Chapter 20

That is the main aspect of the Budget to which I wish to draw your attention. But there is another significance of the highest importance which attaches to the Budget. I mean the new attitude of the State towards wealth. Formerly the only question of the tax-gatherer was, "How much have you got?" We ask that question still, and there is a general feeling, recognised as just by all parties, that the rate of taxation should be greater for large incomes than for small. As to how much greater, parties are no doubt in dispute. But now a new question has arisen. We do not only ask to-day, "How much have you got?" we also ask, "How did you get it? Did you earn it by yourself, or has it just been left you by others? Was it gained by processes which are in themselves beneficial to the community in general, or was it gained by processes which have done no good to any one, but only harm? Was it gained by the enterprise and capacity necessary to found a business, or merely by squeezing and bleeding the owner and founder of the business? Was it gained by supplying the capital which industry needs, or by denying, except at an extortionate price, the land which industry requires? Was it derived from active reproductive processes, or merely by squatting on some piece of necessary land till enterprise and labour, and national interests and municipal interests, had to buy you out at fifty times the agricultural value? Was it gained from opening new minerals to the service of man, or by drawing a mining royalty from the toil and adventure of others? Was it gained by the curious process of using political influence to convert an annual licence into a practical freehold and thereby pocketing a monopoly value which properly belongs to the State--how did you get it?" That is the new question which has been postulated and which is vibrating in penetrating repetition through the land.[20]

It is a tremendous question, never previously in this country asked so plainly, a new idea, pregnant, formidable, full of life, that taxation should not only have regard to the volume of wealth, but, so far as possible, to the character of the processes of its origin. I do not wonder it has raised a great stir. I do not wonder that there are heart-searchings and angry words because that simple question, that modest proposal, which we see embodied in the new income-tax provisions, in the land taxes, in the licence duties, and in the tax on mining royalties--that modest proposal means, and can only mean, the refusal of the modern State to bow down unquestioningly before the authority of wealth. This refusal to treat all forms of wealth with equal deference, no matter what may have been the process by which it was acquired, is a strenuous assertion in a practical form, that there ought to be a constant relation between acquired wealth and useful service previously rendered, and that where no service, but rather disservice, is proved, then, whenever possible, the State should make a sensible difference in the taxes it is bound to impose.

It is well that you should keep these issues clearly before you during the weeks in which we seem to be marching towards a grave constitutional crisis. But I should like to tell you that a general election, consequent upon the rejection of the Budget by the Lords, would not, ought not to be, and could not be fought upon the Budget alone. "Budgets come," as the late Lord Salisbury said in 1894--"Budgets come and Budgets go." Every Government frames its own expenditure for each year; every Government has to make its own provision to meet that expenditure. There is a Budget every year, and memorable as the Budget of my right hon. friend may be, far-reaching as is the policy depending upon it, the Finance Bill, after all, is in its character only an annual affair. But the rejection of the Budget by the House of Lords would not be an annual affair. It would be a violent rupture of constitutional custom and usage extending over three hundred years and recognised during all that time by the leaders of every Party in the State. It would involve a sharp and sensible breach with the traditions of the past; and what does the House of Lords depend upon if not upon the traditions of the past? It would amount to an attempt at revolution not by the poor, but by the rich; not by the masses, but by the privileged few; not in the name of progress, but in that of reaction; not for the purpose of broadening the framework of the State, but of greatly narrowing it. Such an attempt, whatever you may think of it, would be historic in its character, and the result of the battle fought upon it, whoever wins, must inevitably be not of an annual, but of a permanent and final character. The result of such an election must mean an alteration of the veto of the House of Lords; if they win they will have asserted their right, not merely to reject legislation of the House of Commons, but to control the finances of the country, and if they lose, we will deal with their veto once and for all.

We do not seek the struggle, we have our work to do; but if it is to come, it could never come better than now. Never again perhaps, certainly not for many years, will such an opportunity be presented to the British democracy. Never will the ground be more favourable; never will the issues be more clearly or more vividly defined. Those issues will be whether the new taxation, which is admitted on all sides to be necessary, shall be imposed upon luxuries, superfluities, and monopolies, or upon the prime necessaries of life; whether you shall put your tax upon the unearned increment on land or upon the daily bread of labour; whether the policy of constructive social reform on which we are embarked, and which expands and deepens as we advance, shall be carried through and given a fair chance, or whether it shall be brought to a dead stop and all the energies and attention of the State devoted to Jingo armaments and senseless foreign adventure. And, lastly, the issue will be whether the British people in the year of grace 1909 are going to be ruled through a representative Assembly, elected by six or seven millions of voters, about which almost every one in the country, man or woman, has a chance of being consulted, or whether they are going to allow themselves to be dictated to and domineered over by a minute minority of titled persons, who represent nobody, who are answerable to nobody, and who only scurry up to London to vote in their party interests, in their class interests, and in their own interests.

