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 [385]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 [386]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 [387]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 [388]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 [389]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 [390]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 [391]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. [392]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 12? 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.

[393]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 [394]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 [395]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, [396]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 [397]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 [398]to the successful practice of great civilised neighbouring states.

is it really the contention of the conservative party that the state is bound to view all processes of wealth-getting with an equal eye, provided they do not come under the criminal codes? is that their contention? are we really to be bound to impose the same burden upon the hardly won income of the professional man and the extraordinary profits of the land monopolist? are we really to recognise the liquor licence which the state created, which the law says is for one year only—as if it were as much the brewers' or the publicans' property for ever as the coat on his back? no; it is absurd. of the waste and sorrow and ruin which are caused by the liquor traffic, of the injury to national health and national wealth which follows from it, which attends its ill-omened footsteps, i say nothing more in my argument this afternoon. the state is entitled to reclaim its own, and they shall at least render unto c?sar the things which are c?sar's.

the money must be found, and we hold that parliament, in imposing the inevitable taxes, is entitled not only to lay a heavier proportionate burden upon the rich than [399]on the poor, but also to lay a special burden upon certain forms of wealth which are clearly social in their origin, and have not at any point been derived from a useful or productive process on the part of their possessors. but it may be said, "your plans include other expenditure besides the navy and old-age pensions. what about insurance, labour exchanges, and economic development?" those objects, at least, it may be urged are not inevitable or indispensable. it is quite true that the taxation which we seek to impose this year, and which is sufficient, and only sufficient for the needs of this year, will yield more abundant revenues in future years, and if at the same time a reduction in the expenditure on armaments becomes possible, we shall have substantial revenues at our disposal. that is perfectly true, but is that a reason for condemning the budget? when we see on every hand great nations which cannot pay their way, which have to borrow merely to carry on from year to year, when we see how sterile and unproductive all the dodges and devices of their protective tariffs have become, when we remember how often we have ourselves been told that under free trade no more revenue could be got, is it [400]not a welcome change for our country, and for our free trade policy, to find our opponents complaining of the expansive nature of a free trade revenue? i don't wonder that tory protectionists have passed a resolution at birmingham declaring that the budget will indefinitely postpone—that was the phrase—the scheme of tariff reform.

and upon what objects and policies do we propose to spend the extra revenue which this budget will unquestionably yield in future years? people talk vaguely of the stability of society, of the strength of the empire, of the permanence of a christian civilisation. on what foundation do they seek to build? there is only one foundation—a healthy family life for all. if large classes of the population live under conditions which make it difficult if not impossible for them to keep a home together in decent comfort, if the children are habitually underfed, if the housewife is habitually over-strained, if the bread-winner is under-employed or under-paid, if all are unprotected and uninsured against the common hazards of modern industrial life, if sickness, accident, infirmity, or old age, or unchecked intemperance, or any other curse or affliction, break up the home, as they break up [401]thousands of homes, and scatter the family, as they scatter thousands of families in our land, it is not merely the waste of earning-power or the dispersal of a few poor sticks of furniture, it is the stamina, the virtue, safety, and honour of the british race that are being squandered.

now the object of every single constructive proposal to which the revenues raised by this budget will be devoted, not less than the object of the distribution of the taxes which make up the budget, is to buttress and fortify the homes of the people. that is our aim; to that task we have bent our backs; and in that labour we shall not be daunted by the machine-made abuse of partisans or by the nervous clamour of selfish riches. whatever power may be given to us shall be used for this object. it is for you to say whether power will be given us to prevail.

but they say, "this uncertainty about the budget is causing unemployment; you are aggravating the evils you seek to remedy." the budget has not increased unemployment. unemployment is severe in the country this year, but it is less severe this year than it was last, and it is less severe since the budget was [402]introduced than before it was introduced. the proportion of trade unionists reported to be unemployed in the board of trade returns at the end of september was 7.4 per cent., and that is lower than any month since may 1908, and it compares very favourably with september of last year, when the proportion was not 7.4, but 9.3 per cent.

i can well believe that the uncertainty as to whether the house of lords will, in a desperate attempt to escape their fair share of public burdens, plunge the country into revolution and its finances into chaos—i can well believe that that uncertainty is bad for trade and employment, and is hampering the revival which is beginning all over the country. i do not doubt that all this talk of the rejection of the budget is injurious to business, to credit, and to enterprise; but who is to blame for that? when did we ever hear of a budget being rejected by the lords before? when did we ever hear of a leader of the house of lords proposing, like lord lansdowne, to decide whether he would tear up the british constitution after consultation with the leaders of the drink trade? the uncertainty is not due to our action, but to their threats. our [403]action has been regular, constitutional, and necessary. their threats are violent, unprecedented, and outrageous. let them cease their threats. let one of their leaders—let mr. balfour, for instance, say this year what he said last year, in the month of october, at dumfries. let him say, "it is the house of commons and not the house of lords which settles uncontrolled our financial system." let him repeat these words, and all uncertainty about the budget will be over.

i am amazed and i am amused when i read in the newspapers the silly and fantastic rumours which obtain credence, or at any rate currency, from day to day. one day we are told that it is the intention of the government to seek a dissolution of parliament before the budget reaches the house of lords—in other words, to kill the child to save its life. the next day we are told the government have decided to have a referendum—that is to say, they will ask everybody in the country to send them a postcard to say whether they would like the budget to become law or not. another day we are told that the government are contemplating a bargain with the house of lords to alter the budget to please them, or that we should make a bargain with them that if [404]they pass the budget we should seek a dissolution in january. why should we make a bargain with the house of lords? every one of those rumours is more silly, more idiotic, than the other. i wish our conservative friends would face the facts of the situation. "things are what they are, and their consequences will be what they will be." the house of lords has no scrap of right to interfere in finance. if they do, they violate the constitution, they shatter the finances, and they create an administrative breakdown the outcome of which no man can foresee. if such a situation should occur a liberal government can look only to the people. we count on you, and we shall come to you. if you sustain us we shall take effectual steps to prevent such a deadlock ever occurring again. that is the whole policy of his majesty's government—blunt, sober, obvious, and unflinching.