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principal officers who, in 1862, was deputed to carry out the change, and one of the members of Parliament who have most closely watched the effects of that change. I asked him what sum would fairly represent the 18 to 20 millions of 1840, under the system of accounts now in use; allowing for resumptions, owing to payment for services in money instead of by grants of land; the use of stamps in place of Court fees &c. He replied, after a scrutiny of the scanty evidence available to us, from 24 to 25 millions. Since that time we have added more than one-third to the then existing area of British India, and somewhat over one-fourth to the population of British India. Take the figures at the lowest estimate, and assume the revenue of 1840, if represented under our present system of accounts, at 24 millions, plus onefourth, or 6 millions, for the additions to territory and population since that year; and you get a total of 30 millions sterling as a basis for comparison with our actual taxation last year of 35 millions. During the interval, we have covered India with roads, spread over it a network of eight thousand miles of railway, and executed vast irrigation works. Under these circumstances, I do not think that a proportionate rise in the taxation from 30 to 35 millions, in 40 years, is a fact of which the English rulers of India need feel ashamed. It is a smaller increase than that made by any European country, with onesixth of the Indian population, during the same period. It is a smaller proportionate increase than any English squire, through whose property a railway has passed, would have derived from his estate during the past forty years. At this moment, the public revenues of England, apart from local taxation, bear upon the people at a rate considerably over 40 shillings per head; the actual taxation of India bears upon the Indian people at a rate of under 4 shillings per head. Even assuming that money goes four times as far with the poor in India as in England, and that 4 shillings to the Indian tax-payer is as large a sum as 16 shillings to the English tax-payer, there is still an enormous margin (between 4 shillings and 40 shillings) in favour of the Indian peasant. This, however, does not palliate the fact that the Parliamentary Indian accounts are of such a nature as to lead a distinguished statesman into a false comparison, like that into which Mr. Forster fell at Leeds.” Not only are the totals of our Indian revenue and expenditure useless for comparative purposes, but many of the details are of equally little value. From a too great desire to render Indian accounts simple at a first glance to the English public, we have almost concealed the fact that they refer to a totally different currency from that in which they are rendered. In India, the revenues are received and expended in silver; in England the revenues are received and expended in gold; and in our Parliamentary Indian accounts we proceed on a make-believe system that this most important fact means nothing. While there are seldom fewer than II rupees to the pound sterling, and sometimes more than 12 rupees to the pound sterling, we render our Indian accounts to Parliament on the assumption of an invariable but imaginary rate of Io rupees to the pound sterling. By a financial fiction, we tend to hide away a radical financial fact. We invent a conventional value for the rupee, and having invented such a convention, we adhere to it in some parts of our accounts, and we do not adhere to it in others. Thus we represent our debt in 1878 at a total of 135 millions of pounds. In reality, our debt consists of two portions—one item of 60 millions of pounds in England, and another item of 750 millions of rupees in India, now equal to about 63 millions of pounds; making a total of 123 instead of 135 millions sterling. If you really wish to know the debt of India, you may either turn the sterling portion into rupees, or the rupee portion into pounds. At present, we add together the two discordant elements as if they were interchangeable equivalents; and the result is, that we present a total which is inaccurate to the extent of nearly 12 millions sterling. This is the result of the present system, as regards our capital account; and the same errors, on a smaller scale, vitiate our current accounts. I am well aware of the argument that this system of assuming a conventional value of the rupee is convenient for comparing the totals of one year with another. But we have seen that the changes in the system of exhibiting our Indian accounts are so great as to render the totals useless for purposes of comparison; especially the totals of 1878, when the rupee was worth less than twenty pence, with the totals of 1840, when it was worth nearly twenty-four pence. These changes are still going on. The other day Mr. Gladstone mentioned at Edinburgh that the Indian expenditure had increased from an average of 50 millions six years ago, to close on 6o millions last year. The published totals in the Indian accounts more than bear out this statement; but the details show that between 1874 and 1878 vast sums were brought into the yearly accounts as outlay which had never been entered in them as expenditure before. Thus, in the single year 1877, over 6 millions were suddenly brought into the account as the gross payments for guaranteed railway interest—not because the charge was a new one, “but because the accountants determined to exhibit it in a new form; similar additions have been made under other headings of expenditure; and the increase of which Mr.