These will be the issues, and I am content that the responsibility for such a struggle, if it should come, should rest with the House of Lords themselves. But if it is to come, we shall not complain, we shall not draw back from it. We will engage in it with all our hearts and with all our might, it being always clearly understood that the fight will be a fight to the finish, and that the fullest forfeits, which are in accordance with the national welfare, shall be exacted from the defeated foe.

FOOTNOTES:

[20] We do not, of course, ask it of the individual taxpayer. That would be an impossible inquisition. But the House of Commons asks itself when it has to choose between taxes on various forms of wealth, "By what process was it got?"

THE BUDGET AND PROPERTY.

ABERNETHY, _October 7, 1909_

(From _The Daily Telegraph_, by permission of the Editor.)

This is a very fine gathering for a lonely glen, and it augurs well for the spirit of Liberalism. Much will be expected of Scotland in the near future. She will be invited to pronounce upon some of the largest and most complicated questions of politics and finance that can possibly engage the attention of thoughtful citizens, and her decision will perhaps govern events.

There is one contrast between Parties which springs to the eye at once. One Party has a policy, detailed, definite, declared, actually in being. The other Party has no policy. The Conservative Party has no policy which it can put before the country at the present time on any of the great controverted questions of the day. On most of the previous occasions when we have approached a great trial of strength, the Conservative Party have had a policy of their own which they could state in clear terms. You would naturally expect some reticence or reserve from the head of a Government responsible for the day-to-day administration of affairs. But what do you see at the present time? Mr. Asquith speaks out boldly and plainly on all the great questions which are being debated, and it is the Leader of the Opposition who has to take refuge in a tactical and evasive attitude. Why, Mr. Balfour is unable to answer the simplest questions. At Birmingham, the Prime Minister asked him in so many words: What alternative did he propose to the Budget? What did he mean by Tariff Reform? and what was his counsel to the House of Lords?

It would not be difficult to frame an answer to all these questions. Mr. Chamberlain, for instance, was quite ready with his answers to all of them. At Glasgow in 1903 he stated what his Budget would have been, and he explained precisely what he meant by Tariff Reform. At Birmingham last month he was equally clear in urging the Lords to reject the Budget. There is no doubt whatever where Mr. Chamberlain and those who agree with him stand to-day. They would raise the extra taxation which is required, by protective import duties on bread, on meat, on butter, cheese, and eggs, and upon foreign imported manufactured articles; and in order to substitute their plan for ours they are prepared to urge the House of Lords to smash up the Budget and to smash up as much of the British Constitution and the British financial system as may be necessary for the purpose.

That is their policy; but, after all, it is Mr. Balfour who is the leader of the Conservative Party. He is the statesman who would have to form and carry on any administration which might be formed from that Party, and he will not state his policy upon any of the dominant questions of the day. Why will he not answer these simple questions? He is the leader, and it is because he wishes to remain the leader that he observes this discreet silence. He tells us he is in favour of Tariff Reform, he loves Tariff Reform, he worships Tariff Reform. He feels that it is by Tariff Reform alone that the civilisation of Great Britain can be secured, and the unity of the Empire achieved; but nothing will induce him to say what he means by Tariff Reform. That is a secret which remains locked in his own breast. He condemns our Budget, he clamours for greater expenditure, and yet he puts forward no alternative proposals by which the void in the public finances may be made good. And as for his opinion about the House of Lords, he dare not state his true opinion to-day upon that subject. I do not say that there are not good reasons for Mr. Balfour's caution. It sometimes happens that the politics of a Party become involved in such a queer and awkward tangle that only a choice of evils is at the disposal of its leader; and when the leader has to choose between sliding into a bog on the one hand and jumping over a precipice on the other, some measure of indulgence may be extended to him if he prefers to go on marking time, and indicating the direction in which his followers are to advance by a vague general gesture towards the distant horizon.

