May I, Mr. Speaker, take this opportunity of apologising for a mistake I made on Friday? I am always very careful, as far as I can, to be extremely accurate in any statement I make. The point to which I desire to draw attention was the statement that the President of the Board of Trade was not a Member of this House. When I said that, it was not intended as a joke, as some hon. Members think. I am sorry I made the mistake. I mistook him for the Controller of Shipping. I apologise to the House, to the right hon. Gentleman, and to myself. Having confessed my crime, may I state some extenuating circumstances?

I think the reason is well known. The hon. Member himself has been absent so much from the House.

Can the right hon. Gentleman say how far he proposes to go with the Orders to-day?

If time permit, Order No. 4 (Billeting of Civilians Bill) and Order No. 5 (Munitions of War Bill).

One of the taxes in which I took an interest when the Budget was introduced last year by my right hon. Friend opposite was the Amusements Tax—

That does not arise on this Resolution.

The increased duty on tea has a direct bearing on a question which is becoming very important in this country. That is the increased cost of living which falls particularly hardly on the poorer classes, and if we do not continue those taxes on food the question arises what alternative we can offer to take their place without increasing the burden. The great majority of speakers, when the Budget was before the Committee the other day, drew attention to the small proportion of revenue raised from taxation, as compared with the revenue raised by Loans for the purpose of financing the War. The amount actually raised by taxation would perhaps be something under 24 per cent. In approaching the question of the cost of food and the revenue derived by the taxes on food and the alternative I naturally appreciate the position as it stands to-day, and naturally endeavour to offer some alternative for this revenue which we have obtained in the shape of increased taxes. I support the idea that there ought to be a greater proportion raised by taxation, and while protesting, as I am now, against the continuance of the Tea Duty and other food taxes which press so severely on the poorer section of the community, I think that some alternative should be suggested to take their place. I may again refer to the suggestion made by one of the present members of the War Cabinet when he was Leader of the Labour party, to have a graduated tax upon income and upon wages. It might be said that a tax upon wages would press severely—

The hon. Member is not entitled to discuss a tax on wages, or the increased duty on tea. He must wait until we reach the Income Tax.

I was not going to elaborate it. I was merely trying to suggest some alternative to be put in the place of the tax on tea, if we get rid of it, but I appreciate the fact that we cannot elaborate the machinery for such a tax until we come to the Income Tax. That alternative seems to me to be the only alternative which would commend itself to the working classes. They would much rather have direct taxation than the continuance of these indirect taxes, which press particularly hardly upon the poorer sections of the community. With these remarks I must protest against the continuance of the taxes on food.

Question put, and agreed to.

Resolution reported.

CONTINUATION OF DUTIES (EXCISE).

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

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

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

I believe that I am in order now in developing the argument as to the alternative of a graduated tax upon income—

No. This Resolution deals with motor spirit and medicine duties.

Can the right hon. Gentleman say to what date this Resolution will operate, seeing that these duties are continued under the Finance Act of 1916 until the 1st of August 1917?

The Resolution is in the usual form. As I understand it will carry us on for a year from next August.

Question put, and agreed to.

Resolution reported,

Tobacco (Customs)

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

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

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

I hope sincerely that this Resolution will not have the effect, as I believe it will not have, of checking the consumption of tobacco. It is very disinterested on my part, seeing the extreme difficulty which there is in finding any place in the United Kingdom where smokers do not congregate, and where one can live free from clouds of tobacco smoke. The more a man smokes, the more he drinks, which is good for the revenue, provided he does so in proper moderation, but unfortunately the more he eats the worse it is from the point of view of the general public. The moment the consumption of any stimulants is reduced, the more the individual concerned eats. Big smokers are small eaters; non-smokers are the gross feeders. I sincerely hope that this tax will not have the effect of reducing the consumption of tobacco, which is a pleasure to those who indulge in it and does nobody any harm. What has moved me to make these remarks is that they apply to the treatment of all stimulants and the crusade against all stimulants of whatsoever kind which goes on in this House and which really eventuates in the further consumption of food, the preservation of which at the present moment is of the utmost national importance.

That does not arise on the Resolution.

Question put, and agreed to.

Resolution reported,

TOBACCO (EXCISE).

4. "That the additional duties of Excise on tobacco grown in Great Britain or Ireland, imposed by Part I. of the Finance (No. 2) Act, 1915, and continued by Section eighteen of the Finance Act, 1916, until the first day of August, nineteen hundred and seventeen, shall, as from the second day of May, nineteen hundred and seventeen, be doubled, and shall continue to be charged at the doubled rate until the first day of August, nineteen hundred and eighteen. And it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

Resolution agreed to.

Resolution reported,

ENTERTAINMENTS DUTY (INCREASE OF RATES).

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

Where the payment exceeds

3d. but does not exceed 6d.—2d.

6d. but does not exceed ls.—3d.

1s. but does not exceed 2s.—4d.

2s. but does not exceed 3s.—6d.

3s. but does not exceed 5s.—9d.

5s. but does not exceed 7s. 6d.—1s.

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

10s. 6d. but does not exceed 15s.—3s.

15s.; 1s. for every 5s. or part of 5s.

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

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

4.0 P.M.

With regard to the Entertainments Duty, I want to suggest to my right hon. Friend the Chancellor of the Exchequer some considerations which were submitted when this duty was first imposed, and to express the hope that between now and the time those duties are to be incorporated in the Finance Act, he will make such alterations as will at any rate result in a large body of those who are threatened with this increase of taxation. This subject is one in which I took considerable interest when we first discussed the imposition of the Entertainments Duty. My right hon. Friend the late Chancellor of the Exchequer (Mr. McKenna) who was then in charge of these Resolutions, will remember that we discussed the effect of the tax rather fully. The portion of this tax which I mainly challenge, and which I think my right hon. Friend the Chancellor of the Exchequer will not find bring him revenue, is that portion which imposes 2d. on all seats between 3d. and 6d. I have watched very carefully, in view of the tax imposed last year, what has been its effect upon the revenue of places of amusement during the past year, and the figures which I have obtained exactly bear out the position which I took up then, that there would be a decrease on what the late Chancellor of the Exchequer expected to receive from the Entertainments Duty in a full year, namely, the sum of £5,000,000. The result of the tax for the year has been much less than that sum, the amount received approaching something between £3,500,000 and £4,000,000. If my right hon. Friend (Mr. Bonar Law) cares to investigate the facts he will find that the loss of receipts is largely due to the taxation of seats which are below 6d.

I will now give him the figures which I have received in respect of a number of theatres throughout the country. The report which I hold in my hand has reference to 315 theatres throughout the country, and the figures show what has been the effect on the lower priced seats. The figures which I am going to quote are for two periods of three months each—one when the tax was not imposed, and the other in which the tax was imposed. In the three months from February to May, 1915, immediately previous to the imposition of the tax—in each case the three months taken is for the winter months, when there is the best attendance at places of amusement—the report from these 315 theatres shows that they took £278,000 odd as compared with £306,000 in the corresponding period of 1916, thus showing that there was an increase of revenue in 1916, in the winter months, as compared with 1915—that is to say, that business was increasingly on the up-grade. If you take the three months immediately following the imposition of the tax, you find that there is a drop of over £52,000. I can give my hon. Friend the figures in the course of conversation later, but at present I will merely give the broad outline, which is that when you compare the two comparative periods of three months before the imposition of the tax, and three months after the imposition of the tax, you find a great drop in the receipts. Let me give my hon. Friend the results in the case of one individual theatre. I find that for a period of six months before the imposition of the tax and a period of six months after the imposition of the tax, the 6d. seats remained practically the same—the figure for the period without the tax being £4,346, and in the period after the tax, £4,410. But when you come to the remaining seats, 4d., 3d., 2d. and ld., you find an enormous reduction between the number of seats occupied prior to the imposition of the tax and subsequently to the imposition of the tax. I have the figures, but I will not weary the House with them; they amount to several thousands of pounds. The amusements trade, no more than any other trade in the country, desires to escape its legitimate share of any kind of taxation. What my right hon. Friend does is this: he asks the amusements trade to collect for him—and it is a very handy way of collecting—from the great mass of the population, through the medium of their amusements, small contributions to the War.