*Mr. Forster, in The Times of December 16, courteously acknowledges the error into which he was led; but points out certain difficulties in the way of his unreservedly accepting all my conclusions. These difficulties, however, are matters of account, as Sir George Campbell exhaustively showed in his reply to Mr. Forster in The Times of the 17th. They belong to the very class to which I here refer, and form additional illustrations of the difficulty of deriving an accurate comparison from the Parliamentary Statements of Indian expenditure and revenue at distant dates. I learn from Mr. Forster that he referred at Leeds to the Indian expenditure, not to the revenue; but this is a point which does not affect my position, and on which he

principal officers who, in 1862, was deputed to carry out the change, and one of the members of Parliament who have most closely watched the effects of that change. I asked him what sum would fairly represent the 18 to 20 millions of 1840, under the system of accounts now in use ; allowing for resumptions, owing to payment for services in money instead of by grants of land ; the use of stamps in place of Court fees &c. He replied, after a scrutiny of the scanty evidence available to us, from 24 to 25 millions. Since that time we have added more than one-third to the then existing area of British India, and somewhat over one-fourth to the population of British India. Take the figures at the lowest estimate, and assume the revenue of 1840, if represented under our present system of accounts, at 24 millions, plus onefourth, or 6 millions, for the additions to territory and population since that year; and you get a total of 30 millions sterling as a basis for comparison with our actual taxation last year of 35 millions. During the interval, we have covered India with roads, spread over it a network of eight thousand miles of railway, and executed vast irrigation works. Under these circumstances, I do not think that a proportionate rise in the taxation from 30 to 35 millions, in 40 years, is a fact of which the English rulers of India need feel ashamed. It is a smaller increase than that made by any European country, with onesixth of the Indian population, during the same period. It is a smaller proportionate increase than any English squire, through whose property a railway has passed, would have derived from his estate during the past forty years. At this moment, the public revenues of England, apart from local taxation, bear upon the people at a rate considerably over 40 shillings per head; the actual taxation of India bears upon the Indian people at a rate of under 4 shillings per head. Even assuming that money goes four times as far with the poor in India as in England, and that 4 shillings to the Indian tax-payer is as large a sum as 16 shillings to the English tax-payer, there is still an enormous margin (between 4 shillings and 40 shillings) in favour of the Indian peasant.

This, however, does not palliate the fact that the Parliamentary Indian accounts are of such a nature as to lead a distinguished statesman into a false comparison, like that into which Mr. Forster fell at Leeds. Not only are the totals of our Indian revenue and expenditure useless for comparative purposes, but many of the details are of equally little value. From a too great desire to render Indian

2 Mr. Forster, in The Times of December 16, courteously acknowledges the error into which he was led; but points out certain difficulties in the way of his un. reservedly accepting all my conclusions. These difficulties, however, are matters of account, as Sir George Campbell exhaustively showed in his reply to Mr. Forster in The Times of the 17th. They belong to the very class to which I here refer, and form additional illustrations of the difficulty of deriving an accurate comparison from the Parliamentary Statements of Indian expenditure and revenue at distant dates. I learn from Mr. Forster that he referred at Leeds to the Indian expenditure, not to the revenue ; but this is a point which does not affect my position, and on which he