Whatever you may think about politics, you must at least, in justice to his Majesty's Government, recognise that their position is perfectly plain and clear. Some of you may say to me, "Your course, your policy may be clear enough, but you are burdening wealth too heavily by your taxes and by your speeches." Those shocking speeches! "You are driving capital out of the country." Let us look at these points one at a time. The capital wealth of Britain is increasing rapidly. Sir Robert Giffen estimated some years ago that the addition to the capital wealth of the nation was at least between two hundred and three hundred millions a year. I notice that the paid-up capital of registered companies alone, which was 1,013 millions sterling in 1893, has grown naturally and healthily to 2,123 millions sterling in 1908. And, most remarkable of all, the figures I shall submit to you, the gross amount of income which comes under the view of the Treasury Commissioners who are charged with the collection of income-tax, was in the year 1898-9 762 millions, and it had risen from that figure to 980 millions sterling in the year 1908-9: that is to say, that it had risen by 218 millions in the course of ten years.

From this, of course, a deduction has to be made for more efficient methods of collection. This cannot be estimated exactly; but it certainly accounts for much less than half the increase. Let us assume that it is a half. The increase is therefore 109 millions. I only wish that wages had increased in the same proportion. When I was studying those figures I have mentioned to you I looked at the Board of Trade returns of wages. Those returns deal with the affairs of upwards of ten millions of persons, and in the last ten years the increase in the annual wages of that great body of persons has only been about ten million pounds: that is to say, that the increase of income assessable to income-tax is at the very least more than ten times greater than the increase which has taken place in the same period in the wages of those trades which come within the Board of Trade returns.

When we come to the question of how burdens are to be distributed, you must bear these facts and figures in mind, because the choice is severely limited. You can tax wealth or you can tax wages--that is the whole choice which is at the disposal of the Chancellor of the Exchequer. Of course I know there are some people who say you can tax the foreigner--but I am quite sure that you will not expect me to waste your time in dealing with that gospel of quacks and creed of gulls. The choice is between wealth and wages, and we think that, in view of that great increase in accumulated wealth which has marked the last ten years, and is the feature of our modern life, it is not excessive or unreasonable at the present stage in our national finances to ask for a further contribution from the direct taxpayers of something under eight millions a year. That is the total of all the new taxes on wealth which our Budget imposes, and it is about equal to the cost of four of those _Dreadnoughts_ for which these same classes were clamouring a few months ago. And it is less than one-thirteenth of the increased income assessable to income-tax in the last ten years.

It is because we have done this that we are the object of all this abuse and indignation which is so loudly expressed in certain quarters throughout the country at the present time. While the working-classes have borne the extra taxation upon their tobacco and whisky in silence, all this rage and fury is outpoured upon the Government by the owners of this ever-increasing fund of wealth, and we are denounced as Socialists, as Jacobins, as Anarchists, as Communists, and all the rest of the half-understood vocabulary of irritated ignorance, for having dared to go to the wealthy classes for a fair share of the necessary burdens of the country. How easy it would be for us to escape from all this abuse if we were to put the extra taxation entirely upon the wages of the working classes by means of taxes on bread and on meat. In a moment the scene would change, and we should be hailed as patriotic, far-sighted Empire-builders, loyal and noble-hearted citizens worthy of the Motherland, and sagacious statesmen versed in the science of government. See, now, upon what insecure and doubtful foundations human praise and human censure stand.

Well, then, it is said your taxes fall too heavily upon the agricultural landowner and the country gentleman. Now, there is no grosser misrepresentation of the Budget than that it hits the agricultural landowner, and I think few greater disservices can be done to the agricultural landowner, whose property has in the last thirty years in many cases declined in value, than to confuse him with the ground landlord in a great city, who has netted enormous sums through the growth and the needs of the population of the city. None of the new land taxes touch agricultural land, while it remains agricultural land. No cost of the system of valuation which we are going to carry into effect will fall at all upon the individual owner of landed property. He will not be burdened in any way by these proposals. On the contrary, now that an amendment has been accepted permitting death duties to be paid in land in certain circumstances, the owner of a landed estate, instead of encumbering his estate by raising the money to pay off the death duties, can cut a portion from his estate; and this in many cases will be a sensible relief. Secondly, we have given to agricultural landowners a substantial concession in regard to the deductions which they are permitted to make from income-tax assessment on account of the money which they spend as good landlords upon the upkeep of their properties, and we have raised the limit of deduction from 121/2 per cent. to 25 per cent. Thirdly, there is the Development Bill--that flagrant Socialistic measure which passed a second reading in the House of Lords unanimously--which will help all the countryside and all classes of agriculturists, and which will help the landlord in the country among the rest. So much for that charge.

