Undeveloped Land Duty has, for practical purposes, been suspended for the last three years, and in these troublous times it would, perhaps, be too much to expect that the Government should bring it into life again and set the machinery once more into working order.

I see my hon. Friend, who represents the Treasury (Mr. Baldwin), agrees with me on that point. I venture to hope he will agree with me on my next point, which is that if you cannot revive the Undeveloped Land Duty, you might try to do it by developing Schedule A of the Income Tax in certain other respects, and I would suggest something along these lines—I only give the figures provisionally—that where the Income Tax under Schedule A on any land is a tax on an annual value of an amount less than £5 per acre, that that land should be subjected to Income Tax on a value of £5 an acre, except where the Commissioners are satisfied that the selling value is less than twenty times £5 per acre, or, in other words, that £5 per acre would be more than 5 per cent. of the selling value. As an automatic check upon any attempt to get the valuations for this tax too low, I should suggest that twenty times whatever is taken as the annual value should be taken, in the years to come, as the original site value for the purposes of Increment Duty. If that were done, I think we should at least succeed in making a beginning in this matter. My hon. Friend opposite will see that if something were done along these lines, the new system would naturally apply to the lands which are being taxed at a very low rate, and in consequence there would be the avoidance of anything of what might be called double taxation on this subject. The matter seems to me to be one of very great importance, and I take this opportunity of commending specially to the Government the idea that something should be done along these lines, although not necessarily in the precise way which I have suggested. What I have said is only by way of suggestion.

I listened with very great interest to the extremely able speech, if I may say so, of my hon. Friend the Member for the Holmfirth Division (Mr. Arnold). I am sure it impressed the House very much. It certainly impressed me to see the way in which he marshalled his arguments against indirect taxation; in the way he showed how hardly that indirect taxation presses not only on the poor, but how much it will press upon the gallant men who are fighting our battles, and what a series of problems in taxation we have before us. When he spoke of the raising of the Income Tax, I observed that some hon. and right hon. Gentlemen smiled. In view, however, of the financial difficulty in front of us, I am strongly inclined to think that we shall have to raise the Income Tax and the Super-tax, unless we can find some other methods of taxation. The matter is one about which we hear a good deal on all sides as to the discouragement of industry. I for one do not want to discourage industry. Let me, however, take one particular tax mentioned by my hon. Friend—the tax of mining royalties. As we know, the taxation of mining royalties, though—if my memory serves me rightly it has been raised—is still very low.

There is the excess.

The present tax is a shilling in the pound. I should like the Committee to recognise what a mining royalty is. It is not in any sense of the word a return for industry. A coal-mining company, and the people who are working, produce the capital and produce the industry; but the mining royalty is nothing else but a charge on the land in proportion to the material, which the owner of the land exacts from those who are getting the material out. That is not a tax on industry. Yet, as I say, that is only a tax of a shilling in the pound. Even if you add to it the Income Tax which the receiver of these royalties has to pay in proportion to his income, and the Excess Tax which he may have to pay in cases where the Excess Tax is applicable, you have still got a form of property which does not represent industry at all, but which gets off far too lightly, and which ought to be called upon to contribute far more heavily to the national needs. The same might be true of taxation of the value of land. That also was mentioned by my hon. Friend. I do not want on this occasion to enter more fully into that, but I do suggest that those who hold the land of the country, though they should not be taxed on improvements, ought to be taxed on the value of the land to a much greater extent than they are now taxed. I think that these matters will force themselves increasingly on the attention of the House and of the country. My hon. Friend will understand that on a particular occasion like this I am speaking simply and solely in conformity with the general desire of the House that taxation should be put upon a sound basis. So far as the Government proposals are concerned generally, we on this side of the House are, like my right hon. Friend the late Chancellor of the Exchequer, going to give the Government in their Budget proposals our hearty and unqualified support.

The hon. Member who has just addressed the House urged in the earlier part of his speech that economic laws should be put into force to solve certain problems in food production in this country. There can be no doubt that economic laws and economic principles, if properly applied, would undoubtedly, as it has been argued, help in the direction indicated. However, if I may, Mr. Whitley, pass from the remarks of the hon. Gentleman, may I remind you, Sir, that earlier in the Debate the Deputy-Chairman of the Committee ruled out of order any reference, or much reference, to the subject of expenditure? Last week the Chancellor of the Exchequer told the House, in reply to a question, on the subject of expenditure, in which a very large number of Members are now interested—as many as 187 have put their names to the Motion on the Paper—that we might have an opportunity of discussing the subject on the Budget or on the Vote of Credit. It has been ruled out of order on the Budget. Hon. Members who are associated with me on the matter have no intention whatsoever of raising it on the Vote of Credit, as we intend to press the Government to allot us a day specially to discuss the Motion. This afternoon, however, we are invited to consider the different Government proposals to meet the necessities of the War. I am profoundly disappointed that the Chancellor of the Exchequer does not face this matter with more courage and boldness. He has received from his predecessor an abounding revenue. The late Chancellor of the Exchequer showed great courage and boldness in his appeal to the country, and in imposing upon the taxpayer heavier burdens. So far as I can gather, during the last twelve months the country has willingly accepted the burdens which the late Chancellor of the Exchequer placed upon the people, and I was hopeful that the Chancellor of the Exchequer would have maintained that spirit which his predecessor showed, and would have called upon the country for more financial sacrifices in the future. This afternoon the hon. Member for Holmfirth, in his most able and interesting speech, with great force appealed to the Government that now is the time to ask the country to make greater financial sacrifices. During the past two years many hon. Members and myself have appealed times without number to the Government to raise heavily the taxation to meet the growing cost of the War.

I remember about eighteen months ago we pressed this matter on the Government. Only last year the Chancellor of the Exchequer came forward with bold, well-balanced proposals. I regret to find that the Government to-day have not asked the country for greater financial sacrifices. At the times, as the hon. Member for Holmfirth well put it, that the men abroad are going through untold sacrifices it is a tragedy that the people of this country should not be asked here to make greater financial sacrifices. When these men who to-day are abroad return to this country—I hope in a few months—they will return to find this country burdened with debt. We are asking them to-day to fight our battles abroad. In the future we are going to ask them equally to share with us the burden of debt which this country is going to place upon their shoulders. In this matter I am astonished that the members of the Labour party are willing to continue the present methods. Surely they must know that the interest on the debt is a charge on the fruits of the labour of the country. We see the debt piling up week after week and month after month. In the speech of the Chancellor of the Exchequer yesterday he held out no hope whatever of any reduction in expenditure, and he proposed very meagre increases in taxation.

