COMMITTEE ON NATIONAL DEBT AND TAXATION.

MINUTES OF APPOINTMENT.

Treasury Minute dated 20th March, 1924.

The Chancellor of the Exchequer states to the Board that he proposes to appoint a Committee to consider and report on the National Debt and on the incidence of existing taxation, with special reference to their effect on trade, industry, employment and national credit.

The Chancellor further proposes that the Committee should be constituted as follows:

The Rt. Hon. LORD COLWYN, Chairman;

Sir CHARLES ADDIS, K.C.M.G.;

Sir ALAN G. ANDERSON, K.B.E.;

Sir ARTHUR BALFOUR, K.B.E.;

Mr. HENRY BELL;

Mr. J. W. BOWEN;

Mr. FRED BRAMLEY;

Mr. W. L. HICHENS,

Mr. J. A. HOBSON;

Mr. H. B. LEES-SMITH;

Sir WILLIAM MCLINTOCK, K.B.E., C.V.O.;

Sir JOSIAH STAMP, K.B.E.;

Mrs. BARBARA WOOTTON;

with Mr. G. R. HAMILTON of the Inland Revenue Department as Secretary and Mr. G. ISMAY of the Treasury as Assistant Secretary.

My Lords concur.

Treasury Minute dated 14th April, 1924.

The Chancellor of the Exchequer states to the Board that he proposes to appoint Professor Fred Hall to be a member of the Committee on National Debt and Taxation in place of Mr. J. A. Hobson who has resigned on account of other engagements.

My Lords concur.

ON

NATIONAL DEBT AND TAXATION.

TO THE LORDS COMMISSIONERS OF HIS MAJESTY'S TREASURY.

MY LORDS,

1. We have now completed our consideration of the wide subject-matter referred to us in the minute of our appointment dated the 20th March, 1924, and have the honour to submit our Report.

2. We have held 48 sittings, and have received evidence from 62 witnesses, several of whom have appeared before us twice. Witnesses eminent in different spheres of industry, finance and economics, have sometimes given expression to their purely personal views, and sometimes represented the corporate opinion of leading industrial, etc., bodies. The views of the Trades Union Congress, of the Co-operative Congress and of the Women's Co-operative Guild have also been laid before us. We have heard official evidence from the Treasury and the Board of Inland Revenue; in addition, both from these Departments and from others-the Board of Customs and Excise, the Board of Trade, the Ministry of Labour, and the RegistrarGeneral's Department-we have received valuable statistics and other information. We may mention that we have not seldom made use of this material for somewhat speculative inferences, and for these we take sole responsibility.

3. We have also received memoranda from various bodies and persons interested in particular aspects of our enquiry. To a number of these we have referred under the appropriate head in our Report; in some cases, however, the points raised appeared already to be fully covered, and in certain others we were unable to regard them as directly relevant to our reference.

4. Shortly after the commencement of our investigation, Mr. J. A. Hobson found it necessary to resign from the Committee in order to fulfil engagements abroad, and Professor Fred Hall, Principal of the Co-operative College and Adviser of Studies to the Co-operative Union, Ltd., was appointed in his place. At a later stage of our proceedings we were deprived of the services of Mr. Fred Bramley, who resigned in March, 1925, on account of ill-health, and died shortly after.

5. A word may be said as to the area covered by our enquiry. Our terms of reference link together "the National Debt" and the incidence of existing taxation." So far as concerns taxation for the service of the debt, the two terms stand for aspects.

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of a single subject. Questions of debt policy arise, however, independently of taxation; we have therefore treated the debt. and taxation separately as well as in conjunction. Similarly, we have understood the specific reference to the National Debt and its effect on trade, etc., as empowering us to go beyond existing taxes, and give consideration in some detail to large schemes for debt reduction, including especially the Capital Levy. Apart from such schemes we have limited our consideration almost wholly to existing taxes, and have not attempted to explore alternative sources of revenue. The broad lines we have pursued will be clear from the general questionnaire and the questionnaire on the Capital Levy, which we issued to witnesses, and which we reproduce as the first Appendix to this Report. We have regarded questions of a definitely technical character on the assessment of taxes as, in general, outside our reference. We may note that under the head of "existing taxes. existing taxes " we have not directed specific attention either to entirely new taxes imposed in the Finance Acts of 1925 and 1926, or to the New Import (or McKenna) Duties which were re-imposed in the Finance Act, 1925, after being repealed in 1924 at the commencement of our enquiry.

6. The wide character of our task in relation to the debt and existing taxes is made clear by the direction that they are to be considered "with special reference to their effect on trade, industry, employment and national credit." Whatever interpretation may be placed on the term "incidence of taxation and for convenience we use it throughout in its narrower economic sense (cf. para. 288)-we have to examine the whole range of reactions set up by existing taxes. Emphasis is laid upon the corporate industrial aspect of the community, but the effect upon individuals as individuals is not excluded.