What my right hon. Friend, I presume, wants to avoid is the imposition of any tax which would unnecessarily damage the trade concerned. I think that is what my right hon. Friend feels with regard to this question, and if it can be shown to him that the imposition of this extra ld. on seats under 6d. will do that, perhaps the tax may be modified. I do not wish to worry my right hon. Friend now, nor to occupy the time of the House upon the subject, except to make it clear, at this stage preceding the time when we come to the Finance Bill, that it is one which should be considered in detail, and I would suggest that by way of Amendment, or otherwise, the imposition of the tax should begin at 6d. and upwards, and that the higher-Priced seats can better carry heavier taxation than can seats below 6d. After all, in this period of War, when so many events are happening which cause people such great anxiety, places of amusement in the life of the people are really very vital because of the relief that can be secured from thinking about the War. That is an aspect of the subject which is well worth considering, and, as a matter of fact, a cheap form of entertainment, so long as it is healthy and conducted under proper conditions, is perhaps one of the most valuable counter-attractions to more vicious forms of recreation. I venture to suggest that my right hon. Friend would be doing himself and the nation a service if he retains an open mind on the subject of this Entertainments Tax, because this Resolution does not come into operation, I think, until the 1st of July. In regard to that there is one point to which I would direct the attention of the Chancellor of the Ex- chequer. It was a point which was raised last year, namely, that the revenue from the imposition of the tax would be limited or would be far less if it were fixed to begin at that period of the year, and I suggested that the taxation would turn out to be very much better from the 1st of September than during the summer months, because with the Summer Time Act, that with the long evenings the people would not attend amusements in the same way as in the winter months, and that as a result of the operation there were 700 theatres in this country closed. I do not believe that one-half of those theatres would have been closed had my right hon. Friend's tax begun in September instead of beginning in May. Those are the two points I would like the Chancellor of the Exchequer to turn over in his mind: first, whether he cannot see his way clear to leave the taxation below 6d., as it is, and whether he can postpone the operation of the higher tax to a later period, when there are shorter nights, and when it is more likely that people will go to places of amusement. I hope that the right hon. Gentleman will keep these suggestions in his mind during the period between now and the discussion of the Finance Bill.

In reference to what my hon. Friend has just said, I have obtained the opinions of those best qualified to give their views, which are expressed by the Chancellor of the Exchequer in his speech on the Budget, and I rather gathered that the hon. Gentleman is interested in the provision of public amusements, in London, as I am in another great city in which I am particularly interested. Those whose views I represent do not think that this tax will have the effect of checking attendance at public amusements.

dissented.

I am not expressing my own view, but the view of men, among them Mr. Herbert Lyons and Mr. Wentworth Cook, who are closely associated with the provision of public entertainments; and, in express words, or impliedly, they have come to the conclusion that it is a most excellent proposal which the Chancellor of the Exchequer contemplates, namely, to bring complimentary tickets within the purview of the tax. I remember a tax of this character over twenty years ago being collected with great ease and beneficial results in Petersburg. I think that the Chancellor of the Exchequer has adopted a humane and human attitude with regard to amusements. To keep amusements going, and keep up the spirits of the people is an extremely good thing to do and I agree with the Chancellor of the Exchequer that all work, not only makes Jack dull but very inefficient and poor. Neque semper arcum Tendit Apollo.

I have listened very carefully to the argument put forward by my hon. Friend, and the figures he quoted are familiar to me. I have had an opportunity, not only of studying those figures which he gave but also I have had the pleasure of meeting a deputation from the trade, which placed those figures before me. They were good enough to answer questions which I felt it necessary to address to them. I think that before we accept all my hon. Friend says, when he speaks of 315 theatres showing a reduction in trade since the imposition of this Entertainments Tax, we should realise that there are about 4,000 houses in the country; and the association that came before me represented 1,500 of these houses. They sent out circulars to every single member of their association, and they were only able to get answers from about 21 per cent. of their total number. The obvious inference which occurred to me was that answers had not been received from others for the reason, quite apart from the imposition of the Tax, that they had not been very successful in their trade. I think it only fair to remember that the cinema trade itself is undergoing, like many other trades in this country, a process of evolution, and that gradually the smaller houses, and what I may term the inferior houses, having regard to the accommodation and the entertainment given, are slowly being ousted from their position, because of the better equipped theatres which are now being built, certainly in many large centres of population.

Does that mean the cheapest houses?

There is a tendency for the smaller houses, I will say necessarily the cheap houses, which are less comfortable and less efficiently managed to be gradually driven out. After I had received the deputation and after I had heard all they had to say, if I had any fear that possibly we might be inflicting hardship, I was much comforted by an article in a leading organ of the trade a few days later, which stated:

"It is common knowledge that while the volume of business has not been diminished by the tax, part of the receipts has found its way into the pocket of the Chancellor of the Exchequer. The argument, therefore, that the raising of the prices will involve a decreased patronage falls to the ground."

They continued with a reference to the poor response that had come in to the, circular from the association to show how much their trade had suffered. Commenting on the small number of replies this paper said in a leading article:

"How could it be other than, if men treated a matter represented as vital to their continued existence with such indifference, and were doing so well in spite of the tax, that they were nervous about disclosing their business secrets."

What paper is that from?

"The Cinema," Having given the best attention I am able to this subject, and having heard their case put before me, I am satisfied that the proposal we have made and which has been carefully calculated on the various prices except the very lowest, is a tax that can be charged. I believe it will bring a substantial sum to the revenue, and I do not think this year we shall be in a position to ask the House to make any reduction in our proposal.

I have no objection to the tax on indoor sports and cinema entertainments, but I should suppose if there had been a falling off in the cheaper forms of these amusements that in all probability it was due to the appointment of the hon. Member for the Scotland Division of Liverpool (Mr. T, P. O'Connor), as Censor of Films. His well-known severity of view, I fancy, may have to be taken into account in considering the diminution of attendance at those smaller houses. What I rise to draw attention to is this: I want to ask for some information as to the effect of this increased tax upon outdoor sports in Ireland. When the right hon. Gentleman the Member for Monmouthshire (Mr. McKenna) proposed this tax he appeared to make some exception in favour of outdoor sports conducted by certain organisations in Ireland by a Clause which has completely broken down, and which, from the interpretation put upon it, I suppose, has completely lost its vigour. The sports it was intended to exempt have been subjected to the tax. I think we ought to have some figures with regard to the effect on sports, because this is not a war tax, but a permanent tax, and we are entitled to some information as to the effect of the tax on outdoor sports.

