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 C72 
 
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 B 3 lit 30S 
 
 
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PRICE ONE PENNY 
 
 Budget and Tariff 
 
 Compared 
 
 BY 
 
 THE \COBDEN CLUB 
 
 GASSELL AND COMPANY, LTD. 
 
 London, New York, Toronto and Melbourne 
 
 1909 
 
Digitized by the Internet Archive 
 
 in 2008 with funding from 
 
 Microsoft Corporation 
 
 http://www.archive.org/details/budgettariffcompOOcobdrich 
 

 PREFACE 
 
 The Revolution which the Lords have invoked affects the 
 interests of every man, every woman, every household in 
 the United Kingdom. If the Lords carry the day, supreme 
 power in the State will be transferred from the Repre- 
 sentatives of the People to an isolated and privileged body 
 who only represent themselves. It is impossible to 
 suppose that a democracy, such as that under which we 
 live, will permit such a transfer, or will tolerate its con- 
 tinuance, if by chance the powerful interests opposed to 
 the people should carry the day in January. 
 
 This is the first and main issue before the Nation. 
 The other issue, second only in gravity to the 
 usurpation of supreme power by the Peers, is that of 
 taxation. 
 
 The immense and growing expenditure of the State 
 strains, and will strain further, the resources of the people, 
 but the Nation approves it, and the Nation will have to 
 make the sacrifice which it entails. The question is this : 
 Shall the rich out of their superfluity contribute equitably 
 to the expenditure, or shall taxation fall mainly on the 
 food of the poor? 
 
 There are two Budgets before the Nation — that of the 
 Government, with its demand on the rich, and that of the 
 
 m3£3547 
 
4 
 Opposition, with its burthen on the poor. It is in the 
 interest of the latter that the Lords are imperilling their 
 power, their privilege, it may be their existence. 
 
 Everybody who reads this pamphlet, written by Lord 
 Eversley, and revised and approved by the Committee of 
 the Cobden Club, will understand the meaning of these 
 two Budgets, and the contrast between their effects. It 
 compares them in detail. It follows the Chamberlain 
 campaign from its doleful outset and its empty promises 
 to its full development in the adoption of Protection and 
 food taxes by the Conservative party. It shows, too, 
 briefly and intelligibly, how lightly the Government 
 proposals fall on individuals of the working classes, of 
 the middle classes, and on the well-to-do with moderate 
 incomes. It shows also how those proposals affect in de- 
 tail the richer classes. The few minutes which the reader 
 devotes to the pamphlet will enable him to understand the 
 true incidence of the proposed taxation, and discount the 
 exaggerations by which the Conservatives seek to dismay 
 
 or lead astray the ignorant. 
 
 Welby. 
 
BUDGET versus TARIFF 
 
 I.— THE BUDGET OF THE GOVERNMENT. 
 
 Two Budgets are virtually before the country at the present 
 time, and will be decided on at the coming General 
 Election : that of the Government, approved by the repre- 
 sentatives of the people in the House of Commons, but 
 rejected by the House of Lords ; and that of the so-called 
 Tariff Reform League, which the Peers will hug to their 
 bosoms if the electors will give them the opportunity. 
 The one is the poor man's and a Free Trade Budget, 
 the other the rich man's and a Protectionist one. We 
 propose in these pages to compare the incidence of these 
 rival schemes on the various classes of the community. 
 
 It is not necessary to give a full description of the 
 details of the Government Budget. It has been the sub- 
 ject of discussion in the House of Commons prolonged 
 over many months. It will provide for an increased 
 revenue of 13 millions in the current year and 19 millions 
 in the next year. These great increases are rendered neces- 
 sary in great part by Old-Age Pensions, in part by the 
 deplorable increase of naval armaments, which all parties 
 are agreed upon. 
 
 The scheme proposes a contribution from all classes, 
 but in such a manner that the burden will be least on 
 the labouring classes and those with small salaries or in- 
 comes from trades or professions, and will fall in a higher 
 
 / 
 
degree on the wealthier classes by an ascending scale in 
 proportion to their incomes and realised wealth. 
 
 No increase of duty is proposed on such articles of 
 consumption by the labouring classes as sugar and tea, 
 still less on bread and meat. We think that the Govern- 
 ment have acted most wisely in not adding to the burdens 
 of the people in this direction. 
 
 An increase of the duties on tobacco and spirits will 
 fall on all classes in proportion to their consumption of 
 these luxuries. A very large proportion of these will be 
 paid by the working classes. The increase of the income 
 tax by 2d. in the £ will be imposed on those whose earned 
 incomes are more than ,£3,000 a year and those whose 
 incomes from investments are more than £160 a year. 
 A super-tax of 6d. in the £ will be payable on incomes 
 above £5,000 a year after deducting £3,000 a year. An 
 increase of 1 per cent, is proposed to the death duties on 
 estates of over £5,000, with an ascending scale for very 
 large estates. 
 
 It is also proposed to open up new sources of revenue 
 by claiming, on behalf of the State and of local authorities, 
 a small share, in the future, of the growing value of land, 
 in and near to towns, due not to efforts or expenditure 
 of the owners, but to the growth of the surrounding com- 
 munity — a most just and reasonable project, against which 
 a false and ridiculous charge of Socialism has been made. 
 The first suggestion of such a tax was made fifty years ago 
 by the late Mr. J. S. Mill, who of all great political econo- 
 mists of modern times least favoured Socialism. 
 
 By equalising the duties on licensed houses it is pro- 
 posed to secure a larger share in the monopoly value of 
 the more valuable houses, which has been created by the 
 State, and which has hitherto escaped from its fair con- 
 tribution. 
 
 A scheme of this wide and far-reaching character, 
 
involving, in the case of increments of land values, a new 
 principle of taxation, could not fail to arouse vehement 
 opposition, especially from the very wealthy, on whom the 
 super-tax and the death duties will fall, the owners of 
 town properties not yet built, and the brewers, who, with 
 rare exceptions in England, are the owners of all licensed 
 houses. 
 
