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Commons Chamber

Volume 93: debated on Thursday 24 May 1917

House of Commons

Thursday, May 24, 1917

Private Business

Armstrong, Whitworth, and Company (Railways) Bill,

Chepstow Water Bill,

Sheffield United Gaslight Company Bill,

Read the third time, and passed.

Shops Act, 1912

Copies presented of Orders made by the Councils of the undermentioned local authorities, and confirmed by the Secretary of State for the Home Department:—

City of Chester;

Borough of Huntingdon [by Act]; to lie upon the Table.

Universities (Scotland) Act, 1889 (Ordinance)

Copy presented of University Court Ordinance, No. 54 (Glasgow, No. 17)(Foundation of Marshall Chair of Modern Languages), of the Commissioners under the Universities (Scotland) Act, 1889 [by Act]; to lie upon the Table, and to be printed. [No. 83.]

Oral Answers to Questions

War

British Trade Corporation

asked the Secretary of State for Foreign Affairs whether the charter recently issued to the British Trade Corporation, dealing as it does largely with affairs in foreign countries, was submitted to and approved by the Foreign Office before it was issued; if so, do the Foreign Office accept full responsibility for it as it stands; and, if not, will the Foreign Office take advantage of the promised reconsideration of the charter by the Government in order to have inserted such safeguards as may in the opinion of the Foreign Office be necessary?

The charter was submitted to the Foreign Office, who, in so far as that Department were concerned, saw no reason to suggest any substantial modification of its terms. In regard to the two last parts of the question, the Government, as a whole, is responsible for Government action, and I deprecate any attempt to set up the authority of one Department against another.

asked the Secretary of State for Foreign Affairs the exact relationships which will exist between the Foreign Office at home and our Diplomatic and Consular offices abroad and the British Trade Corporation, and in what respect or to what extent these will differ from the relationships with other British concerns which are interested in affairs in foreign countries, and which may be competing with the British Trade Corporation?

I propose to inform His Majesty's Diplomatic and Consular representatives in foreign countries that the British Trade Corporation is an undertaking for the benefit of British trade which enjoys the confidence of His Majesty's Government, and which should be assisted in proper cases by His Majesty's representatives. Their relationship with the corporation will not differ from that with other British concerns with regard to whose standing, objects, and methods His Majesty's Government are equally satisfied.

Does that mark a departure from the diplomatic policy of Great Britain in the past? Does my Noble Friend suggest that now at last diplomatic representatives of this country abroad are going to do something to further British trade?

I cannot admit that there is any departure. It has always been part of the instructions of British diplomatic representatives to assist British trade wherever it is possible to do so.

Is my Noble Friend really satisfied that these instructions have been carried out?

I am satisfied that they have been carried out as far as it is possible to carry them out by the representatives under existing conditions. My hon. Friend is probably aware that the whole question of the commercial side of our diplomacy is under consideration, and I hope to be able to suggest extensive changes.

Is the Noble Lord aware that in the discussion which took place in the House the other day the Government undertook to give a further discussion on the subject of the British Trade Corporation, and will he assure us that no communications with regard to that corporation will be sent abroad until that further discussion in this House has taken place?

I am afraid I am not quite familiar with what took place in the House; of course, I shall not do anything unfair to the House or to hon. Members.

Do I understand that the same powers may be granted to any British concern?

Any British concern of whose standing, objects, and methods His Majesty's Government are equally well satisfied. There is no intention of giving a special monopoly or a special position to the Trade Corporation.

asked the Under-Secretary of State for Foreign Affairs whether his Department was invited to nominate a member to serve on the committee presided over by Lord Faringdon to inquire into the question of financial facilities for trade; and if the Foreign Office expressed a wish to nominate one of the members on that committee?

The Foreign Office were invited by the Board of Trade to appoint a representative to attend the committee. By a misunderstanding the invitation was, however, received only after the committee had been sitting for some time. The Foreign Office had expressed a desire to be represented on the committee.

asked the Under-Secretary of State for Foreign Affairs whether the Committee appointed to investigate the question of financial facilities for trade consulted the Foreign Office before issuing its Report, and in particular whether the consent of the Foreign Office was obtained in advance to the recommendation in Clause 22 of the Committee's Report that the Foreign Office should place British embassies and legations at the service of the particular institution to be formed upon the recommendation of the Committee; and if the Foreign Office has given its consent to the recommendations above referred to to the institution constituted in accordance with the Royal Charter dated 14th April, 1917?

The answer to the first and second part of this question is in the negative; but the Foreign Office have, since the issue of the Committee's Report, approved the recommendation in Clause 22, subject to certain conditions.

Will the Board of Trade in future be considered when assistance is asked of the Foreign Office by merchants abroad?

Will the Foreign Office consult the Board of Trade. They have no interest in commercial matters?

I am so ignorant as to suppose that the Board of Trade has always been intimately interested in commercial matters.

They are directly interested now that this Corporation has been constituted by the Board of Trade, and it will be in competition with others.

That raises the whole question which I understand to be a matter for debate in this House, and I cannot deal with it by way of question and answer.

Japan

Naval Assistance to Allies

asked the Secretary of State for Foreign Affairs whether, in view of the ignorance that appears to exist in some quarters in this country as to the naval assistance rendered by our Japanese Ally during the War, he is in a position to make any statement on the subject?

The activities of the Japanese Navy have not come to an end with their extensive operations undertaken in the early stage of the War in conjunction with the British Navy, which culminated in the extermination of the German naval forces in the Pacific. The special detachment of several cruisers and destroyers which was despatched to the coast of the Straits Settlement early in 1916 has ever since been, and is, assisting the British Navy in guarding the Indian Ocean east of Colombo, while in the northern Pacific detachments of Japanese cruisers have in the course of last year carried out on several occasions at the instance of the British Government extended cruises, which were of great importance to the Allied cause.

More recently, in view of the development of the naval situation, the two allied Governments deemed it necessary that the operations of the Japanese Navy should be further extended. Accordingly the Imperial Government despatched a considerable force of light craft to the Mediterranean, where they are now cooperating with the naval forces of Great Britain and other Allies. In addition thereto, several new detachments of powerful and fast cruisers have been despatched to assist the British Navy in the protection of shipping in the Indian and South Pacific Oceans.

These services to the Allied cause, gratifying and important as they are in themselves, gain additional value as showing the spirit of everyone of our Allies, and as indicating the greatness of the assistance which we may expect from them in the future.

Questions

Turkey and Bulgaria

asked the Under-Secretary of State for Foreign Affairs what avenues of communication exist be- tween Turkey and Bulgaria and the Allies through which appeal could be made for a separate peace?

The Ottoman and Bulgarian Governments could, if they so desired, make such an appeal either through the Government of any neutral country or by means of properly accredited emissaries in neutral territory.

Food Supplies

Tillage (Ireland)

asked the Chief Secretary for Ireland what steps, if any have been taken to prevent the depletion of Ireland of good labourers necessary for tillage and food production; and whether he will ascertain and represent to the military authorities the necessity of sending William Malone, who enlisted under age without his parents' consent, home to them at Coolcullen, near Bagnalstown, for the necessary tillage work, their other sons being already in the Army, and conscription being illegal in Ireland?

I am informed that William Malone enlisted last year, being then seventeen years four months of age, and on the application of his parents he was sent home, apparently under the condition that he would rejoin his unit when he attained military age on the 22nd March last. I am told that during March he left home and has not returned. There is, speaking generally, no lack of labour in Ireland.

Is the Chief Secretary aware that he was called up by the military authorities, and dared not refuse, and in these circumstances will he have him sent home?

My information is that which I have given to the hon. Member, namely, that Malone left his home during March, and has gone away, and his present address is not known.

Colonial Frozen Meat

asked the Parliamentary Secretary to the Ministry of Food whether he is aware that Colonial frozen meat that is being sold retail at 2s. a lb. can be purchased wholesale at 7½d. a lb.; and, if so, what is the reason for the difference in price?

The figures given by the hon. Member are incorrect. The wholesale prices of Colonial mutton is roughly 9½d. per lb., and Colonial lamb 11d. per lb. Where separate retail prices are quoted for such meat, they vary, according to cuts, from 1s. 3d. to 1s. 6d. for lamb, and from 1s. 2d. to 1s. 6d. for mutton. Returns periodically made to the Board of Trade by the largest retail distributors show that the profits which they make on the price of issue of surplus meat under Government control is 5 to 7½ per cent. It is possible that in certain West End shops the prices quoted represent a larger percentage. All retail meat prices will shortly be brought under control by a schedule which is now being worked out in consultation with experts.

Sugar

asked the Parliamentary Secretary to the Ministry of Food if the scarcity of sugar is largely due to the management of the Government authorities dealing with the same, inasmuch as certain importation of sugar was prohibited by them for some considerable time; will he explain the whole circumstances to the House; and if he will explain why sugar, which is controlled, has increased 170 per cent. since the beginning of the War, whilst tea, which is not similarly controlled, and which is a much more bulky cargo, imported from equally distant ports, has only increased 70 per cent.?

I do not understand what the hon. Member has in mind when he says that certain importation of sugar was prohibited for some considerable time. The importation of all sugars, except under licence from the Sugar Commission, has been prohibited since the 26th October, 1914. There is no ground for suggesting that the Commission have failed to obtain all the sugar for which tonnage was available. No fair comparison can be made between the respective increases in the price of sugar and of tea, as the conditions are wholly different in the two cases. Before the War more than half our supply of sugar came from enemy countries, and this has entirely ceased. The increase in its price during the last twelve months has only been 18 per cent. The sources of supply of tea have until recently been unaffected. Moreover, the duty on sugar has been in- creased by over 600 per cent., while the duty on tea has been increased by only 140 per cent.

Does not my hon. Friend think one of the factors in the situation is the moderation and loyalty of those who are concerned in the production, retailing, and distribution of tea?

Is all this due to the mismanagement of Julius Rungen, the indispensable manager?

No. I have already replied to a question about that gentleman, in which I pointed out that there is no reason for the aspersions upon his character which are conveyed in the question.

Milk

asked the Parliamentary Secretary to the Ministry of Food whether, in view of the high price of milk and the desirability of securing ample supplies for children, he proposes to take any steps to prohibit the use of milk in the manufacture of ice-cream?

asked the Parliamentary Secretary to the Ministry of Food whether his attention has been called to the probable shortage of milk during the summer months; and whether he proposes to issue any Orders restricting the use of milk for ice-cream and the use of cream for fruit during the coming months?

An Order is about to be issued to prohibit the sale of cream for consumption as such, save under licence for special requirements. I am not aware of the extent to which milk is used for the manufacture of ice-cream, but I am informed that the quantity is not sufficient to justify its special prohibition.

I am not quite sure to what extent cream enters into the composition of ice-cream.

My question referred to ice-cream, and the hon. and gallant Gentleman has given me an answer about cream.

The hon. Member refers to milk as a constituent of ice-cream. He may be right, but I have been unable to discover to what extent milk is used for this purpose.

Has the hon. and gallant Gentleman caused a serious inquiry to be made, since a question was put some weeks ago by the hon. member for Dartford; and will he make an inquiry as to the consumption of milk in London alone, and whether it goes into thousands of gallons?

A further inquiry is being made into the matter, but as at present advised the proportion of the home milk supply devoted to this purpose appears to be infinitesimal.

I do not like to prophesy upon this point, but in view of the extremely satisfactory weather during the last fortnight I think I can confidently say the prospects are very hopeful.

Ministry of Food

asked whether any person directly or indirectly connected, paid or unpaid, with the Ministry of Food has any interest, directly or through the medium of nominees, in any trading concern, company, or undertaking, British or foreign, which may be directly or indirectly affected by market fluctuations occasioned by food regulations or any other cause attributable to the action of the Ministry of Food?

The Food Controller, in the public interest, is constantly availing himself of the services and advice of experts in all trades connected with the supply of food. If the hon. Member intends to suggest that any person directly or indirectly connected with the Ministry of Food is endeavouring to use his position for the purpose of furthering his own private financial interests, I can only say that it is a libellous innuendo, and I challenge him to make a statement to this effect outside the protection of this House.

Is the hon. Member aware that by the last published report the present Food Controller is the owner of 275,000 shares in the International Tea Stores, and if this is not the case, will the hon. Gentleman please state by what contract and by what method the Food Controller got rid of his interest, and who are his nominees, or who are the purchasers?

I can only repeat that the hon. Member has no right whatever to make such an accusation or innuendo within the walls of this House, where he knows that he is protected from legal proceedings. If he thinks that he has any basis for such allegations, let him make them freely outside this House, and they will be dealt with as they deserve.

Is the hon. Member aware that throughout this country there is a feeling that the market fluctuations are governed by regulations issued by the Food Controller. This feeling is very strong, and is there any reason why I may not ask the question which I put down whether any person directly or indirectly connected with the Food Controller is the holder of any shares in any company likely to be affected by these regulations? Have I not a perfect right to rise in my place and ask that?

I wish to ask your ruling, Mr. Speaker, on this point. It has become a practice of the Front Bench in replying to a question, instead of giving a reply to the question on the Paper, to add to it some menace or insult. I ask you whether the Member who puts the question has a right to reply in such terms, or if not, will you do your best to prevent that habit growing on the Front Bench?

It depends very much upon the question asked. If hon. Members would exercise a little more caution and a little more consideration for those who are attacked, they would not get the answers they do.

Am I not in order in rising from my seat in this House to exercise caution for the protection of the public, as the public, just as much as I, have to exercise caution in regard to an individual?

Certainly. But the hon. Member must also remember that under the protection of this House he has the opportunity of making charges against perfectly innocent people which may turn out to be quite unfounded. He should be very cautious not to do that.

I beg to point out that it was not a charge I made, but a question I asked.

If it were a direct charge it would be better. To make indirect charges by way of question is even worse.

May I directly charge the Department with the fact that the present Food Controller was holding 275,000 shares in the International Tea Stores?

The hon. Member has already made that charge, and he can now make it outside.

Fish

asked what measures are being taken, so far as regards the West Coast of Ireland, to prevent loss of fish owing to occasional large catches, inadequate rapid transit for fresh fish, and unwillingness of curers to invest in fish under restrictions as to export?

The Food Controller has appointed a Committee to deal with stocks of cured fish. The work of the Committee will extend to the West Coast of Ireland.

Maximum Prices

asked the Prime Minister whether his attention has been called to the resolution passed at the labour meetings at Cardiff and Hull on the 12th May calling on the Government to control the price of all food essentials; whether it is the intention of the Government to take this course; and, if not, for what reason they refrain from doing so?

I have been asked to reply. The attention of the Ministry of Food has been called to the resolution referred to. The Government do not at present intend to adopt the course suggested. As I have already indicated, the fixing of maximum prices requires great caution and is apt to produce economic effects which are not in the interests of the consumer.

May I ask the Prime Minister whether, when I ask him a question on a point of policy, he would pay this House, if not myself, the courtesy of replying, so that I may put a supplementary on it?

I can assure the hon. Member there is no want of courtesy. The universal practice has been that when questions are put to the Leader of the House, for which he has to take the answer from a Department, the Department is asked to answer.

This is a question where I ask him to bring pressure, not to consult a Department, and to insist that they shall control the food prices of this country at the present moment.

I should like to have this point cleared up, as I had the same experience yesterday in regard to the Leader of the House. I asked the Leader of the House a question yesterday about policy, which was answered by another Minister. It was not an administrative question at all, and only the Cabinet, with the consent of the House, could carry out the policy. I do not complain if it is for the convenience of the right hon. Gentleman, but I do think that on questions of policy the Leader of the House, in the absence of the Prime Minister, should answer or notify the Member.

The point put by my hon. Friend is a reasonable one. I remember the question. It was about increased payment to soldiers, and that seemed to me a question primarily for the War Office.

Agricultural Labour

asked the Prime Minister whether he is in a position to announce what practical steps the Government intend to take to provide the additional labour staff necessary to carry out the programme announced for the arable cultivation of an additional 3,000,000 acres now under grass as well as to put the existing arable area in such a state of cultivation as will render it capable of producing at least normal crops?

The PARLIAMENTARY SECRETARY to the BOARD of AGRICULTURE (Sir R. Winfrey) rose—

On a point of Order. This question raises a question of policy. Is it possible that an Under-Secretary of the Board of Agriculture can be any guide whatever on this matter?

I am not the authority on these matters, but I should have thought that the person to whom the ques- tion should be addressed would be the representative of the Department in charge of the matter.

May I direct your attention to the fact that the President of the Board of Agriculture is not even a Member of the Cabinet, and therefore this answer is being given by the deputy of a deputy?

These constant interruptions delay the progress of the business of the House.

That may be, but they are due to the unconstitutional action of the Government.

The realisation of the plough programme for 1918 must depend upon the extent to which the Government can supply additional men and horses for agricultural service. It is also conditioned by the supply of additional labour-saving machinery according to the plans prepared by the Food Production Department of the Board of Agriculture, and lastly on the degree to which the farmers of the country co-operate in the movement by making the best use of the comparatively unskilled labour placed at their disposal.

Admitting that it is partly a question of machinery, has there been any addition made to the agricultural labour of the country since the Prime Minister's statement in the Guildhall on the question of increased supply?

In the shape of labour? Is it not a fact that there are 20,000 fewer men than when the Prime Minister spoke?

The answer which I gave yesterday showed that of the 40,000 soldiers placed on the land 16,000 had been recalled to the Colours.

German Prisoners' Rations

asked the Parliamentary Secretary to the Ministry of Food the average increase in prices in the large towns in this country over the pre-war prices of the following articles, namely, eggs, cheese, butter, milk, and the commoner varieties of fruit and vegetables; and whether, in view of the high prices and scarcity of these articles, he will, on behalf of the Ministry of Food, represent to the War Office the desira- bility of forbidding the supply of these articles to German prisoners in this country?

I will circulate the answer in the OFFICIAL REPORT.—[ See Written, Answers. ]

Will my hon. Friend answer the latter part of the question, whether in view of the high prices and scarcity of these articles, he will, on behalf of the Ministry of Food, represent to the War Office the desirability of forbidding the supply of these articles to German prisoners in this country?

The dietary of German prisoners was recently revised by the Army Council with the approval of the Food Controller, and it is not proposed to interfere with it. Potatoes are excluded from the dietary. In the case of all the articles specified except cheese and potatoes the increase of price is less than the average for foodstuffs as a whole. I think that if the hon. and learned Member were to see the present dietary of these prisoners he would be quite satisfied.

Is there enough milk, eggs, butter, and cheese for our own people in the first instance, before supplying the German prisoners?

I have no reason to doubt that there is not in any case a large proportion of these commodities being furnished to German prisoners, and the other persons the hon. Member has mentioned.

asked the Parliamentary Secretary to the Ministry of Food what he considers a fair and just ration for a man engaged in manual labour or for a clerical or sedentary worker; and how this scale compares with that for German prisoners of war, interned aliens, and conscientious objectors?

The ration for a man doing an average day's manual work should provide 3,400 calories or units of energy per day. This can be secured in a variety of ways by combining different kinds of food. As a general rule, bread and meat together provide about 60 per cent. of the required amount. The remaining 40 per cent. is provided by other foods, such as vegetables, dairy products, and sugar. A man engaged on heavy manual work may require food yielding 4,000 to 4,500 calories per day. For a man doing clerical or seden- tary work a ration providing 2,700 calories is usually sufficient. The rations of German prisoners of war, interned aliens, and conscientious objectors are not controlled by the Ministry of Food, but are adjusted according to the character of the work performed.

Maize

Yes, Sir; but, as under the directions of the Wheat Commission all future supplies of maize will be ear-marked for conversion into flour for human consumption, and, in exceptional cases, for horses, it is unlikely that it will be available for this purpose.

As to the conviction the other day, was the magistrate correctly reported as having said—

With respect, Sir, the hon. Gentleman is very likely to know whether the conviction was based upon wheat and not upon maize.

I can only reply that the conviction was based upon wheat and not upon maize.

Let me point out—[HON. MEMBERS: "Order!"]—I hope the hon. Gentleman will not forget—

The hon. Member is not entitled to speak on the question. He can make his speech at another time.

Old Age Pensions

asked the Chief Secretary for Ireland if the Local Government Board for Ireland have adopted the policy of refusing old age pensions in all cases in which legal evidence of age cannot be given; on what grounds they refuse the pension voted by the Gurteen Pension Sub-Committee, county Sligo, to Mary O'Grady, certified by the parish priest to have been married in February, 1868, certified by Bartley Carr, witness of the marriage, to have been then twenty-four years of age, and known to be older than her husband, who is getting an old age pension; whether the Board are aware that the eviction of her parents in her childhood accounts for the absence of her name from Census returns; and whether an inspector will be sent to interview her and the case reconsidered?

If by "legal" evidence the hon. Member means documentary evience from official records, the reply is in the negative. The Local Government Board accept any evidence which, in their opinion, is sufficient to prove that a claimant is seventy years of age. The case of Mary O'Grady has not been before the Board since the 21st September last, on which date there was no evidence that she was seventy years of age. The marriage register records that she was of "full age," and there is no evidence in support of the statement that she was then twenty-four years old. As, according to the record of her age at marriage, the claimant is now seventy, it is open to her to make another claim if she has not already done so.

If she makes another claim, will an inspector be sent to form an opinion as to her age?

I would not like to ask the Local Government Board inspector to be so ungallant as that. I gather from the answer which the Local Government Board have supplied me that apparently there is evidence upon the record of her marriage which tends to support the suggestion that she is now seventy years old.

asked the Chief Secretary for Ireland the reason why Catherine Connolly, of Carrickmaquirk, Moyne, county Longford, was refused the old age pension granted to her by the Barlahy Pension Sub-Committee; whether this is a widow woman whose sole support is a few hens and a goat; whether the evidence of Mrs. Mary Morris, of Camma, aged eighty years, who knew this woman all her life, will be accepted, as her age cannot be traced in the parish register; and will he undertake to ask the Local Government Board to send one of their inspectors specially to inquire into and report on this case?

This claim was disallowed on the 2nd November last, on the ground that the claimant failed to show that she was seventy years of age. The Local Government Board have no information as to her means, investigation on this point being unnecessary in view of the failure to fulfil the statutory condition as to age. The Board having given their decision cannot take any further action.

As there is no register to depend upon to provide the statutory grounds for granting a pension, will the evidence of the elder woman be allowed at an inquiry by the Local Government Board.

I cannot say what evidence the Local Government Board will accept. They are dealing with these cases, as the hon. Member knows, practically every week, and they try to arrive at a correct decision as to whether the age of seventy has been reached.

Will the Local Government Board send an inspector to inquire into this matter?

I cannot promise that an inspector will be sent to investigate every one of these claims where the claimant to a pension fails to establish that he or she is seventy years of age.

asked the Chief Secretary for Ireland why the increased old age pension of 2s. 6d. per week was not granted to Margaret Farrell, of Brocklagh, Drumlish, now nearly eighty years of age; whether this woman has neither friend nor relative to aid her, and depends on the kindness of some neighbours to help her to live on the 5s. a week old age pension she has since the Pensions Act came into operation; and whether, as the price of all foodstuffs has increased so much, he will see that this woman is now given the additional 2s. 6d.?

This application was disallowed on the ground that the applicant's means exceeded 12s. 6d. a week. I am informed that the statement contained in the second part of the question is not correct. The Local Government Board cannot reconsider the case unless a fresh application is made, and there appears to be no ground for such an application.

If a fresh application is made, I gather from the right hon. Gentleman's answer that it will be considered?

County Cavan Magistracy

asked the Chief Secretary for Ireland if he will now specify the conduct for which the English Government in Ireland have deprived Mr. Philip Baxter, of Ballinagh, county Cavan, of the office of justice of the peace, to which he had been duly elected by his neighbours who know him best; and whether the conduct was any other than the promotion of a patriotic purpose with which those neighbours fully concur?

The right hon. Gentleman then refused to specify the conduct for which Mr. Baxter had been so treated. Will he be good enough to specify the conduct as requested in the question on the Paper?

The answer I gave stated that his conduct was inconsistent with the oath of allegiance and the judicial oath.

May I ask whether his conduct is anything but the promotion of a patriotic purpose with which all his neighbours agree?

I do not know what the views of his neighbours are, but I am quite sure that the Lord Chancellor did not remove this man on the ground of patriotism.

Military Service

Conscientious Objectors

asked the Secretary to the Local Government Board whether he will grant a Return of the number of conscientious objectors who have been granted absolute exemption, exemption conditional on doing work of national importance to the satisfaction of the local tribunal, and exemption conditional on doing work of national importance to the satisfaction of the Pelham Committee, respectively; and, if he has not sufficient material available for making such a Return, whether he will request the local tribunals to furnish him with the necessary material?

I do not think a return is necessary, but I may inform the hon. Member that from statistics which have been received from over three-fourths of the tribunals it is estimated that in England and Wales some 400 men have been given absolute exemption on conscientious grounds by the whole of the tribunals, and that 4,200 have been given other exemption from military service, in nearly all cases on the condition that they undertake work of national importance. It lies with the tribunal to decide, in cases in which they are prepared to give exemption from military service on condition that the man takes up work of national importance, whether the case shall be referred to the Committee on Work of National Importance for this purpose. I am informed that 1,714 men who have been referred by tribunals to the Committee are now engaged on work of national importance in accordance with the recommendations of the Committee. These men are included in the total of 4,200 exemptions already mentioned.

Does the number of absolute exemptions include those which have been subsequently reviewed and varied at the request of the military representative?

Drillers (Rosyth Naval Dock)

asked the First Lord of the Admiralty whether he is aware that a number of drillers employed on urgent work at Rosyth have been served with notices and taken into the Army; and whether, in view of the fact that drilling is included in the schedule of protected occupations and that there is at present a dearth of this class of skilled workmen, he will take action to secure the return to their work of the men conscripted and prevent the conscription of any more?

A number of workmen have been released from Rosyth Dockyard, in order that they may be available for military service, on suitable substitutes being provided, in accordance with general arrangements made by the War Office in December last. Amongst the men so released there are some who have been previously employed as drillers. Representations in the matter have already been received from my hon. Friend, and, in consequence, steps have been taken to have the cases reviewed with a view to securing strict compliance with the general arrangement now made by the Government for protecting shipyard workmen from recruitment for military service.

Is the right hon. Gentleman aware that at the time these drillers were being released for the Army the Admiralty was asking our office for drillers for Chatham Dockyard?

I am afraid the hon. Member is not quite seized of my answer. We want these men. It may very well be that we have asked him to assist us in getting them. In this case, on his representation, the question of their release is now under review so that the arrangement now made may be strictly complied with.

Fit Men

asked the Prime Minister whether he will postpone the recall of all men under the Military Service (Review of Exceptions) Act until they have been refused work of national importance as fit men; and whether he will consider the advisability of this work being undertaken by Mr. Neville Chamberlain?

The answer to both parts of the question is in the negative.

Defence of the Realm Act (Ireland)

asked the Chief Secretary for Ireland if he has received protests from Belfast about the arrest of Cathal O'Shannon and others and their detention in prison without trial; and what action he has taken in the matter?

The persons other than Cathal Shannon, to whom I suppose the question to refer, were arrested under Defence of the Realm Regulations, but, upon further investigation, were released. Cathal Shannon was brought to trial upon a charge under the Defence of the Realm Regulations, and acquitted.