7. In this extensive field questions constantly arise to which there are no answers admitting of anything like mathematical proof. Taxation is pre-eminently a matter on which the opinions of individuals, even when in general harmony, differ by an indefinite number of shades, and are almost certain to come into conflict on some point of more or less importance. We found this to be the case with our witnesses, and we do not pretend that we have been able to eliminate all difference of degree among ourselves, in particular regarding the importance to be attached to the harmful effects of high taxation on enterprise in trade and industry. While, however, those of us who sign this Report may differ on some of the details of argument, we agree substantially in the conclusions.

PART I.

SECTION I.

GENERAL CONDITIONS: THE STANDARD OF LIVING AND THE STANDARD OF SAVING.

8. In view of the concurrent enquiry by the Committee on Industry and Trade, we do not think it incumbent upon ourselves to attempt any review of the general position of industry in its many aspects. In the study of taxation, however, we are so deeply concerned with questions relating (1) to the standard of living of the wage-earner, and (2) to the standard of saving in the community, that we think it well, at the outset, to give some broad consideration to these two subjects. Inevitably, the figures and other evidence which we pass under review will reflect to a large extent the industrial conditions of to-day.

THE STANDARD OF LIVING.

9. Introductory.-The phrase "standard of living" is often used as if there were some fixed and absolute scale of comfort to which people have a right. Such a use is misleading. Ideas of what is comfortable or even decent constantly vary from one country and one time to another, and it does not follow, from the fact that a certain standard of living has been attained under one set of economic conditions, either that it can be maintained or that it will prove satisfactory under another.

10. In the nature of the case the notion of an adequate standard must be relative, if only because new commodities create new needs and new desires. The fifteenth centuryespecially its latter half-has been regarded as the golden age of the English labourer. But while wages were such as to enable the lowest-paid classes to obtain abundant supplies of a few simple foods, the standard of comfort was very low according to modern ideas, and the range of commodities open to all except the rich was exceedingly restricted. The fifteenth century, whatever its admirable features, can certainly not be taken as a guide to the wants of the twentieth.

11. It may be noted in passing that in the sixteenth century (after 1525) a decline took place in the purchasing power of wages and in the standard of living. It was not till the eighteenth century that any great improvement took place, and towards the end of that century there was a collapse. Whereas the labourer's condition earlier in the century had been contrasted with that of Continental peasants greatly to his advantage in respect of quantity and variety of food, he was suddenly

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brought down to the barest necessities of life. Arthur Young had said a generation earlier that in France bread formed nineteen parts in twenty of the food of the people, but that in England all ranks consumed an immense quantity of reat, butter, and cheese. . But at this time bacon and other

kinds of meat form a very small part of their diet, and cheese becomes a luxury. But even on the meagre food that now became the ordinary fare of the cottage, the labourers could not make ends meet. The normal labourer, even with

.

constant employment, was no longer solvent."

12. During and after the Napoleonic Wars the position of the labourer was generally one of terrible distress, although it is exceedingly difficult to say how far his sufferings can be traced to the wars, which coincided with serious failures of the harvest and with revolution in the economic life of the country. To whatever extent the wars may be held responsible, it is clear that the standard of living a hundred years ago was extremely low as compared with that existing before the war of 1914-1918 or at any time since. It is worth stressing this fact in face of the opinion that the advantages of the industrial development of the last century have been largely counterbalanced by many new disabilities for the poorer classes. On the other hand, even if men know that they are living better than a past generation, they may still be justified in complaining of their own hardships. The commerce and wealth of this country have expanded enormously in the last hundred years and people may naturally look for a much higher standard of living. We propose, therefore, in this Section, to consider the standard of living to-day and in recent years in relation only to the standard immediately before the outbreak of war in 1914; even here we do not imply any assumption that the pre-war standard was at the highest economic point possible at that time, still less that it had any degree of finality.

13. In order to obtain a proper basis for comparison we shall have to consider not only rates of wages, but also actual total earnings of the individual, so far as these may not be fully represented in rates of wages. We shall also have to consider the bearing of unemployment on the one side and of increased social services, etc., on the other; finally we shall have to give some attention to the relation between the spending and the saving of the wage-earner, and to any changes in the direction of expenditure.

For the sake of clearness we will use the term earnings as distinct from wages," whenever we are concerned with amounts of pay received and not merely with rates of pay. When we speak of wages without qualifying the term we mean money wages: when we speak of real wages, we mean wages measured in terms of purchasing power.

The Village Labourer, 1760-1832. J. L. and Barbara Hammond (1920).