 It is probable, however, that the House of Lords would 
 not have been induced to adopt the unprecedented and, 
 as we believe, wholly unconstitutional course of refusing 
 to the Crown the levy of taxes needed for the public 
 services, if it had not been for the efforts of the 
 so-called Tariff Reformers, who have for the last six years 
 been engaged in an active propaganda for a return to 
 Protection. It was obvious that these people have felt, 
 and, it is to be hoped, with good reason, that if the 
 Budget of the Government were to become law, providing 
 not only for the financial requirements of the present year, 
 but for those of the next two or three years, their own 
 alternative scheme of Protective Duties and the Taxation 
 of Food would be indefinitely postponed and extinguished. 
 
 It w r as, therefore, at their instance, and by the mandate 
 of their leader Mr. Chamberlain, who, though broken 
 in health and, to the regret of all, never likely to 
 appear again in public life, still directs, or is made use of 
 to direct, the Tariff movement, that the Tory Party in the 
 Lords was induced to commit itself to so revolutionary a 
 course. 
 
 II.— THE CHAMBERLAIN SCHEME. 
 
 The origin of the alternative Budget was Mr. Chamber- 
 lain's scheme, devised six years ago, modified and greatly 
 extended of late in the direction of Protection by the Tariff 
 
8 
 
 League. It proposed duties on all food and manufactures, 
 with exceptions in favour of Colonial produce. Raw 
 materials necessary for manufactures, and maize and bacon 
 were to be free of duty. 
 
 The scheme was baited with the promise of Old-Age 
 Pensions. It was also distinctly promised that a 
 great part of the proceeds of the new taxes was to 
 be devoted to the reduction of taxes pressing upon the 
 labouring classes — namely, the tea and sugar duties and 
 the tobacco duty. This was to be compensation for the 
 increased cost of food, which it was then fully recognised 
 would result from the food taxes. 
 
 It is not necessary to point out again in detail, as we 
 did in 1904,* when commenting on the Tariff campaign of 
 Mr. Chamberlain, his deliberate misdescription of the 
 condition of the country before the adoption of Free Trade, 
 and of the results of that great measure, or his habitual 
 abuse of statistics, or the absurdity of his dismal jeremiads 
 of the future of British trade and commerce. His audiences 
 were not taken in by his statements of fact, or misled by 
 his prophecies. They did not swallow the bait which he 
 offered. By overwhelming majorities the constituencies 
 in the General Election of 1906 rejected the scheme, and 
 reaffirmed the principle of Free Trade. Nowhere was the 
 victory more complete than in the great cities which he had 
 addressed, and whose industries he had pronounced to be 
 on the brink of ruin. His campaign was followed by a 
 revival and extension of our export trade, such as the 
 country had never before experienced, and which com- 
 pletely belied all his evil vaticinations. 
 
 In spite, however, of the adverse verdict of the electors 
 in 1906, and of the depressing failure of the prophecies 
 of ruin to our trade, the Tariff League continued its agita- 
 
 * " Fact versus Fiction." The Cobden Club's reply to Mr. Chamberlain 
 1904. 
 
tion, evidently hoping that there would come again a 
 period of bad trade, favourable to the growth of their 
 noxious weeds. Immense sums of money were contributed 
 by persons unwilling to allow their names to be 
 made known, by manufacturers eager to create monopolies 
 for their trades under Protection, and landowners 
 hoping for the artificial raising of their rents. This 
 was expended in the employment of paid agents to 
 advocate the cause of Protection in every remote village 
 of the country. Mock inquiries were also held by 
 committees appointed by the Tariff League, composed 
 of members pledged to their scheme. Witnesses favour- 
 able to it were examined, without any contradiction from 
 those of opposite views. No single representative of the 
 labouring classes was given an opportunity of testi- 
 fying as to the effect of the proposed food taxes. No 
 greater fraud was ever attempted on a credulous public 
 than by these inquiries. As was to be expected, these one- 
 sided committees reported in favour of the prearranged 
 scheme of Protective duties/ 
 
 Meanwhile the ground was being cut from under the 
 Tariff Reform League. What Mr. Chamberlain had 
 promised as an accompaniment, or condition of his 
 scheme, was more than effected by the Liberal Govern- 
 ment, formed after the General Election of 1906, in- 
 dependently of any such scheme. The Sugar Duties were 
 reduced by nearly two-thirds ; the duty on tea was reduced 
 to 5d. on the lb. Great relief was given to Income Tax 
 payers, assessed at ,£2,000 a year and under, by reducing 
 the rate to them by 3d. in the £, or from is. to gd. 
 
 Lastly, in 1908, a scheme of Old Age Pensions was 
 carried through Parliament, not of a contributory charac- 
 ter — which would have given no relief to existing old 
 
 * The Cobden Club, in "Tariff Makers: Their Aims and Method," 
 published early in 1909, dealt full)' with these reports of the Tariff League. 
 •X- 
 
10 
 
 people — but one securing to any person above the age of 
 70 a pension of 5s. a week, provided his income from 
 other sources does not amount to more than ^30 a year. 
 
 This has resulted in providing pensions to over 700,000 
 persons, at a cost for the current year of ^"8,000,000. It 
 is one of the causes of the increased expenditure which 
 the Budget under consideration provides for. 
 
 It has followed from the adoption of an Old-Age 
 Pension scheme that the object which Mr. Chamberlain, 
 in 1903, alleged he had mainly at heart, and without 
 which he would never have embarked on his new policy 
 of Protection, has already been achieved in a far more com- 
 plete and popular form. It is also clear that his scheme 
 of taxation, if now adopted, would do no more at best, in 
 the first instance, than supply the existing deficiency in 
 the revenue for the present year. Nothing also would 
 remain from it for compensating the labouring people for 
 the increased price of their food and other necessaries 
 of life, by the remission of other taxes, such as the re- 
 maining tea and sugar duties; while in the future the 
 receipts from it must continually diminish. 
 
