TAXING BY DECREE.
THE discussion upon Mr. Lloyd George's "Provisional Collection of Taxes" Bill has revealed a somewhat healthier spirit of independence in the House of Commons than recent events had rendered probable. On both sides of the House of Commons protests were made against a proposal to endow the executive government with power to tax the King's subjects without an Act of Parliament. Especially notable were the speeches of Mr. Leif Jones on the Liberal side and Mr. Hayes Fisher, Sir Alfred Cripps, and Mr. George Cave on the Unionist side. On the other hand, we regret to see that Mr. Austen Chamberlain was so far influenced by his Treasury reminiscences that he strongly backed the Chancellor of the Exchequer. The issue is a very simple one. During the last sixty years a practice has grown up of levying taxes, and notably customs duties and income-tax, on the authority of a resolu- tion of the Committee of Ways and Means of the House of Commons. This practice has now, through the public- spirited action of Mr. Gibson Bowles, been declared to be illegal, so far at any rate as income-tax is concerned, and it is fairly obvious that the arguments which apply to income-tax also apply to customs and excise duties. Probably Mr. Bowles would never have brought the action he did against the Bank of England if the com- paratively modern custom had been practised with reason- able discretion. When the custom began, the resolutions passed in Committee of Ways and Means were embodied in a few weeks in an Act of Parliament. Under the Lloyd Georgian lqgime, the passing of the Finance Act has been postponed until late in the autumn, with the result that taxes have been illegally collected for more than half a year. In this, as in most matters, a difference of degree almost involves a difference of principle.
But directly the Chancellor of the Exchequer comes forward to propose that what has hitherto been a tolerated breach of the law shall be converted into a statutory right, it is necessary to challenge the whole principle at stake. The Treasury view is that taxes must be collected within twenty-four hours of being proposed in order to prevent forestalments of revenue. The first answer is that England is the only country in the world, with the doubtful exception of Spain, where this practice prevails. That fact alone casts doubt upon the proposition laid down by the Treasury and endorsed by Mr. Lloyd George and Mr. Austen Chamberlain. When, however, we look at the matter in detail we see even more clearly that the proposition will not hold water. As Mr Gibson Bowles pointed out in the admirable letter which he contributed to the Times of April 7th, forestalments of revenue have always taken place under the very system Mr Lloyd George now wishes to legalize. In 1899, when Sir Michael Hicks-Beach was Chancellor of the Exchequer, forestalments of customs and excise, amounting altogether to £2,300,000, took place. Smaller forestalments are men- tioned by Mr. Bowles in 1902 and 1909; and as recently as 1910, according to Mr. Lloyd George himself, there were forestalments to the extent of £1,400,000. In each of these cases it is important to note the forestalments took place in advance of the Budget, and thus confused the accounts of two separate financial years. This confusion of accounts between two years is in itself a far more serious evil than a loss of revenue confined to one year alone ; for it may lead in the first year to an undue inflation of the old Sinking Fund, and in the second year to the unnecessary embarrassment of the Chancellor of the Exchequer. On the other hand, under the system of giving notice which prevails in other countries, it is possible to calculate the probable loss by forestalmenta and to budget accordingly. To be specific, let us take the case of the tea duty. At present as every Budget comes round persons engaged in the tea trade become nervously anxious lest the tea duty should be altered, and make speculative purchases, and therefore if the present system continues we shall always be subject to the confusion of accounts between two financial years due to forestalments of revenue. But suppose that the Chancellor of the Exchequer gives three months' notice of a proposed alteration in the tea duty. If that altera- tion is only a slight one, it would not be worth while for traders to clear goods from bond to any very great extent, because they would be burdened with the interest payable on the duty, and their own warehouses would be loaded up with goods which they could not rapidly dispose of. If, on the other hand, the alteration in duty was a very extensive one, no doubt clearances from bond would be equally extensive. To take a concrete case, let us suppose that the Chancellor of the Exchequer decided that in order to get rid of the sugar duty he would raise the tea duty from 5d. to 8d., a change which on its merits has very much indeed to commend it.
