Liberalism and the Social Problem

by Winston Churchill

Yes; but let those who reproach us with pedantry and with not showing a sympathetic desire to meet the Colonies listen to this: When such a statement is made by a Minister, is it accepted as a desire on the part of the Government to extend sympathetic treatment to the Colonies? Not at all. It is taken as an admission, and used for the purpose of trying to pretend that the Government have abandoned the principle of their opposition to the larger question of Imperial preference. If, although we think them unsatisfactory, we were, out of complaisance, to accord the small preferences suggested upon dutiable articles, we should be told in a minute that we had given up every logical foothold against preference, and that nothing prevented us imposing a tax on bread and meat except our inability to follow the drift of our own arguments.

I have referred to preference, but there is another proposal. The right hon. gentleman the Member for St. George's, Hanover Square, put forward a proposal earlier in the year, and it was renewed in a slightly different form by Mr. Deakin[5] at the Conference. The proposal was to impose a 1 per cent. ad valorem surtax on all foreign merchandise coming into the ports of the British Empire. That is the proposal which has been put forward as the least objectionable form of the preferential proposals, and it has been said of it that it was the least objectionable because it gave no loophole for the corruption which may spring up in the wake of the other proposals.

Let me ask the House to examine this proposal for a moment. Has any serious, civilised Government—I ask for information—ever been to the pains and trouble of erecting round their coasts a tariff, with all its complications, with the need of exacting certificates of origin on every class of goods, with the need of demanding strict assessment of all commodities brought to their shores—has any nation ever erected the vast and complicated network which would be involved in such a duty, simply for the paltry purpose of imposing a duty of 1 per cent.? I say there is no argument and no reason for such a course, and the only argument which could justify it is the argument used by Dr. Smartt at the Colonial Conference when he said (page 514 of the Blue Book), "The foreigner pays, and we do not." Mr. Deakin felt the force of the objection which would be entertained in this country to introducing such a tariff as the right hon. gentleman has proposed, simply for fiscal purposes, and he proceeded to say that Great Britain, if she was a party to such a bargain, should be permitted to raise the money in her own way, and to contribute her proportion to the common fund. That was a great concession to the self-government of the Mother Country.

There is no doubt a great difference between subventions and preferences. A subvention may be raised by a perfectly orthodox fiscal process. No more money is taken from the taxpayer than is required. The whole yield of the tax by which the subvention may be raised certainly goes to the Exchequer, and when the subvention is paid to the foreign or Colonial Government, it does not go, as a preference would go, to benefit particular interests in the Colony, but it goes to the Government of the Colony for the general purposes of State, and not for private advantage on either side. Therefore it seems to me that the method of subvention is on all grounds to be preferred to the method of preference.

It is of course necessary, however, in examining a question of subvention to look at it on its merits. This proposal of 1 per cent. put forward by Mr. Deakin carried the support of the official spokesman of the Opposition. Let us look at it on its merits. Look first at the proportions on which this new fund was to be subscribed. Canada was "to dedicate"—that was the expression used by Mr. Deakin—£400,000, New Zealand £20,000, Newfoundland £6,000, Cape Colony £40,000, Natal £26,000, Great Britain £4,500,000, and Australia—the proposing body—what was she to "dedicate" to this fund? No more than £100,000 a year, or one forty-fifth part of the contribution which was to be made by this country. And for what object was this fund to be accumulated? It is hard enough for the Chancellor of the Exchequer to raise the money to carry on so great an establishment as this country is forced necessarily to maintain. But here is a proposal to raise no less than £4,500,000 of extra taxation. For what objects? For objects not specified, for objects not yet discovered, for objects which could not be stated by those who made the proposal. The right hon. gentleman said that there was to be a meeting of the representatives of the different Colonies in the different great cities of the Empire—one different great city each year for seven years, excluding London, where there was to be no meeting, and they were to search for a method of spending this money. Such plans have only to be stated to fall to pieces.

The House will see that the real essential fallacy of the protectionist proposal is the idea that taxation is a good thing in itself, that it should be imposed for the fun of the thing, and then, having done it for amusement, we should go round afterwards and look for attractive methods of expenditure in order to give support to the project. These are the actual proposals made to us at the Colonial Conference. These are the sort of proposals in respect of which we are, forsooth, to be censured because we have not found it possible in the name of the Government of this country to give our assent to them.

I will submit a proposition to the House as a broad, general rule. I daresay the Leader of the Opposition may rake up some ingenious, hard case in conflict with it; but as a broad, general rule I believe it will be found true to say that there is no power in a Government to impose indirect taxation outside the limits of its territorial sovereignty. Although I am quite ready to admit that, by sudden and unexpected alterations of the tariff, temporary advantage might be gained, and some share of the wealth of other people and other countries might be netted for this or that set of traders within your own border, in the long run the whole yield of any tax, export or import, will come home to the people of that country by whom it is imposed. It will come home plus the whole cost of collecting the tax, and plus, further, the inconvenience and burden of the network of taxation which is needed. It will come home to them, if they be consumers, in the quantity, quality, or price of the articles they consume, and, if exporters, in the profit, convenience, or reserve power of the business which they conduct.

There is no parity between the sacrifices demanded of the Mother Country and the proposals of preference made by the various Colonies. To them it is merely a fresh application of their existing fiscal system. To us it is a fiscal revolution. To them it is a mere rewriting of their schedules to give an increased measure of protection to their home producers. To us it is a tax on food, and, as I assert again and again, upon raw material, and thus upon all the industries of these islands. If the Conference has established one thing clearly it is this, that none of the great self-governing Colonies of the British Empire are prepared to give us effective access to their own markets in competition with their home producers. That was established with absolute clearness; and even if they were prepared to give us effective access to their home markets, I submit to the House that, having regard to the great preponderance of our foreign trade as against our Colonial trade, it would not be worth our while to purchase the concession which they would then offer at the cost of disturbing and dislocating the whole area of our trade. Therefore, we propose to adhere, and are prepared if necessary to be censured for adhering to our general financial system, which is governed by the rule that there should be no taxation except for revenue, and based on the commercial principle of the equal treatment of all nations, and the most-favoured-nation treatment from those nations in return.

Important as are the economical arguments against a preferential policy, they are in my opinion less grave than the political disadvantages. On other occasions I have addressed the House on the grave danger and detriment to the working of our Colonial system which must follow the intermingling of the affairs of the British Empire in the party politics and financial politics of this country. To establish a preferential system with the Colonies involving differential duties upon food is to make the bond of Imperial unity dependent year after year upon the weather and the crops.

And there is even a more unstable foundation for Imperial unity. Does it never occur to right hon. gentlemen opposite that this solution which they offer of the problem of Imperial unity places the Empire not on a national, but on a purely party basis, and upon a basis repudiated by at least half the nation? Some day it may be that they will return triumphant from a general election. As party politicians they may rejoice, yet I think a wise statesman would try to win for the British Empire, our Colonial relations, the same sort of position, high above the struggle of Parties, which is now so happily occupied by the Crown and the Courts of Justice, which in less degree, though in an increasing degree, is coming to be occupied by the fighting Services. Whatever advantages from a Party point of view, or from the point of view of gratifying Colonial opinion, may be gained by food preferences, they would be very small compared with the enormous boon of keeping the field of Colonial politics separate from the social and economic issues on which Parties in this country are so fiercely divided.