Petrol Supply (Athletic Meetings, Ireland)

asked (1) the Chief Secretary for Ireland if his attention has been directed to the growing number of athletic and Gaelic meetings which are being held on Sundays in many parts of Ulster; if numbers of young men proceed to these meetings by motor conveyances; that they frequently travel through districts thickly inhabited by Protestants; and that going through these districts they display on their motors the flag of the Irish republic and cheer and shout in a menacing manner, in many cases to the disquiet of people engaged in divine worship; in view of the peace of the localities in question, will he take steps to have this conduct, especially on the Sabbath day, to cease; (2) asked the Minister of Munitions if he is aware, in view of the shortage of petrol, that hundreds of motor cars are being used over Ireland each Sunday for the conveyance of thousands of young men of military age who indulge in joy rides to attend athletic and Gaelic sports; that these sports are largely organised for the purpose of spreading seditious teaching, and are a menace and source of disquiet to the peaceful inhabitants; and will he see that this use of petrol is stopped and the supply diverted to purposes of national importance?

I will answer these questions together. The Regulations on the supply of petrol are being revised by the Petrol Supply Committee. As to the questions of police which are involved, no complaints have reached the Inspector-General, Royal Irish Constabulary. Any which are forwarded to him will be dealt with.

Is the right hon. Gentleman aware that these meetings are being held in increasing numbers, and that they are published in the Press, and are well known to the police, and does he think this is the proper way to use petrol in the present circumstances?

The attention of the Petrol Supply Committee has been called to this matter, and they are revising their Regulations. There are no local regulations peculiar to Ireland with regard to the use of petrol, which is controlled by one special committee for the whole of the United Kingdom.

Fishing Industry (Ireland)

asked the Chief Secretary for Ireland how much out of the £3,000 from the Development Fund granted towards the promotion of the fishing industry was given to the Aran Isles Co-operative Fishing Society; how much of the £3,818 lent to that society for motor boats was really for fishing gear, nets, etc.; and how much of this loan has been repaid, with the date and amount of the last instalment in repayment?

As I have already informed the hon. Member, the question of assisting the fisheries of the Aran Islands is a matter coming within the province of the Congested Districts Board, who have lent £3,818 to fishermen resident on the Aran Isles for the purchase and equipment of motor boats. Of this sum £1,129 was applied to the purchase of nets and other fishing gear for motor boats; £1,027 has been repaid; and the last instalment, which was received on the 23rd instant, was £38 11s. 5d.

Munitions

Brewing Restrictions

asked the Minister of Munitions on what data and on whose report the maximum barrelage of 10,000,000 barrels of beer was fixed; whether the Central Control Board reported on the matter and in favour of the reduction; and whether the leading brewers and the Army canteen authorities were consulted?

My right hon. Friend the Chancellor of the Exchequer is dealing with this question in reply to another question which the hon. Member has on the Order Paper.

Carpenters Discharged, Dalmuir

asked the Minister of Munitions if the firm of Beardmore's, of Dalmuir, have recently discharged a number of carpenters, a number of whom are over military age; that their places were filled by munition volunteer workers sent from distant towns, many of them being of military age; that this practice obtains in many controlled establishments; and whether, in view of the waste of public money caused thereby, he will put a stop to this practice?

Since 8th May a certain number of joiners and shipwrights have been discharged by this firm owing to completion of contracts. No other joiners or shipwrights have been engaged by the firm since that date. If the hon. Member will give me specific details of any cases of the kind referred to in the third part of the question, I shall be glad to have careful inquiries made.

Is the hon. Gentleman aware that this very firm is asking permission for the same class of labour to be diluted and yet is discharging men?

I shall be glad to make inquiries if my hon. Friend will give me particulars.

Labour Troubles

asked the Minister of Munitions whether the present labour troubles are due to any disagreement between employers and their work-people or to disagreement between the workers and the Government?

The recent labour troubles were attributed by the strike leaders to the abolition by the Government of the trade card scheme of exemption from military service, and to the Clause of the Munitions of War (Amendment) Bill dealing with dilution of labour on private work. The restraints imposed on labour by the Munitions of War Acts were to some extent contributing factors. The whole problem has been receiving my right hon. Friend's most serious consideration, and he will be glad to consider any suggestions for securing a just settlement of these difficulties.

asked the Minister of Munitions whether the Federation of British Industries or the Employers' Advisory Committee have been consulted in connection with the existing strikes and labour unrest; and, if not, will they be consulted with a view to a satisfactory solution?

Yes, Sir; in April, my right hon. Friend asked the Advisory Committee representing certain employers' organisations, including the Federation of British Industries, to consider the question of industrial unrest, and their report was sent to him on the 21st May. My right hon. Friend also proposes to consult the Advisory Committee on the subject of the Munitions of War Bill.

Henbury Factory Discontinued

asked the Minister of Munitions whether the factory at Henbury is being shut down; whether this is due to an arrangement made whereby America is supplying certain goods; whether many men, including silver badge men, have already received notices of dismissal; and whether preference could be given to all such men instead of to men employed who are fit and who have not so far served in the Army?

The building of the Henbury factory is being discontinued as not absolutely necessary now that supplies from the United States are assured.

It was decided in October of last year to construct a building with the object of securing a large home output of a certain powder for which we had previously been dependent on overseas supplies, and it was ultimately decided to erect it at Henbury. In view, however, of the altered circumstances, and of the large saving in tonnage obtained by importing the finished product instead of the raw materials, as well as by the saving of the use of material and labour, it was decided by the War Cabinet, after careful consideration, that its continuance was inadvisable.

Very few notices of dismissals have yet been served, and due precautions are being taken to obviate the hardships that might result in the discharge of large numbers of men. It is understood that all fit men who are not required elsewhere, and who are liable for military service, have received calling-up notices. Preference is being given to discharged soldiers to continue in work as long as possible, and every effort is being made to find suitable alternative employment for them as soon as possible.

Does my hon. Friend say our suplies from the United States are assured, bearing in mind the operations of German submarines?

There is an actual saving in tonnage by the alteration which has been proposed.

What steps have been taken to restore that large area of land to its former owners?

Of course, the stoppage of work is only just commencing. All those matters will be taken into consideration.

I have already said the raw material and the finished product have to be brought from abroad, and the finished product is less in amount than the raw material, so we have reduced the risk.

Canal Transport

asked the Minister of Munitions whether any use is made of water transport between Birmingham and Woolwich for transporting munitions of any kind; and whether he will have inquiry made with a view to the greater utilisation of the canal facilities which exist?

The canals between Birmingham and the Thames are being used for the transport of munitions, and the question of the greater utilisation of canal facilities which exist is already the subject of inquiry by the Canal Control Committee.

Agricultural Shows

asked the Minister of Munitions whether he is aware that permission has been granted to hold the Herefordshire and Worcestershire Agricultural Show, but has been refused in the case of the Penistone Agricultural Show; and whether he will state the precise grounds for this differential treatment?

Permission was granted on 10th January, 1917, to hold the Herefordshire and Worcestershire Agricultural Show in June next before the new Regulation under the Defence of the Realm Regulations, affecting these shows, was made. In view of the new Regulation, and after consultation with the Board of Agriculture, sanction has now been withdrawn.

Labour Regulations Department

asked the Prime Minister who is director of the trades disputes section of the Ministry of Munitions; and what his qualifications are for this post?

My right hon. Friend has asked me to reply to this question. I assume that my hon. Friend intends to refer to Mr. Wolff, the assistant general secretary in charge of the Labour Regulations Department of the Ministry. Mr. Wolff entered the Board of Trade in 1908 by open competition, and is a principal officer in the Labour Exchanges and Unemployment Insurance Department. He was a member of Sir Edward Ward's Committee on the Employment of Discharged Soldiers and Sailors, and acted as a member or as secretary of a number of other committees of inquiry. In April, 1915, he was seconded for service as secretary to the Munitions of War Committee. From the date of the establishment of the Ministry of Munitions he has been engaged upon the work relating to trade disputes and the other regulative provisions of the Munitions of War Acts.

Does the hon. Gentleman not think that the Director of the Trades Dispute Section should be some man who is not a Civil servant with that kind of training, but someone who understands trades and disputes.

I know no other man with a closer experience of conditions of employment and industry in this country such as are directly connected with the work he has to do than this particular gentleman.

In view of the serious position the country was placed in at the end of last week, will the hon. Gentleman consider the advisability of appointing a small Committee of Members of this House to consider the men's grievances and the difficulties that arise in connection with the Ministry of Munitions?

Can the hon. Gentleman say whether any trade unions or their representatives who have been brought into contact with Mr. Wolff have ever made any complaint, or had cause to complain, or have not been treated with the greatest civility and good service?

I have repeatedly had expressions of opinion from leaders of trade unions of their appreciation of Mr. Wolff's knowledge, sympathy, and common sense.

Are we to understand that the recent disputes are in no way due to this gentleman's qualifications?

They had not the slightest relation, and the influence exerted by Mr. Wolff did a good deal to reduce the gravity of those disturbances.

Questions

Troopship "Ballarat."

asked the Secretary to the Admiralty whether the pay of the officers and crew of the troopship "Ballarat," which was torpedoed on 25th April, was stopped as from that date until such time as they get another ship; if he is aware that some of these men lost money and property in excess of the amount covered by insurance; and whether he proposes to make good these losses?

It is not correct, I am advised, to say that the pay of officers and crew was stopped as from the date of torpedoing. I understand the crew were paid off on their arrival in London. That is, of course, precisely what would have happened if the ship had not been torpedoed.

As regards the second part of the question, I understand that the officers and crew have been granted Admiralty certificates which enable them to claim for the loss of their effects up to the maximum allowed for their rating, irrespective of whether personal policies had been taken out.

Mesopotamia Commission (Report)

asked the Prime Minister whether he has yet received the Report of the Mesopotamia Commission; and whether he will have it presented in dummy before the rising of the House for the Whitsuntide recess, so that it can be printed during the succeeding fortnight?

The Report has been received, and is at present receiving careful consideration. I do not think it will be possible to have it presented before the Whitsuntide recess.

In view of the fact that it will take a fortnight to print the Report, could not we have it presented in dummy before the Recess, so that the printing can be proceeded with?

I really think that it would be better that some opportunity should be given for the Government, which is responsible for the conduct of the War, to consider this Report before it is published,

Can the right hon. Gentleman say whether the Government, which is responsible for the War, will not also consider whether any advantage results to this country, or its officers, civil or military, by the publication of this Report in any manner whatever?

Government of Ireland

Proposed Convention

asked the Prime Minister whether he will state the basis of representation for the proposed Convention of Irishmen to arrange a settlement of the future relations of their country with Great Britain; and whether he will arrange facilities for its discussion on the Motion for Adjournment on Friday next?

asked the Prime Minister (1) if he will say, in view of the fact that the Southern Unionists of Ireland are wholly unrepresented in Parliament, are widely scattered through three provinces, and are of unascertained numbers, by what method it is proposed to determine the proportion of representation they should have in the Convention and how their representatives are to be chosen; and if he will say how the proportionate strength in Ireland of the Nationalist and Sinn Fein parties, respectively, is to be determined, with a view to their fair representation in the Convention and by what method is the election of their respective representatives to be conducted; (2) whether the non-Episcopal churches in Ireland other than the Presbyterian churches are to be represented in the Convention; if he will say in what proportion to the total number of members in the Convention will be the representatives of the local governing bodies, the churches, the trade unions, the commercial interests, and the educational interests, respectively; and, in view of the importance of giving the Convention an accurately representative character and of avoiding entrusting a great constitutional work to a mob of individuals charged with no precise relative authority one to the other, if he will say how it is proposed to determine the amount of representation to which each of these interests is entitled and by what method their representatives are to be selected?

It is not possible today to give any details as to the composition of the Convention.

Will the right hon. Gentleman inform the House when information will be available?

The House will understand that it is not very easy to compose a Convention of this kind. The Government have been engaged on it constantly, and we have a hope—I cannot say more than that—that it may be possible to give some details to-morrow.

Will the right hon. Gentleman bear in mind that many Members are anxious that the Government should have ample time to consider this most important question?

asked whether the new constituencies in Great Britain to be formed under the Representation of the People Bill will be given an opportunity of expressing an opinion on any scheme of Irish government that may be produced by the Convention before legislation is finally passed to give effect to it, having regard to the fact that the Government of Ireland is a matter of Imperial as well as of Irish concern?

If the Convention should arrive at substantial agreement the Government would not think it right to delay action until there had been a General Election.

Can the Government say approximately what they mean by substantial agreement?

That would be rather difficult to define. It must be left to the common sense of the Government.

asked the Prime Minister whether his statement that, in the event of the intended Irish Convention arriving at substantial agreement as to the character and scope of an Irish Constitution, the Government will introduce legislation to give effect to such substantial agreement, is to be taken as in any degree affecting his previous pledge that under no circumstances shall Ulster be coerced into submitting to the jurisdiction of an Irish Parliament?

There could not be substantial agreement in the circumstances suggested by my hon. Friend's question.

asked whether the terms of the proposed reference to the Irish Convention will admit of schemes for the self-government of Ireland without any limitation or only schemes for the self-government of Ireland within the Empire?

The Prime Minister mentioned that it must be a question of self-government within the Empire.

asked whether the hon. Member for South Longford is one of those to whom he has issued invitations to attend the Irish Partition Convention; and, if so, whether the invitation has been accepted?

May I put Question No. 49, which is addressed to the Prime Minister, who referred me to the Irish Office? Whether the right hon. Gentleman is aware the majority of the Irish race at home and abroad considered that the state of their Motherland since its occupation by the English always justified resistance to that rule; and whether, as they only differed with their kinsmen at home who fought in Easter week, 1916, as to the opportune moment of attempting to throw it off, he will, as a condition precedent to the summoning of a Peace Conference between the two nations styled a Convention of Irishmen, hand over to the charge of their own countrymen or treat as prisoners of war those men and women now in English prisons and forced to herd with moral and other criminals because of their action in Easter week of last year? I want an answer, so that I may raise the subject on the Motion for Adjournment should the reply not prove to be satisfactory.

This question was bracketed with another question which was not asked. I will now answer the hon. Gentleman. I am not able at present to add anything to the answer I have already given.

As the matter referred to in the question is of vital importance, I shall take the opportunity of calling attention to the subject on the Adjournment.

Questions

United States (British Aeroplanes)

asked the Prime Minister whether the Government is prepared to loan or sell to the American Government one or more of the latest types of our aeroplanes for the purpose of facilitating and speeding up the production of a great fleet by our American Allies?

I have been asked to answer this question. It would not, I think, be desirable to give any detailed information in regard to measures of co-operation in aeronautical matters between this country and the United States, but the hon. Member may rest assured that the question is one on which the two Governments are in close cosultation.

This is again a question of policy—whether the right hon. Gentleman the Leader of the House does not think that the loaning of one or two of our best machines and of our best men to the American Government at the present minute would do more to win the War than all the Debates in this House since August, 1914?

Obviously the policy of the Government is to co-operate in every possible way with the Government of the United States. The details of the co-operation must be a question for the Departments concerned.

Is the right hon. Gentleman aware that at the present moment we have absolutely declined to lend the Americans one machine?

County and Borough Police Forces

asked the Prime Minister whether he will consider the advisability of appointing a committee of Members of this House to inquire into and report upon the grievances which exist in the city, county, and borough police forces throughout this country?

My right hon. Friend has asked me to reply to this question. I have no reason to think there is any need for such an inquiry. The War has thrown on the police much additional work, and they share with the rest of the community the hardships arising from the War; but they are, with few exceptions, bearing their part in the War cheerfully, and I have reason to know that the local authorities whom they serve have generally treated them liberally in the matter of increased remuneration.

Austrian and Hungarian Prisoners of War

asked the Prime Minister whether the position of British prisoners of war in Austria and Hungary has recenty been materially improved by the direct action of the Austrian Emperor; and, if so, whether corresponding action will be taken by the British Government with regard to Austrian and Hungarian prisoners of war in Great Britain?

The Emperor of Austria promulgated an edict on 22nd December extending to prisoners of war the provisions of an amnesty which he had proclaimed on his accession to the throne, and certain further acts of clemency towards prisoners were announced by the Austro-Hungarian Government during the month of March. The number of British prisoners of war who would benefit by such action would be very small. There is one Austrian prisoner only, so far as is known, who would be affected by reciprocal action on the part of His Majesty's Government.

Will that one prisoner, whoever who is, have the benefit of reciprocal action?

Will the right hon. Gentleman bring all such cases before the sympathetic consideration of the Colonial Office?

National Service (Agriculture)

asked whether it is now recognised by His Majesty's Government that no supply of male labour for agriculture in England and Wales can be looked for from the National Service Department?

When do the Government propose to redeem their pledge to make National Service compulsory?

The only undertaking was as to what would be done if it was found that voluntary service had absolutely failed. That has not arisen yet.

Enlistment (Voluntary)

asked whether His Majesty's Government will make an announcement that the invitation to men between forty-one and fifty voluntarily to attest is not addressed to such men if engaged in agriculture?

asked the Under-Secretary of State for War whether he is yet in a position to state what effect the raising of the age for voluntary enlistment to fifty will have on the Volunteer Force; and whether members of that force are expected to offer themselves for enlistment in the Regular Army?

asked whether men between forty-one and fifty years of age who volunteer for military service under the new group regulations will be required to offer themselves for general service or be allowed to register for a particular service or unit and await vacancies, if it is necessary to do so?

asked whether a man who attested under the Derby scheme and who attained the age of forty-one before being called up is now, in view of the recent change of age for voluntary recruiting, to be deemed to be attested under the new scheme?

The appeal for men over forty-one is not addressed to any class in particular. It is to give an opportunity to men over forty-one who are anxious to serve to do so, the present limitation of age for enlistment preventing the Army from taking them.

These men will not be attested and called up in groups and will have no right of appeal to tribunals, it being understood that no man should offer himself for enlistment unless he is prepared within twenty-eight days to join for service.

Men who come under Category "A" when medically examined will be taken for general service. Other men not of so high a category will be taken for other branches of the Service.

The men required are those with a good knowledge of horses, drivers of motor cars, men with clerical and accountants' experience; also men with police experience and domestic service experience. Men are also urgently required for inland transport work.

With regard to the Volunteer Force, it is recognised what excellent service these men have given and are giving, and it is not desired in any way to impair their efficiency; but if there are men who, when they joined the Volunteer Force, were unable to give the whole of their service and now find that they can give full-time service to the State, they will be gladly accepted.

In answer to the particular question asked by the Member for Leith Burghs, men who attained the age of forty-one before being called are not deemed to be posted under the new scheme, but equally with others are invited, if possible, to join now.

Have the Government formed an estimate of the number of men likely to be trained?

In regard to the earlier part of the answer, are we to understand that this invitation to men between forty-one and fifty to enlist has been directly put before those engaged in agriculture as well as to other people in this country; and, if so, is not that bound to disturb the already inadequate supply for agriculture?

I do not think so. The appeal to men over forty-one is not addressed to any class in particular.

Temperance (Scotland) Act

asked the Prime Minister whether he will take immediate steps to bring into operation forthwith the Temperance (Scotland) Act and submit to the War Losses Committee the question of the compensation, if any, that should be paid as an equivalent to the period antedated?

I cannot at present add anything to the statements already made on the subject.

Brewing Industry

asked the Chancellor of the Exchequer (1) whether the reduction of barrelage of beer to 10,000,000 barrels was based on food shortage or on considerations of liquor control; and whether, in the former case, the maximum permitted would be modified in the event of food shortage becoming either more or less acute; (2) the Minister of Munitions, on what data and on whose report the maximum barrelage of 10,000,000 barrels of beer was fixed; whether the Central Control Board reported on the matter and in favour of the reduction; whether the leading brewers and the Army canteen authorities were consulted; and (3) the Under-Secretary of State for War if, in establishing the maximum barrelage of 10,000,000 barrels of beer, the requirements of the Army had been considered; and if the figure of 10,000,000 barrels included the amount required by Army canteens?

I will answer at the same time the hon. Member's questions addressed to the Minister of Munitions and to the Under-Secretary of State for War. The reasons for the restriction were fully explained by the Prime Minister, and I can add nothing to the statement made by him. The amount required by Army canteens is included in the 10,000,000 barrels.

asked the Chancellor of the Exchequer if he is aware of the practice of some brewers of charging clubs beer duty at the rate of 19s. per barrel on the bulk gallons instead of upon the barrels of standard gravity; and if he has any authority to interfere with this practice?

My advisers inform me that they have no knowledge of a practice such as that referred to under which a brewer charges the beer duty to his customer as a separate item instead of including it in the price; but I see no reason to object to such a practice, so long as the amount of the duty paid is correctly stated. Whether in any particular case 19s. per bulk barrel is equivalent to the amount charged to the brewer by reference to gravity would depend upon the strength of the beer.

asked the Chancellor of the Exchequer whether he is aware that hardship is being inflicted on Irish licensed traders under the order restricting the output of beer; whether he is aware that these men, all owning their houses, having all their capital invested in their trade which is carried on under a special legal title, are now threatened with bankruptcy owing to the action of the Government; that in Ireland very little munition work is carried on as compared with England or Scotland, and therefore very little employment exists for any person whose particular trade is ruined; and if immediate steps will be taken to exempt Ireland altogether from this order, or, in the alternative, to grant compensation to those whose sole means of livelihood is destroyed?

I am afraid that I can add nothing to the previous statements on the subject.

Entertainments Tax

asked the Chancellor of the Exchequer if he is aware that numbers of meetings for public sports are held in Ireland each Sunday to which the public are invited and admitted on payment of an entrance fee; and will he state if an Entertainments Tax is paid for each fixture?

The tax would appear to be leviable on the entertainments in question.

Munitions Establishments (Contribution to Exchequer)

asked the Chancellor of the Exchequer whether he can state the amount paid into the Exchequer by munitions establishments in respect of munitions levy. excess profits, or both?

I would refer the hon. Member to the reply which I gave on the 10th instant to the right hon. Member for the Rushcliffe Division of Nottingham. I am sending the hon. Member a copy of this reply.

Excess Profits Duty

asked what steps, if any, are being taken to recover far the national exchequer Excess Profits taxation from firms and individuals who are at present engaged in gambling in food prices?

The increased profits of trades and businesses are subject to Excess Profits Duty.

Is the right hon. Gentleman prepared to publish a list of the names of those men who at the present minute are gambling in foodstuffs, and causing starvation among hundreds and thousands of people in this country?

:If the hon. Member will give me the names, I will examine into them.

Member for South Longford

The following Question stood on the Paper in the name of Mr. GINNELL:

95. To ask the Attorney-General whether the Government will grant or refuse the documents affecting the privilege of the hon. Member for South Longford, of which Notice stands on the Order Paper; in the former case, when will the documents be available; in the latter case, will he state the reasons for the decision?

May I point out, Sir, that this question is one of privilege, and, therefore, one of urgency. The Attorney-General yesterday asked me to postpone it until to-day, and he has come to-day to answer it. May I ask for his reply?

Haslar Bridge Tolls

asked the Secretary to the Admiralty whether arrangements have been made for allowing seamen of the Royal Navy and Marines in uniform, whether on duty or not, to pass free of toll over Haslar Bridge, which is on the direct road between Haslar Camp and Gosport?

It has not yet been possible to conclude the proposed agreement between the Admiralty, the Army Council, and the Haslar Bridge Company, which will have the effect of freeing from tolls all seamen, marines, and soldiers in uniform, whether on duty or not. Officers, seamen, and marines on duty, I may say, do not pay. But it is being considered whether an arrangement can be concluded with the bridge company which would allow officers and men in uniform to go freely over the bridge, whether on duty or not, pending completion of the formal agreement.

Will the right hon. Gentleman do his very best to get this longstanding question settled as soon as possible?

Yes; certainly. I am sorry it has not been settled before.

Admiral of the Fleet Sir H. MEUX: How many years has it been going on?

A great many years. One of the earliest questions I asked in Parliament was on this subject.

Does the right hon. Gentleman expect it to be finished before the War?

Message from the Lords

That they have agreed to,—

Marriages Provisional Order Bill,

Perth School Board Order Confirmation Bill, without Amendment.

London Corn Exchange Bill, with Amendments.

Amendments to—

Venereal Diseases Bill [ Lords ], without Amendment.

That they have passed a Bill, intituled "An Act for granting additional powers to the Colonial Bank." [Colonial Bank Bill [ Lords. ]

Colonial Bank Bill [Lords]

Read the first time; and referred to the Examiners of Petitions for Private Bills, and to be printed. [Bill 64.]

Orders of the Day

Business of the House

Ordered, "That the Proceedings on the Finance Bill have precedence this day of the Business of Supply."

Motion made, and Question proposed, "That this House do sit To-morrow, at Eleven of the Clock."—[ Mr. Bonar Law. ]

It has been represented to me that owing to the irregularity of trains it would be a great convenience if we met to-morrow an hour earlier and closed an hour earlier. The Government has no wish to press this question unless it is the clear desire of the House.

Are we to understand that the Government is going to effect the Closure at five o'clock to-morrow afternoon?

Not at all. The Government never assume that it will be necessary to effect the Closure.

Can the right hon. Gentleman tell us what business we are to have after the Recess?

Will the Leader of the House inform us on what grounds he expects the House to rise an hour earlier to-morrow than on other Fridays?

I have already given the reason. I understood it was the general wish of the House that we should meet an hour earlier and leave an hour earlier. The Government have no desire to force the question.

May I ask whether it is not an additional reason that the hon. Member has no opportunity of asking questions to-morrow?

Is the Adjournment Debate to go on as long as it likes unless the Government closure it? Is that so—there are no restrictions?

I quite understand that the House can go on unless it is the wish of the House not to do so.

May I offer one remark? It would be better if certain questions were allowed to be debated on the Adjournment in the ordinary way, instead of the Government resorting to the old trick of counting a Member out?

Are we to understand that the Government will not put the Closure on the House under any circumstances? [HON. MEMBERS: "No, no!"]

Question put, and agreed to.

Resolved, "That this House do sit Tomorrow, at Eleven of the Clock."—[ Mr. Bonar Law. ]

Finance Bill

Order for Second Reading read.

Motion made, and Question proposed, "That the Bill be now read a Second time."—[ Mr. Bonar Law. ]

The Finance Bill, the Second Reading of which has just been moved, is in its form a tribute to my right hon. Friend the late Chancellor of the Exchequor, for it is a very faithful imitation of the first Budget which he produced in 1915, although I wish to point out some differences. The Finance Bill we are considering to-day is to raise the largest sum to meet the largest expenditure upon record, and the estimate of the expenditure, we have too much reason to fear, will be far below the reality. The right hon. Gentleman, in his Budget speech, attributed the great increase in the estimate of expenditure for the year to the continued upward trend of prices, and he spoke as if in that upward trend of prices he was the victim of misfortune. But he and the Government are in some degree the authors of their own misfortune, because by their method of raising money, as by their methods of expenditure, they are continually raising the prices against themselves. The rise in prices, which is going on steadily, is due in my judgment in no small degree to the extravagant spending by the Government of this country. All War Governments spend extravagantly, but there is nothing like the rate at which the present expenditure is going on, and the extraordinary demands which the Government are making for commodities and services inevitably by the increased demands tend to raise the prices to all the other purchasers. And the fact that, instead of paying for all these commodities and services out of taxation, they pay for them very largely out of borrowed money, is another reason for the rise in prices. The immense borrowing, the tremendous sums which they are raising by Loan, is causing an inflation throughout the country, and the rise in prices is the inevitable outcome of that method.