accounts simple at a first glance to the English public, we have almost concealed the fact that they refer to a totally different currency from that in which they are rendered. In India, the revenues are received and expended in silver; in England the revenues are received and expended in gold; and in our Parliamentary Indian accounts we proceed on a make-believe system that this most important fact means nothing. While there are seldom fewer than II rupees to the pound sterling, and sometimes more than 12 rupees to the pound sterling, we render our Indian accounts to Parliament on the assumption of an invariable but imaginary rate of 10 rupees to the pound sterling. By a financial fiction, we tend to hide away a radical financial fact. We invent a conventional value for the rupee, and having invented such a convention, we adhere to it in some parts of our accounts, and we do not adhere to it in others. Thus we represent our debt in 1878 at a total of 135 millions of pounds. In reality, our debt consists of two portions—one item of 60 millions of pounds in England, and another item of 750 millions of rupees in India, now equal to about 63 millions of pounds; making a total of 123 instead of 135 millions sterling. If you really wish to know the debt of India, you may either turn the sterling portion into rupees, or the rupee portion into pounds. At present, we add together the two discordant elements as if they were interchangeable equivalents; and the result is, that we present a total which is inaccurate to the extent of nearly 12 millions sterling This is the result of the present system, as regards our capital account; and the same errors, on a smaller scale, vitiate our current accounts. I am well aware of the argument that this system of assuming a conventional value of the rupee is convenient for comparing the totals of one year with another. But we have seen that the changes in the system of exhibiting our Indian accounts are so great as to render the totals useless for purposes of comparison ; especially the totals of 1878, when the rupee was worth less than twenty pence, with the totals of 1840, when it was worth nearly twenty-four pence.

These changes are still going on. The other day Mr. Gladstone mentioned at Edinburgh that the Indian expenditure had increased from an average of 50 millions six years ago, to close on 60 millions last year. The published totals in the Indian accounts more than bear out this statement; but the details show that between 1874 and 1878 vast sums were brought into the yearly accounts as outlay which had never been entered in them as expenditure before. Thus, in the single year 1877, over 6 millions were suddenly brought into the account as the gross payments for guaranteed railway interest-not because the charge

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but because the accountants determined to exhibit it in a new form; similar additions have been made under other headings of expenditure; and the increase of which Mr.

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one of account. I think you will agree with me that there must be something defective in a system of accounts which could thus, even for a moment, mislead the practised eye of the greatest financier of our age. During the past eighteen months I have had occasion to go over these accounts with distinguished statists and economists in France, Norway, Sweden, and Denmark. I did not find that they were intelligible, for comparative purposes, to a single one of these gentlemen. A French friend said to me: “Eh bien you should print on the outside cover of your Indian accounts, “Beware of the totals within.”” It may be said that the totals of public accounts must, from their very constitution, be dangerous. Well, the other day when I sat down to examine into the statements of Mr. Gladstone and Mr. Forster, I found that I had to completely pull to pieces the general account, and to take out from it nineteen subordinate accounts, before I could obtain any accurate idea as to how far the revenue and expenditure of India had really increased. I do not think that this is a process which we can expect either foreign critics or English statesmen to go through. The truth is, that the able accountants who were sent out from England to reform the old Company's book-keeping, and more especially their successors who have pushed still farther those lines of reform both in India and at home, did not give sufficient weight to the essential differences between the business conducted by the Indian Government, and the business conducted by the English Government. They forcibly squeezed our Indian accounts into English moulds. This fact is overlooked, not only by the English writers, but sometimes even by the skilled and careful officials who furnish the materials for Parliamentary Statements. The result is a false simplicity and a delusive uniformity—a system which fails to afford those ready facilities for comparison between one year and another without which the public can exercise no supervision over national expenditure, and which, in place of those facilities, supplies our great English statesmen with incongruous elements and misleading totals. I do not say that it is easy to amend these defects, and anyone who asserts that it is easy can never have sat down to practically apply his remedies. The nature of public accounts is such, that if you touch the form of any one of them it sends an electric shock along the whole series, involving structural changes throughout. We must not tamper with the fundamental principle that all transactions shall be brought to account. But improvement, although not easy, is not impossible. I believe that amendments in the form of the Indian accounts and statements may be based upon the recognition of three facts. First, that the transactions of the Indian Government differ in character and scope from those of the English Government; and that, in addition to its regular business of administration, the Indian Government carries on a variety of vast and complicated mercantile

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