On one occasion, a month or so ago, I addressed similar remarks to the right hon. Gentleman, in which I pleaded, or rather showed, at that time that it would be necessary to raise the direct taxation to 6s. 6d in the £. That brings it up to about what the hon. Member for Holmfirth suggested. Through his minute, accurate, and well-balanced calculation the hon. Member showed that an Income Tax of 6s. 3d. in the £ was to-day necessary. I heartily agree with that proposal, and I wonder why the Government do not move further in this matter. I can well understand the financial interests in the City urging the maintenance of the present Income Tax; and urging the Government to continue month by month to finance a large part of the War by loan, because every pound raised by loan increases the value of the commodity they have to offer. We have seen that the rate of interest, which before the War was 3¼ per cent., is to-day 5 per cent. and is steadily rising. No doubt their interest lies in the high value of money. I sincerely trust before many months are over that the Government will reconsider this matter and ask the country to accept a greater financial sacrifice. May I judge the financial statement of the Chancellor of the Exchequer by the very high standard which he has set up himself? Speaking yesterday, he told us that the standard he had set for himself was as follows:

That £59,000,000 was last year.

I think the figures of my right hon. Friend distinctly tend to show that they refer to the present financial year. Can the Chancellor of the Exchequer tell us how that figure of £153,700,000 in col. 376 is arrived at, because further on in his speech he tells us, in col. 388, that the debt charges will be £211.500,000 a year. and later on he states that we will only have a balance in our favour of £2,000,000, that is, after paying interest on the debt and the other charges which he has enumerated? He takes as his basis the standard laid down by his predecessor, which showed an excess of income over expenditure at the end of the War of nearly £70,000,000. Therefore, the standard which his predecessor set up, which he states in his speech he intends to maintain, has disappeared, even according to his calculations. I, therefore, trust, if my figures are correct, that this standard will be discarded and the country will realise that the standard which we maintained last year is no longer maintained. There is another point in the speech of the Chancellor of the Exchequer to which I should like to refer. In col. 376 he states that fully 26 per cent. of our total national expenditure during the War has been provided out of revenue. The impression conveyed to my mind was that 26 per cent. of war expenditure had been paid for by the revenue raised during the War. I will endeavour to submit to the Chancellor of the Exchequer another figure on that subject. It we deduct £200,000,000 from our revenue and £200,000,000 from our expenditure, which was the pre-war basis of our revenue and expenditure, I find that during the War we have only paid 19 per cent. of the War expenditure out of war revenue. In 1914-15 the excess of our expenditure over the pre-war expenditure was £360.000.000. In 1915-16 it was £1,359,000,000, and in 1916-17 it was £1.998,000,000—a total of £3,717,000,000. If we deduct the loans to our Allies, we get a total of £2,800,000,000. That is the war expenditure during those years. The excess of revenue over our pre-war revenue during that period was £535,000,000. In other words we raised by war taxation during those years £535,000,000, and we have spent for the purposes of the War on ourselves, excluding the loans to our Allies, practically £2,800,000,000, so that for every £100 we have spent in the War we have raised by taxation £19. I cannot help thinking that is not a right figure this country should raise by taxation. I hope on the Second Reading of the Finance Bill we shall find other Members holding similar views, and that we shall be able to bring pressure to bear on the Chancellor of the Exchequer to revise the present scale of taxation so as to make it more in keeping with the reality and the seriousness of the situation.

I think if the system of taxation we are setting up in a time of war were taken as being for the duration of the War only, there might not be much purpose in criticising what are purely temporary and emergency measures, so long as—a very important point—those measures were not of a character to create vested interests behind them which would tend to prevent their abolition. In this matter, at any rate, the Chancellor of the Exchequer is to be congratulated that he has levied no such taxation; but when we find that these taxes are supported as being of a character for after-war continuation, and as being good in themselves, it is, I think, necessary that we should criticise from that point of view. It seems to me that these taxes, to a very great extent, are of a character which undoubtedly will have to be swept away, and, therefore, support of them in this Budget as being for future use, and levied now because they will be for future use, is, I think, an entirely fallacious argument. Take, for instance—and I entirely support in this matter what fell from the hon. Member for Holmfirth—the enormous taxation we are levying upon the necessaries of life, such as tea and sugar. Take the indirect taxation as a whole. Now what will be the condition of things immediately on the declaration of peace and in succeeding years? There will be many millions of men disbanded. Industry in every direction will be disrupted. We must have a great amount of unemployment. Some particular industries may thrive—those, for instance, which will be set to work to make good the destruction of war. I can imagine, for instance, the engineering trade, and the shipbuilding trade, unfortunately, creating a great demand for men; but there will be, undoubtedly, a great mass of men seeking employment, and, in consequence, there will certainly be a tendency for wages to fall—a tendency which, I hope, will be successfully resisted, but undoubtedly resistance will cause great industrial and trade conflagration in this country. But, at any rate, you will have a condition of affairs entirely different from that which obtains to-day, when, owing to the gigantic expenditure due to the War, there is a condition of artificial prosperity, and, consequently, taxes, which the mass of the people can pay to-day, though I think with growing difficulty, and to pay which they are reduced, certainly in many cases, to the subsistence level, and even less, it will be utterly impossible for them to pay in the conditions prevailing after the War.

It has to be remembered that, in dealing with Income Tax, that tax does not fall entirely in accordance with the principle on which it is supposed to be based, namely, ability to pay. It has always to be remembered that a very great sum under the Income Tax is paid by the workers of the country. For instance, take Schedule A, house taxation. We know that that tax is passed on to the user of the house, just in the same way as the tax on bread will be passed on to the consumer of bread. I know that a certain war measure has been put on the Statute Book to prevent that natural economic result of levying taxation upon a commodity which is the production of labour, but if that is continued after the War it will only result in the prevention of the building of cottages and artisans' dwellings, which will be so essential. My point is this, that you must not limit your view of what the masses pay in indirect taxation to those taxes which alone are generally considered to fall upon them, because, as I say, even Income Tax is largely passed on. If my view of the future is correct, it seems to be obvious that a great deal of this taxation will have to be swept away, to make taxation conform more to the social and economic condition of the people after this terrible conflict. Speaking of the Income Tax, it must not be thought that when I say one portion of the Income Tax falls upon the workers that I think the Income Tax could be reduced as a whole. Quite the reverse. I think those who imagine that the Income Tax can stay where it is to-day are living in an Income Tax payer's paradise. I cannot imagine how we can raise £500,000,000 a year after the War in the conditions which will prevail—and it may possibly be more, because if the War goes on for another year or so it will not be £500,000,000, but £600,000,000 or more—without raising substantially the Income Tax. I think you must have, at the very least, an Income Tax of 10s. in the £, or such an Income Tax as will reduce a number of recipients of income to a level which would shock them if I were to name that which would be an essential of the financial situation.