4.0 P.M.

My right hon. Friend the late Chancellor of the Exchequer budgeted last year for a revenue of £502,000,000 out of an estimated expenditure of £1,825,000,000—that is to say, he expected to raise from revenue 27 per cent. of the total expenditure. As a matter of fact, he has not realised that proportion, for though his revenue rose to £573,000,000, the expenditure rose still more—that is, to £2,198,000,000. Thus the actual percentage raised in revenue as against the amount raised in Loan was only 26 per cent. The Chancellor of the Exchequer this year has estimated a revenue of £638,000,000, out of an expenditure of £2,290,000,000, or close upon 28 per cent., which is a trifle higher than the Estimate of the late Chancellor. But I am afraid that even if his Revenue Estimate is realised, there is no doubt that before the end of the year—we know it already—the Budget Estimate of expenditure will be exceeded, so that the proportion will probably fall below even the 26 per cent. realised in the past year. I venture to say to both my right hon. Friend and to the Chancellor of the Exchequer that they aim too low in this matter. I think they ought to aim at paying a higher percentage of the expenditure of the country out of taxation. In the French Wars, which cost somewhere about £831,000,000, this country raised in taxation 47 per cent. of the total cost, and only paid out of Loan 53 per cent. Readers of history will know that even that 53 per cent. constituted an immense burden upon the country during the earlier years of the nineteenth century. In the Crimean War, which was a small affair financially compared with some modern wars, the whole cost came to £67,500,000, and we paid 47 per cent. out of taxation and borrowed a little over 52.6 per cent. It is not until you come to the Boer War, when the country spent £217,000,000, that you reach this modern method of financing war so very largely out of Loans. On the highest estimate you can make, as to the Boer War, it is very optimistic to say that we paid 31 per cent. out of taxation and borrowed the remaining 69 per cent. The Chancellor of the Exchequer claims that over the whole course of the War he has paid 26 per cent. out of taxation. I think that that calculation is not quite a useful one in the way in which he made it, because he omitted to deduct the peace expenditure. If you take the actual war expenditure, the amount paid out of taxation as compared with that paid out of Loan is only about 19 per cent., instead of 26 per cent. The right hon. Gentleman does not escape having to raise this money because he borrows it instead of raising it by taxation. He has still in the course of this financial year to get from somewhere £2,290,000,000, and probably more, and the people of this country during the coming year have got to find that money for the Chancellor of the Exchequer, and the fact that some of it is coming out of Loans, is not going to relieve the Chancellor of the Exchequer of that obligation. I want to urge upon the Government, and upon the House, how unfair it is to the soldiers who have gone to the Front that we who are left behind in this country are carrying a far less heavy burden, and to suggest whether we should not do more to discharge the burden of the War during the currency of the War. Contrast the sacrifice made by two men of equal position at the time the War broke out. They were both, say, earning £500 a year. The one man throws up his business, joins the Army, goes to the Front, remains throughout the War, perhaps loses his life, or possibly comes back a cripple; at any rate he comes back to find his business dislocated, or his employment to seek. The other man remains in this country, very possibly earns an increased income, at any rate is urged to save on every hand, and lends to the Chancellor of the Exchequer £200 out of his £500. The one who has remained at home, has, it is true, suffered some little contraction of his income by the increased prices, but he has permanently increased his income, and the result of the War, so far as he is concerned, is that he is generally better off. The other man after all his sacrifices comes back to take up, as a result of the present policy, his extra burden of taxation, and to pay the increased income of the man who stayed at home. When you consider these two cases it seems to me that there does lie upon us who remain at home the duty of paying out the current taxation of the year every penny that the country can possibly manage. I submit we ought to afford far more than we are paying. There is this further, that you have now a time of inflation, and that means that any money you raise is, for buying purposes, much less valuable than in peace-time. Your pound will scarcely buy you ten shillingsworth of commodities at present prices. When you come back to peace one may hope that the value of the sovereign will be restored. You will be paying—not the amount you have got for it in the shape of services or commodities, but the greater amount when the then value of money will enable you to buy. That is another and pertinent reason why the country should strain every nerve to pay out of taxation now as much as it possibly can.

My right hon. Friend should, I think, have received a good deal more out of Income Tax. I should suppose the only reason he has not done it is the fact of the complications, inequalities, and injustices of the present Income Tax law. It is natural that those inequalities and injustices should press very heavily upon people when the Income Tax has risen to 5s. in the pound. But that only the more impresses me with the fact that the Government ought not really to wait until the end of the War—to the unknown end which we cannot foresee—still less to wait until they can get the Income Tax down—before they set up the committee they have promised to go into this whole matter. I press upon the Government that they should set about this matter at once without any further delay; I do not myself see why they ought not to set up that committee during the War. The Chancellor of the Exchequer finds himself unable to raise money from the Income Tax. He has referred to the Excess Profits Duty. That Duty has already brought him an immense amount of money. It has been my duty since the Budget that my right hon. Friend passed to sit as a referee under the Excess Profits Clauses. I have been immensely struck by the infinite variety, complexity, and ubiquity of British trade. In other words, you have this trade going on under an immense variety of circumstances. The cases that have come before me show that British traders deal with sheeting in Patagonia, tin in Nigeria, coal in Rhodesia, oil in Assam, jute in India, rubber in all parts of the world, tea, coffee, and an infinite number of commodities in the West Indies and elsewhere, opening trade up to the British trader all over the world.

The traders make their money face to face with great natural difficulties; great difficulties in the legal systems in the country in which they trade, in many cases they face hurricanes, strange pests, men of all sorts, unequal laws. Against all these British traders are struggling to make successful businesses in all parts of the world—and they do it with all possible success. This trade has to be carried on, in almost all these places, in rivalry with men belonging to other countries; in those other nations the traders are not burdened with the same great mass of taxation with which our traders are at present burdened. Therefore in regard to the Excess Profits. Duty I myself am rather inclined to think that 60 per cent. lays a very heavy burden upon British traders. Perhaps the greatest danger that this country runs during the War is that our trade may be alienated and driven away to other countries. Still, the Chancellor of the Exchequer, with all these facts before him, has decided to raise the tax to 80 per cent., and he is confident that he will get a good deal more money out of it. I hope he may; but I have no great confidence that there is an unlimited reservoir of money in this Excess Profits Tax. The difficulties in the way of trade in competition with neutral and foreign traders in all parts of the world are so great that if you indefinitely increase the burdens on British trade the tendency is to stop it, and not to secure the revenue sought by the right hon. Gentleman.

In regard to new capital, the right hon. Gentleman has raised the rate from 6 to 9 per cent. He has realised—quite rightly—that business nowadays, with the increased cost of everything, needs increased capital; that capital can only be raised by higher rates of interest. I think, therefore, the Government have done very wisely in putting up the old rate of 6 per cent.—which was low enough—to 9 per cent. for new capital for those whose businesses need it. There is another point in relation to the Excess Profits, Duty which this Budget corrects, and that is the difference between the private trader and the public company. In the Act of my right hon. Friend that was only 1 per cent. The investigation I have been able to make suggests that that is an insufficient allowance. I am glad that the right hon. Gentleman has increased that 1 per cent to 2 per cent., which is no more than sufficient to make up the difference of the circumstances between the two classes of trade. There is one other thing I most heartily welcome in the Budget. That is, that we are going to see the end of the munitions levy. I use the word "levy," but we have not seen very much of it. My right hon. Friend told me that there were 3,277 controlled firms. The money they have contributed to taxation under the munitions levy is £4,620,000. I do not know from how many firms that has been got. It is a very small outcome of the great profits which are supposed to have been made in some of these controlled establishments. I should like to know how it is that only so small a sum has been realised. We shall never, I think, get to the bottom of that. The Excess Profits Duty has produced £140,000,000, against the £4,620,000 under the munitions levy. One can only be thankful that in future the collection of the taxes from the controlled establishments is going to be put in the hands of the Inland Revenue authorities who have been so successful in regard to the Excess Profits Duty.

There is one feature of the way the right hon. Gentleman has dealt with the Excess Profits Duty that I myself am utterly unable to support—that is, Clause 19 of the Bill, in which he withdraws from shipping the protection which was afforded to it by my right hon. Friend by the provisions of Sub-section (3) of Section 38 of the original Act. I wait anxiously to know what justification the right hon. Gentleman has to offer for depriving that particular trade of that which was not only promised, but which was put into the Act of 1915—an Act only passed within the last eighteen months. Clause 19 of this Bill, it seems to me, is an absolute breach of the pledge with the shipping community. The question of how the Excess Profits Duty should be levied was very fully discussed when the Bill was before this House, and if one thing above another was made clear about it—for there was misunderstanding at first—was that people were not to suffer in extending the date of their accounting period or by the fact that they made a profit in one year and a loss the next. My right hon. Friend again and again stated that what was in contemplation was the whole period of the War, or rather the whole period during which the tax lasted. On 27th October, 1915, he said—I am giving not his words exactly, but the effect of them—that they were going to take a constant datum line which would reach right through the whole period of the tax. Whatever was above that datum line was to be excess profits, whatever was below that datum line should be treated as loss. They would deduct the losses from the excess profits, and what was over was to be subjected to the tax—which has now been put up to 80 per cent. The whole theory of the tax was that of a constant datum line running through the whole period for which the tax lasted. So strongly did my right hon. Friend feel that he actually, when the point was raised, described it as being for the taxpayer a nest egg at the Treasury. My right hon. Friend pointed out that this nest egg would be there for the future, and if there were losses then there would be this sum to draw upon. The Treasury was to keep the nest egg for the trader. Now the gamekeeper has turned poacher. The trustee makes off with the property, and gives as a reason to the man who placed the nest egg there that it is no longer there, and therefore he may not draw upon it. That is a strong measure, and needs a good deal of justification.

I do not want to over-state the sanctity of pledges given during war-time. It is not much use doing so. But I must point out that this plegde was very recently given, and it was given with full knowledge of the circumstances. My right hon. Friend was not unacquainted with the circumstances of the shipping industry or of any other industry in the country, and he puts it into the Statute, and the moment it is likely to be of use you find it withdrawn in the new Statute, and the trader penalised accordingly. The Clause is not even repealed altogether. It is repealed in regard only to one particular industry. That, again, I find very hard to justify. I am sure of one thing, and that is that I shall receive hearty agreement from the Chancellor of the Exchequer when I say that it is contrary to sound economic doctrine to pick out one special trade or one special form of wealth for special taxation. I remember the Debates on the land taxes in 1909. I remember a speech made by my right hon. Friend opposite in which he developed this doctrine at some considerable length and let me say with a great deal of indignation, because, after talking about the tyrannies of the past, my right hon. Friend used these words: the inaction of the Government to deal sooner with this question of shipping, and, having allowed it, I do not think the Government have a right to undo the effect of their own inaction by laying hands on realised property in the way they have.

I am not here to testify that the shipowners have not done as well as other traders since the War began. They have done well, but I do say they are not all millionaries. Among millionaires a good many are shipowners, but there are a very large number of small people in the country who own shipping shares. I own no shares in shipping companies now, unfortunately. I sold out at a loss some time before the War. But the shipowners were undoubtedly fortunate in one respect, that they had a high pre-war standard of profit. The two years before the first war-year were undoubtedly good years for the shipping companies, but that in itself ought to make people reflect, because exceptionally good years for shipping companies must mean that there was an actual shortage of mercantile marine for the trade which they had to do in those particular years. It was a warning that our shipbuilding was not keeping apace with the immense growth of trade in the country, and the very fact that they had such a high standard in those two years, and were able to charge such high freights, was a proof that there was a shortage of ships for the trade to be done, and the fact that freights have gone much higher during the War is not due to the direct action of the shipowners. I do not know how they could have kept down freights. Neutral shipowners have raised freights a great deal more. I think shipowners in this country could have secured far higher freights in many cases. Shipowners have said to me they have had traders tumbling over one another to get them to take cargoes at any price they liked to charge. So that it is not altogether the fault of the shipping company that freights have risen to the height to which they have risen in this country. It is in fact one of the simplest operations in the law of supply and demand, and even the great profits made are qualified by two considerations, one of which is that the shipping fleets are being diminished, that they will have to be rebuilt and that they cannot be rebuilt at the old prices after the War. The other thing is that the shipowners who have drawn these great profits have in many cases lost trade overseas, which will never come back to them, and therefore, great as may have been the profits of the shipping companies in this country, I think it would be a great mistake for us to think that all is well with the shipping industry in this country, or that we shall be anything like as strong when the War is over as we were when the War began.

What I feel about this taxation is that you may induce these men who have realised profits to clear out of the business. Now the natural people to build ships after the War are the men who built them before. They like building ships, they understand them and they trust ships, which landsmen do not. But it must be a great temptation to a man who has made his profits now to clear out of the shipping business altogether, and I am told that it is happening. I have heard that very large sums have been realised; in fact, they are hatching their nest egg, and going out of shipping with their capital. And let me point out that the right hon. Gentleman is not going to get at all those who have cleared out. The only ones he will touch are those who have stepped into the necessary business of this country of continuing shipbuilding. It seems to me most undesirable that this should happen, and I want to ask the Government what precaution they are going to take in order to see that ships are built. What method are they going to undertake to induce shipowners to remain shipowners, or to order ships? If they will not do what they ought to do, withdraw this Clause, which seems quite unjustified, will they, at any rate, consider whether, instead of this Clause, they cannot somehow or other earmark the profits which the shipowners might draw apart from this Clause for the purpose of shipbuilding and ship-repairing when the time comes? Really, I do not understand the Government. I think it would have been far better if they had gathered together the shipowners, and had said to them: "You have made specially large sums; you pay us so much tax." I think that would have been a better way, and would have done less harm to the shipbuilding industry, than permanently to place shipbuilding on a worse footing than any other industry. If they had proposed bounties for shipbuilding I could have understood, though I do not ask that. But that they should deliberately place shipping in a worse position than any other industry in future, seems to me utterly unwise and quite unjustifiable. They are discriminating against an industry which of all others is vital to the prosperity and security of our islands, and I venture to close with the words with which the right hon. Gentleman closed his speech in 1909, "that such proposals coming from such a Government should actually be carried into law is utterly intolerable, and I think it is impossible."

In previous Debates on the Finance Bill of the year, considerable point has usually been made of the proportion of direct to indirect taxation, and I think that the gradual increase of direct taxation has continued for a good many years now. Although a point of very great importance, it is at the present time, I think, overshadowed by another proportional tax to which I beg to call the attention of the House in a few words. Of the revenue which it is estimated we shall derive from this Finance Bill, a very large proportion is revenue which, it must be admitted, will disappear at the end of the War, and I say that as that proportion has now become a very considerable one, it is well worthy of the attention of this House to look ahead a little bit, and to see what will happen when a good deal of this revenue ceases to be productive. To begin with, the most important, of course, of the items to which I refer is the Excess Profits Tax, which is estimated now to yield something like £200,000,000. I think it was on the introduction of the Budget that the right hon. Gentleman, the Chancellor of the Exchequer, told us that, as against the disappearance of the Excess Profits Tax at the end of the War, he estimated those same profits would give a yield of something like £50,000,000. I cannot understand quite on what those results were based. The assumption seemed to be in the right hon. Gentleman's mind that the excess profits will continue after the War, but surely the right hon. Gentleman cannot believe, although he may have a strong belief that trade will revive some time after the War, and may revive to such an extent that the profits will equal those which are being made now, largely due to War demands, I am sure he will be the first to acknowledge that there must be a transition period, at any rate, in which there will be a very large falling off, and that consequently, not only will the yield from Excess Profits Tax disappear, but that the proportional Income Tax to which he referred will also be non-existent. Of course, this tax applies to the production of war material during the War, and that production must stop to such an extent after the War that it will reduce the profits made to an enormous extent. Even if you believe that the demands for reinstating the injured countries, building up the North of France and Belgium, and all that will be required there, which must amount to enormous demands, even though you believe those demands will cause a state of industry which will be something like sufficient to replace the enormous output now, it is obvious that between the end of the War and the beginning of that industry during which plant is being converted from war uses to peace uses, during which schemes are maturing and orders are being given, there must be a transition period during which there will be a very serious deficit and falling off in the yield of taxation on the present basis. I believe that not only the whole of this Excess Profits Tax will disappear, but also a very large proportion of the Income Tax which is now being paid, because that is largely due to income which is either directly or indirectly due to the War, and the yield of the Income Tax in the same way, even if not permanently reduced, will be reduced during the transition period in the same way as the Excess Profits Tax.

It would not be an exaggerated estimate to say that on the present basis of taxation which is now being laid down, that the yield of £650,000,000, which we expect to get now, would drop to something between £400,000,000 and £450,000,000 during that period after the War. Taking the maximum, what does it mean? Supposing the loss of yield is the minimum fixed—that is, the loss of the Excess Profits Tax without any reduction in the yield of the Income Tax. It means we might expect a revenue of £450,000,000, but what about the expenditure? The pre-war expenditure, plus the interest on the debt and the cost of pensions, must come to £500,000,000 a year, and when the War ceases the right hon. Gentleman will be faced with this position, that when the country expects some remissions of taxation and some release from War burdens, the right hon. Gentleman will be faced with the necessity of either introducing new taxation at a moment when remissions are expected or he must enter into a policy of continuing to borrow in time of peace as he has done in time of war. I think that is a matter to which the right hon. Gentleman should give very serous consideration. I heartily agree with my right hon. Friend (Mr. Leif Jones) in the relief which I feel at the abandonment of that illogical method of collecting the munitions levy. No matter what the profits, or how small it was which was left to the manufacturer, it was of the utmost importance that that profit should be a proportion of the total profits made and not a fixed percentage over the pre-war standard of profits.

I am glad to hear that the ex-Chancellor of the Exchequer (Mr. McKenna) agrees with that, because when I pressed this point in previous years I did not receive much sympathy from him. As regards this question of the Excess Profits Tax as applied to these controlled industries, and the increase from 60 per cent. to 80 per cent., I do not regret as a war-measure getting the utmost you can from any possible source, and this obviously is one of the most easy to obtain. We must not, however, lose sight of the necessity of retaining in some form or other sufficient capital in this country to reinstate our industries at the end of the War. It may be that whilst taking such a large proportion of profits from industry during the War you are thereby preventing them building up reserve funds to replace their capital, and to make good the wear and tear of their plant at the end of the War. It may be possible to build up that capital in some other form, but as the Government continues to take a very large proportion of the profits from industry, I think that becomes an obligation on the part of the Government to see that some-where, either in their own hands or in the hands of the industry itself, a capital is provided and available at the end of the War to replace these losses and depreciations.

I hope that the right hon. Gentleman, when he is considering the details of the way in which this Excess Profits Tax bears on different industries, will give some consideration to its incidence in the case of very small businesses which were started just previous to the War. I believe that the amount of the tax derivable from these small businesses must be infinitesminal, and there are cases where it bears with a hardship which is very unjustifiable. I will quote a case to which I hope the right hon. Gentleman will give sympathetic consideration. It is the case of a small business started by two ladies in April, 1914. They took over the business of their former employer, who was retiring from business. They had a capital of £1,200, and during the first months of the business they succeeded in a remarkable way, with the result that the profit in the first accounting period ending in August, 1914, almost the moment at which the War broke out, was £1,200, or 100 per cent. At the outbreak of War the trade declined, and it has since remained very much below the normal, and yet they have had to pay no less than £1,000 excess profits in respect of the two subsequent accounting periods. This is a millinery business, and these people have been called upon to pay £1,000 excess profits at a time when they have not been making any profit at all. I think that is one of a few extremely hard cases, and I hope the right hon. Gentleman will do something to relieve cases of that kind.

I appreciate the simplicity of the Budget. The right hon. Gentleman has plunged into very little that is new, and by adopting this course he has no doubt escaped a good deal of criticism. I think, however, that it is possible to carry simplicity too far, and he should fully face the falling off in the revenue derivable from these taxes at the end of the War. If the argument which I have put forward as to the deficiency of the revenue on the basis laid down during the transition period be justified, then I think we have a right to ask for some explanation of the policy which the Government propose to follow when the transition period commences. After the War comes to an end we want to know whether the Government propose to increase taxation of a permanent kind to meet the falling off in taxation which is merely of a temporary nature, or whether they mean to continue during an indefinite period to borrow what is required to meet the deficiency. Those are very important questions, and I think we ought to have some explanation of them. Personally, I believe now, as I have believed all along, that it would be better to raise a larger proportion of the revenue by taxation of a permanent character on which we can count in future after the War is over, as well as during the course of the War itself, and the more we could have our taxation of that permanent kind, the firmer and sounder the basis will be on which our whole system is placed. It is quite obvious that taxation of that sort would enable us at the end of the War to continue it as far as was necessary or to remit what was unnecessary. At any rate it would not entail the difficult position which I now see facing us, either of increasing taxation when the War is over or having a system of borrowing, which I think we all agree would be unsound. I hope on this point the right hon. Gentleman when he replies will give us some explanation.

First of all I should like to say a few words on the subject of the Income Tax. I agree entirely with what fell from my right hon. Friend (Mr. Leif Jones) as to the necessity of carrying out the proposed amendment of the Income Tax Law. It is quite clear that for a very long time to come we are going to have the Income Tax at a very high rate. It is possible that the present rate may have to be increased, and this certainly will be intolerable when people are paying Income Tax, and in many cases Super-tax as well, at those very high rates on something which is not in fact their income. What is necessary is that the law should be so amended that the true net income of every person will be ascertained. Every person ought to be required to pay Income Tax on his true net income, with the necessary graduations and abatements for persons with special obligations. At any rate the basis ought to be the true net income of every citizen, and there ought to be none of these fancy assessments. I agree with the hon. Gentleman who has just sat down that the estimate of the post-war yield of the Income Tax is too high. We must bear in mind this consideration: A very large part of the income which people have been enjoying during the last two years has been due to the expenditure of borrowed money, and it is quite clear that we are not going on borrowing at the rate of £1,000,000,000 or £2,000,000,000 for all eternity. Directly that stops it does appear to me that the income of the community must be diminished to that extent. I hope the right hon. Gentleman will not try to wait for the termination of the War to set up this Committee, because I believe he will find that the putting of post-war finance on a really sound footing cannot be done until the Income Tax is on a really sound footing itself.

I wish to say a few words about the Excess Profits Duty. I have always thought the Excess Profits Duty was in theory a bad tax. I think it is a very bad tax, and at the rate of 80 per cent. it is having certain very bad and objectionable results. If you take the tax at 80 per cent., with Income Tax at 5s. in the £, the combined effect of the tax is 85 per cent. What is the effect of that? It is impossible to cut down reckless extravagance. A man says, why do you grudge me this £5 note when it only costs you 15s.? It is very difficult to resist the argument of that man, and I think everyone who comes face to face with this matter will realise the difficulty of enforcing thrift in business. One of the very great objections to this tax is that it is encouraging a very wasteful use of industry, and is making the putting of industry on a proper footing when the War is over very difficult. It is a very unfair tax. I said when the tax was brought forward, and I say now, that whatever may be said for it, it is grossly unfair. It is not a taxation of war profits at all, but is penalising people because they did badly in two or three years previous to the War. It is a very unfair tax on all improving businesses, and on people starting in business; and I agree with the hon. Gentleman behind me (Mr. J. Mason) that it is a very hard tax indeed on people with very small businesses. I should have thought the Chancellor of the Exchequer could meet that by raising the amount free from Excess Profits Duty. I do not suppose that if he raised the amount from the £100 or £200 in the Bill even to £500 it would have a very serious effect on revenue, and it would relieve the position of those very small businesses. I have never been able to understand on what principle of justice businesses like brokers, who are really almost professional men, are made to pay Excess Profits Tax, while lawyers and all professional men are entirely exempt. There is really no kind of justification in the matter of Excess Profits Tax in leaving out of its operation certain particular classes. It is a very bad tax in this respect, that it is a tax which falls upon industry and takes money out of industry ear-marked for promoting the commerce of the country; and while doing that it does nothing whatever to check personal extravagance or to curtail the expenditure of individuals. It curtails merely the expenditure of large corporations which money would be mainly spent on improving the commercial resources of this country. Both hon. Members who have just spoken recognise that, and say that the Government should do something after the War to provide these people with capital for carrying on their business. I think that is a thoroughly objectionable thing itself. I do not want to see industry in this country financed by capital provided by the Government, no doubt on conditions attached by the Government, conditions inserted for political motives—because we know that is what does happen in countries where the Government finances industry. Conditions are attached to the subvention by the Government which will please certain classes of public opinion which naturally want to get something for their money. I think it would be a great misfortune not only for the conduct of industry, but for purity in English public life if we accepted the contention that the Government should take taxation from prosperous people which at a future date, because those people have not turned out to be as prosperous as was anticipated, will have to be returned to them as a dole. I think that is a very bad theory to adopt.

I want to say something as to the special treatment of shipping, and, in particular, to draw attention to some of the words of this Bill. Clause 19 says:

"In computing the Excess Profits Duty from any trade or business which consists wholly or partly of the business of shipping."

What is the business of shipping? According to the whole of my commercial experience, the business of shipping is the business of the export merchant. That, undoubtedly, in the ordinary sense of the term, is the business of shipping. It is not the business of the shipowner at all, and so far as I understand this Clause—I may say I have had my views confirmed by a very competent lawyer—it is not directed against the shipowner, but against the export merchants of Manchester and Glasgow. I think that is quite right. I do not mean to say that they are the people who ought to be made to pay, but I do say quite seriously that I believe that the persons who carry on the business of shipping in the ordinary commercial meaning of the word are the people who are export merchants and not the people who own ships. At any rate, I hope that steps will be taken if possible on the Committee stage to make quite certain that the class aimed at are in fact hit. When you are dealing with this business of shipping as it is called—a very loose and vague word to use in an Act of Parliament—I think you ought to give some explanation of what is the position of all the small people who surround the business of shipping—the brokers, the underwriters for marine insurance—are they persons whose business consists wholly or partly of the business of shipping?

Yes, Naval architects, consulting engineers; there are whole classes of persons who carry on business more or less in connection with shipping, and I think we ought to know how many people it is proposed to include under this class. Then we have in paragraph ( a ) a special stipulation—

Where it appears to the Commissioners that the shipping business"—

which for the sake of agrument we will believe for the moment to be shipowners—

"is carried on nearly as ancillary to the principal trade or business, the provisions of this Section shall not apply."

As I understand that, if the shipowner has a few ships which he uses for subsidiary purposes, he is not to be liable to this special penalty. I think the Buenos Ayres Great Southern Railway—

Yes, the celebrated soap firm. I think also some of the Argentine railway companies own ships. The English railways are outside the whole thing, but there are a great many people who own ships, and I think we ought to know what is to be done with these people who own quite a substantial number of ships, but obviously as a side-show compared with their real business. I want also to know what is the position of the ship- owner who has other business as ancillary to his business. I know shipowners who own docks, wharves, and who carry on a ship chandler's business, and even ship-building.