 III.— THE TARIFF LEAGUE BUDGET. 
 
 The scheme of import duties, on which the Tariff League 
 appears to be now agreed, has been greatly extended 
 beyond the original of its Birmingham leader. 
 
 The duties on food are, in the first instance, to be 
 nearly the same, viz., 2s. per quarter on corn, 5 per 
 cent, on meat, and up to 10 per cent, (in lieu of 5 per cent.) 
 on dairy produce and other food imports. But only one- 
 half of these duties, and not the whole of them, are to be 
 remitted in the case of Colonial imports. For the first time, 
 therefore, for sixty years duties will be imposed on Colonial 
 
II 
 
 produce. This will necessarily involve the same duties on 
 Indian products, and must lead to a corresponding con- 
 cession to the Indian Government of the right to impose 
 protective duties on British manufactures imported into 
 India — a most deadly blow to the trade of Lancashire. It 
 is very certain that this change will cause great dissatis- 
 faction in the Colonies, and may lead to a reduction, rather 
 than to an increase, of the preference now conceded by 
 them to our manufactures. 
 
 This change has been forced on the Tariff League by 
 the agriculturists. They have felt that if Colonial im- 
 ports of corn, meat, etc., are to be admitted free of duty, 
 the benefit to themselves of a rise in price from the duties 
 on foreign produce will be a continually diminishing one, 
 in proportion as Colonial produce is substituted for foreign 
 imports. Under the same influence another important 
 change has been made. The exemption from duty of 
 maize, as the food of cattle, and of bacon, as the food of 
 the labouring people, so much insisted on by Mr. Cham- 
 berlain, are to be abandoned. It is now said that he was 
 mistaken in proposing these exemptions. 
 
 The duties on fully manufactured goods are not to be 
 limited to the original 10 per cent., but are to be extended 
 to 15 per cent. It is now made clear, for the first time, that 
 partially manufactured goods, which are raw materials to 
 a vast number of manufactures in this country, and which 
 are essential for their maintenance in competition with 
 those of foreign countries, enabling them to break down 
 the barrier of protective duties in many directions, are to 
 be subjected to import duties. Those on which little 
 labour has been expended are to be subjected to duties 
 of 5 per cent., and those on which more labour has been 
 spent to 10 per cent. There are to be three scales of duties 
 on each of these three classes. 
 
 Minimum duties are to be applied to Colonial products, 
 
12 
 
 medium duties, somewhat higher, to all foreign manufac- 
 tures, and maximum duties to imports from those of 
 foreign countries which unduly penalise British manu- 
 factures — that is, the great bulk of protective countries. 
 We need hardly point out the enormous complexity and 
 confusion which will result from these three classes and 
 three scales, and the immense difficulty of applying the 
 principle of drawbacks in the case of exported manu- 
 factures, on the component parts of which import duties 
 have been paid. 
 
 It is alleged that from 16 to 20 millions will be 
 the amount of duties resulting from this scheme, and 
 that the cost of collecting them will be only a quarter of 
 a million. It must, however, be pointed out that whatever 
 may be the amount of duties collected in the first instance 
 under the scheme of the Tariff League,* it must necessarily 
 be reduced in a very short time. The main objects alleged 
 for the scheme are the encouragement of the import of 
 Colonial produce, at the expense of foreign produce, and 
 the substitution of home manufactured goods for foreign 
 imported goods. To whatever extent these objects are 
 attained the revenue from the scheme will be reduced. The 
 reduction of duties from this cause will probably be not 
 less than one-third of the estimated total, and may be 
 one-half. There must be further considerable reductions 
 due to drawbacks — the return of duty on exported manu- 
 factures. The void thus created must be filled up by 
 further taxation ; in all probability, by an increase of the 
 food taxes. The scheme, therefore, contains within it 
 the certain prospect of further developments in the same 
 direction. The cost of collection under this complicated 
 
 * The details of this scheme have been taken from an article of the 
 Birmingham Daily Post of December 7 of this year, 'evidently written with 
 the authority of Mr. Chamberlain, and since con6rmed by a speech of 
 Mr. Austen Chamberlain as representing the present scheme of the Tariff 
 League. 
 
13 
 
 scheme has been estimated by the Board of Trade 
 at three or four times the amount suggested by the 
 Tariff League. 
 
 Evidence is not wanting that the duties thus proposed 
 will not content the leaders of the movement, or its rank 
 and file. Lord Ridley, the Chairman of the Tariff 
 League, in addressing public meetings on its behalf, 
 has held out expectations of much higher rates of duty 
 to various industries of the districts. 
 
 Thus at Maidstone he promised concession to the 
 unanimous demand of the Kentish hop growers of a 
 duty of £2 per cwt. on imported hops, equal to more than 
 40 per cent, on their average value. To paper makers of 
 the district he promised a duty of 20 per cent. The 
 Reports, also, of the Committees of the Tariff Commission 
 afford conclusive evidence that the proposed duties will 
 not suffice for them. It is impossible to read these Reports 
 and the speeches of leaders of the movement, the prophets 
 of the new gospel of Protection, without coming to the 
 conviction that, when once the barriers of Free Trade are 
 broken down, the duties now proposed will be rapidly 
 augmented. The same arguments now put forward for the 
 first essay in Protection will again be trotted out for further 
 increases. If it be true that import duties are not paid 
 by the consumers in the country of import, but fall wholly 
 or in great part on the foreigners who send them, why 
 limit them to 5 or 10 per cent. ? If maximum duties of 
 15 per cent., intended to force the hands of other Govern- 
 ments which treat us badly, fail, as they are certain to 
 fail, why not increase them to 20, 30 and 50 per cent. ? 
 All experience of other countries shows that protective 
 duties had their commencement in very low scales, and 
 that these were continually increased, under the same selfish 
 and corrupt influences which caused their first application, 
 and with the result of always worsening the condition of 
 
14 
 
 the labouring people for the benefit of producers and 
 landowners. 
 