6.0 P.M.

But that will not meet the need of the future. I believe that a new theory of taxation will have to be introduced to meet the after-war needs. When we have run up our National Debt to £4,000,000,000 or £5,000,000,000, and when we have to raise a revenue of £500,000,000 or £600,000,000 a year in place of one of £170,000,000 or £180,000,000, some new theory of taxation, I hold, will have to be introduced, and it seems to me that my hon. Friend who spoke last indicated the direction in which we should have to go. I think we shall have to bring into the after-war balance sheet all the national assets of the country. We shall have to put the value of the land, the value of the coal, and the value of the iron into the balance sheet against the vast debt we have created, and we shall have, by way of a system of land value taxation, to bring that value annually into the Exchequer. It seems to me that it would be essential to do that if you are to meet the needs of this country after the War. There must be an increase in the production of wealth and an increase of the opportunities for employment. What are you going to do with the millions of disbanded men after the War if you do not open to them all the natural resources of the country? How can you meet your gigantic debt unless you give the labourer every opportunity to create wealth? and as it can only be created from the land, it is obvious that every restriction upon access to the land is a restriction on the possible production of wealth. The system which I have suggested should have found a place in the Budget as the best of all war measures of taxation, and it is only by instituting a system of taxation upon land which will compel every owner to use his land, or let somebody else use it, and free it for production that you are going to bring about that increased production of wealth which will be necessary after the War. If the proposals of this Budget were going to be permanent, we might criticise them severely from that point of view. I think it is beneficial to raise as large an amount of taxation as possible during the War, so as to convey to the people some knowledge of what the burden of the War is and bring it home to them. But one has to take a somewhat different view if during the War by way of taxation you are levying enormous burdens by methods of taxation which you try to enforce upon the people in time of peace, for this policy would be most disastrous to the country.

The criticisms made in some of the speeches to which I have listened have related to taxes which are not in this Budget. One hon. Member referred to the conscription of wealth; but is wealth not conscripted now? What are Death Duties rising up to 15 per cent.? What are Super-taxes but conscription of wealth? If it is not, I do not know what it means. I want to speak about some of the taxes which are in this Budget, and, first of all, I would like to say a word or two about the munitions levy. I hold that that levy is altogether irregular, and I do not believe that any system of taxation in this country ought to be left to two Departments. The Munitions Department ought never to have the power of levying any money for service to the Crown upon the people of this country. The proper people to levy money and taxes are the Treasury, and they ought to have kept this matter in their own hands. The munitions levy, as a matter of fact, is altogether wrong, and I am glad to see that my right hon. Friend is going to do his best to remedy this matter. An effort was made to remedy it in the last Budget by amalgamation, but it was very incomplete, and was not at all level between the two parties. Let us see what the genesis of this munitions levy was. The right hon. Gentleman said: It is here that I want the attention of the Chancellor of the Exchequer. I want to know how he is going to do that. As a matter of fact, the basis of the munitions levy is different from the Excess Profits Tax. The one takes a different standard. The munitions levy is not 80 per cent., but it may be 150 per cent, or 200 per cent., for it is everything over 20 per cent. If a man makes £100,000, all the manufacturer can take is £20,000, and the Munitions Department take the remainder. If a man makes £150,000 extra profit, the Munitions Department take the lot except £20,000. The Excess Profits Tax is 60 per cent. and 40 per cent. I want to put the right hon. Gentleman on his guard by pointing out that when he merges them in the Finance Bill they ought to be merged on a common basis, so that from the 1st of January, 1917, and the Inland Revenue is to take over the collection of that tax from that date, I presume he will see that the Finance Bill provides that the standard and method of calculating the whole of the operation is on one basis, so that there will be no confusion. Of course, the great benefit of that would be that you would release an enormous staff which has been struggling with assessments and commissions under this levy, and they have not been very successful, and a great deal of it might be done away with, and the ordinary surveyors of taxes, having the same standard and data on which to arrive at their basis, should arrive at it from the 1st of January, and there should be no making up of different standards.

Then there is the question of the interest to be allowed on capital. The interest is being very properly raised from 6 per cent. to 9 per cent. for companies, and 7 per cent. to 10 per cent. for private individuals. I see from the White Paper that the percentage on capital is to be allowed only for the accounting period in the case of the 8 per cent. rate, and this would only date from the 1st of January, 1917. The assessing of excess profits from 1st January, 1917, is a very reasonable thing, but may I point out that a great many firms make up their balance sheets, some up to 31st March and some up to 30th June, and they would not take their stock on 31st December. The right hon. Gentleman knows what an essential element the taking of the stock is in these matters, and I presume the balance would be taken in the ordinary way, and the profits apportioned month by month

indicated assent.

That is useful to know. With regard to shipping, I am bound to say that I feel very strongly for the shipping people. I am not connected with shipping, but, after all, the mercantile marine has done great things for the nation since the War began. Some of them have made great profits, but they could not help it, because foreign rates were up, and no man in this House would have done very different to what they have done. Why are you going to punish these people, for this proposal is a deliberate punishment, put it how you like? The Chancellor of the Exchequer frankly admitted that there would be a loss on some of these concerns. It should not be forgotten that where an ordinary excess profit is made you are entitled, if a loss is made in any accounting period, to level it up so that the adjustment may go over the whole accounting period. The shipping gentlemen are going to be barred from that privilege, and that is a piece of punishment. It does not seem to me to be at all fair, and I hope between now and the framing of the Finance Bill there will be what the lawyers call a locus penitentiae, so that this proposal may not be so hard upon them as it unodubtedly is in its present form. I have never been against the Excess Profits Tax, the shipping arrangements, or the munitions levy. All that I have argued is that they should be equitably and fairly adjusted.

There is one thing that ought to be considered, particularly with regard to the shipping people. It is true that they have made large profits, but if they have been prudent men, as most of them are, they will not have divided these profits, because ships that have been lost, costing £30,000 or £40,000 each, cannot now be replaced for double that money. [An HON. MEMBER: "Four times!"] It may be four times as much. What provision are you allowing for that? What is to become of our mercantile marine in competition with other nations after the War if you deplete the coffers of the shipping companies, so that they cannot get these ships built. It will be difficult to get them built in any case, but with depleted coffers it will be well nigh impossible. Therefore, I say that the way you are treating them is not fair. Last year the House passed a Clause which was supposed to assist them. I do not know whether it has done so or not. If my recollection serves me rightly, that Clause threw upon the purchaser of a vessel that year the responsibility for the Excess Profits Duty, basing them upon the price that he paid. Supposing he has made very little excess profits and the vessel is taken now and he makes a loss, there is very great hardship on that man. I would, therefore, call my right hon. Friend's particular attention to that Clause passed last year which very greatly affects this subject.