Yes, and merchants. When the right hon. Gentleman comes to try to split this business up he will find a great many cases in which it is absolutely impossible to do it with any approach to justice. I want also entirely to support what my hon. Friend said as to what is in fact a breach of faith. This provision has been on the Statute Book for nearly two years, and a great deal of money has been spent directly on the faith of that provision. Nobody, I think, without that provision would have gone into shipbuilding at all at the very high prices which everybody has had to pay. I am sure the late Chancellor of the Exchequer (Mr. McKenna) remembers that he had a special correspondence with the Shipowners' Association as to the way in which the enhanced cost of shipbuilding was to be treated for the purpose of depreciation, and I can speak for myself, and, I think, for others, in saying that we only agreed to build certain ships at the enhanced prices on the express assurance that that extra cost was going to be treated as special depreciation. The whole of that assurance may be wiped away directly this Clause is put into the Bill. The right hon. Gentleman the Chancellor of the Exchequer (Mr. Bonar Law) actually told the House—I think he was mistaken in his statement—that it was the intention of the Government that shipowners should make a loss below the pre-war standard.

Excuse me, the Chancellor of the Exchequer said so. He said:

"I know that the House imagines, and it is true, that the requisitioning at Blue Book rates allowed a large margin of profits. At the beginning it was so, but the additional cost in every direction of running the ships, especially the additional insurance, made that no longer true. I have myself something like a score of accounts of typical ships—and that is a kind of examination that I really can make on my own account—and in not one of these cases was it possible for them, under the requisition terms, to make anything like pre-war rates of profit." —[OFFICIAL REPORT, 2nd May, 1017, col. 386.]

In other words, the right hon. Gentleman tells the House that it is the policy of the Government to compel shipowners to make a loss, and then to deprive them of the protection put in the original Bill.

The hon. Gentleman has surely put it in a very different way from that in which I put it. He has said that I laid it down that they must make a loss. I said they would not be able to make the large margin of profit they made before. That is a very different thing.

The right hon. Gentleman said they would not be able to make anything like the pre-war rates of profit.

Pre-war rates, as the hon. Gentleman knows, amounted to at least 15 or 16 per cent.

No. I do not think there is any difference between us; there is a misunderstanding, perhaps. But what the right hon. Gentleman means is that they make a loss as compared with the datum line.

I think I will leave my hon. Friend here to read further if he likes. I want to put forward some other considerations to show how harshly this thing might operate. After all, there are a great many shipowners who have only one or two ships, very small people, many of whom, I think very unwisely, have jumped in, where more astute people have unloaded their profits on them. We all know that some very experienced shipowners, particularly some residing in Scotland, have taken advantage of the high value of shipping and have sold all they had to more ignorant persons than themselves. I understand they have turned into landed gentry with the proceeds, and have left these rather foolish people with the ships taken at inflated prices and with little chance of ever seeing their money back again. I think they are very foolish. Just see what may happen now, and the risk a man runs. A man may have a couple of ships or three ships, and he is able to make a good profit and pay excess profit. One of his ships gets sunk. He draws the insurance money, and to that extent his capital is reduced. He may have a ship where he is incapable of running it, and perhaps he has a ship, torpedoed by the enemy, which gets home in a damaged condition, so damaged that she cannot be repaired during the War. He cannot get the insurance money because she is not lost, and he cannot earn a halfpenny because she cannot move. He cannot make a halfpenny out of his business, and therefore he is not able to get back the excess profits he paid before. I think everybody will agree that that is very harsh treatment on anyone who happens to be a shipowner. Is it right, is it in accordance with public policy in dealing with the shipping industry, or with any other industry, that you should so legislate that these people get the best financial result by clearing out of their business? I repeat is that in accordance with public policy? Is it right that a shipowner who sells the whole of his business and turns into a country gentleman should have large sums of money in his pocket, whereas, if his neighbour, who does not think it right to withdraw that considerable business experience from the service of his country at this time and goes on working his business, is liable to pay these taxes? Is that fair under these proposals? I can tell the right hon. Gentleman that it is one of the best things a shipowner can do, but I do not think the House will consider that it is by far the wisest thing he can do, for his own financial interest to have his ship torpedoed. Then he will get from the Government a very large sum of money as the market value of the ship, and he will be saved from all further anxiety. The right hon. Gentleman, in his speech in Committee of Ways and Means, told us of another thing the Government have done with regard to shipowners. He said they had requisitioned the whole of their ships, and were, in fact, running them themselves, and we know that is what the Government is doing.

I want the House to try and understand exactly what has taken place. The Government has gone to shipowners and said we are going to requisition your ships at a certain rate, you are now to run them in your customary business on account of the Government, and we are going to handle the proceeds, we are going to take the difference. I submit to the House that this is a proceeding which is wholly unconstitutional. It amounts to taxation by decree or ukase, by a junta governing the country. It is obviously a matter which must be decided in the Law Courts. I want to know if the House approves of this Government taking possession of the property of a private citizen, not because they want it for the service of the State, but because they want to conduct it at a profit. I can understand taking motorcars and using them for the purposes of taking soldiers to the front, but I do not believe anyone contemplated that the Crown had a right to take a motor and let it out as a taxi for the purpose of earning fares. I do not believe that there is any prerogative or Statute which justifies the Crown taking property from an individual in that way.

Yes, as the right hon. Baronet says, they have done that with wool, and I am surprised none of the owners of wool tested the matter in the Law Courts. It is a nice pitch we have come to if the House of Commons is going to abdicate this right to a Committee of five, two of whom are peers, and therefore incapable of imposing taxes on anyone, and the others are, well, what they are. The right hon. Gentleman in his speech about shipowners went out of his way to disclaim malice, but there is a French proverb of which I may remind the House, "Qui s'excuse s'accuse." A great many people are under the impression that there is a great deal of malice in the proposal. What the shipowners ask is that they should be treated in precisely the same manner as anyone else, just as a greengrocer, a banker, or any other traders are treated. We are entitled to be treated as ordinary private traders, and we seek no exceptional privileges, asking that it should be done according to the law of the land. We are entitled to the same treatment that is meted out to any other citizen, and we will not be satisfied with anything less. Whatever profits we have made in the past, it must be remembered that we should be running risks in the future. Although some shipowners have a made great profits, some have experienced considerable losses; and if it is proposed to punish people who have been extortionate, it must be remembered that those who have suffered most are those who have not been extortionate—not the men who have amassed fortunes and cleared out. See what is going on. Some of us have been required to abandon businesses which have taken years to build up, and hand them over to a dangerous competitor. We have been compelled to assist our Japanese Allies, who are more occupied in getting our business than in helping in the War. We have been compelled to hand over to them the goodwill of businesses built up for years and with the most careful attention; and I submit, if any trade is entitled to special consideration at the hands of the Government, it is that of the shipowner. What have they done? Everyone admits that if it had not been for the enormous mercantile marine it would have been impossible to carry on the War. But the whole of the mercantile marine has been built up without the assistance of the Government. It has never sought State assistance and never received it. It is entirely a private enterprise, and without that enterprise I think it would have been impossible for the Empire to have been what it is or for the country to have succeeded in the War. Yet that is an enterprise which it is proposed to single out for penal treatment. We know what the cause of it is. It is the bargain between the present Government and the Labour party. We know that it is all part of a very discreditable arrangement which was necessary to get the Labour party to sit on that bench. That is the motive of the whole thing, and I venture to say that the House of Commons ought not to allow these proposals to pass.

I had no intention of taking part in the discussion this afternoon, but, after listening to speeches in which the woes of the Income Tax payer and the woes of the excess profits payer were laid before the House, I think it necessary that something should be said on behalf of a very much larger number of people in this country. May I suggest to my right hon. Friend the Member for Rushcliffe (Mr. Leif Jones) as to the relief as he proposes on behalf of indigent shipowners, if they are so poor as to need national assistance, a special flag-day should be instituted for their relief. We are discussing a finance Bill which proposes to raise more than £600,000,000 of taxation. The Chancellor of the Exchequer introduced his Budget in what I think was the smallest House of Commons that has in recent years listened to a Budget statement. We are discussing the Second Reading of this unparalleled proposal this afternoon with an attendance of less than one-fifth of the Members. I do not profess to be able to explain the reason for this indifference to the important question of war finance. I might make two suggestions. One is that a sort of fatalism appears to have fallen on the people of this country. They seem to think that things will be what they will be, and that no human effort can alter them in the slightest degree. Perhaps another reason is that these people have been interested in matters of national finance and taxation in the past, and are so busily engaged now in making enormous war profits that they have little time to attend to the other aspects of the question. Be the reason what it may, the fact remains, and I am afraid in years after the War we shall have to pay very heavily for the indifference to these questions which has been shown during the period of the War. I was very much interested in the speech of the hon. Member for Windsor (Mr. J. F. Mason). I think his criticism of the Chancellor of the Exchequer's Estimate of the proposed war revenue is perfectly justified. So far as I can understand the figures in the statement put before the House in Committee of Ways and Means by the Chancellor of the Exchequer, he stated that during the current year he will receive by taxation sufficient to pay for the national services and the interest upon the National Debt, and he seemed to assume, as the hon. Gentleman pointed out, that he could expect to receive the same income from those taxes, which are going to be permanent, as he is receiving during the current financial year. Now, for reasons which were given by the hon. Gentleman, I think the Chancellor of the Exchequer is not justified in that assumption. In his Budget statement—and may I at this late period congratulate him on the clearness and brevity of that statement—he gave us no figures in regard to the gross amount or the net amount of the assessments for Income Tax, but I have some recollection of an answer to a question given in this House a few weeks ago in which, if my memory serves me aright, it appeared that during the War the gross assessment to Income Tax has been rising by three hundred or four hundred millions. That is accounted for almost wholly by abnormal war profits. I think it will not be for a single moment disputed that when the War is over, when this huge national expenditure on war purposes ceases, there will be an enormous profit in the total amount on which Income Tax can be collected. The hon. Gentleman, whose speech I have already referred to, estimates that the Chancellor of the Exchequer may be able to rely after the War upon an income, on what he regards permanent sources of revenue, of £450,000,000. I do not think he was justi- fied in that, because, so far as I have been able to analyse that part of the Budget statement, the Chancellor of the Exchequer assumed that the Income Tax would not fall, and that the Customs and Excise Duties would not fall. I think there will be, for the reasons I have mentioned, a very considerable decline in the yield, both from Income Tax and Super-tax, after the War, a sum which will probably amount to a very considerable number of millions. It is certain, too, that there will be a considerable decline in the yield from Customs and Excise Duties. It cannot be denied that the purchasing power of the working people is very much larger to-day than it has been at any former period, but I anticipate, and I think there are very good reasons for the expectation, regrettable as it is to have to contemplate it, that there will be a very rapid and very considerable decline in the total of the wages bill of the country when the War is over, and that therefore their capacity to spend money upon articles which bear Excise and Customs Duties will be correspondingly diminished. For instance, I do not think that the yield of the Tea Duty will be maintained at the present high rate after the War. I am fairly certain that the yield of the Tobacco Duty will not be maintained, and the minor Customs Duties upon coffee, cocoa, dried fruits, and the like will suffer diminutions in yield. We can only in a matter of this sort make rough guesses and estimates, but I think the Chancellor of the Exchequer was a good many tens of millions out in his estimate of the yield of post-war revenue from what he regards as permanent taxes.

Coming to post-war expenditure, I do not think that the Chancellor's estimate was sufficiently high. The hon. Gentleman the Member for Windsor estimated that we should have an expenditure of about £500,000,000, or a little over, after the War. I think it will be very considerably higher than that. There will be the pre-war national. services to be maintained. There had been a tendency for a good many years before the War for these permanent services to become more expensive, and I do not think that we can expect that tendency will cease after the War. I anticipate that the masses of the people of this country during the War will have learned lessons which will result, after the War, in far stronger demands for social reform, which will be very much more expensive to the State than any that were made in the days before the War. We may expect, therefore, an addition to the permanent national services of a much larger sum than that which the Chancellor of the Exchequer estimates. He counted upon an increase in our educational expenditure, and he estimated that there would be an addition of something like £30,000,000 a year in pensions. Taking these items of expenditure together, and for the moment leaving out of consideration the interest and sinking fund on the National Debt, there is an enormously wider discrepancy between post-war revenue and post-war expenditure.

The amount of the National Debt and the amount of interest and sinking fund for which provision will have to be made depend, of course, upon the duration of the War. Supposing there were movements in favour of peace now, we could not expect that there would be any material reduction in war expenditure during the current financial year, and, if the war expenditure during this year is maintained at the high level of the last few months of the last financial year the addition will be not far short of £2,000,000,000. There was last year something like £1,600,000,000 which had to be made good by borrowing. The expenditure now is much higher, and we are, therefore, justified in saying that if the War goes on—and, as I said just now, if the War does not go on the expenditure will go on up to the end of the present financial year—we shall have a National Debt on 31st March next of something not far short of £6,000,000,000. I know some part of that represents loans which have been made to our Allies, but it remains to be seen what the post-war value of those loans will be. Therefore, for the purposes of my present argument, I may assume a National Debt of not far short of £6,000,000,000, which will be the burden this country will have to bear when this terrible struggle comes to an end. Taking the Chancellor's figure of 5½ per cent. to provide interest and sinking fund, we shall have to make provision for over £300,000,000 per year—and, by the way, I do not quite understand why the right hon. Gentleman puts the combined interest and sinking fund during a period of forty years' creation at 5½ per cent, unless he anticipates some reduction in the present average rate of interest—and, taking the expenditure for national ser- vices before the War, excluding the payment of pre-war National Debt of £170,000,000, we get a sum of £500,000,000. Then we may, if not with pleasure at any rate with confidence, assume an addition of from £50,000,000 to £100,000,000 beyond that. Of course, there will be, as he admitted, increased cost of education, which I am quite sure is going to be far more than £3,000,000 a year. There is the pensions bill, and there is the cost of industrial and social reconstruction.

The Chancellor of the Exchequer, therefore, will require to raise additional revenue either by an increase of existing taxes or by the imposition of new taxes to a very considerable amount. He has laid if down as his policy to raise sufficient during the War to meet the ordinary services of the country and the interest upon the War Debt. I do not think that is sufficient because if he continues that policy it means the piling up of an enormous debt, leaving the country with a terrible burden. It means that for two generations after the War the country will be very grievously burdened by having to meet the interest upon this debt. We must, of course, be somewhat free in our estimates, but taking the amount that has to be raised by taxation at anything from £250,000,000 to £300,000,000 a year after the War, that, by the admission of the Chancellor of the Exchequer—it arises out of the announced policy of the right hon. Gentleman—is going to be a burden upon the people of this country for the next forty years. It means also that before the debt is liquidated they will have to pay a sum considerably more than the amount of the original debt and the interest upon it. I want to urge upon the Chancellor of the Exchequer the importance of revising that policy. We are not raising anything like sufficient by taxation during the War, and by neglecting to raise larger sums by taxation during the War the Chancellor of the Exchequer is missing opportunities which will not occur when the War is over. Take, as an instance of that, the Excess Profits Duty. He proposes this year to raise it from 60 to 80 per cent. It was raised last year from 50 to 60 per cent. Supposing the right hon. Gentleman's predecessor, as he was advised by some of us at the time, had imposed a duty of 80 per cent. when it was first proposed, he would, during the past two years, have got 30 per cent. more in the first year and 20 per cent. more in the second year. That has gone for ever. So it is with regard to the Income Tax. I am quite sure that it will be necessary for the Chancellor of the Exchequer or his successor to raise the Income Tax to a higher figure than that at which it now stands. Why, therefore, should he not do it now? If he neglects to do it now he is, as in the case of the delay in fixing the Excess Profits Duty at 80 per cent., losing income which he can never tax in future at the higher rate which will have to be imposed.

I quite agree—I think it is sound administration—that it is not desirable to impose new taxes if existing taxes are capable of bearing a higher rate or a higher burden, and that is a particularly wise policy at a time like this when labour is scarce. I do not, therefore, complain because the Chancellor of the Exchequer has not imposed new taxes, and has confined his increases to taxes which are already in existence, but I do complain about the existing taxes which have been selected for the purposes of additional taxation. Take, for instance, the Entertainments Tax. I never favoured that tax. It is amateurish, a rather silly, pettifogging, irritating sort of tax, and it yields very little revenue, as taxes of this kind very rarely do. The Chancellor of the Exchequer a year ago estimated that he would receive about £5,000,000 from this tax. He received little more than 50 per cent. of that amount, and yet after that experience he comes forward this year and proposes to increase it. I do not know much about it except what I have been told in circulars which, in common with other Members of Parliament, I have received from the proprietors and managers of places of entertainment. I do not know what effect it has had upon these businesses. We are told that it has had, in many cases, a very disastrous result. At any rate, I do not believe the Chancellor of the Exchequer will gain very much by the increaed rates of prices for entrance into places of entertainment, because what will the people do? They will simply take lower priced seats, and, therefore, the Revenue will suffer.

I should like to say a word about the Tobacco Tax. The Chancellor of the Exchequer has increased the Duty upon tobacco by 1s. 10d. in the £. In his Budget speech he made the interesting, and, to me, at any rate, surprising statement that about 70 per cent. of the tobacco is smoked in cigarettes. I do not know whether I should say anything about the practice of smoking cigarettes, but it is a practice in which I sometimes indulge, therefore, I know something about the increase in the price of cigarettes which has taken place since the War began. The kind of cigarette most commonly smoked in this country, which, I should say, would represent nineteen-twentieths of the cigarettes, is a sort of virginia goldflake, sold in packets of ten or twenty. The price before the War was 3d. per packet of ten, and 6d. per packet of twenty. Before the Chancellor of the Exchequer's Budget speech the price of a packet of twenty cigarettes was 8d., and the next day the price had risen to 10d. Twenty of these cigarettes weigh less than one ounce—they weigh about five-sixths of an ounce. That represents an increase of 3s. in the lb. in the price of these cigarettes. I should like the Chancellor of the Exchequer to tell us who is getting the difference between the 1s. 10d. Duty which the Exchequer is going to receive and the 3s. increase which the purchaser of these cigarettes has to pay? In passing, I may say that the purchasers of these cigarettes have to pay something like 14s. or 15s. in the pound on the price of paper. I saw an estimate the other day which, after going rather elaborately into the figures, came to the conclusion that, though the Chancellor of the Exchequer receives only £6,000,000 from the increase in the Tobacco Duty, the total increase to the consumer is £17,000,000. I can quite understand that there must be some margin in order to cover the manufacturer when an increase of Duty takes place, but the margin is altogether too wide between the Duty which the Chancellor of the Exchequer has imposed and the increased price to the consumer. We have only to follow the reports of the tobacco manufacturing companies to know how enormously profitable this trade is. It is increasingly profitable. I happened only this morning, in looking through the newspaper, to come across a paragraph dealing with the report of a tobacco manufacturing company of which I have never before heard, namely, Henry Clay and Bock and Company. This is in regard to their report for 1916. It says:

Can the hon. Member tell us how much of the money went in Excess Profits Duty

I simply cut the paragraph out of the paper this morning, and my information is confined to what the paragraph contains. I mention it because it is an illustration of an increase in the profits of tobacco manufacturing companies during the War. Take the case of the Imperial Tobacco Company, whose profits since the formation of the combination have risen from £2,000,000 a year to over £3,000,000 a year. My point in referring to these matters is that now that so large a proportion of the cost of tobacco is represented by a Government Duty, there is an obligation upon the Government to protect the people, who are so heavily taxed, against unfair exploitation. The only way in which that can be effectively done—and I think the time has come to do it—is to nationalise the tobacco manufacturing trade. It is a very easy thing to do, because it is virtually a monopoly. The Imperial Tobacco Company and its subsidiary concerns practically monopolise a large part of the tobacco trade of this country. If the Tobacco Duty is going to be retained permanently at such a high figure as this, it is imperative that the Government should take this suggestion into consideration.

I want to say a word or two upon the way in which the Chancellor of the Exchequer is relying upon borrowing to finance the War, instead of having the courage to raise a far larger sum by current taxation. He is not following the policy which Pitt followed during the last ten years of the Napoleonic Wars. In the early days of the Napoleonic Wars Pitt followed the policy which the Government have carried out during this War, but as that war went on it became evident that that was a disastrous policy to pursue, and during the last ten years of the Napoleonic Wars Pitt raised the whole cost of the war out of current revenue. The country at that time was poor indeed. Its capacity to bear taxation was in- finitely less than the capacity of the country to bear it to-day. An Income Tax of 5s. in the £1 is high for people with small incomes, but they do not pay a tax of 5s. in the £1. I think I am right when I say that the full tax is only levied upon people who have an income exceeding £2,000 a year. I fully endorse what the hon. Member for Hexham (Mr. Holt) said in regard to a review of the methods of assessing the Income Tax. Its anomalies and injustices constitute a crying shame. These might be tolerated if the tax were small, but they become a grievance too heavy to be borne when the amount of the tax upon the income is as high as it is at the present time and as high as it is likely to become in the not distant future We have now the conscription of life for military service. By the operation of the Military Service Act tens of thousands of men have been ruined, their businesses have been destroyed, but they get no compensation from the State. If they return they will return penniless; they will have to begin life's straggle again at the bottom rung of the ladder; and, after having been fighting for a year or two years, they will have to spend the rest of their lives struggling and helping to pay for the War in which they have done their part on the field of battle. Conscription for the purposes of military service, but no conscription of wealth!

When the Government wanted to borrow a few months ago they had to spend thousands of pounds in newspaper advertisements and in appeals from the hoardings to the patriotism of the people to come to the assistance of the country and lend their money. They had to offer what the "Times" newspaper described as the most attractive combination of patriotism and pocket which had ever been offered to the investing people of this country. When the Government want money, they raise the rate of interest from 3 per cent. to 4½ per cent. and then to 5¼ per cent. When they want life, they take it. Now we demand that wealth shall not be treated less considerately than human life, and that when the country wants wealth, it shall take that wealth, so long as it pursues the policy of taking human life by compulsion and without compensation. My hon. Friend opposite (Mr. J. M. Henderson) says there is conscription of wealth now. I suppose by that he means the Excess Profits Duty and the Income Tax.

Of course, it is a conscription of wealth, but it is a matter of degree, and in the case I have just quoted a man's all is taken. But the hon. Member's interruption does not in any way vitiate the argument I am putting, and does not dispose of my statement that when the Government want money they have to offer attractive terms to those who have money to invest. If it be right to take human life without compensation, then it is equally right to take a man's wealth. It is the old men who have made this War; it is the old men who remain at home now to make money after they have sent the young men to fight the old men's battle. Therefore, the least that the people can do in this time of national crisis who have money is to give as freely of their wealth, according to their capacity, to, contribute to the national cause, as the men who are giving it by military and by naval service.

I was not aware of the fact, and it evidently has not reached the knowledge of the Chancellor of the Exchequer yet. The Chancellor of the Exchequer last year received about £500,000,000 of revenue. He had to borrow £1,600,000,000, and upon that he had to pay the rates of interest to which I have already referred. What can be do? He can raise the Income Tax a good deal higher than it is at present upon large incomes. He has stated that the instrument of taxation can be used not merely for the purpose of raising revenue, but in order to deprive people with the means to spend in ways which do not conduce to the national good. With all the increase we have had in the Income Tax I see no signs of a diminished spending power on the part of wealthy people. Go through the streets of London. Go through Oxford Street. Go through Regent Street. Are the displays of ex- pensive articles there less than they were before the War? Everywhere you see the most ostentatious display of luxury and wealth. The increase of Income Tax has certainly not had that effect. I do not advocate an increase in the Income Tax on incomes of people with comparatively small means, because we have in this connection to bear in mind that the increase in the cost of living has reduced the value of the small income by something like a half. Last year the Chancellor of the Exchequer imposed Income Tax upon working men earning 50s. a week. Fifty shillings a week is only equal to 25s. a week before the War, and to impose a heavy Income Tax upon such people would be altogether unfair and most unjust. We must exhaust the capacity of incomes in the larger ranges before we begin to impose heavier taxation upon people with smaller incomes, and that is the reason why I deprecate the increased Entertainments Tax and Tobacco Duty, because the increase will fall most heavily upon the people who have the least capacity to bear it.

If the Chancellor of the Exchequer should contemplate, in view of next year's deficit and the necessity of imposing new taxation, any increase of taxation which will bear upon the poorer part of our population, I would beg him to remember that the working people are being taxed in a great many ways to-day other than by the payment of taxes which are imposed by this House. Take, for instance, the increase of railway fares. Working people must travel, and it is a heavy burden indeed upon them to have to pay a 50 per cent. increase in railway fares. Even before that increase was imposed the facilities for cheap tickets had been taken away, which also was a burden upon the general travelling public. I suggest to the right hon. Gentleman that he should raise the Income Tax considerably upon incomes of over £1,000 a year. Then I feel sure he or his successor will have after the War to consider the possibility of getting a large national income by an extension of State enterprise. Partial State control of railways, of mines, and of shipping are accustoming people to the idea of the State control of industry. One often hears from people who before the War would have repudiated the very idea of holding any views of a Socialistic character, "We must never allow the railways to return into private hands." They say the same about mines.

If the right hon. Gentleman (Mr. Leif Jones) has his way the breweries will not be worth taking over, especially if the purpose be to bring a good financial return to the State. But by taking over enterprises of this character, effecting economies, and eliminating the waste of competition, I think the Government will be able, as in the case of the Post Office, to get the very considerable revenue which will be so very badly needed when the War is over. I was induced to offer these desultory remarks by what the hon. Member (Mr. Mason) said. I think he made a most important point, and one which it is incumbent upon the Chancellor of the Exchequer to answer. If he should be in office next year and if he has the preparation of the financial statement, I hope he will be courageous and will reverse the policy which he is following at present of raising so little by current taxation and relying so very unduly upon the policy of borrowing, thereby piling a heavy burden upon the generations which are going to follow.

I should like to ask my right hon. Friend if he will favourably consider a few suggestions in connection with the merging of the munitions levy into the Excess Profits Tax. Munitions firms have been asked by the Munitions Ministry in very many cases to speed up work, so as to have greater production, and in order to do so they necessarily work their plant much faster than they would in ordinary years, and so have what one may term abnormal depreciation. I should like him to consider that these firms which do play up and make excess production should have some allowance for abnormal depreciation, and also that where they depreciate their plant in order to play up to the country they should have some inducement given them to do so by some allowance on the costs which are made over the stamp. Under the Munitions Act these people have to deal with the Finance Department of the Munitions Ministry, and there they met business men who knew something about the conditions, and therefore were more or less sympathetic with them, and agreements were come to as to so much per cent. for depreciation and so much per ton over and above the standard production. I would ask the right hon. Gen- tleman to insert something into the Bill which would preclude the Inland Revenue Department from altering any arrangement already made with the Financial Department of the Munitions Ministry. It would be very simple. It would be quite an ordinary thing to work if you took the normal depreciation before the War and added 4 per cent., leaving 10 per cent over. That would be something like a fair extra allowance for depreciation for extra output, and the extra output itself should be in direct proportion to the increased output based on the profit per ton or per unit made on the standard theory.

