1914-15.1913-14.Increase.
30,847,915l.28,898,720l.1,949,195l.

The Inland Revenue Estimate showed a net increase of 176,670l., mainly due to acceleration of the completion of the valuation under the Finance (1909-10) Act of 1910. The Post Office Estimate showed a net increase of 1,772,510l., due largely to increases in pay following the recent recommendations of the Holt Committee.

The Budget, which had been postponed because the Chancellor of the Exchequer had temporarily lost his voice, was taken on May 4. It had been awaited with special interest in view of the Prime Minister's pronouncement at Oldham as to the income tax (A.R., 1913, p. 252) and of the promises of a revision of the system of Imperial grants in aid of local taxation (A.R., 1913, p. 58; 1911, p. 22). In view of the Ministerial attitude to food taxes, insurances had been effected against reduction or abolition of the sugar duty at premiums rising since March from 10 to 30 per cent., and also, at lower rates, against reduction or abolition of the tea, coffee, and cocoa duties, and increase of those on alcoholic liquors. But the Budget proved to be less sensational than was expected.

The Chancellor of the Exchequer began by pointing out that his forecast of 1913 had been more than justified (A.R., 1913, p. 102). Trade had reached its highest point, unemployment its lowest, and hardly any other country had had a like experience. He had estimated an increased revenue of 6,000,000l.; the increase had been unprecedented—9,441,000l. He had had, however, to meet Supplementary Estimates of 3,371,000l., against which were set savings in various departments of 1,500,000l. The deficiency he had to face was 1,860,000l. The increase of revenue enabled him to pay the Supplementary Estimates, wipe out the deficit, leave the 1,000,000l. which he had proposed to take from the Exchequer balances, and end with a surplus of 750,000l. The new taxes of 1909 had yielded 27,215,000l., the national income had increased since that year by 140 to 150 millions, and the national savings by 1,750,000,000l. The revenue from these taxes had sufficed for all their proposed aims except the relief of local taxation, and, but for increased naval expenditure, it would have sufficed for that likewise. In the current year the estimated expenditure was increased by 8,492,000l. and the conditions of revenue were very difficult to forecast. The total estimated revenue from existing sources was 200,655,000l., the total expenditure, apart from the new projects, 205,985,000l., leaving a deficit of 5,330,000l. But the readjustment of the relations of Imperial and local finance had long been imperative. He referred to the Commission which reported in 1901, and to the pledge of the Government in 1908 (A.R., 1908, p. 42). Local authorities had immensely wide functions, but inadequate means; Parliament for forty years had almost annually imposed new powers on them, making hardly any provision to meet the cost. Rates in some districts had doubled in twenty or thirty years; slums could not be cleared because the cost was prohibitive (though this was not altogether a question of rates), and education demanded assistance. The existing system of rating was indefensible, discouraging improvements and very unequal in its incidence. A workman in a town paid about 5 per cent. of his income in rates, a supertax payer 1 or 2 per cent., a tradesman 9 and (in London) 13 per cent. The basis of taxation was too narrow, and the system of assigned revenues and of the Agricultural Rating Act had failed. Further and substantial aid from the Exchequer was necessary to save the municipalities from bankruptcy; but mere subsidies without conditions would be pernicious. There should be a national system of valuation for local taxation, involving the taxation of site values; the machinery for this existed already, and the effect would be to relieve owners who had spent heavily on improvements; but there must be a time-limit, or one might go back to the Roman period. The distribution of relief would give the greatest proportion of it to the most hard-pressed areas; the grants would bear a direct relation to the expenditure; the assigned revenues would be abolished, and efficient service would be a condition of the grant. These grants, for England and Wales in the first full year, would be: Poor law, 3,615,000l.; police, 3,400,000l.; criminal prosecutions, 120,000l.; suppression of cattle disease, 71,300l.; mental deficiency (optional provisions), 45,000l. additional; small grants under Shops and Employment of Children Acts, 22,500l.; Reformatories and Industrial Schools, 22,000l. additional; Public Health, 4,000,000l. (first year, l,300,000l.); Tuberculosis, Nursing, and Pathological Laboratories, 750,000l. The Education grant would be reconstituted on the principles sanctioned by the Kempe Committee (post, Chron., March 30), so as to give the greatest relief to the poorest districts and to those where the expenditure was highest. For the current year the increase—2,750,000l. for England and Wales only—would be confined to the necessitous areas. But besides this, the Exchequer would contribute half the cost of feeding necessitous school children, and give further grants for health work—physical training, open-air schools, crippled and feeble-minded children, and maternity centres, and for technical, secondary, and higher education. These grants for the first year would be 560,000l., the health grants 282,000l. For insurance, also, there would be further assistance, 1,250,000l. for the whole United Kingdom. Something would be done for deposit contributors, and health lectures would be established. The grant would be distributed on the "Goschen principle"—80 per cent, for England and Wales, 11 per cent. for Scotland, and 9 per cent. for Ireland, omitting education and police, which were almost exclusively paid for there by Imperial grants. The grant would begin on December 1, subject to the condition that legislation as to the basis of distribution, including valuation, should have passed in time. For the current year the new grants would increase the deficit by 4,218,000l., and he needed a margin of 252,000l. He had, therefore, to find 9,800,000l. The best method of equalising the burden was by a graduated income tax. A local income tax, according to experts, would not work; in Germany it drove away the men with large independent incomes. He would not interfere with earned incomes up to 1,000l. a year, but after that the scale would be: 1,000l. to 1,500l., 10½d. in the pound; 1,500l. to 2,000l., 1s.; 2,000l. to 2,500l., 1s. 2d.; 2,500l. to 3,000l., 1s. 4d. On unearned income and all income above 3,000l. it would be 1s. 4d. The allowance for each child of 7s. 6d. in the case of incomes under 500l. would be doubled; and the 25 per cent. limit on deduction for repairs would be abolished. The supertax would begin at 3,000l. instead of 5,000l.; the first 500l. would be excepted, the next 1,000l. charged 7d., the next 9d., the next 11d., the next 1s. 1d., the next 1s. 3d., and the remainder 1s. 4d. The total yield of this and the existing supertax would be 7,770,000l. in a full year. Incomes left abroad for reinvestment, which had been exempted actually by a decision of the Courts, would be included by means of declarations, with penalties and recovery when death duties became payable. The death duties would increase by 1 per cent. for estates between 60,000l. and 200,000l. and thereafter to a maximum of 20 per cent. for 1,000,000l. Relief would be granted, however, in cases of rapid succession to property, by remissions of estate duty on realty and stock-in-trade, varying from 50 per cent. if death occurred within one year of succeeding to property to 10 per cent. if it occurred within five years. The settlement estate duty would be abolished, and settled property treated like any other. These taxes together would produce 8,800,000l. for the current year, and he would fill the gap by taking a million from the Sinking Fund, seeing that the existing Government had paid off 104,000,000l. of debt and by 1915 would have paid off 114,000,000l. Direct and indirect taxation, which were equally balanced when the Government came into office, would now be 60 and 40 per cent. of the whole respectively. In conclusion, he claimed that the Government were honourably fulfilling pledges and taking a decisive step towards the greater happiness and efficiency of the people and the greater strength and honour of the land.