There is another matter to which I would like to call his attention in the framing of the Finance Bill. Owing to the attacks upon our hospital ships, there has been a great demand for medical men to go to France. In the Act of 1914 there is a Clause enabling medical men who have gone to the War to pay Income Tax upon real earnings only, and not upon the average of three previous years. A great many of these medical men upon whom you are calling have been in partnership, and they have been returning on a three years' average. Now one of the partners, presumably the younger partner, has gone, and his share of the business or his profits should be determined upon what he actually makes by his pay during the financial year 1917-18 and not upon the average. I do not think that Clause will help him. They will presently be asked to make their return for 1917-18. If the partnership is severed from now, there will be practically twelve months of a single partnership, during which the man will only earn what he gets as pay in the Royal Army Medical Corps. There should, therefore, be some modification in that direction. Some Clause is required which will enable such a man to make his return upon the actual amount which he receives, following the lines of Sections 13 and 14 of the Act of 1914.

I would again ask my right hon. Friend to review the shipping provisions, and to repeal Sections 4 and 5 of the Munitions Levy Act. Then we shall have a uniform rate and method and give great satisfaction to all contributing people. My right hon. Friend opposite, who was greatly responsible for the Excess Profits Duty, made a lamentable estimate, as I then told the Chancellor of the Exchequer, of the results of the Excess Profits Tax. He estimated the first accounting period at £30,000,000, and the second accounting period at £68,000,000. The first and second accounting periods have already amounted to £140,000,000, and they are not anything like done with yet. There are many millions of those periods which have not to this day been settled, and the amount to come in must be very great. A large company with which I am connected, in paying a dividend the other day, said that they could not settle the accounts because they had not settled with regard to the Excess Profits Duty for the first or second accounting periods. There are any number of companies in the same position, and I am perfectly certain, when my right hon. Friend comes to review this matter next year, he will find, and he will be pleased to find, that instead of £20,000,000, it will be more like £50,000,000. I shall be very glad if it is so. At the same time, he must not underestimate these things. I am quite sure that his move in merging these two duties is a wise one. It will dispense with a lot of men in the Munitions Department who could be better employed at the front, and it will put it, as it ought always to have been put, into the hands of the assessors and surveyors of the Inland Revenue to assess the tax, and I am sure that it will give the greatest satisfaction.

The whole House listened to the statement of the Chancellor of the Exchequer with great interest and hope I was interested the whole time, but as he explained his various taxes and alterations my hope went altogether when he got to the Excess Profits Tax. I had hope that he would have seen his way to make every person in the country who makes excess profits pay his fair share. Now it is only the trader and manufacturer. The professional man, if he makes a larger income, is let off altogether, and the agriculturist, who has made very large profits during the War, has not been touched. I had hope that he would have brought into a tax, which everybody agrees is a fair one, the great farming community, who have undoubtedly made very heavy profits. I do not know whether it is too late to appeal to him. I have appealed to him privately, and now I once more make an appeal to him in the interests of justice. At a time like this I feel that it is in the interests of the nation that all who make extra profits should pay their fair taxation. What is the position of the farmer? At the beginning of the War he was prac- tically paying no Income Tax at all. I he had a rental of £500 per year, he paid on one-third of it, but he got an abatement of about £150, which practically made him free of Income Tax. If you refer to the Income Tax of 1912-13, you will find that it produced £41,000,000, but under Schedule B, under which the farmer came, including parks and woodlands, £189,000 only was contributed. There may have been some reason during those hard times for dealing very kindly with the farmer. In 1914 we find that the Income Tax raised £69,000,000, and the yield under Schedule B only went up to £269,000. That was the first year of the War.

Many of us thought it was very unfair that the farmer should be let off altogether. We put the case to the late Chancellor of the Exchequer, and in his next Budget he raised the assessment of the farmer under Schedule B to the full amount of his rent. What did it bring in? In 1915-16 it brought in about £2,250,000 out of £128,000,000. If it is considered unfair for the farmer to pay on his rent, it is always open to him to produce his accounts like any other man in business and ask to be assessed in the ordinary way. He would then have every advantage of being treated as any other man in business. I know it is always said by the Treasury that it is very difficult to collect Income Tax from farmers. Farmers usually are pretty cute and sharp business men, but they do not keep accounts. I believe education has gone far enough now for farmers to be able to keep accounts if they want to. I am a farmer myself in a small way, and I keep most accurate accounts. I only farm for pleasure, but it is perfectly easy for any business man to keep proper business accounts of farming transactions. I do not think the public know the large amount which farmers have made in excess profits during the War. It is impossible to get accurate figures, but we have the Returns of the Board of Agriculture, giving the quantity of grain grown, and we might take the average of the three years 1914, 1915, and 1916 as 40,000,000 quarters. I think we might take it that in 1914, the first year of the War, the farmer got an average of 10s. per quarter extra for all his grain, wheat, barley, rye, oats, etc., grown. In 1915 the average price might be taken at 20s. a quarter over the pre-war price, that would be £40,000,000 excess profit. In 1916 the amount would be about 20s. to 30s. per quarter, which gives you from £100,000,000 to £120,000,000 in extra price that the farmers received for their grain over the average pre-war price, taking an average of from three to five years. That is not all that the farmer has received.

What about the extra cost of production?

I should like my hon. and gallant Friend to reply on that. If you put the cost of production up, my case is still good. I should like to know what the cost of production is. In addition to the grain which is produced only in certain parts of the country, in many other parts of the country farmers have had very heavy crops of hay and have obtained enormous prices for them, such prices as they never dreamed of before the War. The farmer has been able to sell his straw for high prices, he has also obtained enormous prices for his beef, mutton and pork, and during the last two years he has obtained higher prices for milk; in fact, everything he has had to sell has gone up in price. What about the cost? In 1914 we heard nothing about the rise in wages. In the first year of the War there was nothing the farmer had to buy which cost him much more. I agree that in the next year things did rise, and he had to pay more for cattle food and machinery, and, at the end of that period, he had to pay more for his labour. Anybody who wants to go into the matter will find that until this year the cost of production to the farmer had not risen to any great extent. Another thing is that his rent has not risen. That is all to the credit of the landlord. I believe that in very few cases has the landlord tried to put up the land to the farmer. The rent, which is one of the farmer's largest items, has been stationary, although the other things which he needs in order to produce his manufactured article from the raw material has risen.