In many cases firms which are taken over and controlled by the Ministry of Munitions had, before this controversy commenced, made large contracts for delivery of goods with other business people. They could not complete these contracts because their works were taken over for Government work, but as honourable traders they would feel themselves bound to complete these contracts after the controlled period is finished. Since the commencement of the War there have been large increases in prices. These contracts were made in many cases at low prices. The prudent trader if he makes a contract sees that he has got the material at equivalent prices to those at which he has made the contract. If he is turning out iron or steel at a low price, he has bought his material to make it at similarly low prices. But after these firms are taken over they find that their large stocks of materials are in many cases used up in Government work. By that method it is very easy to see that the country gains financially to a considerable extent, because although the finished article is sold at a high price, owing to the rise in prices, the material it was made out of is obtained from the manufacturer at a low price. There it is at his works. Therefore the Government benefits by having the increased profit made by the manufacturer, and it takes it in increased profits duty. Therefore I think the Chancellor of the Exchequer ought to make some allowance to the manufacturer for the contract which the trader has made in order to enable him to complete that contract after the War is over, and something ought to be added to the standard of profits, as a sort of sinking or reserve fund, in order to enable the honest trader to complete his contract after the War. In the same way with the other point about the stock. Before some firms were taken over by the Munitions Ministry the manufacturer had stocks of material and also stocks of his finished articles. When they come to reckon up in their balance sheet the price of their stocks, the manufacturers contend that they should not be obliged to reckon the value of those articles at the price now, when prices have risen so much, or else they may find themselves at the end of the period of control with an article that is priced very high, but which will be subject to a very great fall at the end of the War. Either the right hon. Gentleman ought to make some allowance for the fall in price or ought not compulsorily to make a manufacturer put the price in his balance sheet at anything more than it was at the time of the commencement of the War. I hope my right hon. Friend will sympathetically consider these points and see if he cannot introduce a few Amendments which will protect the interests I have endeavoured to represent.

6.0 P.M.

I rise to appeal to the Chancellor of the Exchequer to see if he can grant some little concession to soldiers serving at home in respect of the increased duties on tobacco, which press upon them very much more harshly than upon any other section of the community. I do not know whether many hon. Members realise how very small is the net rate of the private soldier's pay. Nominally it is one shilling a day, but in the present Army think I may safely say that 80 per cent. of the soldiers now serving have sixpence per diem deducted as allotment from their rate of pay in order to provide for their wives and other dependants. Further, if the soldier goes into hospital, unless it is proved that the disease or disability is entirely due to military service he has to pay 7d. a day hospital stoppage. Therefore, while he is in hospital he is actually losing one penny per day. In any case I do not think that 6d. a day is very much from which the private soldier must pay for his tobacco, his soap, his matches and any little luxury he may require. If he goes to a cinema theatre he has to pay the increased tax. The Chancellor of the Exchequer has kindly remitted the tax in the case of soldiers, but it is only when the tickets for the entertainment are given to them free. In all other cases the soldier has to pay the tax. Soldiers are grateful for that concession, but they would far rather have some concession with regard to their tobacco.

We have a very large number—we cannot say the number here—of soldiers serving at home. They are all working hard. Some are training to go gut in a few weeks to the front and others are working on the coast, while many are convalescing and recovering from wounds and disabilities received overseas. The price of an ounce of the cheapest tobacco sold in the Army canteen, which is the cheapest place at which the soldier can buy, was 3½d. previous to the 1915 Budget. That Budget raised it to 5d., and at the present time it is 7d. for an ounce of the cheapest tobacco. That is one penny more than the soldier's net rate of pay. With regard to cigarettes, ten cigarettes which were sold in 1914 for 3d. now cost 5d. These figures are slightly different from the figures quoted by the hon. Member for Blackburn (Mr. Snowden) owing to the cheaper rate at which soldiers can buy in the Army canteen. The wages of practically every class of civilian have risen during the War, and enable him to continue to purchase his former allowance of tobacco, even with the increased tax. The Chancellor of the Exchequer admits that when he says that the increase of the Tobacco Tax will bring in an increase of six millions in revenue. He also implies that this increase has been imposed, not for the purpose of reducing consumption, but in order to get revenue. In the case of the soldier it will reduce his consumption, and will not produce revenue. He cannot afford to pay any more for his tobacco, and his little ration of tobacco, his dearest luxury, will be cut off. It is very important work at home which the soldiers are carrying out and everyone knows that the fag is one of their dearest luxuries. It will hit them very hard if their tobacco ration is cut down. I ask that the soldier serving at home may be allowed to purchase a limited amount of tobacco out of bond to be sold through the Army Canteen Committee. There is very good precedent for this form of concession. Exemption in regard to the increase in Income Tax since the War has been granted in the case of the pay of officers. Sailors, before the War, were allowed— and the same privilege obtains to-day— to buy one pound of tobacco per month, at the rate of 1s. 6d. for pipe tobacco and 1s. 10d. for cigarette tobacco, while the soldier pays 9s. 4d. The Red Cross, I am very glad to say, are allowed to buy tobacco free of duty in order to give it to the soldiers in hospital.

I think there is a strong case that the soldier's claim should be sympathetically considered, and I am sure the Chancellor of the Exchequer will do so. I hope the case of the soldier which I have put will also receive the support of other hon. Members. The soldier is contributing —as we all know—to the War in other ways. There is no money to be made out of him; no revenue to be made. The only possible objection which I can see to my proposal would be that there might be difficulties in regard to evasion. But arrangements might be made whereby the soldier could get his tobacco while at the same time fraud and evasion by others could be prevented. It would be quite sufficient for the Chancellor of the Exchequer to insist that tobacco sold to soldiers out of bond should be sold at the Army canteens only and that the Army Canteen Committee should only take out of bond tobacco up to the maximum of 1 lb. pipe or cigarette tobacco per soldier per month, to be calculated on ration strength on the last day of the month. You could safely leave further details to be arranged, so as to ensure that the soldier got his pound of tobacco and that no one else fraudulently purchased tobacco. You might leave those details to be settled by the Army Council and the Army Canteen Committee. If the Exchequer and the revenue authorities wish to arrange the details themselves and to provide for greater safeguards, there would be no difficulty in arranging that the tobacco should only be sold at the reduced rate on one particular day of the month, say, on the last Saturday of each month, and that the same day should be observed throughout the whole of the United Kingdom. Further, that the tobacco should only be sold in the Army canteens to soldiers whose names are on the list furnished by the commanding officers to the canteen, and that their signature should be appended to this rule before they could get tobacco at the reduced rate. This I believe is similar to the system followed most successfully in the Navy, where, as I have said, the sailors get their tobacco at 1s. 6d. per lb., compared with 9s. 4d. per lb. paid by soldiers.

I trust the Chancellor of the Exchequer will consider this point, and will either give effect to it by administrative action or by putting down an Amendment to Clause 4 of this Bill in the Committee stage. In taking away tobacco from the soldier we are hitting him in his tenderest spot. The calling of the private soldier is the one calling which has received no advance of pay to meet the increased cost of living. Even the messing allowance remains at 5½d. as at the commencement of the War, and this is combined with the order of the Food Controller, which has, no doubt, necessitated a reduction in the little luxuries which used to be provided for him at meals. The soldier does not complain about that. This Bill asks him to pay more than his net rate of pay for one ounce of tobacco. I hope the Chancellor of the Exchequer will see his way to give them the same privilege as is granted to the sailors, which is also granted, I know, to the soldiers at the front. I ask that the soldiers at home should be allowed to buy 1 lb. of tobacco per month free of duty. If that is too great a concession, even exemption from the increased rate, caused by the Finance Act of 1915 and this present Budget, would be an inestimable boon, and, I submit, only bare justice to the soldiers.

The hon. and gallant Gentleman has the sympathy of all of us, and if anything can be done to alleviate the hardship on soldiers they are certainly, deserving of every consideration. Whether the suggestion is a practical one I must leave the Chancellor of the Exchequer to decide. I think his argument goes to show that when you tax things and the tax gets to a very high figure the tendency undoubtedly is to interfere with consumption. I should like to refer to some of the remarks made by the hon. Member for Windsor (Mr. J. Mason) and the hon. Member for Blackburn. Both these hon. Gentlemen agreed, curiously enough, in their desire that we should have an increased amount of the cost of the War raised from taxation rather than from Loan. The right hon. Gentleman who initiated this Debate in a very capable survey of the whole Budget also laid stress upon that point. It has been put by a number of speakers, and I hope it will receive consideration by the Chancellor of the Exchequer, possibly not in this Budget but in the next, for I suppose we may have another Budget in September or later in the year. I think the case is a conclusive one. Our proportion of something like 24 per cent. in this War, as against 33 per cent. in the Boer War and 50 per cent. in the Crimean War, shows that our proportion is rather on the down grade. I think we ought to see to it now, particularly in view of what was said by the hon. Member for Windsor, that when peace is restored the Excess Profits Tax will disappear and the necessity for revenue will still remain to a considerable extent, while our basis will have been very considerably curtailed. Now is the time rather than after the War to remodel the Income Tax, with a view to securing a real permanent revenue, than to leave consideration till after the War is over.

The Member for the Rushcliffe Division (Mr. Leif Jones) spoke of the effect which this Loan policy has upon inflation, and I think we see that demonstrated over and over again. We see it by our borrowing in America and our mobilisation of American securities. Our imports are rising and our exports are contracting. The latest figures bear out the fact that when you have, as we have, very great inflation as the result of borrowing and the raising of money by currency notes and the mobilisation of securities which may help us to buy, perhaps, our munitions a little cheaper, the import trade is stimulated rather than the export trade. We find that when we consult the latest Trade Returns. We find from the latest Trade Returns that the last month's imports were valued at £84,000,000, compared with £75,000,000 last year, an increase of £8,000,000 odd; while exports amount to £35,000,000, against £36,000,000, a decrease of £1,000,000. The imports for the four months were £327,000,000, an increase of £20,000,000, and the exports were £164,000,000, a decrease of £16,000,000. If you take these four months as a basis for a rough estimate for the rest of the year you get an excess of imports for the year of £488,000,000. We have to add to that the undisclosed imports of munitions. Of course, I have no means of knowing the amount, but, assuming that it is something like £200,000,000, we have an excess of imports for the year of £688,000,000. That shows a very grave position because we are now in the third year of the War, we have not got the reserve of securities to export, and we shall certainly have to pay the gold. Therefore, it seems to me that the case for direct taxation as a means of curtailing consumption is urgent. It is said that because America has entered the War that will help us. It certainly helps in a sense. We have a banker willing to lend, but that does not cancel our indebtedness; we have still to pay. I believe that we will always be able to pay properly, but we should realise our position and the fact that the establishment of credits over in America is another means of increasing our indebtedness. The figures prove the urgent necessity of facing this problem now and by direct taxation reducing consumption.

The Chancellor of the Exchequer the other day, when I was advocating this, seemed to doubt my contention and suggested that I should study the subject a little further. I have been taking his advice, and I may read an extract from Ricardo in confirmation of my argument as to the advantage of direct taxation as against loans and taxes upon commodities. He says that the latter is a system which tends to make us less thrifty and blinds us to our real situation. That was written a hundred years ago. He says that if the expenses of a war be £40,000,000 per annum—though the rate of expenditure has increased so enormously since then the principle still remains—and the share which a man is called upon to contribute towards that amount is £100, that man would, on being called on to pay that amount, endeavour to save £100 from his income. But under the system of loans he is called on to pay only the interest, namely £5, and he does not bother saving this amount on his expenditure, but deludes himself with the belief that he is as rich as he was before. It is very simple to apply that principle. If we are only called upon to pay the interest on our Loans to meet current expenditure, we do unquestionably delude ourselves with the belief that we are very much richer than we are. It is very interesting to recall the effect on exchanges after the Franco-German War— the effect on our exchanges which we have to consider is a different problem, that of maintaining our exchanges—but it was found in France that the notes of the Bank of France after 1870 were inconvertible. The directors showed great sagacity and prudence in the management of that institution, with the result that it did not affect their trade, but un-questionably it affected their position as a great monetary centre. And I may point out that if you do allow anything to affect your exchange you are undermining your position, and the result that during that period the notes of the Bank of France were inconvertible undoubtedly gave to London the monopoly as the monetary centre of the world. We should look to that problem now. If you allow the increase of an enormous indebtedness, which we shall have to meet after the War, you are unquestionably undermining our position and jeopardising our ability to maintain ourselves as the monetary centre of the world.

Reference has been made to the double Income Tax. I do not want to labour the matter unduly, but since it was last discussed I have had a significant communication placed in my hands from an important corporation—the Bombay Electric Supply Company, which is one of very many more who are now thinking of changing their offices and leaving this country. I find it stated in a report that they are advised by counsel that by the transfer of their administration to India they would be free from liability to pay this tax after 1916. That is very significant, because it may be typical of many more companies. I hope that the right hon. Gentleman will consider before the Committee stage the question of making some concession to those institutions, like Australian and other concerns, which are penalised by having to pay double Income Tax.

Clause 28 of the Finance Bill deals with what is called the Depreciation Fund. We had some discussion with regard to that before, and I ventured to attack the provision as being quite unsound. Of course I recognise that in the prospectus for the War Loan there was a paragraph which provided that for the purpose of providing against depreciation in the market price of the Loan the Treasury would undertake to set aside monthly a sum equal to one-eighth of 1 per cent. of the amount of the Loan to be used in the purchase of stock and bonds of the Loan for cancellation whenever the market price falls below the issue price; whenever the fund reaches £10,000,000 it is to be stopped, but it is to be resumed when it falls below £10,000,000. Now we are asked to pass this Clause in the Finance Bill after it has been put into the prospectus and sent broadcast to investors. But if it can be shown that this particular Clause, if carried into effect, will not add to our credit, and is quite unsound and quite illusory, in the fact of having no effect on prices during the War, it should not be adopted during the War. The only possible way in which a sinking fund can have any effect on a stock is when revenue exceeds expenditure. Surely it is self-evident, if we have a deficit of £1,600,000,000 to meet, that for the Treasury to go into the market and deplete it, as it must, to the tune of something like £30,000,000 per annum—one-eighth of 1 per cent. per month—cannot have the effect of supporting this stock. The stock has been at a discount since the Loan was issued, and in the nature of things is almost certain to be at a discount. How can you support stock while you are going on the market for this large amount? It is like robbing Peter to pay Paul. The real test must be the maintenance of our credit.

The principle now being adopted was tried in the time of the Napoleonic Wars and proved to be absolutely unsound. That does not mean that I do not subscribe to a sinking fund. Everyone subscribes to a sinking fund in time of peace when you have a surplus of revenue over expenditure; but no sinking fund is possible in time of war when you have a large deficit. We have suspended the old Sinking Fund, and we have suspended the New Sinking Fund, and now that we have a deficit of something like £1,600,000,000 there is a proposition to compel the Treasury to go into the market to borrow, not for the purposes of the War, but for the purpose of taking from one hand to put into the other. It simply means so much burden on the taxpayer, so much commission, so much extra expense without a penny being raised for the credit or the finance of the War. It is a most unsound proposal, and reflects the greatest discredit on the Treasury for allowing it to be proposed. It comes before us now in a way in which it is hard to avoid it because we have promised this to investors, but I think that it should be suspended during the duration of the War. It might be carried out afterwards. I would support any sinking fund to get rid of our large debt, but to carry out an obligation of this kind which adds to our charges to the tune of £30,000,000 a year, simply lowers our credit.

It has been suggested that we should have a Finance Committee for such purposes as this. I find, going back about a hundred years ago, that a similar committee was appointed, and they also seem to have had the same trouble, because they were faced with the same difficulty, and their report is a very interesting document, which I commend to the attention of any hon. Member who has time for research. This Committee, which was appointed in 1828 declared that in no circumstances could they recommend a Sinking Fund which was not provided by a real surplus of revenue. Again, they go on to express the sentiments of the Committee, and recommend perseverance in the Resolution passed in 1819 for a fund to gradually extinguish the debt,if that measure could not be accomplished by the application of surplus revenue. This Committee 100 years ago protested against the very thing to which I am now calling attention, and I think I have said enough to show that the same difficulty presents itself now as it did then. As in those days, Hamilton and other critics were successful in regard to these unsound proposals, so I trust that the right hon. Gentleman will give a sympathetic hearing to the protest which I now make.

I have listened to the speech of my hon. Friend, who referred to economic authorities who have a certain charm to everyone who hears about them and if people have the patience to read them. In the first part of my hon. Friend's speech he pointed out that if a man has to pay a debt out of income he realises that he is paying it, but that if he pays it out of borrowed money he does not feel that he has got to pay the debt, and that he is not likely to exercise sound and proper financial control. It is the case that at the time of the Napoleonic War somebody thought that they had invented the idea of the Sinking Fund, and they tried to persuade Pitt, who apparently lent an ear to it to a certain extent. It was thought that if you have a Sinking Fund, and you know that every loan would be paid off in that way, things would be done better than in any other way, that they would be done in some way by magic, and that you would get matters to go better than was possible otherwise. The only thing I ever understood about that Sinking Fund was that debts were paid out of borrowed money, and how that could help to get rid of a debt was one of the things I never could understand. My hon. Friend really forgets the whole purpose of this particular Sinking Fund. I have always understood that one of the complaints made generally against the Treasury is that they have too much of the official mind, and that they are not ready to take advantage of the practical experience of men who presumably know so much more about these financial transactions. At the time when I was arranging for the Loan I saw a great many City experts in regard to different aspects of this matter. There were almost as many different views as there were experts, but I will say that while there was an extreme difference of opinion on almost every one of the points, yet there was one important point in regard to which every man who spoke to me was agreed, and that was, that we must put a Clause as to the sinking fund into the prospectus, and then we would get the money much more easily than if we did not put that in the prospectus. That is the reason why I put it into the prospectus.

Why so? If this particular kind of sinking fund was going to do to the State in any shape or form any harm, or if it was going to deceive the investors, of course we ought not to do it. What was the actual position? We wanted to borrow as large a sum of money as we could, and we thought it was wise that we should put into the prospectus that out of the money we borrowed we would pay out 1½ per cent. per annum, in order to keep the price of stock at a higher level than it would have been without it. It all depends on the conditions at the given time whether or not the city critics were right or my right hon. Friend was wrong, or the reverse. Any one with any acquaintance of these matters will see that it might often happen that a certain amount of buying must take place. and that it will have a steadying effect in proportion to the amount that you put in. Let me point out what happened in this case. As a rule the bulk, or a large part of the Loan, is taken up by people who do not intend to sell, and you may take it that this large body will not go on to the market under any circumstances. But very often there is a certain amount of stock which must be sold from one cause or another. If there is nobody to support it on the market at all, and it is left entirely to the law of supply and demand, it might happen that a very little selling would have a very big effect in lowering the price of the whole stock. That is the view which was taken in the city, and I thought myself that it was a perfectly reasonable view, and I cannot imagine that anyone in my position could have done otherwise than adopt that expedient, having in view what was my object at the time, to get the largest possible amount of money for the purpose of carrying on the War. That is the explanation of that particular matter.

I must deal with some of the other subjects which have been raised. I agree with the hon. Member for Blackburn that it is curious there should be such a thin House when we are dealing with these gigantic financial transactions. But the hon. Gentleman gave us what is the actual explanation. It is that the House recognises that the money has got to be raised, and I think that on the whole—I hope I am not unduly sanguine—the House has come to the conclusion that, though they may dislike and criticise some of our proposals, or think that better proposals could have been carried through, still they do not think it worth while to try seriously to upset those which we submit. I do not think that is a bad frame of mind, certainly not from my point of view. My hon. Friend who began the discussion pointed out to us the serious results and the unfairness of our system of Income Tax, and urged that a Committee should be appointed to inquire into it. Nobody doubts that it would be well if we could get a Committee to work. It is a fact that, as regards the consolidation of the Income Tax law, that has been going on and is almost completed. As regards a Committee to inquire into the incidence of Income Tax, I have considered whether or not it was possible or wise to try to get to work now. I think the House, on the whole, will come to the conclusion that it is hardly possible. Nearly every man whose services would be of value on such a Committee is now working up to the hilt, and it is perfectly certain that if I tried to set up a Committee, and endeavoured to get the best men for the purpose, they would not be able to give the time necessary to go into the matter thoroughly. I do not think it is possible, much as I desire to see it, that this ar- rangement can be carried out now. The hon. Member for Blackburn referred to the increased Tobacco Duty.

Before the right hon. Gentleman leaves the subject of the Income Tax, can he say whether there will be any further relief on the Double Income Tax?

That is an entirely different problem, and I did not intend to refer to it. I thought it was probably not worth while to speak of it, having already delivered a speech upon the subject. I think it will be better not to enter into a discussion, but to rely on what I have already said. The hon. Member for Blackburn referred to the effect of the Tobacco Duty upon the price charged to consumers. I can assure the House that is one of the dangers which we always have to consider. At the time the duty was imposed the amount was decided upon with reference to the probable effect on the selling price. Of course, it must not be forgotten that there are many circumstances, apart from the additional tax, which account for the increased price of tobacco. The restriction on the amount imported, the interest to be provided, the higher duty to be paid, and many other considerations of that kind, all have to be taken into account; but, all the same, the Government are making inquiries in regard to the price which is being charged to the consumers. The hon. Member for Blackburn pointed out that we could, at all events in regard to the great tobacco companies, get a very considerable share of any excess profits they made—that we could get 80 per cent. What we have got to do, however, is to see that no unnecessary burden is put upon those who have to buy the material. I can assure the House that arrangements are being made by which the price of tobacco is watched, and if we find that there is any increase which could be avoided we shall not hesitate to take steps. I will now come to other points which have been raised.

One of the most important of the subjects was that raised by my hon. Friend, namely, the relation between the amount of money we are getting to carry on the War from revenue and the amount which we are raising by Loan. I am sure that everyone in the House realises that we can make no greater mistake than to borrow more than in all the circumstances of the case it is wise or expedient to borrow. Before examining that especially from that point of view, I should like to deal with the view expressed that the estimate which I gave as to our position at the end of the War was too sanguine. I do not think it was. I shall tell the House exactly what it was based upon. I took the existing taxes and estimated that at the end of the War they give the same revenue at the same rate as they are giving now. I did not, of course, include in that category Excess Profits Duty. I left it out altogether. Making that calculation we found that there would be a balance in our favour, after paying the cost of governing the country in peace time as far as we could estimate it and after paying for the interest on the Debt and Sinking Fund.

It has been said to-day more than once that I was wrong in assuming that we will get as large an amount of money at the same rate of taxation after the War is ended. I am not so sure of that. It was pointed out that the inflation which comes from borrowing accounts for a very large part of the higher profits we are getting now. That is perfectly true, but surely a large part of the higher profits shown in that way is to be found in the Excess Profits Duty, which is not taken into account at all in the estimate I made for after the War. I ask the House to remember this also, unless we assume, which I am sure nobody will, that the number of people engaged in production has no effect whatever on the total income of the country, then we must assume that with not merely all the soldiers who were doing manual labour now, but with all the business men who were heads of very successful businesses before the War coming back, that we will not have a bit more production or more business going on then than now. Unless we assume that, then we must put that against the other view of inflation, and this further view that there will be a largely increased body of men enaged in production, and that there should be something to show for all that amount of business done in the taxation which will come in. In addition to that the House must remember that we are not making allowance for what must inevitably happen, namely, that there must be some increase in the Customs and Excise Duties when the restrictions have been taken away. As I have said before, I have not actually done that, but I am certain, and I think my right hon. Friend will agree with me, that if I were to ask the Treasury officials to make an estimate as to what the peace revenue will be at the end of the War on the basis of existing taxation, leaving out the Excess Profits Duty, I have not the smallest doubt that they will give me a very large margin instead of the comparatively small margin I showed in my Eetimate.

Let us consider the question of what is the right amount which you are to raise by Loan and which you are to raise by taxation, and let us consider how we are to decide. The hon. Member for Blackburn said that we are doing nothing in the nature of conscription of wealth, that we are taking men quite freely, and without making any appeals to their patriotism now we are taking them; but that when we wish to raise a Loan, then we appeal to their patriotism, and give a mixture of patriotism with a very high rate of interest. That may be true, but is not, after all, the question, more or less, how you are going to get the amount you need for this War with the certainty that you are going to continue to get it. As regards the men, I was one of those who did not wish to employ compulsion as long as we could get them by a voluntary system. I would have preferred the voluntary system if we could have got all the men we wanted for many reasons, which I mentioned before. It is the same here. If we can get the money we need by voluntary methods, by upsetting as little as possible the existing machinery, then I am certain you will get more of it and for a longer time than by any attempt at conscription. I have not the smallest doubt of that. When it is pointed out how small a portion of our expenditure has been raised by taxation, and when references are made to what happened in the Crimean War and the Napoleonic Wars, hon. Members really should take into account the difference of the figures, and that it is absolutely impossible to imagine raising the biggest part of the expenditure we have now by taxation. Perhaps it may be some consolation to us to know, although I do not know whether it will help us much when the War is over, that if we are in a bad position financially, Germany is much worse. But it may give us a better sense of perspective if I ask the House to consider what the position in Germany is. So far as I have been able to ascertain, their national debt has grown to a figure as large as ours, and they have not advanced to their Allies to the same extent as we have, sums which I have every reason to think will be paid back in our case. They have only raised altogether £85,000,000 of additional taxation, while if we include the Excess Profits Tax we have raised £400,000,000 more than before the War; and even if we leave the Excess Profits Tax out, we have raised £240,000,000 more than before the War— that is to say, three times as much as the Germans have raised. That is an indication, I think, of the position, and will give a sense of perspective.

I do ask the House to remember this, that no other combatant country could possibly have raised the amount of revenue we have done. As I said, it is all a question of what is the right proportion. I think I said at the time the Loan was being raised that no Government in this country would allow us to be defeated in the War or to be prevented from prosecuting the War for want of money, if the money were here and could be taken; and if we could not get it in any other way we would conscript it at once, if we could get it. I said that then, and I say it now; and if the necessity arose I would not hesitate to do it, not for a moment; but when I said it I began to ask myself how I would set about doing it, and I confess that I have not answered that question, and I am not going to answer it in these Debates. It must be quite obvious to anyone that if at the same time you take away almost the whole of a person's income you cannot expect to borrow money. You cannot do both. I think it was rather hinted to-day that I was just a shadow of my right hon. Friend the late Chancellor in following his Budget. I am not a bit ashamed of it. I really think in this respect he had taken the right course, and I am trying to do the same. It is my belief if an attempt were made to raise a much larger sum by a great increase in the Income Tax rates, which has been so much recommended, I am perfectly convinced in my own mind, if we made that attempt, and if the War lasts for a considerable time yet, as it well may, we would find it far more difficult than now, and perhaps impossible, to raise the money which we shall require for carrying on the War. That is my view. Now I shall deal with the criticisms such as they were, and they were not very severe, which have been directed against the Budget. My right hon. Friend the Member for Rushcliffe (Mr. Leif Jones) was, I think, a little inconsistent when he pointed out the effect the Excess Profits Tax would have in hampering and handicapping out trade after the War. I will tell him where I think the inconsistency lay. Every argument he used is fully present to my mind. Our business men and manufacturers will be handicapped in competition with men who are not engaged in the War, and have not these burdens behind them, although now that America has come in the number of those men is being greatly limited. It is true we will be greatly handicapped, but I do not see myself any real difference between taking excess profits and taking an increased Income Tax and Super-tax as well. The effect on the man will be the same. Therefore I say that the same argument which applies to one applies precisely to the other.

If you take it from excess profits you are only taking it from people doing a flourishing business, while if you take it from Income Tax you are taking it over the whole country.