The complexity of the Budget proposals precluded immediate discussion. Mr. Austen Chamberlain condemned the proposal to have recourse to the Sinking Fund, partly in view of the new charges, amounting already to 21,000,000l., added by the Government under Old Age Pensions and Insurance alone. A number of questions were asked by other members, and answered by the Chancellor of the Exchequer, and, after the resolution enacting the new income tax had been agreed to, the House adjourned early—at 7.15 P.M.

The following table shows the Estimated Revenue for 1914-15, compared with the Receipts of 1913-14.

Estimate
1914-15.		Exchequer Receipts
1913-14.
££
Customs 35,350,000 35,450,000
Excise 39,650,000 39,590,000
Estate, etc., Duties 28,800,000 27,359,000
Stamps 9,900,000 9,966,000
Land Tax 700,000 700,000
House Duty 2,000,000 2,000,000
Income Tax (including Supertax) 56,550,000 47,249,000
Land Value Duties 725,000 715,000
Postal Service 21,750,000 21,190,000
Telegraph Service 3,100,000 3,080,000
Telephone Service 6,900,000 6,530,000
Crown Lands 530,000 530,000
Suez Canal Shares and Sundry Loans 1,370,000 1,580,000
Miscellaneous 2,130,000 2,304,000
Total £209,455,000 £198,243,000
Borrowings to meet Expenditure chargeable against Capital 5,265,000 3,717,000

The following table shows the Estimated Expenditure, 1914-15, compared with the Issues of 1913-14.

Estimate
1914-15.		 Exchequer Issue
1913-14.
£ £
National Debt Services 23,500,000 24,500,000
Development and Road Improvement Funds 1,545,000 1,395,000
Payments to Local Taxation Accounts, etc. 9,885,000 9,734,000
Other Consolidated Fund Services 1,706,000 1,694,000
Army (including Ordnance Factories) 28,885,000 28,346,000
Navy 51,550,000 48,833,000
Civil Services (including Old Age Pensions) 61,084,000 53,901,000
Customs and Excise and Inland Revenue 4,821,000 4,483,000
Post Office Services 26,227,000 24,607,000
Total £209,203,000 £197,493,000

The final balance sheet, 1914-15, as proposed by the Chancellor of the Exchequer was as follows:—