Rates!

I rather doubt if rates have risen.

I meant they have been stationary.

They have either been stationary or, in a good many cases, have gone down. There is every reason why the farmer should now be paying Income Tax. I had hoped that if he did not have to pay Excess Profits Duty the Chancellor of the Exchequer would have promised to increase his Income Tax, which was already commenced by the late Chancellor of the Exchequer. During the last month a greater reason has arisen than ever for putting the farmer on the same basis as other traders and manufacturers. He is now to have a handsome profit guaranteed to him. We are to have bounty-fed wheat and oats. He has a guarantee for his price for years ahead, and a guarantee that his rent is not to go up. It is true that he has to pay a little more for his labour, but that will give him better labour, so that I do not think his expenses will rise very rapidly. I would point out to the Chancellor of the Exchequer that it is very unfair to the other traders of the country that this great industry, one of the largest industries in the country, is to be subsidised in this way. Rightly or wrongly, it is to be subsidised. It must make heavy profits, the country is to pay for it, yet the farmer is to get off paying not only a fair Income Tax, but paying the Excess Profits Duty altogether. A friend of mine was arguing with me that there was no evidence that the farmers were getting high profits. On that point I would refer the Chancellor of the Exchequer to the evidence he can obtain from the Duke Commission. A number of farmers appeared before that Commission, and when they wanted to gain something in the nature of compensation they referred to the enormous profits they had been getting. When a farmer wants anything he can always produce figures and evidence to show what his profits are, but when he has to pay anything, then he does not keep accounts, but is an ignorant person, and he must leave it to the Treasury or the Chancellor of the Exchequer to charge him what is the fair thing. He has some reason for leaving it to the Treasury or the Chancellor of the Exchequer, because he has been let off altogether, at the expense of the rest of the nation, the consumers who are paying these high prices, whereas the farmer is getting off practically scot-free. [An HON. MEMBER: "He is feeding the nation!"] I make an appeal to the Chancellor of the Exchequer in this matter. I have no feeling against farmers. I want to encourage them in every way to grow more corn. There are plenty of ways of doing that. At the present time prices are quite sufficient to put every acre and almost every yard of land under cultivation, but it is very unfair to the trading and manufacturing part of the nation that the farmer should be let off in what I consider this unjustifiable way.

I do not desire to offer any opposition to the Budget as a whole. I believe that the country generally will welcome the Budget and, in the main, endorse the proposals made therein. We all realise that a very serious financial obligation is placed upon the country, an obligation which cannot be avoided. I am not aware of any individual who has any desire whatever to avoid bearing a fair and equitable share of the burden, but as workers we feel that we are called upon to bear an unfair and inequitable share of the burden. The exemption limit in regard to the Income Tax is £130. That inflicts a far greater burden, comparatively speaking, upon poor working men than is inflicted on the better-paid classes of the people. Some regard must be had to the ability of the individual to pay. It is not altogether a question of what you get out of the individual; it is rather a question of what he has left when he has paid the tax demanded from him. The old limit of £160, under present conditions, would fall very hardly indeed upon the low-paid working men; but the burden is enhanced considerably, taking into consideration the increased cost of living, by the reduction that has been made in that limit. We are told that wages have gone up. We have been told that more than once in this Debate. I happen to know, as well as most people, the extent to which wages have risen in the various trades. It is true that in some cases wages have gone up considerably, but it is equally true that in other trades wages have gone up very little. In the mining trade wages have gone up 50 per cent., in the textile trades they have gone up very little, and in other cases the trade is not so good as it was before the War. Consequently, we have to admit that from the wages point of view conditions are little better in some trades than they were before the War. On the other hand, to everybody the cost of living has gone up enormously. I have been at considerable pains to obtain information upon that point, and to ascertain exactly what the increase in the cost of living has been. I have gone to various families living in typical districts. I find that the cost of living in many cases has gone up by nearly 100 per cent. and that there has been no comparative in- crease in the wages of these people. The cost of living has doubled in many cases, but the wages have not doubled. Income Tax is now paid on a wage of 50s. a week. There are tens of thousands of people in this country to-day whose wages average from 50s. to 55s. per week. In the mining trade the men who are working by the day—they are a very large percentage of the people employed—receive for a full week's work, that is a week of five and five-and-a-half shifts, a wage from 50s. to 55s. a week. Those people have to pay the Income Tax. I have no hesitation in saying that, generally speaking, absolutely every penny of that wage is required to meet legitimate, unavoidable, necessary domestic expenditure. There is no margin whatever in those cases, yet they are called upon to pay Income Tax.

The limit is £130.

That does not affect my argument at all. I know that the exemption is up to £130. They have to pay the Income Tax. The wealthy man can pay the tax out of his abundance and does not feel the burden of it at all, but it is a very different matter with these people, because they can only pay the tax out of their deprivation, so to speak. They have to curtail some necessities, and they can only pay the tax by their health and efficiency being affected, and I hold it very unsound finance, and from the national point of view it is a very unwise course, to tax people when the tax cannot be paid without their health and efficiency being affected. The miners have had this matter under very careful consideration. It has been discussed throughout the length and breadth of the mining community. We have had large meetings at all our pitheads, and the result was that a national conference was held, at which every district in the Kingdom was represented. I am deluged with complaints from miners about being called upon to pay the tax when their income is down as low as £130. The conference decided unanimously that an appeal should be made to the Government to raise it from £130 to £160, because the cost of living is so much heavier now than it was then, and even if it was raised to that the position of these people would be far worse than it was before the War. I am expressing the wish not only of the mining community but of the workers generally. There is no desire anywhere to avoid the payment of just and equitable taxes. I am quite sure everyone is ready to pay what is fair and honest in order to meet the inevitable and essential national expenditure. Our only complaint is that we are called upon to pay something that is not equitable and not honest. I hope the Chancellor of the Exchequer will see his way clear to give people who to-day are really living below subsistence level some consideration in the direction I have indicated.