I also desire to mention one small point on this issue. The police in Ireland insist on forcing their way into these sports free and on paying no gate money. They have insisted upon that in spite of a circular from the Royal Irish Constabulary ordering them to pay at the doors like everybody else. In consequence of that a most extraordinary circumstance has arisen in Ireland which, I suppose, could not have arisen in any other part of the British Empire, and I wish to tell the House what the conduct of the police was, and I challenge contradiction. I think it must be made perfectly clear that the police must pay if they attend these sports, like everybody else. The House will hardly credit that within the last six months the police presented themselves at an outdoor sports in the county of Limerick, and a humble gatekeeper demanded 3d. or 6d., whatever the charge was. They took the man by the throat and hauled him off to the nearest police barrack. He was then brought and charged under the Defence of the Realm Act with obstructing the police in the discharge of their duty. The solicitor, Mr. Moran, for this unfortunate defendant produced a police circular ordering them to pay. Whereupon Mr. Moran was ordered by General Sir Bryan Mahon to come up from Limerick to Dublin to answer under the Defence of the Realm Act as to where he got this circular from the Royal Irish Constabulary. Mr. Moran said he was a solicitor and that he had privilege as a solicitor, and refused to answer. Whereupon, in this time of war, when men are so badly wanted, General Sir Bryan Mahon sent him into gaol, and assembled a general court-martial of half the colonels and captains of this Empire. They sat in Dublin and they sentenced this solicitor for defending his client by means of a police circular to six months' imprisonment. That seems an incredible story, but I challenge the Government to deny it, and that is done in the Premiership of one who is himself a solicitor. What is the end of it? When Mr. Moran had served either two or three months' imprisonment he was discharged by the Royal Clemency, and went down to Limerick, where he was received with bands and tar barrels, which were attacked by the police, and some score of men are now in gaol undergoing additional sentences of imprisonment for having welcomed Mr. Moran home. That is the result of the Amusements Tax in Ireland. Far from commenting on the case, I simply draw attention to the facts. Now that it is proposed to put on an extra tax, I do think we might ask whether the police are going to pay like everybody else. At all events, I think we are entitled to ask that they shall not seize the gatekeeper for refusing to allow them in. There is a story that in a saloon in Western America there was a notice, "Don't shoot—the organist is doing his best." I think we are entitled to ask for a statement that a humble gatekeeper in circumstances such as have been represented should at all events be free from the Defence of the Realm Act. I think it would be an excellent Amendment to move, though I am the last person who would give any trouble to the present Chancellor of the Exchequer, that no prosecution connected with this tax should be brought under the Defence of the Realm Act Statute. I certainly think it was not for these purposes the Defence of the Realm Act was passed, and I certainly think that Sir Bryan Mahon might have found better use for the powers of the Defence of the Realm Act than to haul up a solicitor engaged in defending a gatekeeper whose only offence was to ask the police for 3d. If the British Constitution has come down to that state, so that we are driven in Ireland to make representations to this House in circumstances of the kind, the House will understand why it is that English law in Ireland is looked upon by the population in the spirit which at present unfortunately prevails. You had a perfectly loyal community but you have so managed this Defence of the Realm Act in our country that I am sorry to say you have poisoned in many cases public life, so that even now, when this question of the Amusements Tax is under consideration, you are subjected to this affair.

The hon. and learned Gentleman (Mr. Healy) began by saying that he challenged contradiction of what he was about to say. He was quite safe as far as I am concerned, as the whole story is new to me, and I am not in a position to contradict it. But the hon. and learned Gentleman made another statement which I greatly appreciate, and it is that he does not intend to give any trouble to the present Chancellor of the Exchequer. I know nobody who would be more able to give trouble if he had the desire, and I am very grateful to find him in the frame of mind which he indicated.

Does the pledge go beyond to-day?

It does seem to me reasonable that if the circular of the Royal Irish Constabulary says that the police were to pay that they should pay. I will make some inquiry, and I think I can go as far as to say that if the case is as the hon. and learned Gentleman described it, I shall be very glad that due and proper consideration shall be given, not only to the gatekeeper and to the solicitor, but I shall be equally willing to extend consideration to any barrister concerned.

The hon. and learned Gentleman (Mr. Healy) began his speech by complaining that, under certain circumstances, a tax was put on outdoor amusements in Ireland, and he drew attention to what took place when the right hon. Gentleman (Mr. McKenna) was Chancellor of the Exchequer. I rather gather that the hon. and learned Gentleman wanted some exception made in favour of certain sports in Ireland. I am very glad my right hon. Friend (Mr. Bonar Law) apparently forgot that that was part of the hon. and learned Gentleman's speech, because he made no allusion to it. Personally, I hope very earnestly that there will be no exception made to any society, whether loyal or disloyal, in Ireland on this matter. People in Great Britain had to pay the Amusements Tax, and Ireland, which, as far as I know, has been exempted from all the troubles which have been imposed upon England under the Defence of the Realm Act and other things, might surely not object to pay this particular tax. Now we come to the story of the police, and I did not quite follow the hon. and learned Gentleman as to whether they wished to enter in order to fulfil their duties or in order to obtain amusement. If they wished to enter in order to obtain amusement then they certainly ought to pay, but if they were only going in in order to see that law and order was maintained, and the rules and regulations of the country enforced, then I do not see why they should pay. I did not quite gather from the hon. and learned Gentleman which was the case.

How was the gatekeeper to know what they were going in for?

I happened to be asked the other day to go round with one of the Provost Marshals in London, and we visited a number of places of entertainment and did not pay at all. We were not supposed to pay because we were on duty, and I think the gatekeeper ought to have found out whether, in the case mentioned by the hon. and learned gentleman, the police were on duty or whether they were entering as spectators. Personally, I am rather glad that there has been this increased tax put upon amusements, and especially upon the cheaper form of amusement, because I do not think it can be denied that a large number of people, and especially children, are wasting their money by constantly going to these cinema shows, which I cannot see do much good, and which, in many cases do a considerable amount of harm. While I quite agree that amusements are good things and ought not to be stopped, I think a tax of this sort, especially on that kind of entertainment, is a very good one, and I hope my right hon. Friend will not alter it in any way. With regard to the tax on the higher tickets, I agree that that does not make very much difference, because if a person wishes to spend 7s. 6d. on a theatre ticket he will probably spend 8s. 6d. all the same, and is therefore only contributing indirectly to the taxation of the country, which, in view of the enormous amount of direct taxation, is, I think, quite right.

Question put, and agreed to.

Resolution reported,

ENTERTAINMENTS DUTY (FREE ADMISSIONS).

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

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

Resolution agreed to.

Resolution reported,

INCOME TAX.

(7) That—

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

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

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

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

I believe it is the fact that under the law as it exists now, or as it will exist after this Resolution is carried, persons resident abroad are not allowed to claim in reduction a deduction to which they would be entitled if resident in England. I have been asked how the Inland Revenue will interpret that Clause where people are either prisoners of war abroad or are interned. When the question was asked me I said that of course a man interned or a prisoner abroad could not be, as I should have thought, legally considered to be resident abroad. At any rate, he is not a resident of his own free will, but I said that at the first opportunity I would ask the Chancellor of the Exchequer if that question had been brought to his notice and how he proposed to act upon it.

I understand that such a person will be treated in the same way as if he were at home.

Will he be allowed to claim the deduction which would have been allowed if instead of being detained in Germany or some other country he had been at home?

I understand so.