7.0 P.M.

That is quite true. It may be to a certain extent that if you take it only from excess profits you are taking it from people obviously engaged in business, while if you take it in Income Tax you include a number of the professional classes. But in the main it is true that if you take large sums, whether in Income Tax or excess profits, it does limit the amount of capital available for carrying on the business of this country at the end of the War. If the House would look. at it from the point of view of the Chancellor of the Exchequer they would come to the conclusion that they must raise this additional revenue, and that there was only one of two ways of doing it, either by increasing the Excess Profits Duty or by increasing the Income Tax. I was convinced that it was fair to take it from the Excess Profits Duty. Nobody would question its absolute fairness if the profits were all due to the War, and I think it may be said in the bulk or large majority of cases the higher profits are indirectly or directly due to the War. In any case, when you are going to consider the question of fairness, I think the House will take the view I took myself that at a time when such terrible sacrifices are being exacted from so many of our people, not merely those who are fighting, though Heaven knows they come first, and with the privations of all kinds to be found throughout the country, you cannot really say that a man is badly off who has something more than the income which he had before the War. That is my opinion and I think on the whole it is not unfair from that point of view. But several hon. Members have pointed out the very great hardship which this imposes on particular firms, and I have myself in deputations I have seen, and which I am sure my right hon. Friend saw before me, found many cases of hardship. That is inevitable, but it is undoubtedly true small firms, and the firms which are just beginning to compete with the big ones, have suffered more from this than long established firms. It was for that reason that I decided to increase the amount allowed for new capital from 6 per cent. to 9 per cent. That was a bigger increase than was expected even by those who advocated it. I thought it the right thing to do. Personally, if there was any way fairly to help a case of the kind, I should be very glad to hear of it, but I do not see any.

Now I come to what has been the crux of this Debate, that is the shipping question. If there is anything in connection with my political experience on which I do to a certain extent flatter myself it is that I have a fair idea of the opinion of the man in the street so far as the Members of the House of Commons are concerned; and when this arrangement was made I did really believe that the attack to which I should be subjected would be that I had treated the shipowners far too delicately, and that I ought to have treated them worse. That is my view. I venture to say to those who represent shipping in the House that if I had not made this provision to which such exception has been taken the criticism would have been all the other way. I certainly would have been found bigger fault with, and there would have been a much bigger echo in the country than there has been in the criticism to which I have been subjected. I was sorry to hear the hon. Member for Hexham (Mr. Holt) say that he thought I was prejudiced against the shipowners. Really I am not. I have tried to act with what I considered absolute fairness in all the circumstances of the case. I do not think the House quite appreciates what is the position in this respect. When the present Government was formed the Prime Minister, in his speech to the House of Commons—a speech made, because I was Chancellor of the Exchequer, after consultation with me—said:

I mean the average of them. I refer to all well-managed ships. What is the position? If we had not made that proviso that they were not to fall back upon the Excess Profits Duty that they had previously, the effect of it in substance would have been that we would have been guaranteeing them now—after allowing them these gigantic profits for nearly three years—that we would have guaranteed them now practically pre-war rates. Just think of that! Think what that means! The House will understand that I am rather in a difficulty with regard to this matter, because, while I am trying to justify the position of the Government, I do not want to increase prejudice against shipowners, or the impression that they have been doing things which other people would not do. But I must show the case as I understand it. The year before the War gave ships on an average far higher rates of freight than the average rate. Taking the two years before the War—which the shipowners have a right to select as the two best years out of three—taking those as the average rate, the profit earned by ships was about 15 per cent. If we adopted this plan and allowed them to recover by means of excess profits any deficit incurred in the requisitioning rates, the result would be practically that the State would be guaranteeing the 15 per cent., and that at a time when the Government is under a pledge to take over the ships at a fair and reasonable rate of profit! Will the House try to consider the thing from the point of view of perfect fairness, as I have tried to do. I do not think there is anyone who knows anything about ships who would question this: that shipowners have been allowed to make profit directly arising out of the War which we ought not to have allowed them to make. That is the first position I shall lay down. I do not know whether those who are actual shipowners will disagree; if so, I can say that I have some means of justifying the statement I am going to make. As a rule, during the three years which have elapsed since the War began shipowners have made the whole of their capital; they have made the equivalent of 33⅓ per cent., and that after paying Excess Profits.

Well, my hon. Friends opposite ought to know better than I do for they are shipowners; but I am going to give to the House what I did not intend to do, and what will, perhaps, interest hon. Members. It so happens that when I was in business in Glasgow, I myself had certain small investments in ships. When I mention the rate per cent. of profit, the House will think that I must be a rich man. Perhaps I had better disabuse them of that idea. The total amount of the investment was only a few hundred pounds in each ship. I was a shareholder in fourteen ships. Taking the average of those ships, all of them paying very well, the rate of dividend I received last year was 47 per cent., after paying the Excess Profits Tax. I do not say that that is typical of the whole shipping community.

They were capitalised at the value they cost. I do not know beyond that, but at all events, what I am going to say my hon. Friends will understand perfectly well, and that is that for every £100 I put in I received £47 last year after Excess Profits had been paid.

None of them. Now, here is the position. The Government have undertaken, in the interests of the nation to take over the ships; at the same time they have undertaken that fair remuneration shall be given to the shipowners. I say that that promise would not have been fulfilled if we had made an arrangement which practically guaranteed to the shipowners—considering the profit they have made during the period of the War till now—the equivalent of the prewar rate, which was something near 15 per cent. I do not for a moment believe that any fair-minded man will consider that that is an arrangement which in all the circumstances is unfair to the shipowners, or one that ought not to be ratified by the House. As I say, that was the gravamen to-day of the criticism of the Budget. I do not remember if there were any other points specially raised, but I would say in conclusion this: that in all these matters the House must bear in mind that at a time like this, when you have to get your revenue, that whatever principle you adopt you will in all probability hit some people unfairly. It is extremely difficult to adopt some system which to certain classes of the community does not seem unfair. What, however, I would ask the House of Commons to believe—that the Government as a whole, and that I, as representing them in this matter, in every case of the kind have adopted what, under the circumstances, I believe is as fair means as possible of raising the necessary revenue.

I am very glad that my right hon. Friend has made the statement that he has made about raising money by taxation and by loan. Both are equally bad. We do not want to increase our debt. On the other hand, we do not want to increase taxation to such an extent that we shall prevent people from saving money, and so in the future prevent them from providing that capital which at the end of the War will be absolutely necessary if we are to continue the prosperity which existed before the War. It is absolutely necessary that we should have that money. If you raise taxation beyond the point which it has arrived at now it will be impossible to provide that money. It is quite true that dealing with the Sinking Fund on the one hand and borrowing money on the other is a bad thing; but the Chancellor of the Exchequer is absolutely correct in what he said, that it was done because it was supposed that it would attract investors to the Loan. I think it had that effect. Under the circumstances I think that it was the proper thing to do. It is quite evident also that we could not have a Committee to consider the Income Tax at the present time. Everyone is busy, and it would not be possible to have a Committee of that sort. But I would like to ask my right hon. Friend if he would consider the method of levying the Super-tax and the Income Tax. The result of levying the Super-tax upon the whole of your nominal income is this: Take the case of a man with a nominal income of £3,000. If the Income Tax were 10s.—and the hon. Gentleman below the Gangway would probably not object to a little more—that would be £1,500 on an income of £3,000, and if the Super-tax were 5s.—and I do not think the hon. Gentleman below the Gangway would object to that—the result would be that he would only have a very small amount of money left to himself, £750. If the Income Tax and Super-tax were higher, there would be nothing left at all. I do not think it is right that a man should have to pay Super-tax upon something he has never received, and therefore I do hope my right bon. Friend will consider whether he could not take some steps which would remedy that injustice. It is a very difficult thing to do, but I think it might be achieved in this way without causing very much loss to the revenue: The Super-tax was imposed originally when the Income Tax was a fixed sum, and there was no graduation of the Income Tax. Now there is a graduation. Personally, I think that is a bad thing, but that does not matter. But why should not the Super-tax and the Income Tax be combined into one tax? At the present moment the highest Income Tax is 5s. and the highest Super-tax is 3s. 6d., making 8s. 6d. I venture to say that the great majority of people in the country do not realise that there are large numbers of people who are paying 8s. 6d. in the £ out of their income before they are paying any other tax at all, and there is, of course, the tremendous difficulty of calculating the Super-tax. Even on my small income I spend many days in trying not to defraud the revenue, and as I have to be answerable for a true account of my wife's income, and, as neither of us can do adding up, we generally find that the addition comes out differently. All that might be saved if an Income Tax of 8s. 6d. were imposed instead of these two different methods of levying the tax, and it would have the effect of letting people know—and I am glad that I have the approval of the hon. Gentleman below the Gangway—what taxation is really being imposed.

I want to draw the right hon. Gentleman's attention to Clause 31, which seems to me to be a very extraordinary Clause. It provides that trustees may borrow money and invest that money in Government securities without the consent of the beneficiary or the tenant for life. I am glad my right hon. Friend the Lord Advocate is present, because I know he is an authority upon trusteeships, and I think he will agree with me when I say that a trust has always been considered to be a sacred object. It has been one of the methods by which prudent people, who have done what we ought to encourage everyone to do now, save money, to put by their savings for the benefit of their families, and I do not think anything should be done which would encourage or allow any speculation to occur in these trusts. As I read the Clause this might occur: A trust might consist of £20,000 invested in various securities, the kind of securities being mentioned in the trust. Now, under this Clause the trustees, if they are of a sanguine or a very patriotic disposition, might purchase War Loan.

Royal Assent

Message to attend the Lords Commissioners.

The House went; and, having returned,

Finance Bill

Question again proposed, "That the Bill be now read a second time."

I was alluding to Clause 31, which allows trustees, without the consent of the beneficiary, to borow money, and with that money to make investments. It is true that it is limited to Government loans, but the fact remains that for the first time in the history of this country trustees may borrow money, and with that money make investments. The Clause also says that the trustees are not to be liable for any loss arising from the fact that they have so borrowed money, or that they have invested in such security. May I point out that there is no limit in the Clause as to the amount of money the trustees may borrow. The result of this might be that some very sanguine and patriotic trustees, knowing that no loss of any kind would fall upon them, might borrow £20,000 or £50,000, and invest it in a Government Loan. The probability would be that the rate of interest they would have to pay on the money they borrowed would exceed the rate of interest they would receive from the investment, and who is going to pay that? Is it to come out of the income of the beneficiary or the corpus of the trust? it is also evident that sooner or later they will have to realise those new securities. If they had to realise them at a loss, which might easily happen, there again who has to pay? Is it to come out of the income or out of the corpus of the trust? It seems to me to be a most extraordinary provision to put into an Act of Parliament. I suppose the idea is to encourage investments in Government Loans, but I really do think that to allow trustees to, speculate— because that is what it comes to—with other people's money, and money which they have been appointed to safeguard, and to put into an Act of Parliament that no loss resulting from such speculation is to fall upon them is really an Act which cannot be justified, and which, I think, on further reflection, the hon. Gentleman opposite will consider it advisable to withdraw. I raise this point now because the House was not very full when it was mentioned, and I do not think everybody reads every Clause in the Finance Bill. I attach so much importance to it that I have raised it on the first opportunity after my attention was drawn to it.

At the present moment it is very important that taxes should be imposed for the sake of revenue, and that no taxes should be imposed which do not bring in revenue. Under those circumstances, I regret that there is not a Clause in this Bill abolishing the Land Tax, and I propose to put down an Amendment in Committee to that effect. I will not discuss the point now beyond saying that from information which I believe to be correct I understand that the yield of the land taxes has been from the date they were imposed to the 31st March, 1916, a loss of £558,189. This loss it still going on, and it cannot be held that in time of war it is wise to continue a tax the result of which is what I have just outlined. It is said that a certain amount of this money has been recouped by the fact that the amount of the value of property passing by voluntary dispositions has been increased. I do not think that is so. But if you give 1 per cent. on that sum, even then the loss is £681,610. When I come to move a Clause in Committee which will have the effect of causing this loss to cease, I hope I shall have the support of the hon. Member opposite (Mr. Baldwin) and the Chancellor of the Exchequer. I shall be obliged if my hon. Friend will put as forcibly as he can his reply to the points I have raised in regard to Clause 31. If I can have his support I shall feel comforted when I go for my short holiday to-morrow.

I agree with what the right hon. Baronet who spoke last has said with regard to some of the Income Tax anomalies. When the Chancellor of the Exchequer was speaking just now, he explained to the House why it was impossible for him, after consideration, to put into effect at once the Commission which is going to sit some day to level and smooth out all the various anomalies of the Income Tax, simplify it, and make it more just in its incidence. I think the Chancellor of the Exchequer gave us a very conclusive reason, for he said that if he could put the men who had the necessary experience, and who commanded the confidence of the country, on this job now, they could not give their whole time to the subject. One or two of the more glaring anomalies amount almost to an injustice, such as the one mentioned by the right hon. Baronet the Member for the City of London, who pointed out the injustice of collecting Income Tax on the top of Super-tax; and he mentioned 8s. 6d. as the highest rate of Income Tax and Super-tax. I think that was a slip, because the 3s. 6d. is charged on the 100 per cent., whereas the person receiving the income has only received 75 per cent., and 25 per cent. has already been taken away; therefore the highest rate is something over 10s. in the £ now. Surely now when we have a system of graduated Income Tax and Super-tax we do not want two half-pages to tell us about fifteen or eighteen different rates of Income Tax or Super-tax, as well as this ridiculous and complicated method of collection. These things need not wait for a Royal Commission, and the right hon. Baronet the Member for the City of London has pointed out how it can be done by combining the two taxes together and letting everybody know what they have to pay, without any unnecessary complication; and this would let other people know who are not large Income Tax payers or Super-tax payers exactly how much these richer people have to pay to the Revenue. I will keep off the question of the double Income Tax, although I do not think it is justifiable, and you can have a double Income Tax on a very large number of people within this Empire.

While the Chancellor of the Exchequer does not think this Commission can be set up during the War, I think it is possible to deal with £250,000,000 of trade of the country that escapes Income Tax altogether—I refer to the trade done by the wholesale and retail co-operative societies. There has been a recent case dealing with the question of the Excess Profits Tax, and there is now no dispute that these trading societies do make profits. Not only is that so, but in the very case to which I have referred—the Plymouth case—wherethe liability to Excess Profits was dealt. with in the Courts, it was laid down by counsel for the Crown that the rules of these societies laid down clearly the objects as being to carry on the trade and business of general dealers and manufacturers, etc. Ordinary provision was made for capital, loan capital, division of profits, interest on capital, reserve fund, investment of capital, payment of officers and auditors, mode of conducting the business, and the keeping of accounts. which showed the ordinary profits made just as if it had been an ordinary trading concern.

With regard to the Scottish Co-operative Wholesale Society, they have a method of setting up retail establishments in different districts where none existed before. They trade with all and sundry, and there are no members there at all. They trade until each customer has got £5 to his credit as half the dividend he would have received if he had been a member, and then the new branch is instructed by the central body of the Scottish Wholesale Society to form a branch at once and the business. is done. The injustice of that is obvious. These societies enjoy freedom from Income Tax under the provisions of Clause 24 of the Act of 1893, which of course provides for their immunity from Income Tax provided that one of two conditions are fulfilled. The first condition is that it must not have a limit to its membership, and the second is that it must not trade with the public. Practically all these societies trade with the public and they all avoid the incidence of the Income Tax because they do not limit the numbers of their membership. There an off-shoot is set up. I do not complain of it, but obviously it takes away from the business done by other retailers in that district, and when it becomes clear, as it does from the returns in the "Labour Gazette," that this co-operative retail trade particularly is increasing by leaps and bounds, it is a very serious thing for the Chancellor of the Exchequer to leave this all over until after the War. The increase between 1914 and 1915 in the turnover was £33,000,000, and if we had the figures for 1916 we should probably find the turnover was at least £250,000,000, which escapes all direct taxation altogether. Increased prices carry increased profits, and, as the hon. Member for Blackburn (Mr. Snowden) has pointed out in the case of tobacco, it often carries a much larger rate of profit than it ought. Then there is another point. Salaries are still allowed to be paid free of Income Tax, and I think that as the Chancellor of the Exchequer has three Clauses in this Finance Bill which deal with Income Tax-free dividends—I think they are Clauses 14, 15, and 16—on the part of the late War Loan, he might very well turn his attention to this, which, although a comparatively small matter, is a very insidious one. There is no question that the payment of these Income Tax-free salaries means that in the assessment of Super-tax, for the purpose of exemption, of abatement, and reduced rate of Income Tax as between earned and unearned income, the person receiving this tax-free remuneration, which he declares in Schedule E, is at an advantage, because he is able to declare as his total income something which is by 5s. in the £ less than his real total income which ought to be returned for Super-tax. That is another anomoly which might be remedied.

In the last Debate we were led to expect that in the Finance Bill, or before, the Chancellor of the Exchequer would come to some conclusion about an additional tax on dogs. I was expecting this additional tax on dogs as one means of co-operation between the Treasury and the Food Controller to do something which I think would be extremely practical. I have had estimates, which I believe are fairly conservative, that there are at least 2,000,000 dogs—and the figure might be put much higher—in this country. They are not all wanted. These 2,000,000 dogs, if they only eat one pound of useful food a day, say, oatmeal or anything of that kind which is so constantly fed to dogs, will consume 350,000 tons a year. That is a considerable amount compared with what has been the source of a very long and no doubt very interesting debate in another place this afternoon, the question of the amount of oats to be fed to racehorses. I thought the Chancellor of the Exchequer was going to indicate the outline of the proposal for a very large increase in the tax on dogs, on what he called "new dogs," I remember, and in the tax on dogs which are owned in large numbers by one person. That does not appear in the Finance Bill, and I hope that before the Debate is finished we shall hear that in some other way this excellent project is going to be carried out, and that it has not been abandoned for any reason of difficulty.

May I ask the Chancellor of the Exchequer to give his very sympathetic consideration between now and the Committee stage to the question I wish to raise, and on which I shall have a good deal of support, namely, that of the incidence of the relief that was given in 1915 and extended in 1916 in respect of Income Tax on the incomes of sailors and soldiers. I believe the Chancellor of the Exchequer knows that as far as those who have quite small incomes are concerned, where the ordinary abatement of £120 each is in respect of soldiers and sailors allowed to be at the old pre-war amount of £160, this Income Tax of 9d. in the £1, of which so much was made, is absolutely inoperative, and that there is not a penny of their income which pays only 9d. Let me take an actual case I have, of a sergeant-major who was in receipt before the War of an income of £300 a year, I believe as a school teacher. He is a sergeant-major now, with an income of about £73 a year from pay, and his late employers make up, as many people did, particularly in the earlier part of the War under the voluntary system when their employés volunteered for service, his salary to the same sum as it was before the War. How does this remission turn out? He has two children. There is £160 abatement, and £50 for two children, that is £210, and owing to the words put into Clause 30 of the Finance Act of last year, which this Bill carries on and re-enacts, all abatements are to be deducted prmarily from the pay. That means that in every case of a really poor man with a small income up to £300, which is the very class that we took a lot of time discussing in 1915 and for which we settled the 9d. Income Tax, the abatement is equal to the whole of the pay, and as it is to be deducted from the pay they are in exactly the same position as if they had never joined the Army at all. In this case the operation is on everything over £210—that is, £90—on which he has to pay at the full rate of 2s. 3d., exactly as if he had never joned the Army at all. I only want to give one more case to show how, if this is maintained, the House will be doing the opposite of what was intended. Let us take the case of a man of higher rank and of larger income, with £400 a year from invested property and pay of £400, about the pay of a major. He has a total income of £800 and is above the abatement limit. The Income Tax he will pay on that income, at the unearned income rate, is 3s. 6d. According to the Schedule in the Act of last year, on his Army pay of £400 he would pay 1s. 9d. Therefore he, having no obligations with regard to abatement, gets the difference of 1s. 9d. on £400—that is, £35, which he is saved by what we enacted for the relief of officers, noncommissioned officers and men serving with the forces. If the Amendment which I put down last year, which I do not think had the consideration it ought to have had, and which 1 shall put down this year, is not accepted by foe Government, we shall be giving a substantial relief to all men who are officers with incomes right up to £2,500 a year, although the man with £300 a year, partly pay and partly income, so long as their pay does not exceed the abatement limit, will not get a halfpenny. That is not what the House intended.

There is only one other matter to which I want to refer, but it is one which I think is worthy of consideration. The Chancellor of the Exchequer has given us in Clause 25, Part IV., what he promised some time ago, the extension of the Death Duties (Killed in War) Act to the merchant service. I am naturally very grateful for that, and since the right hon. Gentleman made his statement that he was going to give that act of justice, as I think it is, to these gallant men who are losing their lives, or rather to their families who come after them, I have asked whether it could be retrospective. The right hon. Gentleman told me that he did not think it could, but so far I understand the Clause—I do not pretend to be an expert in Acts of Parliament—it is retrospective, because it says:

"whether before or after the passing of this Act, from causes arising out of the operations of the present War."

If that were all I should take it as completely retrospective, and that the small property that is passed from time to time at the death of one of these men from the act of the enemy, if it had paid the Death Duties at the full rate, would be entitled to get back from the Treasury the difference between that rate and the lower rate enacted by the Death Duties. (Killed in War) Act, 1914. But the Bill goes on—

"And within twelve months from the occurrence to which death is due."

Surely, if it is possible to make it retrospective where the death occurred. twelve months before, you might go back to the beginning of the War and make a clean job of it, and admit that we ought to have included the merchant service in the fighting Services when that special legislation was, enacted with regard to Death Duties on their estates. While I am on the subject of merchant service, might I warn the Chancellor of the Exchequer that I shall press him as strongly as I possibly can in Committee to extend the concessions with regard to Income Tax to the merchant service? It is given to nurses, to the Army Medical Corps, and to various other categories of people not strictly soldiers or sailors who do not incur a tithe of the, risk of any of the men of the merchant service. We had better recognise after three years of war that to all intents and purposes the personnel of the merchant service are running the risks of the Navy, and that they rightly form a part of the, fighting forces of the Crown.

The only thing on the general question raised by the hon. Member for Windsor (Mr. J. Mason) to which I should like to refer is the question of the Excess Profits Tax after the War. The hon. Member had grave doubts, and I think they are shared by other hon. Members, as to whether there will not be an hiatus between the time when that additional revenue which the Chancellor of the Exchequer anticipates after the War, begins to come in from revived business and the actual termination of the War. The Chancellor of the Exchequer was not at all definite when speaking on the introduction of the Budget with regard to carrying on Excess Profits Tax. I know that carrying it on in a modified form was advocated by some Members in that Debate, but the right hon. Gentleman said:

I want to enter a protest against any possibility of the Excess Profits Tax being regarded as a peace tax. The late Chancellor of the Exchequer (Mr. McKenna) said that it was not a tax but a war levy. As the Chancellor of the Exchequer said just now, if it was a tax, and you are to call it so, exclusively upon excess profits earned through the War, it would be almost ideal as a war tax or levy. I agree. In the main it is now both. In the fist year it was nothing to do with war profits, although we talked about them, because they were profits earned before the beginning of the War. We have got over that, and I want to put this consideration before the House. In time of war it is, if it could be adjusted really to the profits that were due to the War—and in the main these excess profits are due to it—an ideal form of levy. Just imagine the effect of an Excess Profits Tax after the War. After the War we want new people, and young people if possible, to take up all kinds of new processes, to start new business, to revivify the trade of the country, much of which will be in a state of dislocation. And the Treasury put on the Excess Profits which affects every young business man who has an idea of taking up a new process and starting a new business. They say to him, "You go ahead if you like my young man, but if you are successful the Treasury is going to penalise you just in proportion to your success, and prevent you accumulating those early thousands of capital," which it is so difficult to get and which mean often the foundation of businesses from which thousands in the course of a lifetime are collected by the Treasury, beside the incidental benefits to the country. I have a grateful recollection of when I started as a young man in business in the comparatively halcyon days when Mr. Gladstone talked about abolishing the Income Tax altogether, and I think all I was charged on the few thousands I made in business was 8d. in the £. I do want to say a word or two for the young people who will come back from the War to start in business. For goodness sake do not handicap them with anything heavier than the terribly heavy Income Tax they will have to bear, and see that it is fairly levied and does not involve an unfair taxation upon brains and industry, which must necessarily handicap every person who has a trade.

If you will allow me I should like to ask my right hon. Friend a question or two. He made the statement to the House that he had re- ceived over 47 per cent. on some dividends. I want to ask, if it is a proper thing to ask, on what capital was the 47 per cent. realised? Were the vessels requisitioned or trading in the open market?

I really cannot answer the question except to this extent, that the capital on which the 47 per cent. was realised was £100.

The capital of the vessel I mean. I know the single-vessel company. I know them very well.

It makes all the difference. I can assure the right hon. Gentleman it makes all the difference whether it is a large company owning many vessels or a company with a single vessel which may have been bought very cheaply. You can get your percentage all the same.

This is rather a diversion, but I may tell the hon. Member that there were fourteen ships; whether single ships or not, I estimate pretty fairly for that class of ship.

The House has been concerned mainly on two subjects. In the first place we have had a discussion as to the proposal that war expenditure should be available out of taxation. On that point the Chancellor of the Exchequer has explained that he has been endeavouring to live up to the policy of his predecessor, and I think a great part of the House will agree that he has made out a fair case. Many comparisons have been drawn between the practice during this War and preceding wars, and in particular the example of Pitt has been held up to my right hon. Friend. The example between this War and the Napoleonic Wars is unfair, mainly because in this War the country has not followed the policy of the Napoleonic Wars. In the Napoleonic Wars Pitt entered upon a policy of strictly limited liability, and on that policy it was obviously easy for him to raise a large proportion of the expenditure on that war out of the ordinary revenue of the country. In this War we have entered upon a policy of unlimited liability. I think that has imposed the necessity upon each successive Chancellor of the Exchequer of a policy of Loans—I believe in the vicious policy of Loans—because it is throwing a tremendous burden on those who have to come after. On the other question the right hon. Gentleman has departed from his predecessor on the point of the differential treatment of shipping, and in regard to excess profits. He has set up a new standard for the Chancellor of the Exchequer of this country to follow. The standard which he has now set up is the standard of the man in the street. He says there is one thing which I profess to know, and which I have been able to ascertain in the course of my political life, and he has decided his treatment of the shipping industry upon the course, wise or unwise, instructive or uninstructive, of the man in the street. It will be very interesting to observe whether in succeeding Budgets, if he has the good fortune to introduce succeeding Budgets, in respect of other industries he will follow the views of the man in the street. What is his account of the view of the man in the street? That the shipping industry, above all others in the country, has made enormous profits out of the War, that the shipowners have battened on the necessities of the country, and that the profits of the shipowners have been very largely responsible for the high prices that the ordinary consumer has had to pay.

That is the view of the man in the street. It is the view put forward in the papers which are most widely read in this country, from "Reynolds's Newspaper" to the "Daily Mail." I can understand that the right hon. Gentleman should take his views from the man in the street, known through these widely circulated organs. But has he made out a case to show that that view is the sound view? He has told us that since the month of December the present Government has requisitioned all the shipping of the country at local rates, not only for the purpose of carrying on the work of the War, but also for provisioning the country. I think it is common knowledge that we have seen far quicker and larger increases in the price of foodstuffs in that period than in any other period of the War. That is common knowledge. We have seen the Food Controller intervening in respect of all sorts of commodities, where you have had sudden jumps of nearly 100 per cent. in a few days. It has been the policy on the part of these widely read newspapers, and on the part of the Chancellor of the Exchequer and the Prime Minister, to attribute the rise in prices before December, when this great Government came into power, to the freights charged by the shipowners. There were other causes, causes which I think have been well pointed out in some respect by the hon. Member for Coventry (Mr. D. Mason), who has shown the inevitable result of inflation by freights. The one thing which has caused a rise in the prices of all commodities is that the right hon. Gentleman has succumbed to the foolish popular cry, and said, "I will frame my Budget on the basis of the man in the street." Why is it that this clamour has arisen about the shipowners? Very rightly because the shipowner has in many cases published his accounts. There are a few people who have not published their accounts, and the man in the street will find out about them very soon.