While I am in general agreement with what has fallen from the hon. Member he should remember that in this country the working classes have an advantage which is not enjoyed elsewhere. because there are co-operative societies, which are not taxed, and it is a subject of bitter complaint amongst many of the shopkeepers in England that these societies are able to conduct their operations in competition with them and entirely fail to make adequate contribution to the Exchequer. With that limitation I am generally in agreement with what the hon. Member has said. But this is, I think, the first time in the thirty-six Budgets I have heard opened in this House that there has been no voice raised to put the case of Ireland, and at a time when some expectation is held out of an Irish settlement, though really I do not believe in these promises and do not share in these hopes, it is important that some voice should be raised upon this subject, especially under the present Prime Minister. He stated some two or three years ago that when framing his Budgets he never took into consideration the separate case of Ireland nor did the Treasury remember the existence of that country, but he gave some hope that in a better time he would be able to take the separate case of Ireland into consideration. I should like English Members to take this into their view. Taxation, after all, is only one means of the distribution of wealth. It may seem an odd way to put it, but if I am taxed in this country the money which I pay goes to the support of Civil servants and to pay for soldiers and sailors, and you get it back in another form. No doubt there are inequalities in the incidence of taxation and that is a matter upon which English statesmanship is constantly engaged, I do not say always with success, but there is no intention on the part of any English statesman ever to inflict a deliberate injustice upon any one section of the community over another. In the course of centuries it happens, for various reasons, that at times undoubtedly some classes are more hit than others, but they always come to this House and howl. We have heard the Excess Profits man and the shipowner howling to-night.

No, no!

Well, I have heard them howl. I withdraw "howl." I have heard them eloquent. At all events you have this profound satisfaction, that every penny that you raise as Englishmen is going back into some English pocket or in another. In fact the tax is like the sun. It draws up the moisture from the earth and sends it back in the shape of rain on to some other part of the world's surface. But is that our case? I would beg of Englishmen to remember their bargain with our country. You bargained with us, when you made the Union, that you would give us exemptions and abatements. What is the result of these 117 years of promises? We were paying £1,000,000 of taxation at the time of the Union, with 5,000,000 of population. To-day we are paying £22,000,000 with 4,500,000 of population.

And getting more for it.

I should like to examine that question. That is the very proposition I am now coming to. That is the point of view of the Minister for Foreign Affairs, whose magnificent services in America I gladly bear tribute to, and certainly I think it was a magnificent example of patriotism that at his time of life he should have set forth on the perilous journey which he has undertaken, and no one is better pleased than I am at the splendied reception given him in the United States. When a Royal Commission under Mr. Gladstone reported that Ireland was paying £3,000,000 too much, and that you owed us something like £200,000,000, the Conservative Government, although that proposition was put forward largely by Conservative statesmen, was willing to appoint a counter Commission and take up the attitude that Ireland was getting, as the right hon. Gentleman (Mr. Wiles) said, more for it. That was twenty years ago, and from that hour to the present no Commission has ever been appointed.

I am now going to address myself to the War situation. You have raised something like £3,000,000,000 of money, a sum which, even in the Arabian Nights entertainments, no one ever dreamt of as a possibility. How much of that £3,000,000,000 have you spent amongst yourselves, and how much have you spent in our country? So as not to exaggerate, I will cut it down to £2,000,000,000, leaving out what the Allies and the Canadians and the Australians have got. You have spent £2,000,000,000, and raised it in this country. How much have you spent in Ireland? Not £2,000,000. There is the proportion: £2,000,000,000 spent on armaments and on war in this country, and not £2,000,000 in Ireland. It is a perfectly monstrous state of things that, while we are just as well able to have munition works and other forms of expenditure as you are, when you are calling loudly. for men and putting us on an equality as regards taxation, there has been no mind at the Treasury directed to see that we get an equal return for some part of the taxation, at all events, which you have imposed upon us. I fully bear in mind the exigencies of war, and I am not taking this subject because of the conditions of war which prevail. I am only taking it as illustrative of the British mind in dealing with what you are pleased to call the sister isle. Whether there was war or not, the argument I am making would still hold good. I wish the right hon. Gentleman would give me some hint of what it is that we are getting.

You are getting your return for it in proportion.

I want to know what it is.

You are getting your old age pensions.

That is the one thing in which England can claim to have given us an advantage, and a more Christian act was never passed and no Act ever did this House more honour. I never hoped to live to see the time when England would put forward a proposal to give poor working men who had spent all their lives in hard labour five shillings a week at the close of their days. I grant that as regards that measure Ireland is getting, for the moment perhaps, a fairer proportion. But what is the cause of it? It is because you chose, under that appalling policy of yours for the forty previous years, to hunt out of Ireland what the "Saturday Review" called the departing demons of assassination and murder. That was the way you hunted our emigrants and you took people in the flower of their age and hunted something like 3,000,000 of them across the Atlantic, leaving behind the old men and women to be a burden, as they now are, upon the taxes. I am quite willing to bear any burden put upon me in connection with the War, as to which I entirely endorse everything the right hon. Gentleman said in opening his statement, that this is the greatest crime in history and that England is absolutely free from guilt in the matter. Therefore, I am making in no sense a pacifist speech or anything of that kind. I am willing to carry on the struggle as far and as long as any other Member of the House. The true test of taxation is the value you get for it. Apart from the War and apart from old age pensions, I want to know what is the value that you can pretend Ireland is getting.

7.0 P.M.

I rise for the purpose of entering what is no doubt a secular protest against a system which takes no account of the disparity both of wealth and of capacity of the two countries, and I specially urge the right hon. Gentleman to give us some equivalent in the shape of the purchase of the Irish railways. He has done something, I quite agree, this year—he and the Irish Secretary. On account of the scarcity of coal something has been done—seven or eight miles of line—to develop the coal mines of the country during the last few months. Here is a measurable, handy, small proposition. It will not cost this country anything. Forty millions will buy them, paper will do the work, and they can be handed over as a national asset to the country for the benefit of the country. I have made that suggestion before, and I now renew it. In that connection I should like to know what is the constitutionality of the existing Railway Tax of an additional 50 per cent. It is shown nowhere in your Budget. The late Chancellor of the Exchequer tried two years ago to get permission from this House to have a Railway Passengers Duty, but the House refused him permission. What do we find now? The old first-class return fare to Ireland used to be about £5; now it is £8. I pay it every week. I want to know, when this House has refused you the right to impose a special railway tax, what business you have under the Defence of the Realm Act to turn the Defence of the Realm Act into a Budget Statute? You dare not impose that tax on London. With 5,000,000 of people here in London, living under a tablecloth, so to speak, within a short radius of Charing Cross, the strength of that population is such that you dare not put the Railway Tax upon them; but the poor people of Lancashire, Scotland, and other parts, the non-vocal parts which cannot demonstrate here, Liverpool, Manchester, and Glasgow, are all paying this 50 per cent. Railway Duty. I would not object to that if it were done openly, after discussion in the House, and put into Budget form. Let somebody tell me that it is necessary for the purpose of carrying on this War to impose this tax, and I will gladly submit. But I do say that to turn the Defence of the Realm Act into a taxing Statute was never what this House contemplated. I think, considering the freedom and the generosity with which this House granted powers to the Government under the Defence of the Realm Act, it was one of the greatest abuses ever attempted to put on this Railway Tax without getting the permission of the House in the first instance.