I propose to revert to the subject to which I referred in an earlier part of our discussion, but I want first of all to raise another point with regard to Income Tax, and that is to ask the Chancellor of the Exchequer to reconsider the question of the double Income Tax. There has been a considerable amount of discussion outside as the result of his sympathetic and encouraging remarks, and although he rather seemed to postpone the question until after the War, I believe there is to be an Amendment proposed on the Finance Bill which I hope will receive his favourable consideration. I would ask whether he cannot see his way to follow with regard to Income Tax the same procedure he has followed with regard to Excess Profits. The hon. Members will remember that in the Memorandum which was in our hands during the Budget Debate it was stated that where Excess Profits Duty is chargeable both in the United Kingdom and in a Dominion it is proposed to insert a provision enabling the Imperial Government to enter into an agreement with the Dominion Government under which the higher of the two duties will be collected and apportioned between the two Exchequers; and that a provision of this kind already exists in the New Zealand Excess Profits Duty Act. I would ask the right hon. Gentleman if he cannot extend that same principle to double Income Tax. It seems to me an admirable arrangement, and one which does offer a solution of what we all agree is a most complicated problem. I hope that between now and the introduction of the Finance Bill the right hon. Gentleman may perhaps take up this question again with the representatives of the Dominions, and that some such procedure may be devised which may enable him to put into his Bill a provision for Income Tax on similar lines to that regarding Excess Profits Duty. I have no doubt he has had many communications on this subject. I happen to have had one from an important institution, and I am sure the hon. Baronet the Member for the City (Sir F. Banbury) will confirm this: that many companies already have moved their offices from London to the Dominions—I am referring to the Bombay Corporation in this particular case—and if the right hon. Gentleman postpones action until after the War the penalty, which is a very heavy one, will have a twofold effect. It does have such an effect. It affects the credit of these institutions. The enormous taxation involved here and also in the Dominions affects the earning powers of many of these concerns, and tends to depreciate the capital of many companies; and a great deal of that may be done before the end of the War. I do, therefore, hope that the right hon. Gentleman will, as I have no doubt he will because he has already spoken in sympathetic terms and recognises the equity of these arguments, consider whether he cannot see his way to give a sympathetic and encouraging reply, and whether some provision such as I have indicated may not perhaps be included in the Finance Bill.

With reference to what I have said earlier in the discussion as to the alteration of the food taxes, I regret exceedingly that the right hon. Gentleman has postponed the remodelling of the Income Tax until after the War, because there it seems to me is the true solution of the increased proportion of revenue which may be derived from taxation rather than from loans, if this enormous drain is to continue. We do feel that the proportion really is a small one when you think that only £24 out of every £100 is being derived from people, in the country who are in a position to give a much larger proportion, and that a graduated tax on income and wages would be a much fairer and much more equitable way of getting the money he wants. A tax on commodities raises the price of food which penalises the working classes, whereas a tax on wages does not really penalise the working classes because it tends to raise wages. That is borne out by Ricardo:

I wish to say something with regard to the position of co-operative societies. The House will recollect that the discussion we had last year had two results. The first was to make it clear that there was an extraordinary dearth of information as to various facts which one would require to have at one's disposal in order to arrive at a judgment as to how these societies should be treated in equity. The other was that a general compromise was arranged. The hon. Member (Mr. Baldwin), speaking the other day in reply to a deputation, put the matter very fairly. He said:

I am inclined to think that co-operative societies, when they agreed to this compromise last year, practically without debate so far as my recollection serves me, made a much worse bargain than they thought they were making. I am inclined to think that at present co-operative societies are paying more in the name of the Excess Profits Tax than I think they could be reasonably asked to pay in the name of ordinary Income Tax. I shall be glad, on that point, if the Chancellor can give us any information. I know, of course, that legislation could not be obtained without agreement on the point, but there is some reason to think that the time has arrived when, by a process of compromise, a settlement of this vexatious question could be made. I would suggest that in equity the co-operative societies should, at all events, in the meantime not be asked to pay more in the name of Excess Profits Duty than a reasonable calculation would show them to be fairly liable to pay in the name of ordinary Income Tax, or in the name of any other contribution to the establishment charges to which I have referred. The amount of heated feeling that has always surrounded this question arises, unfortunately, from misapprehension of facts. I would suggest to the Chancellor of the Exchequer that he should do something at the present stage to remove that element out of the discussion by making some concession just now to the co-operative societies with reference to the levying of the Excess Profits Tax. I believe it is extremely unfair to the ordinary traders, in the absence of an Excess Profits Tax, that these societies for the last ten years should have been making no ascertainable contribution to the taxes.

I do not know how far the Chancellor of the Exchequer will go at the present time to remedy some of the grosser abuses connected with the Income Tax, but the one to which I desire to call his attention is, I think, the extremely serious case of a company in in which I am interested. I hope, however, that that will not prejudice the case, because the illustration, no doubt, applies to a great many other companies of a similar character. The case is that of a company owning leasehold houses assessed under Schedule A. The Income Tax payable is no less than 18s. 3d. in the £. That is a case which deserves a remedy even in time of war. It is brought about, in the first place, by the one-sixth allowance for repairs not being nearly enough in war time, and, on the other hand, by the Income Tax being paid upon the sinking fund. It is not a case analogous to property which depreciates, because in the case of these leasehold houses the property absolutely disappears. At the end of the lease the property goes back to the ground landlord. In spite of that fact, Income Tax law does not allow Income Tax to be deducted on the sinking fund. Last year it was not so bad. We only paid 9s. 10d. in the £. I am very much afraid, however, that in the coming year the Income Tax will be more than 20s. in the £. If the Chancellor of the Exchequer does not see his way to remodel the Income Tax so as to give some relief to companies of this character, I hope he will extend the Royal clemency, and not make us liable for more than our profits.

Generally speaking, I find amongst commercial people not so much objection, after all, to these very heavy taxes and Excess Profits Duty, but there is a very strong feeling that some of the difficulties and some of the special hardships which particular people, and in particular these kinds of property have endured, should be met. When the Income Tax was a comparatively small sum, although its hardships existed in theory, they were not of very great importance in fact, but now that we have the Income Tax and other taxes up to the amount which we see at the present time, it certainly does appear that there are very grave financial hardships involved, under varying circumstances, to a large number of people. We have just heard from the last speaker one of them. The amount of hardship that it involves arises out of the refusal of the Income Tax authorities, owing to the various Statutes which apply to the matter, to adopt any correct method in respect of wasting assets. The House may understand that there are over forty-seven Acts of Parliament which are required to be investigated, some of these Acts repealing Clauses in other Acts, and, again, reinstating parts of these repealed Clauses, and all of these having to be read together in order to make up the mass of decisions and practice which constitutes the method and means by which the Income Tax is levied. I think, therefore, we are justified on every occasion when the question of Income Tax and its kindred subjects come before the House of Commons in calling attention to these anomalies, and to the special hardship which various trades and various classes of property suffer in consequence of the interpretation which is put upon the Statutes, and to ask that some effort should be made to co-ordinate the law and to reduce it to something like a reasonable and understandable state, and at the same time to make it more equitable in its incidence upon different kinds of property and upon different people. Some companies in which I am interested in the same way as the hon. Member who has just spoken are in much the same position. We have been promised by, I think, no less than four Chancellors of the Exchequer each in their turn, that this subject should be properly tackled, and that some effort should be made to reduce the Income Tax law and practice, not merely to an understandable code, but to wipe out all or some of these obvious difficulties. The contention on behalf of the commercial community is that the proper basis for ascertaining profits for the purpose of levying the Income Tax is to base it upon that which any ordinary reasonable man of business would do in making up his own balance-sheet: show what his profits are. If they show a case upon which tax should be levied there would be nothing more to be said on this point, but it is notoriously otherwise. So long as these anomalies exist, so long as the Income Tax is that which now operates, so long will these difficulties and these grievances exist.