Let us take the munitions people. My right hon. Friend, the Member for Rushcliffe (Mr. Leif Jones) put a question on 10th May, which I repeated to-day, forgetting that it had been put, as to what has been contributed to the Exchequer in the shape of munitions levy or excess profits. He was informed that there were over three thousand munition establishments and that they had only contributed £4,620,000 out of a total contribution in excess profits of £140,000,000. Obviously that is not fair. Everybody knows that if there is one industry in the country which has been making excess profits it is the munition industry. They were the people to have exceptional provisions made for them. I know those exceptional provisions were represented as a bargain, and it is interesting, in view of the present controversy to know what that bargain was. At that time, under the persuasion of the present Prime Minister, the trades unions engaged in munitions surrendered all their trade union restrictions, all their privileges in regard to keeping certain unskilled people out of their industry, and allowed women and unskilled men to come in. That was their side of the bargain. The other side of the bargain was the limitation of profits, and after eighteen months we have the admission that all that has come in is £4,620,000.

I explained that that was due to the difficulty of making up the account, and that £20,000,000 has been received this year.

I am glad to hear that. That is why I think the shipowner's accounts will be the same, and then there will be a question asked whether munition establishments have paid their fair share. These munition people have received special privileges from the Government. At the request of the Government the men have made sacrifices, and greater sacrifices than any other class in the country, but the establishments pay less to the Treasury than any other class paying excess profits. You will hear about it in the "Daily Mail" before very long and you will have munition establishments placed on the basis of the man in the street. I hope you will like it. We have had one hon. Member pleading for special facilities for munition establishments. On the question raised by my right hon. Friend in his interruption this afternoon, as to whether they have delayed their payments, I may point out that they have had £20,000,000 for twelve months longer than anyone else, and that is a considerable favour. They could put it in the War Loan. I wonder whether the right hon. Gentleman will put a special Clause in his next Budget to see that they do not get the advantage of the favour. Why should not the right hon. Gentleman keep his eye on the munitions people? Is it because the munitions establishments are to provide the party funds for the new national party that they should be left in this exceptionally favourable position?

There are other industries in which questions will arise if we are to go upon the basis of the view of the man in the street. Yes, there is another industry which has earned excess profits in this country since the beginning of the War, and that is agriculture. What happens in agriculture? The farmer does not even pay Income Tax on the same basis as the ordinary taxpayer. He pays no Super-tax, and he is not liable to Excess Profits Duty. It is common knowledge, even although he does not publish accounts or keep books, that he has made enormous profits. The ordinary man sees his prosperity. He knows what the farmer has made out of potatoes, out of wheat, out of meat, and out of milk. Yes, and if he is going to be taxed on the basis of the view of the man in the street there will be some Excess Profits taxation in the next Budget for the farmer. What is the treatment the present Government is giving to the farmer? He is getting a guarantee. One profiteer is being robbed, and the other is being endowed. I wonder whether that will commend itself to the man in the street, so ably represented on the front bench just now by my right hon. Friend the Minister for Labour (Mr. Hodge). I wonder when he goes down to the Gorton Division how he will explain the different incidence of taxation as between shipowners and agriculturists. He will say, of course, that the shipowner when he was importing the food raised the price by his high freights, and that he ought to pay. But if it be true that prices were raised on account of high freights, the British farmer got a share of the enhanced prices without a single penny being added to his own cost of production. He, however, has not to pay anything. He is to get a guarantee for six years of minimum prices of wheat and of oats. All these things will have to be explained if we are to have a Budget on the basis of the view of the man in the street.

The right hon. Gentleman has not attempted to make out any case to-day on the merits. He has quoted his own isolated case of shares in the ships of a well known shipowner. I should say that the shipowner to whom he refers is not representative. The right hon. Gentleman said that if the shipowner managed his business well he was all right. Yes, if he managed not to have all his ships requisitioned he was all right. That has been the great consideration with shipowners during the War—to keep right with the Admiralty and to keep down your proportion of requisitions. Then if the shipowner is wise enough and if he has the prescience and patriotism to sell a sufficient proportion of his ships he will be all right. A question was put in the House with regard to the number of ships that a shipowner had sold, and the facts are now in the pages of the OFFICIAL REPORT, and we can all appreciate the prescience and the patriotism which led to his present appointment. Nobody objects to heavy taxation during wartime. It has to be. It is regrettable that it should be so, and it is bound to prejudice our commerce and our industry. That is one of the penalties of having a war. If you are going to have a war and the enormous expenditure of a war, you cannot hope that your industry and your commerce will escape the burdens of the war, and I am indeed surprised when the right hon. Gentleman rises at that box and, from one point of view, endeavours to suggest that our post-war taxation is going to be equal to our present taxation on the basis of the artificial expenditure of the War. I think it is a most unfortunate thing to represent to the country, because nothing could be more misleading. The right hon. Gentleman told us that we were going to have all the more plant for production and that we were going to have all the more people to work. All these soldiers will return and will be engaged in production. Therefore, he said, our Income Tax will be maintained. But are you going to have customers for all these things? Are you going to have the demand for the products of all these machines and these workmen? That is the question which the right hon. Gentleman has never faced.

I find two totally inconsistent views put forward by the Government at one time. When they are meeting munition manufacturers they allow them a special rate of depreciation on their new plant, because that plant is not likely to be productive after the War. They hold that these people have put up plant far in excess either of the needs of this country or of the world market. Consequently, under the rules made by the Munitions Department, a special rate of depreciation is allowed on all this new plant. When the right hon. Gentleman comes here to talk about finance, he gives what I believe is an inflated view of our normal revenue after the War. He tells us that this plant is going to be productive. Every new lathe and every new machine is going to continue to produce after the War, and consequently we may be absolutely certain that the income assessable to Income Tax after the War will be equal to that which we have under the present artificial conditions of expenditure out of borrowed money. The Government should make up its mind really what is the sound view in relation to this matter. This plant is either to be utilised after the War and you are going to have this revenue, or it is not going to be utilised and you are not going to have the revenue. If it is to be used after the War, you have no right to allow these special claims for depreciation. If the manufacturers are going to get the benefit of all this plant, then they ought to get no reduction either in Income Tax or in Excess Profits Duty. If, on the other hand, they are entitled to these claims for reduction, then we should not have these rosy pictures painted as to conditions with regard to revenue after the War.

The right hon. Gentleman made out no. case on the merits, and particularly no case for withdrawing that provision regarding accounting where there is a loss during one of the accounting periods. That was one matter in which he might fairly have followed the precedent of his predecessor. It was a fair provision. But it seems to be inevitable with the Government that whenever it does an act of justice it has to break its word. We have seen that in all sorts of directions, and especially in regard to military service, where there have been successive statutory breaches of faith, and here we have it in the region of finance. The right hon. Gentleman has talked of enormous profits made by shipowners, but will the renunciation of this pledge affect the men who have made the enormous profits? That is the real question. The people who have made the greatest profits in the past are not the people likely to make a loss on Blue Book rates now. It is precisely the people who have made the smallest profits in the past who are likely to make a loss, and these are the people who are to be prejudiced. It is not going to be the wealthy men who are held up to opprobrium by my right hon. Friend in the popular phrase. He ought to realise that it is the men who have had the greatest difficulty in making excess profits in the past who are now going to be robbed of any excess profits they may be fortunate enough to make. I hope between now and the Committee stage that the right hon. Gentleman will reconsider the matter. In any event, if it is going to be withdrawn from one class, why should it not be withdrawn all round? Is there a case for differentiation? The right hon. Gentleman spoke as if in every case the man who did not make an excess profit was a man who was not able to manage his business well. That does not necessarily follow. The right hon. Gentleman surely knows enough about business to know that there are other things besides management which may affect the profits in different periods. I will give him a hypothetical case. Suppose that a shipowner has made large forward contracts before the War broke out. He may have made contracts for a term of years on the basis of the prices then ruling. Mark you, they were good times for shipowners. He might have thought that it was a good thing for him to make contracts on the basis of those good years. These may be contracts made with neutrals. The ships may be requisitioned at Blue Book rates. What happens? The shipowner who is in that position is bound to carry out the contracts because he is amenable to the law of the neutral country. What then? He must go into the open market and charter shipping at the high war rate. He might be able to do that, but he has no chance of making excess profits.

He might be making a loss, and then the right hon. Gentleman would say that he was not managing his business well; but according to the basis of this taxation a man in that position is to be in the same position as the tramp owner who has all his vessels free. It is a monstrous injustice, and one which the right hon. Gentleman when he reflects upon it will not seek to defend. Then he will take the trouble to enlighten the man in the street on this matter, and save himself from other demands from that gentleman whom he so much respects. There is no other question in regard to the Budget to which I desire to make particular reference. On all hands it is agreed that it is desirable, from the point of view of our national interests after the War, that those industries which are vital industries should have special attention paid to them. We have heard a good deal about key industries in the course of this War. We were told that dyeing was a key industry. I believe that margarine also became a key industry. We are told that agriculture is a key industry. But if there is one industry more than another in tills country which is a key industry of the Empire, it is shipping. We know that this Empire, scattered over the seven seas, depends upon its sea communications for its life more than upon anything else. If you kill your mercantile marine you are going to take a very great step to ruin your Empire. The six years' guarantee you have given to agriculture would not save it. We congratulate ourselves upon the entry of America into this War, and we are glad to see the great growth in American shipbuilding as a means of limiting the effects of the submarine menace. But American shipbuilding will have other effects besides limiting the effect of submarine warfare. All these new American ships will be competitors with you after the War. It is nothing short of folly for the Chancellor of the Exchequer in this House, when he is dealing with the position of this country, to ask us here to contrast our position with that of Germany after the War. We do not need to trouble about Germany. Germany is not going to be a formidable competitor after the War, and the fools who led this country into the Paris Conference because of fears of German competition and German dumping were led away simply by the follies of war psychology. The direction to which we shall have to look for competition after the War is on the other side of the Atlantic. There you run the risk of having your most formidable competitor in shipping and in finance, and if the Chancellor of the Exchequer would look to our national interests and not surrender to foolish popular clamour, then we might regard him with more confidence as the custodian of our national finance.

The Chancellor of the Exchequer suggested that the air of listlessness with which the House has followed the discussion on the Budget was due to a sense that nothing could be done and that we had to accept anything which he proposed. I do not think it really does amount to acquiescence. The air of indifference which has prevailed in the House this afternoon rather represents a patriotic willingness on the part of the taxpayer to accept taxes which everyone feels to be necessary, however much one may criticise them in detail. The Chancellor of the Exchequer had not the least difficulty in meeting the general attack upon the principles of the Finance Bill. I am inclined to think that under these conditions the best service which the House of Commons can render is rather to look at incidental flaws in the Budget than at the general principles on which it rests. I rise for the purpose of drawing attention to one incidental flaw. I alluded to this matter in the discussion on the Budget Resolutions and the Chancellor of the Exchequer was then good enough to invite me to raise the matter again, if I thought it worth while, on the Finance Bill. I do think it worth while to raise it again, because having looked into his proposals with reference to the Excise Licence Duties I am bound to say that the argument which the Chancellor of the Exchequer then presented seems to me very thin and indefensible, whereas the case against the reduction and abatement which he proposes in the Finance Bill is far stronger than I had imagined. I, therefore, make no apology to the House for raising the question now, and, although I shall not expect an immediate answer this evening, I hope that when the Bill gets into Committee the criticisms which I venture to make will be considered and weighed. I do not think the Chancellor of the Exchequer could have given very much attention to the matter. No doubt he has a vast amount of work to do, and incidental flaws which only affect a million or two no doubt get lost in these vast, even colossal figures. That is no reason why we should neglect the casual million, which may be lost sight of and which may slip through the Chancellor of the Exchequer's fingers. I do not think that the Chancellor of the Exchequer mentioned it in his statement at all. It was left entirely out of sight until the hon. Member for the Bewdley Division (Mr. Baldwin) drew attention to it quite casually, in a sort of postscript, late on the evening of the Budget statement.

The point is that the Licence Duties have been halved by successive concessions. They have been dropped from £4,300,000 to £2,100,000. The present Finance Bill apparently gives away—I cannot follow the exact calculation—about £1,000,000 of revenue. My point is that the giving away quite gratuitously of that £1,000,003 of revenue is worthy of the attention of the Chancellor of the Exchequer His argument was that he has treated the Licence Duties in exactly the same way that he has treated the duties paid by the owners of motor cars. That, of course, is quite fallacious. If you pay Licence Duty for the use of a motor car, no doubt it is in proportion to the amount of use which you are going to get out of it; and if the use of the car is dropped by 50 per cent., no doubt there is a case for dropping the Licence Duty to an equivalent amount. But the object of a duty on a licence is not merely to sell, but to make a profit on the intoxicants that you sell, and the question really is whether the Licence Duty should be on the profit or on the consumption. The Chancellor of the Exchequer argued that it ought to be on the consumption. Even if that is the case, it surely ought to be in proportion to the takings of the trade—not merely to the reductions in the gallons actually sold, but to the actual takings of the trade—and if it is to be proportioned to that, we all know that the drink bill has gone up steadily during the War, from £161,000,000 to £164,000,000, then to £182,000,000, and last year to about £200,000,000. Therefore, if you are going to proportion it to the takings, the Licence Duty ought not to be dropped, but t3 be increased.

The Chancellor of the Exchequer had another argument. He said this was in accordance with the principle laid down in 1914, when it had been suggested that there might be reductions through the operations of the Liquor Control Board and the activities of naval and military authorities up and down the country, and that it was laid down then as a kind of principle that if these reductions of consumption were measured by 25 per cent. the Licence Duty should go down by 25 per cent. I have looked up what was said during that period, and most certainly nothing of the kind was said. The 25 per cent. reduction came about in a haphazard and anomalous manner, and there was no principle explained to the House which would justify it at all. It came about really in this way: Reductions were granted in the Licence Duties in virtue of certain shortenings of the hours, and the then Chancellor of the Exchequer, who is now Prime Minister, said that should be allowed up to a maximum of 25 per cent. Subsequently, in 1915, the 25 per cent. was made a uniform standard throughout the country. It had no relation to the reduction of output. In fact, the reduction of output came a year later, after this was laid down. Consequently it has nothing whatever to do with any principle, and when the Chancellor of the Exchequer shelters himself beside the previous Chancellor of the Exchequer, and says he is merely carrying out the principles laid down by him, I am utterly unable to find the principle on which he founds himself. I do not think it exists at all. So much for the case which the right hon. Gentleman then put in answer to me.

But in reality I do not think there has been any justification for a reduction in the Licence Duty at all. If the great breweries of the country were suffering a reduction of their profits through the War there might conceivably be a case for it. But are they? I expected to find that, and I have looked into the matter. I do not say I have made an exhaustive examination, but I have looked at some 150 breweries, and at least 100 of them in 1915 improved their position, either by a slight increase in their dividend or else by strengthening their reserves, and, having had a rather better year in 1915 than they had in 1914 or 1913, in 1916 the full returns of which I admit are not in all cases available, they seemed to be doing still better. I have a number of instances. This is the kind of thing that happens; Here is one brewery—1913, 8 per cent.; 1914, 8 per cent.; 1915, 10 per cent.; 1916, 10 per cent. The reserve in that period had increased from £120,000 to £250,000. In other cases you get a brewery which did not pay any dividends at all in 1913, 1914, or 1915. In 1916 this particular brewery paid 7½ per cent. Here is another which paid 10 per cent., 15 per cent., 10 per cent., and 12 per cent., and increased its reserve from £500,000 to £675,000 in the four years. Another one, which paid 15 per cent. throughout the period, increased its reserve from £770,000 to £980,000. I really do not see under these circumstances why you should knock down the Licence Duties, and lose a revenue of £1,000,000 to the nation, by no less than 75 per cent.

No doubt it may be said that, after all, up to 1916 you have not got the drastic reductions in consumption which are now contemplated. Reductions in actual gallonage or barrelage have taken place in these previous years, and are in no kind of relation to the profits earned by the brewers. It may be that this reduction which is contemplated during 1917 may limit the profits, but I do not for a moment believe, when you consider the increase in prices which has taken place everywhere, that you are going to knock down the profits of these great concerns by 75 per cent. in consequence of that reduction. The managers of these establishments have a practical monopoly and can adjust themselves to circumstances, and they are already doing it. The point I wish to submit to the hon. Gentleman (Mr. Baldwin) is that he should be willing to adjust the Clause of the Bill which deals with this and make the reduction in the Licence Duty proportionate to the reduction in the profit. I have some ground for thinking the Chancellor of the Exchequer would meet me on that point, because in discussing it he argued that the ground of taking off the duty was that the restrictions imposed on the trade suggestion that there is any temperance point involved, because I do not think there is. It is simply a question of a wrong principle of making revenue which on this particular point I think the Chancellor of the Exchequer has adopted. If he tells me to accept his statement that he really means to make the reduction in Licence Duty proportionate to the loss of profit, I shall be quite satisfied. If he is right in saying that the loss of profit is identical with or proportionate to the diminution in consumption, then the trade will be no worse off by this form of words. I am quite certain that if he will base his reduction of duty on the reduction in profit, and not on the reduction in consumption, he has accepted the only real ground on which licence duty is justifiable at all. That is the point I hope words may be found which will carry that out, without great additional trouble to the revenue, and certainly with a very considerable saving. I do not think that would be inequitable to the trade, but I think it would prevent the very considerable amount of loss to the revenue which the Chancellor of the Exchequer would otherwise incur. At the present moment I cannot see any justification in principle for what he is doing. There is one, and that is the principle of the unjust steward. "Thou owest £100 worth of licence duty. Take thy bill quickly and write £25." There is absolutely no other justification that I can discover.

I do not think the man in the street who was referred to by the Chancellor of the Exchequer as dictating to him the policy of the need for taxation would appreciate the endeavour of the right hon. Gentleman (Mr. Roberts) as regards his dealing with the brewing trade. I think we all know that they are suffering very heavily at the present time.

They are suffering very heavily, and any relief that can be afforded to them in the reduction of Licence Duty in the difficulties they have to undergo ought to be appreciated. If the Chancellor of the Exchequer had been here, I should have liked to congratulate him upon the excellence of his investments in. shipping, which produced 16½ per cent. before the War and an average of 45 per cent. It showed great discrimination and ability and I am sorry that a poor chartered accountant like myself neither had the judgment nor the ability to obtain the same results. I am afraid I could refer him to a good many investments in shipping where, since the War, not only the capital but the whole of the revenue has been lost. Though there have been undoubtedly great successes and great returns, I really do not know what there is in this class of returns as distinguished from the general run of the results of the community to make them now subject to the penalties which they have to undergo. I think before we come to judgment on this matter we ought to ask the Chancellor of the Exchequer to give us a list of all the Excess Profits paid since the War whether they are by merchants, millers, cotton spinners, colliery proprietors, or whoever they may be, and not to rest himself upon the man in the street's suggestion as to the one to be penalised. Many of us in this House are very well acquainted with other classes who have made large profits, besides shipowners. If you are to deal justly as between man and man, you ought to take them and put them in a class and say, "You have done so well in the past that we are going to deprive you of some of the advantages which you have had up till now, and which you would have received if you had been left in the ordinary category of the individual during the ensuing period." The man in the street seems to have seen a lot of shipping, and he is dictating to the Chancellor of the Exchequer. I am not going to pursue that subject further, though I could say a great deal more. The Chancellor of the Exchequer is a Member for a county of which the City of Liverpool is a borough, and therefore I am sure he is not actuated by any vindictive feeling towards the great city with which he is so closely connected, but there is great feeling there amongst shipowners regarding the penal legislation to which they are subjected, and I am sure he will find when we come to the discussion in Committee that a strong effort will be made to deal with this matter in a way equitable and just to all the citizens of this Empire, and not to single out one particular class for penal legislation.

The hon. Member (Mr. Pringle) put the case very clearly, and, therefore, I will not pursue it, but in putting the case he introduced the taunt that the controlled munition establishments ought to be taken into account, and that they were not paying their fair share. I think I can say something on their behalf. I would ask the Secretary to the Treasury to look into the question as to who is responsible for the fact that so small an amount has been obtained from the controlled establishments, and also who is responsible for the fact that whilst a large amount has been obtained from the Excess Profits Duty, it is nothing in comparison to what ought to have been obtained. I consider that the Chancellor of the Exchequer and the Munitions Department, and Somerset House to some extent, are responsible for the collection of that money to so small an extent, because they have adopted a method of dealing with the accounts of the Munitions Department, and those who pay excess profits, which is entirely inequitable and unjust. I put a question to the Chancellor of the Exchequer the other day on this point. It is a point which, perhaps, it is difficult for anyone except an accountant to understand. The question was as to what steps would be taken now to adjust the excess profits created by the instructions of the surveyors to everyone to revalue their stocks and stores. The answer I got treated the matter as a very small point, and said that if I would bring the case forward—as if it was one case—the Chancellor of the Exchequer would kindly have it looked into. As a matter of fact, it is not one case, but it is 10,000 cases that want looking into in this respect. I met a distinguished official in Somerset House—I hope the gentleman will not mind my repeating our conversation—and he said, "You did not expect to get an answer, did you?" I said, "No, perhaps not." He added, "It would have taken us many closely written pages to answer you, and then it would only have been half done." Yet the Chancellor of the Exchequer, in the usual Treasury way, treated this as if it was one case of hardship which had to be inquired into

The case is this. Hon. Members will probably know that there is an association of controlled firms. I mention them particularly because of the reference of the hon. Member (Mr. Pringle) to controlled munitions establishments not paying their proper share. The Control Association has been in communication with the authorities of the Munitions Department with regard to the valuation of stocks for a very considerable time, and it is because the valuation of stocks has not been agreed to that the difficulties arise whereby Munitions Departments do not pay the amount which otherwise they ought to do. The letter from the Control Association says that they hope shortly to get something settled in copper, brass, etc., as to valuation of stock. The copper and brass are only one portion of the Munitions Department. There are such things as iron, aluminium, spelter, leather, coal, timber, and in reference to these and the articles used in every other industry the request is made to revalue stocks and stores and deal with them at the present time. This question does not affect the Income Tax so much, and I need not deal with that, but it does affect the Excess Profits Duty and the control of munitions to an enormous extent.

9.0 P.M.

The point is this, the surveyors now are requesting all manufacturers and traders to revalue their stocks at cost price or market price, whichever is the lower. That is the basis on which all manufacturers, or all prudent ones, have their stocks for very many years. The best method of book-keeping I know is the method of putting all your receipts into one pocket, taking all your payments out of another and considering the difference as the profit. A great many of the prudent concerns in this Kingdom have dealt with their accounts in that way. For instance, the steel in their stock may have cost them £7 before the War, and they put it down at £3. Or take the leather in their stock. They put it into the tannery pits, they bearing all the cost of treatment of the leather, and when they take stock they keep it at the original price. It is the same with copper and brass, and in many colliery companies where they buy their timber or other stores they put them at that reduced price at which it remains. This does not affect the Income Tax, the general average. The Government gain largely because of the low-priced stocks. But though all these traders have been accustomed to keep their books in that way, with all their stocks and stores at considerably below cost price, the Munitions Department come forward and the Coal Controller and all the Controllers come forward now and say, "You must revalue all your stock and stores at the market price or the cost price, whichever is the lower." Of course, revaluing them in that way, when you always have them in your books at a low price, creates a considerable excess which has to be dealt with. We all recognise that there are a great many partnerships going on at the present time. If we went before the Chancery Court the Court would divide the partnerships in accordance with the pre-war period, the period for control, and the period after control—that is, the 50 per cent. excess profit period, the 60 per cent, period, and the 80 per cent. period. Now Somerset House and the Munition Department come in and by revaluing all these stocks in the country create this excess. To which of those partners is that excess going to be attributed, because you must remember that they are depriving the man with the low-priced stock of his advantage and they are not undertaking when the War ends, if he wants to be put back into the same position, that the stocks will be put back at the price at which they stood in the books originally. They have done it in the case of the railways, but in no other case. What I want the Chancellor of the Exchequer to do is to settle some fair and proper basis in respect of which this revaluation of stock shall be made. The reference to the Munitions Department only paying so small a proportion arises from the fact that that partnership between the pre-war period and the other periods has never been settled.

I may give one illustration. A man buys steel billets at £7 and puts them in at £3, and now when they are in his books at £3, at which he has kept them for the last twenty or thirty or forty years, he is asked to revalue them when steel is worth from £17 to £20. To whom in the partnership does the difference between the £3 and the £17 or the £20 belong? Is it to partners of the 50 per cent. or the 60 per cent. or the 80 per cent. period? That is the test. I think that the Government should come forward now and say that they want that all fairly settled. We should have some general statement by the Chancellor of the Exchequer. Undoubtedly this is affecting the non-payment of munitions, because they are nearly all iron and steel, and other materials the price of which is affected by the War. They are perfectly ready to pay. I happen to have an interest in three or four of them, and I know that we have got accounts in dispute in every one of these cases. We are ready to pay, but we cannot get the basis settled. I know hundreds of other cases of controlled establishments in which there is a basis wanted of this revaluation of the stocks. I think that I have put it sufficiently clearly to show that something is required. I am offering this observation, because it not only means a settlement with these establishments, but it also means a very large additional sum through the Munitions Control Association, and also, through the Chancellor of the Exchequer, it means an enormous sum in addition for the Treasury if the Government can do what is required.

I am one of those who do not often speak, because just at present I think that our whole business ought to be to try to do what is best to end the War, and to support the Government in whatever they ask from us or whatever they require us to do. The Government must, if they want their money, treat people fairly; they must go into these matters with thoroughness, and not let things drift. They have made a few concessions in the Bill, particularly to the man who receives under £500, and who has got a very considerable concession from the Chancellor of the Exchequer. It may be that there are other boons that the right hon. Gentleman, or the Lord of the Treasury can tell us about, or they may be in the financial paper without our being able to discover what there are. If there are some, we will thank the Government, who will obtain a very large addition to its funds if it treats practical matters in regard to the revaluing of stock in a fair manner, and endeavours to adjust the various rights in the spirit in which I have addressed my observations to them.

I do not intend to follow the hon. Member who has just sat down in his observations, save in regard to one reference which he made in the early part of his speech. He said that all should be treated alike, and remarked that this was the feeling of the man in the street. I thoroughly agree with the hon. Gentleman that Excess Profits Tax, about which there has been a good deal of discussion this afternoon, should apply all round, and not specifically to any particular class. That is what the man in the street expects and hopes for. But I rise more particularly for the purpose of pointing out that there are other sections of the community than those who represent large interests, and who are exceptionally well represented in this House. The section that I want to call attention to is the other end of the scale—men receiving £2 10s. a week or less, and who have to contend with the fact that the value of that income is very much reduced by reason of the high price of foodstuffs. Any additional burden thrown upon upon a class of that kind hits them hard. You hit them on tea, you hit them on tobacco, you hit them on amusements, and, taking all the circumstances into consideration, I have come to the conclusion that it is not the man with £2 or £2 10s. a week upon whom you ought to impose additional burdens, but that no man under £3 a week should be called upon to pay Income Tax. It seems to me that is as low a limit as ought to be fixed. It should be remembered that Income Tax payers, on higher incomes, receive abatements.