Let the Government attempt to reguarise their position. They have taken over the whole of these railways, and propose, as I understand, to give the railway shareholders their existing dividend. When you made that bargain you proposed to meet the deficit out of the Budget, and out of the taxpayers, and by means voted in this House. Did you ever, when the House assented to that bargain with the railway companies, pretend that you could take a cut out of our loins by means of this excess on the railway tickets. You never did. I appeal to the Chancellor of the Exchequer—who, after all, is a House of Commons man, who understands this House and its Members, whether English, Irish or Scotch, or at any rate tried to understand them—to come down with a Clause to attempt to regularise the position as regards these railway fares, and I venture to say he will not be supported in any quarter of the House except London, which is not affected. The effect of all that is that there is no efficient railway service now to the extent there was before. You ask the railway companies for an extra wagon, and they say, "We do not want your trade." They have got their 6 per cent. guarantee so they do not care. You appeal to a Government Department, and they say, "We want to reduce traffic, we do not want your traffic. We do not want this, that and the other." The result is that for a higher fare there is a poorer service. Did you attempt to put it on the freights? No, you did not. You dare not put it on the freights. You only put it on the human freights. While I have been tempted to go a little beyond the Budget discussion, I think what I have said is somewhat germane to the question.

I want to congratulate the Government on what I understood from the statement of the hon. Member (Mr. Baldwin) last night. He promised that he would remit the Licence Duty to the publicans to the extent, as I understood him, of three-fourths. If you look at the Excise returns, whether for beer or for spirits, you will find that the fall in the returns is something appalling, and I am not sure that three-fourths is a sufficient remission, because my experience is that you have absolutely ruined these men, and once they are shut up they will never open again. I fully agree that we have got too many public houses. We have too many in Ireland. You put them there. You did it deliberately, and you had an object in doing it. It was done in the 'fifties and 'sixties, and your object was to soak our people with liquor. It was done by the resident magistrates. There are 7,000 public-houses in Scotland, and 17,000 in Ireland. The magistrates who did it were not in our hands. There was not a Nationalist magistrate from one end of the country to the other. Of the 5,000 or 6,000 magistrates at that time there were not five Catholics. They all belonged to the party of law and order, the party of education, the party of wealth. It was those men who strewed these 17,000 public-houses around our country and round the homes and the feet of the poor. Having set up these public-houses and drawn revenue from them you now say you are going to remit something like three-fourths of the Licence Duty. It is not enough. The Licence Duty should be absolutely abolished, because the trade is gone. I make a special plea with regard to Dublin. In addition to what you draw from ordinary Licence Duty in Dublin, you exact from every licence holder in Dublin 10s. I may be told that that is a very small sum, but at any rate the Dublin publican pays 10s. more than any other publican in the three Kingdoms. What for? Nothing, except that it has always been so. On every Budget night I have protested against the Dublin publican having to pay 10s. more than any other publican, but I have never succeeded in getting my voice heard with any acceptance. I now make a claim. It is said that for England, Ireland, and Scotland the loss will be £900,000. You are going to raise £6,000,000 extra in tobacco. That £6,000,000 will not compensate for what you will have lost in Excise and Customs Duties.

At all events, you are now going to ruin two very important trades. You say you cannot help it, and to a large extent I agree with you. I agree that it is not done with deliberate intention on the part of the Government, but undoubtedly you are going to ruin the brewing and distilling industries. Guinness' are dismissing men by the hundred every week, and there is distress of the most intense kind in consequence. While you are doing that you are importing into Ireland large quantities of beer from England and using British bottoms to bring it to our country, while our people are being dismissed and our breweries are being either shut up or reduced. It seems to me that it is an extraordinary state of things that you should use British shipping for the purpose of sending alcoholic stimulants into Ireland when you are causing the dismissal of people and ruining people who are unable to make the native article. I do not understand it, but I suppose it is one of those mysteries of British government that we hear of from time to time. At the same time there is the outcry in regard to potatoes. Potatoes are a luxury in this country to a very great extent, because bread is the staple food in this country, while in our country potatoes are the staple article of food. Now there is this outcry about potatoes which may end in sending up our potatoes to a higher price. Perhaps my remarks may not have been as strictly germane to the subject as a discussion of the Excess Profits Tax, but I do not think that in the one-hundred-and-seventeenth year of the accursed Act of Union, which has brought misery and woe upon both countries, and which is just as much a source of British misfortune as it is of Irish misfortune, it would be unfair if some Irish voice was not raised to continue the secular protest against this miserable Act of Union.

The hon. and learned Gentleman paid me a compliment which more or less is deserved, and that is that I try to understand the Members of this House from whatever quarter they come. The hon. and learned Gentleman was right in that, though very often trying is the greatest length that I can go. As regards my hon. and learned Friend, he is a case in point. I never quite understand him. One of the things that I not only do not understand but in regard to which I envy him, is how he always succeeds in giving a certain amount of interest to the discussion of any subject even as dry as that on which we are engaged to-day. I am glad that it so happens that in this present Budget I have not done anything to add to the long string of crimes of which this House has been guilty in regard to Ireland. My hon. and learned Friend was a little inaccurate in his statement of the amount of money in connection with the War which has been spent in Ireland. He alluded to munitions only. I can say of myself, and I think it is true of the whole House, that we wish that there were industries in the South and West of Ireland suitable for the production of munitions. I am sorry that the War has not established a large number of such industries, and, so far as I am concerned, I would gladly do anything I could to see such industries established there. I think the hon. and learned Gentleman forgot the North of Ireland. Very large sums for the purposes of the War have been paid in Belfast. It is true also, and he ought to remember this, that if Ireland has not sold munitions as a direct result of the War, it has sold other things which are just as essential for the War, such as foodstuffs of all kinds, and Ireland has derived a very considerable amount of benefit from the prices which have arisen in consequence of that demand.