Then it is said, "At any rate you cannot deny that the Budget is driving capital out of the country." I should like to point out to you that before the Budget was introduced, we were told that it was Free Trade that was driving capital out of the country. Let that pass. It is said we cannot deny that the Budget is driving capital out of the country. I deny it absolutely. To begin with, it is impossible to drive the greater part of our capital out of this country, for what is the capital of the country? The greatest part of that capital is the land, the state of cultivation which exists, the roads, the railways, the mines, the mills--this is the greatest part of the capital. The owners of that capital might conceivably, if they thought fit, depart from the country, but their possessions would remain behind.

I shall be asked, What about all this foreign investment that is going on? Is not British credit now being diverted abroad to foreign countries, to the detriment of our own country? Is not British capital fleeing from The Socialistic speeches of the Chancellor of the Exchequer, and the President of the Board of Trade, and taking refuge in Germany, where of course there are no Socialists, or in other countries, where there is never any disturbance, like France, or Spain, or Russia, or Turkey? Now let us look into that. There are only two ways in which capital can leave this country for foreign investments. It is no good sending bits of paper to the foreigner and expecting him to pay a dividend in return. There are only two ways--one is by exports made by British labour, and the other by bullion. Now, if the exports were to increase, surely that should be a cause of rejoicing, especially to our Tariff Reformers, who regard the increase in exports as the index of national prosperity. As for the second--the export of bullion--would you believe it, it is only a coincidence, but it is an amusing coincidence, there are actually six million pounds' worth more gold in the country now, than there were at the beginning of the year before the Budget was introduced. The active and profitable investment abroad which has marked the last two or three years, which is bound to swell the exports of the next few years, has not been attended by any starvation of home industry. On the contrary, the amount of money forthcoming for the development of new industries and now enterprises in this country during the last two or three years has compared very favourably with the years which immediately preceded them, when the Conservative Government was in power.

Property in Great Britain is secure. It would be a great mistake to suppose that that security depends upon the House of Lords. If the security of property in a powerful nation like our own were dependent upon the action or inaction of 500 or 600 persons, that security would long ago have been swept away. The security of property depends upon its wide diffusion among great numbers and all classes of the population, and it becomes more secure year by year because it is gradually being more widely distributed. The vital processes of civilisation require, and the combined interests of millions guarantee, the security of property. A society in which property was insecure would speedily degenerate into barbarism; a society in which property was absolutely secure, irrespective of all conceptions of justice in regard to the manner of its acquisition, would degenerate, not to barbarism, but death. No one claims that a Government should from time to time, according to its conceptions of justice, attempt fundamentally to recast the bases on which property is erected. The process must be a gradual one; must be a social and a moral process, working steadily in the mind and in the body of the community; but we contend, when new burdens have to be apportioned, when new revenues have to be procured, when the necessary upkeep of the State requires further taxes to be imposed--we contend that, in distributing the new burdens, a Government should have regard first of all to ability to pay and, secondly, that they should have regard to some extent, and so far as is practicable, to the means and the process by which different forms of wealth have been acquired; and that they should make a sensible difference between wealth which is the fruit of productive enterprise and industry or of individual skill, and wealth which represents the capture by individuals of socially created values. We say that ought to be taken into consideration. We are taking it into consideration now by the difference we have made in the income-tax between earned and unearned incomes, by the difference we make between the taxation which is imposed upon a fortune which a man makes himself and the fortune which he obtains from a relative or a stranger. We are taking it into consideration in our tax on mining royalties, in our licence duties and in our taxes on the unearned increment in land. The State, we contend, has a special claim upon the monopoly value of the liquor licence, which the State itself has created, and which the State itself maintains from year to year by its sole authority. If that claim has not previously been made good, that is only because the liquor interest have had the power, by using one branch of the Legislature, to keep the nation out of its rights. All the more reason to make our claim good now.

Again we say that the unearned increment in land is reaped in proportion to the disservice done to the community, is a mere toll levied upon the community, is an actual burden and imposition upon them, and an appropriation by an individual, under existing law, no doubt, of socially created wealth. For the principle of a special charge being levied on this class of wealth we can cite economic authority as high us Adam Smith, and political authority as respectable as Lord Rosebery; and for its application we need not merely cite authority, but we can point to the successful practice of great civilised neighbouring States.