There is one abatement which I welcome, namely, the allowance in respect of adoptive children, as well as in respect of parents' own children. I know that is a boon which will be greatly appreciated in my county, where the people are great lovers of children, and where, if they have no children of their own they seek to adopt somebody else's. I have a good deal of correspondence, and I suppose it is the same with other Members, in regard to this question of Income Tax, and I gather from it that men who are making comparatively small incomes are frequently responsible for the maintenance of a mother, or a sister, or other relative or relatives, and the income is often subject to very large calls upon it in respect of these obligations. For a man in that position I would suggest that he should have some consideration in the form of an allowance or abatement as in the case of children, in view of these charges upon his income. The hon. Member for Devizes (Mr. Peto) called attention to the co-operators, but I trust that the Chancellor of the Exchequer will not be charmed by the speech of the hon. Gentleman who comes with tears in his voice in behalf of people with £300 and £500 a year; but where it happens to be a co-operator, earning perhaps £2 a week, the hon. Member wonders why the Government does not take him by the heels. For my part, I do not think that the co-operative society should be compared at all with big commercial companies. In the case of a railway company, if they have ten, fifteen, or twenty thousand pounds profit on the year, that sum goes in dividends to the investors, and the Income Tax is paid in their behalf by the company in the lump. But in the case of the co-operative society it should be remembered that the members of it are trading with themselves, and if they make a profit on the stock purchased by them and bought in the store by them, it is because of the manipulation of the prices among themselves.

I would like to call attention to what may occur if you pressed closely this question of Income Tax in the case of the co-operative societies. They may cut down the prices of their goods to net cost, plus the management expenses, and in that way they would very easily rectify matters. I know it has been said that the co-operative societies get a great deal out of dividends, but they are credited with getting a great deal more than is really the fact. Members of co-operative societies who purchase articles in their stores are in the habit of saving their money and getting it returned to them quarterly. We had proof of that in connection with the Housing Act for Scotland, where the landlords of Scotland obtained the provision that they were to receive their rental weekly, and I believe that the people in Scotland who were effected were up in arms against the property owners, and this simply on the ground that being members of co-operative societies it was their custom to use their quarterly dividends to pay their rents and they felt the inconvenience of being turned into weekly tenants making weekly payments. This question as to the co-operative movement requires to be discussed much more fully and much more closely than there is time for in this period of national struggle. There should be a clear understanding of the whole matter, and that can only be accomplished after the War. when possibly the Government might see their way to appoint a Committee with a view to making recommendations on the subject on evidence they have had before them. We have had increases of expenditure except in one particular, namely, old age pensions. I ask the hon. Gentleman how it is that has come about? Are people ceasing to grow old? Is it that the increased payment of 2s. 6d. per week necessitates an increased demand on the Exchequer? I should like the hon. Member to explain how it comes about? Is it being done by an extra turn of the screw upon applicants for old age pensions so that they may be barred out?

That does not arise on the Finance Bill. That is a matter for discussion in Committee of Supply.

I apologise. May I be allowed to support the appeal made by the hon. and gallant Member for Midlothian (Colonel Hope) for some concession to the home soldiers on the question of tobacco? If the hon. Gentleman is not able to give some favourable treatment, I would ask him at least to see that they are saved the increased charge of 2d. per ounce, which is very severe, having regard to their pay. I desire to thank the hon. Gentleman (Mr. Baldwin) for the manner in which he has dealt with matters to which I have called attention.

I desire to refer also to the question of Income Tax on wage-earners whose wage is 50s. per week. There is a great deal of dissatisfaction on that point amongst the working classes of the country. A few months ago the Miners' Federation of Great Britain, at their meeting in Southport, adopted a resolution protesting against an Income Tax on wage-earners of 50s. per week, and asking that the tax ought to be abolished, or put on only on those whose wages were much higher. Since the tax has been put on, commodities have gone up, so that the wage-earner feels the matter very much indeed. If the hon. Gentleman cannot see his way to abolish the tax, I would ask him to consider the case where there is only one wage-earner in the house, and in which case he has only got a sufficiency. On such a man the tax falls very heavily, while in another house there may be three or four who escape because the head of the family has not reached the amount asked for by the Income Tax Commission. There is a big feeling against this tax, especially owing to the rise in the price of the different commodities. Another question I wish to mention is the Amusement Tax. The Chancellor of the Exchequer mentioned that he estimated he would get five millions from it during the past year, while it had only realised three millions. A theatre proprietor told me last year that instead of five millions the Chancellor of the Exchequer would get nearer ten, although it had only realised three. I understand the hon. Gentleman received a deputation from cinema, music hall, and theatre proprietors, and I am told by most people, considered their representations to him very kindly indeed. I am of opinion that no tax ought to go on 6d. tickets or downwards. Those. why buy them receive the smallest rate of wage, and they really deserve a little recreation. They may have husband or sons at the front, and I am one of those who believe with the Chancellor that those people require some kind of entertainment. Then there is the Tobacco Tax. The Chancellor told us 70 per cent. of tobacco was smoked in cigarettes, which was, I think, a surprise to many Members, and 5 per cent. in cigars, and the other 25 per cent. in packet mixtures, or other kinds of tobacco. I plead for those who smoke the 25 per cent., and ask that no tax should be put on them, because they are generally unskilled labourers, carters, or something of that kind. Their wages are low, and the additional 2d. per oz. falls very heavily upon them. Carters, transport people, and such like, are a good deal out in the open air and smoke a great deal of tobacco each week. If the hon. Gentleman will consider those questions, that is Income Tax on people with wages of 50s. and the Amusement and Tobacco Taxes, and deal favourably with them, I feel sure it would cause some kind of satisfaction which does not exist in the minds of the working classes of the country at the present time.

I had intended to say something on the subject of the taxation of co-operative societies, which has been referred to by two hon. Members. It cannot be too often said that there are three separate confusions of thought with regard to this matter, and I cannot help saying that my two hon. Friends who have referred to the subject appear to me to a certain extent at all events to be the victims of two of them. In the speech of the hon. Member (Mr. Wing) there is a slight confusion of thought on this point. It is quite true that your co-operative store member is, as a rule, raher a poor man, but at the same time that does not touch the question of how this whole movement, which is now very large, should be assessed. I think that view must be got rid of. I will not refer to that now, for, as the Chancellor of the Exchequer admitted the other day, the question required to be looked into. It is no answer, but does in fact make confusion worse confounded.

The second confusion appears to me to be that so many people will not understand, or do not agree, whichever it be, that the so-called surpluses of these societies are not really trading profits. When I say that I think co-operative societies ought to be taxed to a certain extent, I do not mean to suggest these surpluses are profits, because that is one thing, in plain language, that they are not. At the same time it is absurd to the last degree to contemplate the present relations between these societies and the Exchequer. On the question of ordinary tax, the Treasury virtually takes up the position that these are not profits, and therefore they will not treat them as ordinary profits. When, however, you come to the question of the Excess Profits Tax, exactly the reverse attitude is taken up. Although the Treasury does not say in so many words that they are profits, they tax them as if they were. The conclusion I have arrived at is that at the present these societies, although they are unjustly favoured as to ordinary Income Tax, are being rather hardly dealt with, and I should like to hear from the Chancellor of the Exchequer or from the Financial Secretary whether this matter has been finally settled or whether any conclusion has been arrived at. My suggestion would be that for the present year, so far as I can arrive at an estimate of the facts from very unsatisfactory data indeed, it would only be just to these societies not to increase their excess levy. It might very well be left at 60 per cent., unless facts were given and a case made out for a fuller levy.

These two confusions of thought lead to the third. In connection with that my suggestion would be that whatever tax is placed upon societies of the kind, whether it is called Income Tax or Excess Profits Tax, that it should not be a tax as upon a surplus, but upon their turnover; so these societies would pay up a fair share of what one may call the establishment charges of the Empire—not their own establishment charges—and avoid the question, which does not really require to be raised, as to whether these surpluses are or are not in the nature of profits. Finally, a great deal of confusion has arisen on the point that the exemption of which we have heard so much is not so much a legal exemption at all as it is due to defective collection. On that point, I think, the Treasury really ought to give us some more information. There is the question raised by the hon. Member for Eversley as to the effect of valuation on the Excess Tax. The other day he concluded his remarks upon this point with a note of thanks to the Treasury for the concession they had made. I think the Chancellor of the Exchequer has scarcely received all the thanks to which he is entitled, or the Treasury, for the special trouble they have taken in that connection. I have often thought that it would really be better for more of these excess taxpayers to be charged 85 per cent. instead of 80, and receive some still further adjustment.

I do not think one can listen to the speeches which have been made in the Debate without arriving at the conclusion that we are lacking in information very much as to what are the sources of the Excess Profits Tax of the £140,000,000 which has been gathered by the Treasury this year. It is really very unsatisfactory. Unless some further information is made available the Treasury will have endless trouble. The question of the beer duties has been raised. Then there was the points as to shipping which takes this matter a step further. Take also the distilling trade. I understand that we are to be asked to consider some wholesale transaction with the distilling trade. How can we make up our minds what is fair until we know what profits these people have been making, and the amount of the taxes they pay? In regard to shipping I think the position is still more unsatisfactory. I do not for a moment associate myself with most of the criticisms of the shipowners. If a mistake was made it was not their fault, but ours, or the fault of the late Chancellor of the Exchequer. Be that as it may, the profits were made, and it is the facts I want to find out. In case the Under-Secretary is under any misapprehension as to the opinion which the shipowners entertain, I should like to tell him that I received only this morning from a body called the Shipowners' Parliamentary Committee a printed document in which they were charged with having acted in breach of a contract, with being vindictive, vicious, unfair, and repudiators of their part of a bargain. I do not mind an amount of good hard argument or a little strong language, but I do wish to draw the attention of the hon. Gentleman to the concluding observations of his shipowner friends—if they are that. I do not know the members of the committee; I wish I did. I do not know whether the Member for Hexham or the Member for Liverpool is a member of the Shipowners' Parliamentary Committee. I should be glad to know. But let me give the concluding words of the document. They say that:

Before the hon. Member replies I should like to put one or two questions to him. I should like, first of all, to ask him in regard to the Committe which I believe exists and looks into cases in regard to excess profits. I am warmly in favour of the Excess Profits Tax; in fact, I believe if at the beginning of the War the Government had decided to take the excess profits of all firms that a great many of the difficulties we are face to face with to-day would have been avoided and that the mass of the people would have felt that the Treasury had endeavoured to stop all profiteering. I am not asking my question because I am against the tax, but because I do believe that there are certain cases where it has already borne very hardly and where the increased amount of hardship will be all the greater. I had a letter two or three days ago from a firm who are engaged in a small way of business, having started in July, 1910. They say:

I should like to suggest also to the hon. Member that if this War continues, I believe that the Government will very seriously have to consider whether they should not still further increase the Income Tax, and if they are able to get money in that way to reduce some of the taxes on food. I do not believe it is realised at the present time that with food prices as they are to-day, if a family of a man, his wife, and three children are to live on a bare maintenance standard, a wage of 40s. is required. We know that whilst wages have very largely increased in the last three years, there are still hundreds of thousands of men who are not receiving anything like that wage; and if, as I fear, the price of commodities will still further increase, I believe that it will be impossible for the Government to expect that they are going to have a contented people unless they are able to meet in some way the question of the price of food. I believe the hon. Member for Holmfirth (Mr. S. Arnold) the other day said that the taxes on tea and sugar meant that every family on an average paid 1s. 3d. a week, and I think if hon. Members will look into the question they will find that of all the increases in the price the people are paying for food at the present time sugar comes out the highest. That, after all, is a commodity the price of which the Government have it in their power to reduce by dealing with the question of the tax. One might be inclined to say, "But if you do that, people will try to get too much." Of course, they cannot get too much now, because the Government have control of it, and therefore I personally should have thought that it was very well worth the consideration of the Government whether in some ways it would not have been better to have had an Income Tax of 6s. 8d., and look to reducing the taxes on food. I suppose that if the Government had put an extra 1s. 8d. on the Income Tax they would in that way have received £50,000,000, and not only from the standpoint of the reduction in the price of food, but, I believe, that it would be good finance for us to pay off rather more than we are doing of the total cost of the War. I think it would be a good thing for us to do that, and I think it would help the Government in getting up the revenue of the country to something like a reasonable figure for the time when peace comes. I think it is expected now that when peace comes, we shall have to raise a revenue year by year of £500,000,000 at least.

I accept the correction. I believe £500,000,000 is a minimum, and if we are to do our duty with regard to housing and education, I believe it will have to be a much larger figure than that. I gather we are expected to raise from the operations of this Finance Act something like £640,000,000, of which £200,000,000 will come from excess profits. Now when the War is over, I suppose that we are going at any rate to make some fresh arrangement with regard to the Excess Profits Tax. I am perfectly certain it will be unwise for us to have it in its present form, because we must do all that we can to encourage a large development of business after the War. Whilst I accept this tax in the form that it is as a wise expedient during the War, I am perfectly certain after the War it will want rearranging altogether, so that everything may be done to increase the productive power of all businesses. I am perfectly certain that the business men in this House know that the effect of the Excess Profits Tax is that directors of public companies again and again put down new propositions which appear to yield a satisfactory profit, and they are not carried out because they look at the very large amount which is taken in excess profits, and they conclude that it is not worth while putting in more capital to make profit, 80 per cent. of which will go to the Government. While I approve of this tax during war-time, I think the Government would be well advised not to depend upon it too much for the large amount of money which has to be raised, and they should try and get an increased amount from Income Tax so that after the War they will, in the normal course, be able to raise a revenue which will be something like the amount that will be required in ordinary times. I will close by pressing this last point chiefly from the standpoint of the question of the taxation of food. I do not believe that we can warn the Government too much with regard to this point, that they must recognise the enormous prices that the working people are paying at present, and there are to-day hundreds of thousands of people who, despite the fact that wages have increased so much in the last three years, are still earning an amount which does not allow them to live on a subsistence basis. That process will get worse and worse with the increase of food prices, and therefore the Government will be well advised to look to an increase in the Income Tax and a reduction in the taxation on food.

I have during the last few weeks received communications from small traders who find that the Excess Profits Tax, as now drawn up, creates a great hardship. I have particularly in mind the case of a firm who started just before the War, and whose profits even during the War have been very small, but they show a slight increase in comparison with the pre-war period, and out of that small increase the Government propose to take some 80 per cent. I hope the Government will favourably consider an Amendment which I shall put down on the Paper limiting the increase from 60 to 80 per cent. to firms who make over £1,000 a year. If we could have some graduated scale in connection with the Excess Profits Tax I think it would be more satisfactory to many firms in this country. Earlier in the afternoon several hon. Members referred to the increased Tobacco Duty. It is rather a striking thing that this increased tax is to yield £6,000,000 to the Treasury, and so far as I can find out to-day, the public are going to pay a further £2,000,000 to various trade interests. It other words, the public are paying 33 per cent. more through indirect taxation.

If we compare the policy of the Government in that respect with their policy of inaction in not levying a fair and correct duty upon the farmers of this country I think the contrast is very striking. The Chancellor of the Exchequer, in his Budget speech, told us that he had considered an Income Tax to be levied according to a proper scale upon the farmers of this country, and he told us that if he had to make 12,000 assessments the amount of money received by the Exchequer would only be some £300,000 a year. In the same sentence he told us that it would cost the Treasury practiaclly the whole of that amount. In other words, according to the Treasury, it would cost them £25 for every new assessment they would make. I cannot help thinking that the Chancellor of the Exchequer must have been gravely misinformed on this point. Surely it would not cost the Government £25 to make an assessment upon the individual farmers of this country. That cannot be correct, and as the Government are quite willing to increase the Tobacco Duty, and by that means take £6,000,000 into the Exchequer, and place a further £2,000,000 on the backs of the taxpayers which goes to trade interests, surely with that policy before them they are bound to review their policy of inaction so far as the Income Tax is concerned upon the farmers of this country at a time when this country is putting on the Statute Book a Bill to guarantee a fixed price to farmers.

The Government should reconsider this matter. It is not fair to the general taxpayers that they should seek out a particular class and not only guarantee them a fixed price, but to exempt them from a proper Income Tax. I hope before the Government passes this proposal into law they will reconsider the matter. The Chancellor of the Exchequer before the dinner hour this evening defended his Budget from many points of view. I will not refer to the remarks he made in connection with the new shipping proposals, but during the last few days many speakers in all quarters of this House have deplored the extent to which the Government this year are going to rely upon borrowed money. The contribution which the Chancellor of the Exchequer has made to the financial position of this country is this: He is by his policy placing a permanent charge for debt of £80,000,000 upon the country, and at the same time he is only asking the country to pay a further £7,500,000 a year by taxation. That is the contribution which the Government invite from the country this year. It is a permanent debt of £80,000,000 a year and a permanent increase of taxation of £7,500,000 a year. That is not worthy of the sacrifices we are making. Many hon. Members have pressed this point of view, and it is a strange thing that in a democratic House, when hon. Members will have to justify their actions before their constituents, to find hon. Members in all quarters of the House pleading with the Government in these days to place the burden more equitably upon the people of this country to-day, so that in the future we shall not be loaded with an overwhelming debt.

I do not want to delay the House more than a few minutes except to make good the claim which some of us have already made on another stage of the Resolutions connected with this Bill with regard to the Entertainments Duty. I want to remind the Leader of the House of a statement that he made in his speech on the Resolutions with regard to the Entertainments Duty, and to ask this question, to which I hope he may be able to give some answer. When the Entertainments Duty was first imposed as a method of taxation the Chancellor of the Exchequer, in his speech, said that the trade was very well able to bear the new burden. I should like to know from the Chancellor of the Exchequer if he has altered his view and the view of the Treasury with regard to the basis upon which that tax is to be levied, because when the tax was first levied the idea was that as the working-class population of the country were not contributing as they might do, or as much as might be expected from them, to the revenue necessary for the continuation of the War, the amusement centres all over the country were a very easy medium by which more money could be collected from the working classes. That, of course, was a condition which anybody could understand, and I do not for a moment criticise the method of the Treasury in using the entertainments of this country in collecting more revenue from the great mass of the population who might not be contributing directly to taxation in any other way. But obviously that alters the position of the principle upon which the tax was originally levied. The tax was originally levied for the purpose which I have stated. In defending a higher imposition, a higher tax upon amusements, the Chancellor justified his attitude on the ground that the industry itself could easily bear the additional imposition.

10.0 P.M.

One could, of course, make quite a long speech, if one wanted, on the basis of the relation of our amusements to the social condition of the people of this country. I do not require to make that speech now, because the Chancellor of the Exchequer has quite freely admitted himself that it would be a disaster, and I honestly think it would be, if all amusements in this country were curtailed. In view of the situation in which we find ourselves, it is obviously a good thing that people who are worried with all the cares and anxieties of this War should have some relief from that care and worry. They find it, of course, in various forms of amusement, and the cheaper and easier the facilities are for that amusement the better it will be for a very large number of people in this country. I say that the Chancellor of the Exchequer has quite frankly recognised that in the speech he made on the financial resolutions, but I want to look at the question for a moment from this point or view. I think the Chancellor of the Exchequer will agree that at any rate I have been perfectly frank in the matter of the Amusements Tax, not only with his predecessor but with himself. I have never said for a moment that the industry should not bear some measure of taxation. All I am concerned about is that the method of taxation should be such that the trade should not be permanently injured. The experience of the last tax was this. For the first three to four months of the imposition of the tax, I admit quite frankly for perhaps other reasons, the tax was a very heavy impost on the trade. It was introduced at the same time as the Day light Saving Bill became law, which meant longer nights, and therefore, naturally, people resorted to outdoor life rather than to indoor life. I do not blame them for one moment, because I think it is infinitely preferable when you can get outside in good weather to keep outside. But these two things did synchronise, and the trade for a very long time was very badly hit. When the winter months came on the trade to some extent recovered, but, generally speaking, this was the result of the imposition of this tax—that at least 700 houses of entertainment in this country were absolutely closed by the operation of the Amusements Tax. That was due principally to the fact that the people who attended these places of amusement adjusted their habits so that the price they were in the habit of paying for their seat fitted in with a lower grade of seat, and you got a progressive shoving out at the lower end of these amusements. The people at the lower end of any theatre or place of amusement are just the class of people you want to provide with whole-some recreation, and I think it was a great pity that the tax had that effect. What the Chancellor of the Exchequer proposes to do on this occasion is to raise the tax on everything above a seat which costs threepence. That means that a fourpenny seat and a fivepenny seat will now be fivepence and sixpence; and when you get above that price the rate is higher and the sixpenny seat becomes eightpence. What does that mean? It practically means this—and I think I talk with some little experience of the trade itself—that you are going in this financial year to destroy even a larger number of amusements in this country than were destroyed by the imposition of the tax on the lower-priced seats. When we come to Committee—and that is the real reason why I am making these few remarks on this occasion in order that my right hon. Friend may expect that we shall fight the incidence of the tax in Committee—I hope that the Chancellor will be moved to consider the seats below 6d. If he persists in raising the tax on 4d. and 5d. seats he is going to drive even a larger number than the 700 theatres which have been driven out of the business during the past year out of the business again.

The Chancellor himself will lose on that transaction. It is quite obvious that every one of these concerns pays Income Tax, and if they are driven out of the trade, or if they do not secure the same revenue then the Chancellor loses on one side what he may hope to gain on another. I venture to appeal to him not only from the point of view of the Chancellor of the Exchequer who wishes to raise revenue, but from the point of view of a legitimate amusement of the poorer classes of this country. I believe, and I think the House will agree, that the facilities for amusements even in this country to-day are not nearly adequate for the mass of the population. I think also that the average man who looks at this subject is apt to look at it from the point of view of what is known as the continuous house in the best parts and most prominent streets in our great cities. There you have with an entertainment of that class easy and good profits. But when you come down from the great industrial cities to the villages in our counties, I may tell my right hon. Friend that the results of the existing tax have been disastrous. I know many colliery towns in Yorkshire, with a population of from 15,000 to 20,000 people, where the only entertainment is the cinema theatre. That cinema theatre has been run by a man who probably works the operating machine himself, whose wife takes the receipts at the pay-box, and whose daughter provides the music for the entertainment. That man has been making not a profit but a wage, a wage amounting to something like £2 10s. or £3 a week. The imposition of that tax has absolutely destroyed that small man. I think my right hon. Friend will agree that in a village of that kind an entertainment of that sort is a social advantage, that it is an alternative recreation from the existing recreations, and that, at any rate, it provides cheap, wholesome amusement. I am sure my right hon. Friend does not wish to crush that type of business out of existence if he can avoid it. What I suggest is this, that he will, and I think he will, abandon his proposals to impose the extra penny on the amusement tax from 6d. under, which only affects two classes of seats, the 4d. and 5d. He can rest assured of this, that he will not destroy a large number of existing houses. Above that price I am perfectly frank in making the statement that from 6d. upwards, I think, the trade can carry the extra tax. The only point in dispute is those smaller priced seats that really form the backbone of the business of a large class of men in this country. I appeal to the right hon. Gentleman to hold out some hope in his reply. He has had several deputations already. He has had the facts placed before him, and I appeal to him to hold out the hope that in those lower-priced seats he will not tax what I think are the legitimate amusements of the people, but if he agrees to maintain the price above that I, for one, do not object. I think the trade can carry it and not receive any material damage, but I am convinced from acquaintance with the facts of this particular trade, that if he persists in the tax on the 4d. seat, which, if he cares to look into the figures, is one of the largest blocks of seats in every cinema theatre in this country, he is going to make it extremely difficult for the perfectly legitimate trade to carry on its business. I want to know if he can hold out any hope of a concession on that point. I want also an answer to the question which I put at the beginning of my remarks whether the Treasury regard the amusements of this country as a method of collecting something for them towards the revenue required for the continuance of the War, or whether, as the Chancellor of the Exchequer himself said in his speech, he thinks the trade can bear it as a trade, and whether he is taxing the trade as a trade or taking the principle laid down by his predecessor of simply using these amusements as a method of collecting a tax? I shall myself, and I know a large number of other Members will, put down Amendments to these particular Clauses in the Bill, but my right hon. Friend knows us well enough to realise that we are not prepared, that we are not anxious or willing, to put down Amendments if we know his mind in relation to this matter. I can assure him that if he agrees to abandon the proposal of extra taxation under 6d. he need have no further trouble so far as this Budget is concerned. [HON. MEMBERS: "Oh!"] Of course, I mean for the entertainment part. The House knows very well that ingenuity, if exercised in the proper direction, can make it troublesome for the Front Bench, and that on a Clause which extends to fifteen or twenty lines a Debate can be raised on each of these. My right hon. Friend knows well enough that there could be a Debate which might be continued eternally. I have offered him a perfectly fair and square compromise. [An HON. MEMBER: "Agreed!"] I make this offer to him, that if he is willing to abandon the extra taxation under 6d. no further trouble will exist in regard to the Entertainments Duty. I have given him very substantial reasons from the very intimate knowledge I have of that particular trade, and with the experience of a year's working of this tax. I am offering him something which he wants. He wants money. Every Chancellor of the Exchequer wants money, and I am certain that if he persists in running the tax on the lower rates he will not get the money he expects. His predecessor did not get the money he expected, which was £5,000,000. He only got £3,500,000. We told his predecessor, when we were discussing it before, that this would be the result, and if he wants to preserve his revenue I am sure he will accept the suggestion. That is all I wish to say now. I venture to say that if he is not prepared to concede this we shall have to contest it step by step.

Question put, "That the Bill be read a second time."

Is there no answer? I think it is too bad!

Question agreed to.

Bill read a second time, and committed to a Committee of the Whole House for Tuesday, 5th June.

Representation of the People [Expenses]

Committee to consider of authorising the payment out of moneys to be provided by Parliament of Expenses payable under any Act of the present Session to Amend the Law with respect to Parliamentary and Local Government Franchises, and the Registration of Parliamentary and Local Government Electors, and the conduct a Elections—( King's Recommendation signified ).—To-morrow.—[ Mr. Bonar Law. ]

The remaining Orders were read, and postponed.

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

I made a speech a few minutes ago which you heard, Sir. There has been no reply, and, as the Parliamentary Secretary to the Treasury is still on the bench, I wish to revert to it. I should extremely like to know what is the position of the Chancellor of the Exchequer with regard to this particular question. I do not think that my hon. Friend will for a moment imagine that I trouble him unduly on the Front Bench, but this matter concerns a very large trade in the country in which a very large capital is involved.

I thought my hon. Friend would have been satisfied with what has been already said. With regard to what he said about Amusements Tax, it is a matter to which we have given a great deal of attention, and the information that we have received so far does not agree entirely with what he has said. We have no prejudice in the matter, and if my hon. Friend can make good to the Chancellor of the Exchequer between now and the Committee stage the contention he has made in his speech we shall be willing to reconsider the matter in the light of the information he has laid before us.

I think, in view of the length to which the discussion went, we ought to have had a reply from the Treasury earlier than on the Adjournment. I was asked, and several other Members who had been rising, were asked not to speak, in anticipation that there would be a reply from the Treasury Bench, and it was hardly treating the House with proper courtesy to make no reply.

Question put, and agreed to.

House adjourned accordingly at Sixteen minutes after Ten o'clock till to-morrow (Friday), pursuant to the Resolution of the House this day.