 IV.— THE EFFECT OF IMPORT DUTIES ON 
 PRICES. 
 
 Before going further into a comparison of the rival 
 Budgets, it is essentially necessary to form a definite con- 
 clusion as to the incidence of import duties, and their 
 effect on the prices of food and other necessaries of life. 
 
 Mr. Chamberlain, in the early days of his agitation 
 as a Protectionist, in 1903, propounded the theory, new 
 altogether to economists and statesmen, that such duties do 
 not increase the prices of the imported articles and are not 
 paid by the consumers in the country which imposes them, 
 but are paid, wholly or in great part, by the foreign pro- 
 ducers or merchants who are good enough to export them. 
 4< Tax the foreigners, and make them pay a toll for the 
 privilege of trading with us," was his advice to the 
 working people of this country, and became the battle-cry 
 of his followers. It is impossible to conceive a more base- 
 less assertion. 
 
 But if there is any grain of truth in the contention that 
 by imposing duties on imported goods we could make the 
 foreigners, who send the goods, pay any large portion of 
 the duties on them, we should indeed be the most insensate 
 of fools if we failed to avail ourselves of this method of 
 raising money and of making our rivals pay for our 
 "Dreadnoughts" or other expenditure. The whole con- 
 tention is a baseless fiction, fit only for the " Horse 
 Marines." 
 
 We maintain, with the utmost confidence, that no pro- 
 position is more emphatically and universally admitted by 
 all economists of any authority in the world, with the 
 rarest exception, than that all duties levied on im- 
 ported food and other articles of necessity must raise 
 
i5 
 
 the prices of these articles in those countries, which do nut 
 produce a sufficiency of them for the wants of their people, 
 by the amount of the duties, and generally by something 
 more. It is true that in the case of articles not of neces- 
 sity, but rather of luxury, the effect of an import duty, 
 while raising prices, may be to check the demand for them, 
 and that, as a result, the prices may tend to fall again, 
 not to their former level, but to some point much above 
 that, but not equal to the original price, plus the import 
 duty. Subject to this exception, and to some few cases 
 of very special character, which economists such as the 
 late Mr. Mill and others have pointed out, it must be taken 
 as universally true that import duties raise prices, as they 
 are intended to do, by the amount of the duties, in the case 
 of food and other necessaries of life. 
 
 This, which is the teaching of economists, is also the 
 common opinion of men in all countries as the result of 
 experience. The whole theory of Protection to native in- 
 dustries is founded on the belief and conviction that 
 import duties will certainly have the effect of raising prices, 
 in the interest of home producers. It need scarcely be 
 pointed out that Mr. Chamberlain's scheme contained 
 many admissions fatal to his new doctrine. The exemp- 
 tion from import duties of raw materials for our manu- 
 factures w T ould have no meaning, and would be quite 
 unnecessary, if it were not that prices of the manufactured 
 articles would be increased in price, and would fatally 
 hamper us in our export trade as compared with our rivals 
 in trade. The proposed exemption from import duties of 
 maize and bacon were admissions to the same effect. The 
 universal practice of all countries, where protective import 
 duties are levied, to allow repayment of the duties on 
 articles manufactured out of raw materials, or partially 
 manufactured articles, on which duty has been paid, is 
 Striking testimony to the same effect, 
 
i6 
 
 So far has this policy been carried that when, in 1902, 
 a duty of only is. per quarter was imposed in this country 
 on imported corn, it was provided that even this small 
 duty should be refunded to the exporter of biscuits baked 
 out of imported corn. In 1903, when the duty on corn 
 was repealed, no less a sum than £390,000 was repaid 
 by the Government to holders of imported corn in this 
 country, on which duty had been paid, a conclusive recog- 
 nition that the duty had not been paid by the foreigner. 
 
 It was further admitted by Mr. Ritchie, who was 
 Chancellor of the Exchequer in 1903, when the corn duty 
 was repealed, that even this small duty had raised the 
 price of bread; and Mr. Balfour, who was Prime Minister 
 at the time, justified the repeal of the duty on the ground, 
 among others, that it had raised the price to farmers of 
 feeding stuffs for their cattle by no less than ,£500,000, 
 the amount of the duty paid on the maize, &c, used for 
 this purpose. These opinions were the more important, as 
 Lord St. Aldwyn, who was Chancellor of the Exchequer 
 in 1902, when the corn duty was imposed, had expressed 
 the confident opinion that so small a duty as is. per 
 quarter would not increase the cost of bread to consumers. 
 Later, however, after the repeal of the duty, in a speech at 
 Manchester, he admitted that he had been mistaken in 
 the above statement. "I found, he said, that in not a few 
 cases the duty had the effect of giving an excuse to the 
 bakers to raise the price of bread, and therefore I must 
 confess that I believe that doubling that duty and also 
 adding new duties upon meat and dairy produce must 
 increase the cost of the food of the working classes." 
 The main argument of the Tariff mongers in the course 
 of their prolonged campaign for protective duties is also 
 based on the above conclusion. In every page of the 
 reports of the Tariff Commission the expectation is held 
 out, and it is assumed by manufacturers and producers 
 
17 
 
 that prices of their products will be increased by the 
 proposed import duties. 
 