The hon. Member behind me has somewhat taken the bread out of my mouth, for I have been long associated with this particular bread. Nay, it is a stone, or rather a millstone around the necks of my friends this matter of a double Income Tax, and I am unwilling to allow any opportunity to pass without saying a word or two concerning it. The Chancellor of the Exchequer not only exceeded expectation in his Budget, but he resisted the temptation to administer another kick to that financier's football, the Income Tax payer. Indeed, he expressed sympathy with him, and said how heavy were his burdens. Heaven knows that that must be so when Income Tax, Death Duties, and Excess Profits Tax accounted for 75 per cent. of the whole tax revenue of the country last year. This is not an occasion for any general remarks upon Income Tax—that opportunity will come again—but as regards double Income Tax the Secretary to the Treasury, upon the second night of the Budget, speaking with sympathy, said: I venture to repeat what I said in seconding a resolution in the City. This referring the matter to a Committee will be to exhaust time and to encroach upon eternity. Think what an operation this will be! A general consideration of all the inequalities that have heaped together and collected during many years of Income Tax administration. Are these unfortunate people who are now, by common consent, admittedly overtaxed and thrice overtaxed, to continue to pay not only until the fighting ceases—which we pray will be soon—but until the Committee has been appointed, and while it considers this complex and difficult subject in all its eternal branches? Meanwhile, are officials from India—notoriously a poor class—to pay double Income Tax? It is quite true some concession has been made on their behalf—that the Indian Income Tax is deducted from the English Income Tax under circumstances well known. There is the exception. Why, however, is not a similar concession made to the Colonial Income Tax payer? That unhappy man at present pays a State Income Tax and the Federal Income Tax; if he lives in England he pays the British Income Tax, whether he brings his money home or not he pays that British Income Tax; and he pays the British Super-tax if he brings home enough money. He gets in the end, I think—I calculate it to be—some 4s. 6d. out of his £1. I have heard Friends of mine who have spoken from these benches say it was even lower than that, and say that the tax runs up to 17s. in the £. This, too, is in relation to the class which once was, and still is, ironically described as "the rich."

5.0 P.M.

It is absolute confiscation. I would ask the Chancellor of the Exchequer, who is a most fair-minded man, and one who has displayed more reasonable sympathy with the overburdened Income Tax payer than any Chancellor of the Exchequer I have heard here in this House in the last dozen years, if he cannot now consider the propriety of deducting the 3s. 6d. in the case of the Colonial taxation of those who pay tax and Super-tax in their own country from the tax that they pay here, so that some instalment of justice may be done in this matter? I am more particularly charged to speak by my clients, by more particularly the Indian Income Tax payers, from whom the amounts are severely exacted, though not to anything like the extent as is the case with the Colonial taxpayers. I am very unwilling to go over the ground which has already been sufficiently covered by hon. Members. but I am quite unwilling to let this opportunity pass without adding my voice to the protest that has been raised in regard to this matter. May I ask the Chancellor of the Exchequer if he will even now, at this early stage, consider the propriety of altering the practice whereby, in computing Super-tax, when a man's actual receipts have been ascertained and added up, Income Tax which he has never received but has actually paid away is added to his receipts in order to produce a gross total upon which Super-tax is calculated? That I consider is a superfluity of naughtiness, an absolute insult added to injury. I beg the Chancellor of the Exchequer to consider how thoroughly unjust it is that what a man has never received shall be added to that which he has received in order that another deduction on Super-tax may be made. I ask him to take that into consideration, and to do justice to a class formerly known, and still with delicate irony regarded, as the rich.

I do not suppose that any politician fails to enjoy praise of whatever nature it is, but when my Friend spoke of me as the most sympathetic Chancellor of the Exchequer he has known in the last few years, I had a feeling that my predecessors must have been a very bad lot. What I said was that I would not have the smallest hesitation in taking a half, or even three-quarters, if I thought it would be for the general interests of the country, but that I did not propose to add to the Income Tax, because I believe it would not be in the interests of the nation that that course should be taken. With regard to the other points, I can add nothing to what I have said. I did not say, I am glad to remind my hon. Friend, that it should be referred to a Committee, but I said it was one of the circumstances which should be considered immediately the War came to an end.

The Financial Secretary said so.

That is not what I said. I would remind the House that the Dominion Prime Ministers are all of them very keen about this subject, and it is not in their view entirely, perhaps mainly, a question of money involved, but a question of principle. But they realise that we must have every penny of revenue that we can get so long as the War lasts. I think they set a good example in passing a resolution asking that the subject should be taken into consideration when the War ends, but not suggesting that it should be dealt with as long as the War is on.

My hon. Friend has spoken about hardships arising out of the Income Tax. There is no doubt an anomaly, or hardship, which is of little importance, comparatively, when the tax is low, or even a shilling, but which becomes very oppressive when the tax reaches a figure so high as the present. That is quite true, but I should like to say that that is precisely the reason which makes it impossible to consider the question of a double Income Tax and which makes it very difficult to give up revenue of any kind. There is one other point. An hon. Member asked me what would happen in regard to exemptions from Income Tax and other relief to anyone in the War or who is being kept away by that reason. That has been dealt with already. They are being given precisely the same privileges as if they were at home. The hon. Member for Coventry gave us his views on the economic question. I was rather struck by one fertile mode of raising taxation, which was that the easiest way of raising wages was to tax them. I think if he were in my place as Chancellor of the Exchequer and tried to adopt that plan he would find a large number of people who would not agree with his view of economy in regard to that matter. I may say further, if he will study Ricardo and other economists a little more minutely, he will find that putting a tax on does not necessarily raise wages. It adds to the cost of production—of course it has a tendency in that direction—but it depends on other things, many of them more important than taxation, and I am quite sure it is not by any means certain that the tax would be met by an increase of wages by the employers. I think these are all the points.

What about co-operative societies?

Cooperative societies is a difficult subject, and I am afraid I can add nothing that would be useful, but it is one of the subjects that must be considered by me before the Finance Bill.

Question put, and agreed to.

Resolution reported,

INCOME TAX (WAR. LOAN SECURITIES).

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

Resolution agreed to.

Resolution reported,

EXCESS PROFITS DUTY.