According to present practice, notice would be given of the intended repeal of the sugar tax, so that the trade might clear off on to the public the stocks upon which duty had been paid. Assuming the same notice to be given to the tea trade, the result would undoubtedly be that large stocks of tea would be cleared at the 5d. duty, so as to avoid the extra 3d. But this is a prospect which the Chancellor of the Exchequer could perfectly well allow for. In any case he would not lose the 5d. on the pounds of tea cleared, as he does with present forestahnents which come into the previous financial year. He would only have to calculate to what extent the trade could, say in two months, clear out of bond tea at the rate of 5d. as compared with the amount that would have to be cleared later in the year at the amount of 8d. There is not more difficulty about making this calculation than about the numberless other calcu- lations that have to be made in framing every Budget.
The advantage of thus acting publicly and above-board is not only financial ; for the present system obviously leaves the door open to corruption. For at least several days before the Budget is introduced, there are perhaps thirty Cabinet Ministers and Civil servants who know what changes in taxation are proposed, and if any one of these thirty were corrupt be could easily use his inside know- ledge to make a successful deal on the produce market.
From every point of view therefore it would be advan- tageous to substitute the practice which prevails in foreign countries of giving notice of proposed changes of taxation for the practice which has grown up through carelessness in our own country. As regards the constitutional aspects of the question, it is difficult to see how any difference of opinion can arise. From the time of Magna Cha.rta down- wards Englishmen have realized that the most important safeguard for their liberties lay in the provision that no taxes should be levied except by the consent of the Common Council of the Kingdom. This provision was made not merely to guard against the tyranny of autocratic monarchs,but equally to guard against the unwisdom of con- stitutional Ministers. As was pointed out. in the House of Commons on Tuesday last, the Bill of Rights was passed expressly to protect the subjects not only from the Sovereign but from the exaction of evil councillors and Ministers. If Mr. Lloyd George's proposals, as originally made in the House of Commons, were embodied in an Act of Parliament, it would be possible for a Minister to come down to the House of Commons on Budget night, and, making use of the closure and of the party Whips, to impose a whole system of new taxation on the country, to take effect on the following morning. Mr. Austen Chamberlain repudiated the suggestion that such a scheme was in his own mind, and we, of course, accept that dis- claimer absolutely—both in the letter and in the spirit.
Nevertheless he showed great anxiety to secure for the Chancellor of the Exchequer the power of imposing new taxes without the authority of an Act of Parliament.
It is fairly obvious that the fair consideration of any new tax would be immensely fettered if the tax were actually in operation before the consideration began.
This argument, it will be observed, applies not only to customs duties but also to any fancy taxes that the ingenuity of Mr. Lloyd George and his land-tax supporters might suggest. We are glad to note that the feeling of the House of Commons was so strong that Mr. Lloyd George agreed to cut out from his Bill all reference to new taxes.
With this amendment the Bill will merely provide that alterations in existing taxes can have legal effect upon the passing of a resolution by the Committee of Ways and Means. For the reasons above stated we can see no possible justification for this proposal. In the case of the income-tax it is perfectly simple to make the date at which the tax expires June 30th instead of April 5th. This would leave ample time for the Chancellor of the Exchequer to introduce his income-tax Bill and get it passed into an Act before the old tax expires. In the case of customs duties, as we have already argued, there is a great advantage in giving a considerable notice to the trade ; but if for any reason it should be deemed imperative to impose a tax with very brief notice there is nothing to pre- vent the passing of a special Act for that purpose. It has to be remembered that the present practice of combining all the taxes of the year in one Finance Bill only began in the 'sixties because of the quarrel between Mr. Gladstone and the House of Lords over the paper duty. Now that the financial powers of the House of Lords have been virtually abolished, there is no reason whatever why we should not revert to the old practice of having a separate Act for a. separate tax whenever that course seems desirable.
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