 There is, in fact, a vein of deliberate and calculated 
 duplicity running through all the publications of the Tariff 
 League and the speeches of its supporters and paid agents. 
 With one voice they appeal to the individual interests 
 of producers and manufacturers in their separate in- 
 dustries, promising that their products will be raised 
 in price by the proposed import duties, and that their 
 profits will be increased. With another voice, in order to 
 disarm opposition to their scheme on the part of the 
 general public, and especially of the labouring classes, 
 they disclaim, with their tongues in their cheeks, that the 
 effect of the duties will be to raise prices to consumers. 
 Following the example of their chief, they have invented 
 the theory that the hated foreigners will pay these duties.* 
 
 A necessary conclusion resulting from the admission 
 that import duties raise the prices of imported articles, of 
 the gravest importance from a fiscal point of view, is that 
 they raise the prices not only of the imported articles, 
 but also of the home-produced articles of the same kind. 
 There cannot be two prices in the same market at the same 
 time for articles of the same quality. It results that, 
 when an import duty is levied on an article, raising the 
 price of both the imported and home-produced article, the 
 consumers — the general public — have to pay the increased 
 
 * An illustration of this duplicity is to be found in two leaflets issued by 
 the Tariff League within a short time of one another. Leaflet No. 13 is 
 headed "Food Taxes do not Raise Prices." Leaflet No. 22, headed "The 
 Salvation of Ireland," runs as follows : " Mr. Chamberlain proposes to^give 
 a moderate protection to the staple articles which Ireland produces— com, 
 meat, and dairy produce — while at the same time reducing the duty on tea, 
 sugar, and perhaps tobacco, which are articles of large consumption in 
 Ireland. She will obtain a higher price for all she sells in the English 
 market by being protected from the competition of America, Denmark, and 
 France, and she will pay less for what she purchases, the dqties being largely 
 reduced." 
 
i8 
 
 price of both. This increased price of both is the real tax 
 imposed on the consumers. But only that part of the tax 
 which is levied on the imported article finds its way into the 
 coffers of the State. The other part of the tax, the in- 
 creased price of the home-produced article, does not go 
 to the State, but into the pockets of the producers ; and, in 
 the case of agricultural produce, the greater part of it 
 ultimately into the pockets of the landowners in the shape 
 of increased rent. To illustrate this we may point out that 
 we import food of all kinds (not including tea and sugar) 
 to the value of about ^200,000,000, and we produce food 
 of all kinds in this country of about the same value. If 
 we impose a duty, say of 5 per cent., on the imported 
 food in order to raise a revenue of ;£ 10,000,000, we increase 
 the price by this amount, not only of the two hundred 
 millions of imported food, but also of the same amount of 
 home-produced food. The increase of price of the whole 
 is ^20,000,000, and this forms the real tax on consumers. 
 But only one-half of it is received by the State. The other 
 ;£ 10,000,000 goes to the producers, and ultimately a large 
 part of it to the landowners. 
 
 It is for this reason that, since the adoption of Free 
 Trade, it has been an axiom of finance that, if we desire 
 to impose indirect taxes and to make the consumers — that 
 is, mainly the labouring classes — pay a contribution to- 
 wards increased expenditure, we select for the purpose some 
 article which we do not produce in this country, such as 
 tea or sugar, with the object of securing to the State the 
 whole of the increase of price caused by the duty. But for 
 this there would be no greater reason for taxing sugar than 
 corn or meat. 
 
 For the same reason in the case of spirits, which we 
 produce in this country as well as import, we balance the 
 duty on imports by an excise duty of the same amount on 
 the home product. Equally when the Imperial Government 
 
19 
 
 consented to the imposition by the Indian Government of 
 duties on imported cotton manufactures to India, it in- 
 sisted on the levy of an equivalent excise duty on Indian 
 cotton manufactures, so as to avoid the protective effect 
 of the duties, and the discouragement, if not destruction, of 
 the British export trade of cotton tissues. 
 
 V.— EFFECT ON RENTS OF IMPORT DUTIES 
 ON FOOD. 
 
 Another consequence resulting from the rise of price of 
 corn and other agricultural products subject to import 
 duties, which it is most important to bear in mind in this 
 great controversy, is that rents of agricultural land are 
 certain to rise in about the same proportion. If corn is 
 permanently raised in price by 2s. per quarter, the rent of 
 corn land will also rise. This is a matter of long-past ex- 
 perience. It is also recognised and affirmed by statute 
 law. The Tithe Act of 1834, which provided for the com- 
 mutation of tithe from a payment in kind to a money 
 payment, laid down the principle that just in proportion 
 as the prices of corn — namely, wheat, barley, and oats — 
 should thenceforth rise or fall, so the money payment of 
 tithe, which is part of the rent of land, was to rise or 
 fall in the future. It follows from this that if the agricul- 
 tural produce of this country is raised in price, rents of 
 agricultural land are certain to follow suit, and to rise, in 
 the same proportion, sooner or later — sooner, probably, in 
 most cases, rather than later. 
 
 Nearly the whole of the agricultural land in England 
 and Wales is let to tenants on yearly agreements, which 
 enable the landowners, within a few months, to raise their 
 rents whenever they think it reasonable to do so. There 
 cannot be a doubt, therefore, that after the adoption of 
 
20 
 
 a protective system such as that proposed by the Tariff 
 League, raising duties of 7}^ per cent, on the average on 
 imported food, many landlords will very soon raise their 
 rents in the same proportion, and that all will do so 
 before long. The scheme, therefore, means a bonus to 
 landowners, in the shape of increased rent, of between 
 three and four millions. This fact must be borne in 
 mind in relation to the action of the House of 
 Lords in rejecting the Budget, in the hope of sub- 
 stituting for it the tariff scheme, fraught with such 
 enormous benefit to the class which alone they represent. 
 Lord Rosebery and Lord Ridley, in the course of the 
 debate on the Budget, called attention to the fact, based 
 on the authority of the Domesday Book of a few years ago, 
 that the members of the House of Lords own between them 
 one-fifth of the land of the whole country. The tariff 
 scheme therefore means an ultimate increase of their rents 
 by about ,£750,000 a year. 
 
 VI.— COMPARATIVE INCIDENCE OF THE TWO 
 BUDGETS. 
 
 (1) Labourers. 
 
 On the assumption, which we have shown to be absolutely 
 irrefutable, that import duties on food and other necessaries 
 of life raise the prices in the same proportion, the general 
 body of consumers must pay these increased prices. Let us 
 then consider the comparative incidence of the two Budgets 
 on the various classes of the community, beginning with 
 the labourers, who constitute at least three-fourths of them. 
 We will in the first instance deal with the case of the 
 agricultural labourers, who stand at one end of our social 
 system, of which the landowners are at the opposite end. 
 The Budget of the Government imposes some, but a 
 
21 
 
 very small, burden on the agricultural labourers of Eng- 
 land and Wales. The only increased tax which will be felt 
 by them is the tobacco duty. The increase of the spirit 
 duty will scarcely touch them, for their habitual beverage 
 is beer and not spirits, and the price of beer is not likely . 
 to be increased in rural districts by the increase of the 
 licence duties. 
 