9. "That—

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

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

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

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

I think the House will agree with me that this is a feature of the Budget which requires close examination. I notice my right hon. Friend the Chancellor of the Exchequer said at an early stage of the Debate that this question had been carefully examined, but I think some protest should be made, which I hope may not be altogether unavailing when the Bill is presented to the House. The objection I take to the Excess Profits Tax is that no serious effort is made by the Treasury to confine it to profits that arise directly or even indirectly from the War. It would apply to all the business done in this great business centre, the greatest business centre of the world, and when one thinks of the prolongation of the War, which has lasted nearly three years, it would be a serious thing to stop any growth in the profit made in any business the biggest proportion of which is taxed. It would be a burden on enterprise. There are many aspects of the question which ought to be carefully considered, and I wish strongly the Chancellor of the Exchequer had seen his way not to increase the extremely heavy tax which was levied previously of 60 per cent. Look how the 80 per cent. works out. Remember, it applies to all businesses in any way connected with the War, and to any business which may be set up in this Kingdom at the present time. Supposing a business had been making a profit of £20,000 a year previous to the War, and it now makes, after two or three years, £40,000—not an unreasonable growth—and the return may be an amount which would still give a modest, and perhaps an inadequate, return on the capital invested. Now when you have of the £20,000 excess 80 per cent., or £16,000, taken by the State, I think the House ought to remember that there is a 5s. Income Tax which is levied on the top of that, so that the right hon. Gentleman really takes £22,000, which is £2,000 more than the Excess Profits. I think that is a very hard case. It must impose a great tax upon the industry of this country and upon enterprise. I think the Chancellor of the Exchequer ought to consider this matter very carefully, especially with regard to such an adjustment as may be brought before him to make this extremely heavy burden press with greater fairness. I sent to the hon. Member for the Bewdley Division some of the correspondence which I have had with regard to one particular point which refers to the interpretation put upon the word "capital." This has caused great hardship, arising out of the collection of the tax, and he has promised to look into this matter. It may be necessary to raise it as an Amendment when the Bill comes forward, but I hope my right hon. Friend will promise to give it consideration. I believe a good many points will be brought to the notice of the Treasury with regard to this particular burden when the Bill comes up for discussion. I appeal to him to reconsider the amount of the tax. I hope he will see his way to reduce it by 10 per cent., or at all events not to persist in the whole of it, and I trust he will consider the recommendation made by myself and others, and when the Bill comes before the House he will endeavour so to adjust it to relieve hard-pressed members of the community who have suffered most heavy burdens, greater than they can bear.

I do not want to add any voice of regret because of this very high tax. On the contrary, I congratulate the Chancellor of the Exchequer upon his courage in levying what, I believe, everybody regards as undoubtedly adjust tax. I only desire to raise two points. The first is what precisely the Chancellor of the Exchequer means by his retrospective Clause. He told us on the Budget statement that the 80 per cent. would be levied as from 1st January, and I think a good many business people, having in mind the analogy of Income Tax, thought that meant that one quarter of the financial year would carry a burden of 80 per cent as against the three-quarters which carried the 60 per cent., and that the 60 per cent. had added to it this retrospective burden in respect of one-quarter of the year. But, on examining the Resolution which is put to us now, we find that what happens is that where an accounting period begins on or after 1st January in this year, then the company pays 80 per cent.; but if, for example, a company has an accounting period which ends on the 31st December—the case, of course, of the great mass of the companies—then the 80 per cent. is not levied at all in respect of them. It appears to be an additional tax that falls simply on those companies whose year does not coincide with the calendar year, but if a company happens to make up its accounts to 30th June, 1917, then it will pay 80 per cent. in respect of six months and 60 per cent. in respect of six months, or a total of 70 per cent.; but an ordinary company whose year ends on 31st December will be in no way affected. That, so far as I understand, is the effect of the Clause. It may be absolutely sound, and I am not attempting to criticise it, but I think the Chancellor of the Exchequer will welcome probably an opportunity of explaining a matter which will be of interest to many businesses.

The other point I want to mention is that of co-operative societies. It was a point raised on the Income Tax Resolution by the hon. Member opposite, whose speech related entirely to the Excess. Profits Clause. If he had not mentioned the subject, I should not have mentioned it now, but I do not want it to be understood that Members desire to press the Government to alter the Excess Profits Tax in relation to co-operative societies simply because we were all silent in response to the hon. Member's speech. I suppose all of us have been circularised from a number of different societies who endeavour to make out that they are very grievously affected by this Clause. In point of fact, they are very well treated, and I think they would be very unwise to try to get any further concessions than they have already got. Their whole case rests on a misunderstanding of the nature of the duty. I think they have in their mind the Income Tax laws, which, of course, consider a corporation, not as a corporation doing business, but as a collection of units, each one of Whom is interested in the income of the whole. The Excess Profits Duty does not regard a company in that way. It says that a corporation or association is trading as a unit and is taxed as a unit. It does not matter who belong to that association; they cannot recover. It is no concern of theirs what the company as a company pay. That, of course, is directly contrary to the Income Tax principle. Applying that principle of Excess Profits Duty to cooperative societies, it was obvious that the claims they make—and I think rightly make—in respect of Income Tax do not apply at all in respect of Excess Profits Duty. They were corporations as much liable to pay Excess Profits Duty on their profits as corporations as anybody else, but they presented the special difficulty that, whereas ordinary associations have fixed amounts of capital, the co-operative society varies from day to day according to its membership. It has no fixed capital. A new member comes along and pays in a share, and the capital undergoes daily fluctuations. Accordingly, the Chancellor of the Exchequer of the day said that the datum line should depend, not upon the capital of the company, but upon the amount distributed per member; and it was accordingly laid down in the original Act that Excess Profits Duty should be paid on the amount by which the previous profits per member was exceeded, and by nothing else. The result of this is that no member of any cooperative society has had to receive one penny less profit by reason of the Excess Profits Duty. These co-operative societies complain that they have had to reduce their dividends, because, owing to the rise in prices, the same return of money represents a reduced dividend. That may be so, but if they think that the country is going to be deeply sympathetic with them because in time of war they are only receiving back the same cash amount they received before, I think they are very much mistaken. They have had special treatment in this Excess Profits Duty, and if they are wise they will be very thankful to have what they have got, and not try to get more, because in that case they will endanger their very favourable position in respect of Income Tax.

It is proposed by the Government that the munitions levy shall be under the direction of the Treasury, and I want to point out that there are certain classes of businesses whose temporary prosperity is very high, but whose position after the War will be destroyed, or very precarious. In many cases this arises from the very large amount of plant erected at the instance of the Ministry of Munitions, and the Ministry know the particular circumstances which these concerns will have to face after the War. I have been a member of a Departmental Committee appointed to examine the condition of two industries, and the future of those two industries, without a doubt, is extremely affected by the enormous erection of plant which has been absolutely necessary for the purposes of the War. Now, the Ministry of Munitions, knowing all the circumstances, having to settle allowances and abatements for depreciation, would be able readily to temper the wind to these particular industries with knowledge and experience, and what is felt is—I do not say from want of sympathy, but from want of knowledge—that the transfer from the Ministry of Munitions to the Treasury may result in all these conditions not being taken properly into account. I understand, even under the Finance Act, most of these allowances and abatements can be made, but there were very full powers, to the satisfaction of a good many interests, given in the Munitions of War Act, and I want to bring under the notice of the Government the necessity that nothing should be taken away from the means of rectifying what is really a very hard position when the Act is administered by the Treasury rather than by the Ministry of Munitions.

There are two points on which I should like to ask the Chancellor of the Exchequer for information. Last year I asked the then Chancellor of the Exchequer whether he would not reconsider his position of exempting professional men from the Excess Profits Tax. As he knows, I am one myself, and I always resent the imputation that professional men wish to escape from a burden placed upon the community. The answer of the late Chancellor was that he was perfectly satisfied the proceeds would be run away with by any such tax. If the present Chancellor shares that opinion, then, of course, I have not much to say, but I would like to know whether he has looked into the matter and has arrived at the same conclusion. I should not myself have thought that there was difficulty in collecting a sufficient sum of money to make it worth while to collect that tax. The other point on which I should like to ask for information is the position of the Mineral Rights Duty. Last year I called the attention of the Treasury to the fact that there were cases in Scotland, and possibly one or two in England, where, in spite of a minefield showing a reduced income, the Excess Mineral Rights Duty was actually imposed. I do not myself believe that the real intention of those who framed this first Act was that this absurd result should be brought about, but the facts are as I have stated. What I suggest in such a case is that the Treasury should at least this year introduce some modification, so that the effect will be that a person called upon to pay such a levy should at least not be left in a worse position than if his income had remained as before. It seems absurd that an excess tax should be levied on coalfields when the income shows a considerable reduction, as it does in a number of cases.