My hon. and learned Friend made a philosophical remark which I wish were true in practical life. He said, speaking of this taxation, that it was like the sun, which draws moisture from the sea in one form and sends it back in another. I wish that I found that those living on the spot from which it was taken took that philosophical view of it. If that were so, there would not be so much protest against particular taxes as every Chancellor of the Exchequer has to face. I have had a few telegrams myself in spite of the very limited number of taxes which are being imposed. I hope that the House will not expect me to deal at length with the points which have been brought forward in this Debate, but I would like to, thank every speaker for the very friendly way in which he has spoken of my efforts in relation to this Budget. I quite admit that I am open to many charges in connection with it. One of them is lack of originality—that I was quite willing to accept things as they were left by my two predecessors. I do not object to criticism of that kind; I simply want to get the money that is necessary in the best and most convenient way, and the way which is best in the national interests, and I am certainly not going to make a change-merely for the sake of making a change.

The hon. and learned Gentleman who has just sat down spoke of the Railway Tax. I quite admit that it was put into the Budget of last year and left out after criticism in this House, but it was put in, for the sake of raising revenue. That is not the object of the change which is being made now. It has been made deliberately with the object of stopping traffic because the rolling stock is needed in France. It is not intended to get revenue from it, and it will not produce revenue. The object was quite different, and it was for that reason a subject suitable to be dealt with in another way—by Regulations under the Defence of the Realm Act.

Why do you not put them on in London?

I am not familiar with all the facts, but I think that the reason is pretty obvious, because the people of London have to come in to their work and there is no desire to stop the traffic, because you could not stop it. Then my hon. Friend made another remark—that the people in the districts which are affected, including, I suppose, Ireland, are not vocal, whereas people in London are so vocal that they made it necessary for us not to impose this additional rate.

As regards the general financial position, there has been criticism from two different points of view, which have neutralised one another. The hon. Member for Holmfirth (Mr. Arnold) and the hon. Member for Greenock (Major Collins). took the view that my estimate at the end of this year was too sanguine. On the other hand, my right hon. Friend the Member for Monmouthshire (Mr. McKenna) took the view, and I think the view was correct, that I underrated our resources. at the end of the year. The hon. Member for Holmfirth, in a very interesting speech, gave figures exactly in the same way as that in which the Chancellor of the Exchequer has to produce them, but he took the view of presenting everything in its most gloomy light. It is quite easy on that basis to present a very serious picture, but I do not think that it is a correct picture. He assumed, for instance, that our Allies would not be able even to pay us the interest on their debts to us at the end of the War. I am sure that that is wrong. Unless we are defeated I see no reason whatever to suppose that they will not be able to pay us interest on the loans.

In reference to what was said by my right hon. Friend the Member for Monmouthshire, I admit that I was presenting for the end of the year a point of view which was probably worse than the reality, and I will tell the Committee why. As I stated in my speech yesterday, when I began to consider the Budget I took this as my aim, that at the end of the year on which we have now entered we should still be in this position, that the amount of present taxation, without including taxation which we presume would be taken off at the end of the War and making allowance for the new debt which we should incur, would be sufficient to leave a margin without having to add additional taxes. I did not say, as my hon. Friend the Member for Greenock seemed to think, that I was determined to have the same margin as there was at the end of the last financial year. All I said was that there should be a margin. Making the calculation in that way I showed practically a margin of £1,000,000 or £2,000,000; but now I will ask the Committee to look at it from the other point of view. Suppose instead of taking the existing taxation and its yield, I had asked the Treasury officials to make an estimate as to what they supposed would be the return when peace comes, I am perfectly certain that an extremely large margin would have been shown. May I point out why that must be so. In the first place, in the figures which I used I took no account of the Income Tax on the dividends on the Loans created this year. That, I think, in itself would amount to something like £15,000,000. In the second place, I took no account whatever of the return from items of taxation which have now gone down—revenue on account of stamps, Post Office, telegrams, Excise and everything of that kind. Certainly in ordinary circumstances we can hope that there will be a very large revenue from these sources. In addition, I did not take into account, though I referred to it yesterday, this obvious fact, that presumably the excess profits which are taxed this year will be represented by some kind of profits when peace comes, and on these profits there will be income. If, therefore, the amount is large, the amount of the Income Tax will be large and, of course, the Super-tax.

So if it had been my desire, as it was not, to present a rosy picture, I could have presented an estimate which would have given a very large sum indeed on the credit side, but I did not want to present a rosy picture. I wanted to present a picture which, on the whole, was worse than I expected the reality to be, and for this reason. I do not want either the Committee or the country to imagine for a moment that we can spend all this money, that we can have all this prosperity which has now to be based on borrowed money, without paying for it. We cannot. It is a terrible price to pay, but it is a price which we have to pay, and all I desired to point out to the Committee is that we are able to pay it, and that it will not be the lack of money which will prevent us from getting a victory in this War.

The hon. Member for Holmfirth suggested a new tax, which he said had not been thought of. I pricked up my ears at once, and I must confess that he was right. He did suggest a form of taxation which had not occurred to me—taxation on titles of all kinds.

It would not apply to Scotland. They would never pay.

My hon. Friend suggests that if it were applied to Scotland there would be no tax paid. Then the result desired by the hon. Member would be attained—there would be no gentlemen with titles in Scotland. Surely the hon. Gentleman himself will agree that he did not put that forward as a method of raising revenue. It was to attain other objects to which he attaches a certain amount of importance.

I was a little surprised, I must say, to find a recurrence to the old ideas about not getting enough out of the rich people. If there is one thing which, honestly, has impressed me more than another in connection with this War, except, perhaps the readiness of men of all ranks to risk their lives, it is the readiness with which people have borne taxation of a weight which has never been known before in the old days, and which could not be imposed in any other country on the same scale except in the United Kingdom. I think that that is true. The hon. Gentleman spoke of our old friend mineral rights. I do not think that he seriously contemplated that as a war tax. May I point out that where royalties vary according to price the result is that if a man is getting royalties and has a large amount of income on which he pays Super-tax, the share of the excess which he pays to the State under the excess Mineral Rights Duty—I have had the calculations made, and I have received it just now—may be 95½ per cent. I do not think that there is much room for further revenue to be derived from that source, unless you were to have the whole lot.

Coming to some of the other points which have been raised, my hon. Friend opposite referred to farmers. I really can add nothing to what I said on that subject yesterday. I admit the fairness of having taxation on farmers. I have had everything prepared for imposing such a tax, but I found that if you took the figure of, say, —400 rent and began on that basis, all you would get at the end would be —300,000, and if you went down to a lower figure, and a figure which would be fairer, it would imply so many assessments that with the present staff you could not possibly have done it, except at the risk, and indeed with the certainty of losing a larger amount of money than you would get, by neglecting the collection of taxes which were of greater value to the Revenue.

Could you not have doubled it on the rent?

You cannot be sure that that would be fair all round. You would need to take the same basis. If my hon. Friend had been in my position, I do not think he would have thought it worth while to put on a tax.