 The increased cost of tobacco to these labourers cannot 
 be estimated at more than an average of id. per week. 
 Those who do not indulge in this luxury will not pay the 
 charge. Women will be free from it. Those on whom it 
 will fall can free themselves from the charge by slightly 
 reducing their consumption. In any case, the charge is 
 not a large contribution towards the enormous benefit of 
 Old-Age Pensions, which many of them will live to enjoy. 
 
 Let us now estimate what will be the additional charge 
 to the agricultural labourer under the alternative Budget of 
 the Tariff League. We will take the average wage at 16s. a 
 week, of which ns.,at least, is expended on food, clothing, 
 and other necessaries, which will be raised in price by the 
 import duties, and the residue on rent, fuel, sugar, tea, 
 tobacco and beer. We also estimate that the average duties 
 on articles required by the labourer will be 7^ per cent, 
 on their value, raising their price in this proportion. It 
 follows that the charge to the labourer will be at least 
 7% per cent, on us. a week, or about iod. a week, equal 
 to 13d. in the £ on his annual wage earning, an enor- 
 mously heavy burden, ten times more than that under the 
 Budget of the Government. To the labourers in towns, 
 with an average wage of 20s. a week, or to the artisan with 
 a wage of 30s. a week, the charge, under the Budget of the 
 Government, will be slightly increased in proportion to the 
 greater consumption of spirits. It may be estimated at 
 \%d. per week to the former, and 2d. per week to the 
 latter, but the proportion to their wages remains about the 
 
22 
 
 same. On the other hand, the charge under the Tariff 
 scheme will be in about the same proportion as in the 
 case of the agricultural labourer, or ten times greater than 
 under the Budget of the Government. 
 
 It is said by the Tariff Leaguers that the labourers 
 will gain by increased employment. So far as agricultural 
 labourers are concerned, this cannot be the case, for the 
 duties proposed on corn of 2s. per quarter will not induce 
 any greater growth of corn in this country, or the plough- 
 ing up of any grass land for the purpose.* It is gener- 
 ally admitted that there must be a very large increase of 
 the price of wheat, of not less than 12s. a quarter, before 
 any inducement will be given in this direction. As 
 regards artisans, we are quite unable to admit that the 
 substitution in certain trades of home manufactured goods, 
 for foreign imported goods, will add to the general 
 employment of the whole country. The foreign im- 
 ported manufactures are not paid for in money, but 
 indirectly by the export of other goods, on the produc- 
 tion of which other labour has been employed in this 
 country. The effect of the change, at best, will be merely to 
 cause a transference of labour from one kind of work to 
 another, and of capital from the more profitable to the less 
 remunerative industries. What one class of workmen gain 
 in increased employment will be balanced by losses to 
 another class. If any experience is to be drawn from the 
 past, the scheme will mean less work, and not more. 
 Wages will not be increased, and there will be nothing to 
 compensate the labourers and artisans for their increased 
 cost of living. This, in fact, means lower wages. 
 
 (2) Small Tradesmen, Clerks, etc. 
 
 The next class in the community to that of labourers 
 is the vast number of small tradesmen and professional 
 
 * Mr. Austen Chamberlain in a recent speech has admitted this. 
 
23 
 
 men, clerks and salaried officers, and persons living on 
 small incomes from investments or on annuities of ^160 
 a year or less. 
 
 Those who are in this class are also very lightly bur- 
 dened by new taxes, under the Budget of the Government. 
 They do not now pay income tax, if their total income 
 does not exceed ^160 a year. They will not have to pay 
 the 2d. to be added to the income tax. They will pay the 
 increase for their tobacco and spirits in proportion 
 io their consumption. It may be assumed that this will 
 not average more than 3d. per week. 
 
 Under the Tariff League scheme they will pay 7^ per 
 cent, increase on the cost of their food, clothing, and other 
 necessaries. To the head of a family with an income of 
 ;£ioo a year, the expenditure of this kind may be estimated 
 at ;£6o a year. The increased cost to them, therefore, will 
 be ^4 us., equal to an income tax of nd. in the £ on 
 their gross income. 
 
 The small tradesmen, who make their profits by selling 
 their goods to labouring people, especially those in vil- 
 lages, will further suffer under the Tariff scheme from 
 the reduced purchasing power of their customers, the 
 labouring people, who, in consequence of the rise in price 
 of food, will be compelled to curtail their other expenditure. 
 
 (3) Tradesmen, professional men, and those in receipt of 
 salaries with earned incomes of from £160 a year to 
 ,£3,000 a year. 
 
 Persons in this class will contribute, under the Budget, 
 only to the extent of the increased price of the tobacco and 
 spirits which they may consume, and by the additional 2d. 
 for income tax on the interest of invested money. 
 
 They will not pay this additional income tax on their 
 earned income unless it exceeds ,£3,000 a year. This class 
 has already benefited from the reduction of income tax 
 
24 
 
 under the present Government. They are charged 3d. in 
 the £ less than persons with incomes above ,£2,000 a year. 
 
 Under the Budget scheme, those of this class, with 
 incomes of ,£500 a year and under, who have children 
 under the age of 16, will also have the benefit of a 
 deduction from the assessment of the income tax now pay- 
 able by them of ,£10 for each child, with the income tax 
 at 9d. in the £. This means a reduced payment of 7s. 6d. 
 for each child, a very important matter for those with very 
 small incomes. The total cost of this relief under the 
 Budget is estimated at not less than ,£600,000 a year. 
 