I am rather inclined to agree with the last speakers contention that professional men should come under this tax. No doubt a great number of professional men gain by the calling up of younger men into the Army, through having a greater field for their professional work, and so gain as a direct consequence of the War. The general principle of excess profits makes it, perhaps, one of the most popular taxes in the country. It is a sound tax. There is something very repugnant in manufacturers or business men making profits out of the War, while our men in the trenches have to risk their all, and in many cases lose their businesses, the accumulation of many years, while some firms are under the suspicion of making a profit out of those circumstances, which is entirely repugnant to the feelings and sentiment of the country. But this tax, I venture to think, suffers from one fault in the way it is arranged. It assumes that the business of the country is carried on by big, prosperous manufacturers who are making these large profits. When we are dealing with large, well-established concerns they demand very little sympathy, and I should be quite satisfied to support the Chancellor of the Exchequer if he proposed in those cases to bring up the tax even to 100 per cent. But, although a great part of the business of the country is done by large manufacturers, there are still, and always will be, a large number of small firms constantly coming into existence. They are the very life-blood of British industry. The fact of these new businesses coming into existence is a check against monopoly, against stagnation in trade, and is security that new blood is always being introduced into industry and trade. A lot of small firms came into existence just before the War—in 1912, 1913 and 1914—and are undoubtedly very hard hit by this tax. I have had several instances sent to me by my own Constituency of small hosiery manufacturers coming into existence—men who have been employés and given up regular salaries in order to invest their small savings in a factory of their own. This tax undoubtedly hits very hardly firms of this character. Some of these men by leaving their employment in the first year or two actually lost by the transaction, and the only hope of making the success of their enterprise was either by building up capital or increasing their profits. The War came, and the larger profits they are now making are not really extra profits, but a return for their enterprise in the first year or two. Therefore I ask the Chancellor of the Exchequer to consider the possibility of graduating this tax, not for all firms, but for those firms who can show their total income does not exceed a certain amount. I know some of the partners in these firms, and they are not making more than £100 or £200 a year out of their concern. A large part of their business is done by borrowed capital, and what amounts to a fair profit in an ordinary well-established concern in their case is little more than a salary. I know it is difficult to devise a scheme of that character without a considerable amount of labour, but if a fair principle was established those concerns which are not deriving a larger income than £1,000 a year should be exempt from Excess Profits Tax, or subjected to a less scale of payment, and this would go far to meet what in many cases is a penalty on new businesses or a discouragement of new enterprises.

I do not pay any Excess Profits or Super-tax, therefore I take a disinterested view of the imposition of this particular tax. For that reason I think one has the advantage of looking at the position of these taxes from the point of view of the future welfare of the whole community. I have been very much struck in looking at this increase in the Excess Profits from 60 to 80 per cent. as to what the results are going to be. Listening to the observations which have been made by hon. Members in different parts of the House, my own conclusions in regard to it have been largely verified. The hon. Member for Limehouse (Sir W. Pearce) pointed out the effect that this tax was going to have upon war industries, and how the imposition of the tax might leave those engaged in such industries at the end of the War and the beginning of the peace period with largely depleted resources to meet any future business they might then have to undertake. If that is so with regard to a new industry it is equally true with regard to some of the older industries of this country. During the week-end I read an article which is commended to the House of Commons by a very important business man in the Midlands dealing with the cotton industry, and the last sentence is as follows: the shipowning industry of being thieves who have put their hands into the national resources and have waxed fat as a result of the profits made from high freights. If you examine this question more closely, you will find more serious questions arising than might occur to one on the first consideration of this subject. I do not pretend to be a financier, or to understand the intricacies of important industries in this country, but I do pretend to understand the resources upon which this country depends, and when I am asked, as the Chancellor of the Exchequer asked me and others in this House, to agree to the imposition of an 80 per cent. Excess Profits Tax on the top of an Income Tax of 5s. in the £ and on the top of a Super-tax which may run up to 3s. 6d. in the £, it becomes a very serious burden to men carrying very heavy obligations. If a man has £5,000 left to live upon it is a cheap form of argument to say that that is enough to be going on with and that one would like to be going on with as much as that, but we often forget that these so-called rich men have often very heavy obligations. If a man cannot rid himself of his obligations, and if by taxation his income is so reduced that he cannot carry out those obligations, he gets into a position where the advantage of that man's energy and ability is lost to the whole community.

If there is one industry in the United Kingdom which is more necessary to the country at the present moment than any other, it is shipping. The Chancellor of the Exchequer who represents a Liverpool constituency and practically sits on the quayside, knows all the advantages of shipping to our great industrial community. I think everybody will agree that no branch of industry at the present moment is more essential to the War than our shipping, and we are doing our best to protect our mercantile marine against the ravages of the German submarine. The Chancellor of the Exchequer also knows that more inroads have been made into the total tonnage of our mercantile marine during the last few months than within the memory of any man in this House, or, as a matter of fact, within any period in the history of this country. The Chancellor of the Exchequer also knows that when the War is over, which everyone of us desires at the earliest possible moment, the essential thing for the further prosperity of this country is the maintenance of our trade routes with foreign countries. Just as in this country to-day the curtailment of your railways, shorter trains, and inadequate provision of wagons, and things of that kind are detrimental to the carrying on of our native industries, so when the War is over, if the Chancellor of the Exchequer happens to be in office and happens to have anything to do with the government of the country, as we hope and believe he may have, he will be faced with the proposition of increasing the communications between this country and the fields of material which can be brought to this country for the carrying on of our native industries. The House knows how depleted is our mercantile marine. The House knows that although it may be insured by the shipowners there may be a state of things in which it would be better for the shipowner to invest his money in War Loans, because, when the War is over, the cost of building ships will be so very much greater. When peace is declared for many months to come, if not for many years to come, it will be impossible to build ships at anything like the prices that obtained when they could be built at a commercial advantage.

That leads me practically to the argument, which I am sure my right hon. Friend has guessed at long ago, that if you take from any one class of the community, and particularly from this class, more money in Excess Profits Tax than will leave to them the impetus to continue their individual effort to build up and maintain the shipping of this country, then you are doing the nation a disservice. My right hon. Friend knows that there are men in this House and on both sides of the House who out of their own native ingenuity and ability have built up some of the finest mercantile trades, not only between this country and other countries, but between different countries in the world which have been destroyed by the operation of this War. These men have done that because there was the possibility of making not only a return on the capital they invested, but a reputation for high business ability, and if you increase taxation so that they will not feel the inclination to continue those enterprises, why, then, you are doing the nation a disservice. I am not a financier; I look at this purely as the average man in the street, and I think it is a view that must not be forgotten. I do not believe that my right hon. Friend has forgotten it, but he has been tuned up to try and get as much as he can, like everybody else who introduces any proposal on the Front Bench. The House may take it that proposals brought forward by the Government are the maximum that the Government hope to get. They possibly have in their own minds that they may have to give away a certain amount, and I suggest, apart from all the slipshod criticisms that have been urged against the class of men whose ships have been of enormous use to us during the War and whose ships have been manned by men who have shown as much courage as the men who man our Navy, the shipowners should not be penalised in their future enterprise, however much they may be called upon to pay at the present time. I hope that is a thing which my right hon. Friend will keep steadily in front of him. In the race for commercial supremacy after the War we shall want every ounce of brains put into every national enterprise, and, if our mercantile marine is so depleted that we cannot speedily put on to the seas again the engines which will conduct this great commercial enterprise between all parts of the world, then it will be to the detriment of the whole of the people. I hope, therefore, that my right hon. Friend will be willing to make some concession in the Excess Profits Duty.