 Under the Tariff League scheme persons in this class 
 will have to pay the increased cost of food and other 
 necessaries of life for themselves, their families, and their 
 servants— if any. It may be confidently estimated that 
 the proportion thus spent on articles of necessity will be 
 lessened as the annual income rises in amount. For an 
 income of ,£100 we have estimated this expenditure at ,£60. 
 For ,£160 a year we think it may be taken at ;£8o, at 
 which the increased cost would be about £6 a year, or gd. 
 in the £ on the gross income. For an income of ,£1,000 
 a year we may assume the expenditure on food, etc., at 
 ,£200 a year, and the increased cost at £16 10s., or about 
 4d. in the £ ; and for an income of ,£5,000 a year, ,£600, 
 and the charge ,£45, or 2d. in the £. 
 
 (4) Persons with incomes from investments other than 
 agricultural land from ,£160 to ,£3,000 a year. 
 
 Those in this class will be called upon under the Budget 
 to pay the additional 2d. in the £ on the income tax, 
 subject to some graduated reduction on their aggregate 
 income, if not over ,£700 a year. They will also pay 
 the increased duty of their tobacco and spirits. Where 
 the income is ,£2,000 a year the 2d. additional will be 
 ;£i6 13s. Together these additions of taxation will not 
 
25 
 
 equal the reduction granted last year to incomes of ^2,000 
 and under of 3d. in the £ on the income tax. 
 
 Under the Tariff scheme persons in this class will be 
 treated precisely in the same manner as those in Class 3 
 already dealt with. 
 
 (5) Persons with incomes from £3,000 to ,£5,000 a year. 
 
 Those in this class will be charged under the Budget 
 with the additional 2d. in the £ income tax, whether their 
 incomes be earned or unearned. They will pay £25 on 
 an income of ,£3,000 a year, and £41 on that of ,£5,000 
 a year. They will not pay the super-tax. They will pay 
 the increased duty on their tobacco and spirits. 
 
 Under the Tariff scheme persons with incomes of 
 ,£3,000 a year may be expected to pay in the increased 
 cost of their food, etc., about £31, or 2^d. in the £ on 
 their income; and those with ,£5,000 a year 2d. in the £ } 
 or ,£45. 
 
 (6) Persons other than owners of agricultural land with 
 incomes over ,£5,000 a year. 
 
 It is not till we come to persons with incomes over 
 ,£5,000 a year that the increased burdens imposed by the 
 Budget become more serious. The super-tax of 6d. in the 
 £ then begins to tell, in respect of the excess of their in- 
 come over ,£3,000 a year. They will also pay the addi- 
 tional 2d. on their total incomes. 
 
 Thus persons with incomes just over ,£5,000 a year 
 will pay ,£50 towards the super-tax and ,£41 for the 2d. 
 income tax, or ,£91, equal to 4^d. in the £ — not a very 
 serious charge to them. 
 
 Those with incomes of ;£ 10,000 a year will pay super- 
 tax on ,£7,000, or ,£175, and ,£83 on the 2d. income tax — 
 a total of .£255, or about 6d. in the £. The maximum 
 increased charge for income tax to persons with higher 
 incomes will be just under 8d. in the £. 
 
26 
 
 Under the Tariff scheme they will pay only the in- 
 creased cost of the food, etc., of their households. 
 (7) The Death Duties. 
 
 The increase of the estate and settlement duties under 
 the Budget scheme of the Government begins to tell on 
 the deaths of persons in the last three classes. No increase 
 is proposed in the case of estates valued at ,£5,000 or 
 under. On estates from ,£5,000 to ,£10,000, not under 
 settlement, the increase is 1 per cent, on the value of the 
 property, and for estates of greater value there is an 
 ascending scale till the maximum is reached on estates 
 valued at over ,£1,000,000, when an additional 7 per cent, 
 will be charged, making a total of 15 per cent. The in- 
 crease of duty charged on property under settlement will 
 be 1 per cent. 
 
 (8) Owners of agricultural land. 
 
 We find it necessary to deal separately with owners 
 of agricultural land. It is persistently complained that 
 they will be very severely taxed under the Budget of the 
 Government. This is the reverse of the fact. They will 
 be most leniently dealt with; at all events, those with net 
 incomes up to ,£5,000 a year. Agricultural land is not to 
 be charged with increment duty or with undeveloped land 
 tax. 
 
 We may assume, with confidence, that owners of agri- 
 cultural land only receive, on the average, one-half of 
 their gross rental. Of the remainder, one-half (or a quarter 
 of the gross income) is expended, as a rule, in maintaining 
 the estate, repairing cottages, etc., and the other half goes 
 to meet the interest on mortgages or family charges. 
 
 The landowner, therefore, with a gross income of 
 ,£10,000 a year, and a net income of ,£5,000 a year, will 
 not have to pay the super-tax. He will pay the additional 
 2d. on the income tax. On the other hand he will have 
 
27 
 
 the benefit of Mr. Lloyd George's great concession made 
 in the discussion on the Budget, of an abatement 
 from the existing income tax, in respect of another one- 
 eighth of his gross income for maintenance and repairs 
 on his estate. This, at the present rate of the income 
 tax of is. in the £, will exceed the 2d. increase of the 
 tax by more than 50 per cent. The landowner, therefore, 
 will gain and not lose by the Budget. Even if we take 
 into account the increase of the settlement duty of 1 per cent, 
 (on the supposition that the estate is in family settlement, 
 as is usually the case), and assume that the owner will 
 insure his life against this, the net charge on the land- 
 owner, of an average age of 50, will be very small — not 
 more than £30 a year on a rental of ,£5,000 a year. 
 
 What will be the position of the landowner with a 
 gross rental of ;£ 10,000 a year and a net income of ^5,000 
 a year under the Tariff scheme ? He will be relieved of 
 any direct taxation, of the increased income tax and super- 
 tax, and of the increased death duties. He will have to 
 pay the increased cost of food, etc., for his household, 
 which may be estimated at about ^45 a year. On 
 the other hand, he will certainly gain, sooner or 
 later, by the increase of his rents, consequent on 
 the rise in price of agricultural produce. This, at the 
 rate of 7^ per cent, will be a corresponding rise not of his 
 net income, but of his gross rents, of ^750 a year. His net 
 gain, therefore, will be over ^700 a year, equal to 14 per 
 cent, on his income. 
 
 These comparisons hold good for all landowners with 
 net incomes from rents of from ^700 a year to ,£5,000 a 
 year. 
 
 Landowners with net incomes above ,£5,000 a year 
 will be worse off under the Budget of the Government 
 by the super-tax of 6d. in the £ i after deducting ,£3,000. 
 Thus the owner of land with a gross rental of ^20,000 a 
 
28 
 
 year and net income of ,£10,000 a year will be charged 
 under the Budget with ^258 a year. On the other hand, 
 under the Tariff scheme, his gross rent will be increased 
 by ;£i>5oo a year, and the only charge against him then 
 will be ,£45, additional cost of the food of his household. 
 
 The number of landowners in this country with a gross 
 rental of ,£10,000 a year is very limited. It was said 
 by Mr. Pitt, in days when rents were higher than 
 they now are, that a landowner with a rental of ,£10,000 
 a year was entitled to claim a peerage from his 
 political leader. This principle of selection has been 
 largely acted upon during the last 150 years by both 
 political parties, with the result that of about 400 owners 
 of agricultural land, with rentals of ,£10,000 a year, and 
 over, 300 are to be found in the House of Lords. 
 
 The 350 Peers who voted against the Budget own 
 between them one-seventh of the whole area and rental 
 of the land of the United Kingdom. This gives the very 
 high average of 30,000 acres and ,£20,000 a year apiece. It 
 appears, then, that if the result of their recent action should 
 be to defeat the Budget and to substitute for it that of the 
 Tariff League, they will, on the above basis, be relieved 
 on the average of a charge of ,£258 a year, and will gain 
 in increased rent, sooner or later, an average of ,£1,500, 
 subject only to the increased cost of food, etc. 
 
 It is not in human nature that men, however honest in 
 intention, should not be swayed by their personal interests 
 of such magnitude, and certainly no one in his senses 
 would leave to a second chamber thus constituted any 
 voice in determining which of the two Budgets, above 
 described, should prevail. 
 
 VIIL— CONCLUSION. 
 
 Looking broadly at the two competing Budgets, it will 
 be seen how absolutely opposed they are in principle and 
 
2Q 
 
 in results. The Budget of the Government proposes to 
 lay the lightest burden on the labouring population, and 
 upon tradesmen, clerks and others with small incomes. 
 There will be no increase in the cost of their food or other 
 necessaries of life. Their luxuries only will be slightly 
 taxed. The burdens are increased by an ascending scale 
 to persons of larger means. The super-tax does not come 
 in till incomes of over ,£5,000 a year are reached. The 
 charges on millionaires and on their estates after death 
 will be increased, but not to an unjust extent, having 
 regard to the immense value of the protection which they 
 receive from the State. The alternative scheme of the 
 Tariff mongers is based on exactly the opposite principle. 
 It will put the whole burden of increased taxation on the 
 consumer. It will tax food and all other necessaries of 
 life. The taxation will fall heaviest on the lowest class 
 of labourers. It will be reduced to other classes in pro- 
 portion as their expenditure on food, &c, becomes less 
 to their total incomes* The wealthier classes will be free 
 altogether, so far as new taxation is proposed, from direct 
 charges. The scheme will result, sooner or later, in an 
 enormous boon to landowners, in the shape of an increase 
 of their rents in proportion to the rise in price of food. 
 
 We have not, on the present occasion, dealt with the 
 many other grave evils and perils, which the scheme of 
 protective duties will entail, its disastrous effects on our 
 trade and commerce, the corruption which is certain to be 
 introduced into our representative institutions. We have 
 dealt only with its fiscal consequences and its inequality 
 of incidence on different classes. 
 
 The reasons which induced the electorate to reject the 
 scheme at the General Election four years ago remain in 
 much greater force at the present time. It is not now 
 
 * A table in the Appendix shows the inequality of treatment of small 
 and large incomes. 
 
30 
 
 pretended that the burdens, which will be imposed on the 
 labouring classes by the increased cost of their food, can 
 be compensated out of the revenue to be obtained from the 
 scheme. It is, therefore, in our opinion, a scheme for 
 mulcting the poor for the immunity of the rich and the 
 benefit of landowners. 
 
APPENDIX 
 
 Table, showing the effect under the Tariff scheme of the 
 increased price of food and other necessaries in the 
 increased expenditure on them, at various rates of total 
 Income, from £50 a year to .£10,000, and the equivalent 
 charge on Income Tax per pennies in the £. 
 
 The increased price of food, 
 
 is estimated at jh per cent. 
 
 
 
 1 
 
 Equivalent Charge 
 
 Yearly 
 Total Income. 
 
 Estimated 
 Expenditure 
 on Food, &c. 
 
 Increased Price 
 
 paid for Food, 
 
 &c. 
 
 caused by 
 Increased Price of 
 
 Food, &c, in 
 
 Pennies in the £ on 
 
 Total Income. 
 
 £ 
 
 £ 
 
 £ s. 
 
 d. 
 
 50 
 
 35 
 
 2 12 
 
 13 
 
 100 
 
 60 
 
 4 IO 
 
 II 
 
 200 
 
 100 
 
 7 10 
 
 9 
 
 300 
 
 130 
 
 9 7 
 
 7i 
 
 500 
 
 *5° 
 
 " 5 
 
 c 1 
 5 2 
 
 1,000 
 
 200 
 
 15 
 
 ,3 
 
 34 
 
 5,000 
 
 600 
 
 45 
 
 2 
 
 1.0,000 
 
 800 
 
 60 
 
 I* 
 
GENERAL LIBRARY 
 UNIVERSITY OF CALIFORNIA— BERKELEY 
 
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 55 \y. 
 
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