We have just listened to a speech of sound doctrine, with none of which I am disposed to disagree. My hon. Friend says, quite truly, that there was another line which he described as a cheap form of criticism, of attacking the Government with regard to their proposals. I have a vague recollection that other form has not always been absent from his own style of oratory. I can assure him that I thoroughly realise the importance of everything that he has said about the necessity of giving an incentive to the men who are carrying on the industries of the country and the need that there is to leave that incentive when the War is over, but I also realise that we have got to get revenue, and the whole question which I had to decide was what was the best method not only from the point of view of fairness, but from the point of view of the interests of the country by which that taxation could be raised. I came to the conclusion, as I have already told the House, that this increase of the Excess Profits Duty was the best method open to me, and, therefore, I cannot hold out any hope to my hon. Friend that the Government will be prepared to lower the amount of the duty which we intend to take. The right hon. Gentleman the Member for Islington (Mr. Lough) began by reminding the House that I had said that I was surprised there had not been more outcry about this increase of the Excess Profits Duty. I did not mean the House of Commons. I meant objections by those affected by it. I feel bound to say to the House now that, in my view, that fact is only another proof, of which we have had so many, that all classes in this country, even when they think that they themselves are perhaps unfairly hit, are prepared to recognise the difficulties of the situation and are not prepared to raise personal objections when the needs of the country make demands upon them. My right hon. Friend suggested, and I am sure that we all take the same view, that it would have been much more desirable if we could have put this tax on profits directly arising out of the War. I do not think it is feasible to do that. After all, and this is a point of view which I think the House will recognise, if you look at it from the point of view of fairness, then if I, or any other Member of the House, feel that I am, or that he is, actually enjoying during this War a rather bigger income than before, then whatever the cause may be, in view of the suffering and the hardship of other sections of the community, no one can feel that he is badly hit or that it is an unfair tax.

My hon. Friend the Member for Leith (Mr. Currie) raised a point which I had considered long before I became Chancellor of the Exchequer, namely, whether or not Excess Profits Duty ought to apply to professions as well as to businesses. He has given the real explanation why that is not done. I think on the whole it would be fair to do it. I know two Members in this House who would be affected. The hon. Member who spoke last, and who told us that he was not a financier, perhaps might have found that he would have to pay something if anything of that kind came into effect; and another Member who would have been affected is myself. The salary that I now get would have been excess profits, and I should have had to pay duty on it. I think that would have been perfectly fair, but after close inquiry I have come to the same conclusion as my predecessor—that in order to get revenue from the professional classes you would have to spread your net so wide and make so many assessments from which nothing would come that, as my advisers tell me, we should really not get a revenue in proportion to the expenditure. My hon. Friend the Member for Limehouse (Sir William Pearce) dwelt upon an aspect of this question, the importance of which is evident to everyone. He pointed out that now that the tax is going to be levied by the Treasury there was a danger that the allowances for businesses which are putting in new machinery and everything of that kind to do work which may not continue after the War would not be given. The powers are precisely the same As regards the past, they will still be levied on the principle of the munitions levy, and as regards the tax from 1st January, the Treasury, under the Finance Bill, has precisely the same powers to deal with individual cases as they are dealt with under the munitions levy. I need not tell the House that when we found it necessary to raise this tax to so high a level we fully realised that it must be carried out with reason and with a due regard to all the circumstances of the case. I am convinced from that point of view no additional hardship is imposed in consequence of the change of the machinery by which the tax is levied.

My hon. Friend the Member for Carlisle (Mr. Denman) praised my courage for adding to this tax. That is thoroughly undeserved. I knew perfectly well that there was no tax, for the reason I have given, which would be more popular in the House of Commons than this one. It would have required much more courage to add to the Income Tax or to raise the revenue in some other way. I hope that I should not have lacked the courage if I had thought it necessary. At all events, it has not been for that reason, but because on the whole I thought this was the best method of raising the money. One hon. Gentleman pointed out a great hardship which has been brought to my notice by many different traders, and which is a real disadvantage of this tax. The industries of this country have been largely maintained by the way in which young men with push and ambition gradually come to the front and take the place of some of the older firms which have fallen into more antiquated habits, perhaps because of their success. It is perfectly true that businesses of that kind, which were growing, and which would have grown irrespective of the War, have suffered very severely by the imposition of this levy. It would have been a pleasure if I could have seen any way of meeting that case, and I think it is to some extent met. As the House knows, industries of that kind have had the right to go to a Board of Referees. They found that the only possible way of dealing with the matter was to give a larger amount of interest on new capital than the 6 per cent. allowed under the Excess Profits Tax. I have realised the importance of this, as I have already intimated to the House, and I have promised to make a concession in this respect. I have decided to raise the rate of interest in these cases from 6 to 9 per cent., and I have also decided, in cases of firms which are not public companies that the difference instead of being 1 per cent. as hitherto shall be 2 per cent. I think the feeling which I have is one perhaps which would be shared by the House as a whole. Other things being equal, private firms are to be encouraged, and for that reason I think it should be made 2 per cent. instead of 1 per cent. I do not believe that this concession will cost the Treasury a very great deal of money, but it will do a great deal to remedy the hardships in these particular trades, though I do not pretend for a moment that it will anything like remove them altogether.

The hon. Gentleman who spoke last said that the shipowners were being treated as if they were forty thieves. I have never had that feeling about them. They have done precisely what other people have done. The conditions were there, and, without in any way desiring to rob the nation, they have acted like business men. If they have made big profits, and I think they have, it is not their fault; it is ours for allowing them. I quite realise the importance of that industry. No industry has been more important to this country in the past, and no industry will be more important after the War is over; but they have made very heavy and undue profits during the War, and I am satisfied that the arrangement which I propose is not an unfair arrangement, taking all the facts into consideration. I believe that view is shared by the House of Commons as a whole. I think that I have now dealt with the special points raised in this short Debate.

Would the right hon. Gentleman say something about mineral rights?

6.0 P.M.

The case the hon. Member gave seems, on the face of it, to be one that needs looking into. I do not know how it stands, but I promise to look into it before the Finance Bill comes on. I thought I had made the point about the coming into force of this new duty quite clear. It will apply simply from the 1st January. Supposing the financial year comes partly before the 1st January and partly this year, the Tax will be graduated between the two dates. The part of the year which was liable to pay the 60 per cent. will pay 60 per cent., and the part liable to pay 80 per cent. will pay 80 per cent. That is perfectly clear.

How does the right hon. Gentleman propose to deal with the munition levies? He said in his Budget speech that they would be put on the same level as excess profits. Can he give the House any information on the point?

I think the House understands the position. As from the 1st January there will he no munitions levy collected, and the controlled firms will come in under the same tax as the other firms and will pay the 80 per cent.

Question put, and agreed to.

Resolution reported,

EXCESS PROFITS DUTY (SHIPPING).

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

Resolution agreed to.

Resolutions reported,

DEPRECIATION FUND.

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

REDEMPTION EXPENSES.

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

Ordered, That the consideration of the Eleventh and Twelfth Resolutions be deferred till To-morrow.— [Mr. Baldwin.]