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may be convinced that town meetings are to liberty what primary schools are to science, that they bring it within the peoples' reach and teach them how to use it. But I am not so sure that these old “local assemblies of citizens" form complete analogies to modern conditions. The vast burden of financial responsibility has been imposed since then. There may be danger in overdoing management and supervision to the detriment of liberty, but a little supervision now to secure the material for intelligent criticism will stave off that complete supervision which will have to be resorted to if these assemblies insist on steering full steam ahead for the rocks.

J. A. Row-Fogo



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SEVERAL circumstances combined to excite an unusual degree of interest in the recent budget statement of the Chancellor of the Exchequer. Some doubts were felt as to the existence of a surplus even for the year just closing, while the great increase in expenditure made it certain that some considerable readjustment of existing arrangements would be necessary in order to prevent a deficit in the next financial year. The calls of the local bodies on the State had set up a further drain on the revenue, the latest one resulting from the Irish Local Government Act of 1898, which involves an annual grant of nearly £730,000. The increase of the death duties in 1894 and the comparatively high rate of the income tax in a time of peace seemed to hinder any fresh taxation on income or successions. Had the same situation occurred fifteen years ago, spirits would, beyond doubt, have been regarded as the readiest object for heavier imposts, but the controversies as to Irish overtaxation made that expedient impossible. Then an influential section of public opinion approved of an extension of the list of articles subjected to indirect taxation, and in some quarters a return to the duties on sugar and the 1s. duty on corn were favoured. The dread of extra duties on tea and tobacco explains the very large withdrawal from bond of both those articles in the last weeks of March and the earlier part of April. In fact, both amongst traders and the community generally, there was a decided expectation of considerable changes. The result has been somewhat disappointing. Instead of alterations in important taxes or a seeking of some fresh object of revenue, the public learned with surprise that a shifting of the wine duties, some new stamps, and a cutting down of the debt charge were the expedients relied on for supplying a small estimated

1 About three times the ordinary amount of tea was withdrawn from bond.

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surplus in the coming year. It is a probable conjecture that more serious changes were at first contemplated, or at least considered, but if so, they were renounced by the Treasury, or rejected by the Cabinet, which may have resolved in accordance with what the best authority assures us is its normal procedure, that everything beyond what is absolutely necessary “must be deferred until next year.” It is, however, this very prospect of further financial adjustment in the near future that makes the study of the position desirable. If we regard the present budget as marking “a pause,” and as containing a merely provisional arrangement adopted in order to gain time for further inquiry, we should probably be very near the truth ; and therefore it will be most convenient to notice the particular budget proposals in reference to the general questions of policy.

The first prominent fact and the one which really governs the financial position, is the tendency of all political parties to favour increased expenditure. A single comparison will be quite as effective an illustration as the elaborate tables often used. Let us place some of the budget figures of 1860 side by side with those of 1899. In 1859-60 the gross expenditure was £70,123,000 ; in 1898-9 it reached £111,703,000, with a further appropriation to local purposes of imperial taxation amounting to £9,521,000. Thus, omitting for the moment the last mentioned item, there remains an increase of 60 per cent. This comparison is even more effective if we remember that Mr. Gladstone regarded the earlier year as one of dangerously increased expenditure.

Various extenuations may indeed be noted, which somewhat modify the conclusion at first suggested. The growth of population and the expansion of State functions supply a reasonable justification for some part of the increase. If the State machine is more costly its product is also increased. In some degree the new expenditure is even the necessary condition of increased earnings, as in the case of the Post Office, where the use of net, instead of gross, figures would give a truer view and reduce the totals of both expenditure and revenue by over £11,000,000. But after all such allowances are made, the fact of an immense growth in military and naval outlay remains. The navy alone cost almost as much in 1898-9 as the army and navy together in 1859-60, when the estimates were affected by the panic in 1859, and the first appearance of ironclads. The necessary inference is that provision will have to be made in the years immediately

i Financial Statements, p. 119.


succeeding for a sum at least equal to, but more probably greater than, that of 1898-9.

To meet such a demand without undue pressure, a reconstruction of the existing system of taxation appears at first sight the most natural expedient, and this idea is fostered by the remarkable results achieved by the financial measures of Peel and Gladstone. To develop the revenue by judicious alterations, to remove unproductive duties, and more particularly to stimulate consumption by lowering taxation on articles of general use, was the policy pursued by both those statesmen, and under suitable conditions it proved marvellously effective. But its very success removed the opportunity for its further use. As soon as all the injurious and less productive parts of the tax system are eliminated, and when the point of maximum productiveness with economy has been approached, fiscal inventiveness and dexterity are no longer applicable. This point was, broadly speaking, touched early in " the seventies.” The complete repeal of the sugar duty removed the last article unsuitable for taxation from the dutiable list. From that time the fiscal problem ceased to be one of securing relief to production, and thereby stimulating the growth of wealth, and it became one of so apportioning taxation as to secure a fair distribution of the necessary charge. It may be said that, in spite of sundry minor defects, the existing taxes involve no oppressive burden on any branch of industry, and that it is hardly possible to devise any new form of taxation which will not be as heavy in proportion to its amount as those already

in use.

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The proposal to enlarge the area of taxation by including a greater number of objects in the excise and customs, though it appears to have secured some influential support,' is nevertheless partly based on a fallacious conception of the true source of revenue.

In advocating the taxation of a commodity now free from duty, as, e.g., sugar, it seems to be thought that a new resource has been discovered, and that the burdens of the former taxpayers will be so far reduced, while in truth the new duty, like the old ones, must come out of the income of the community, and if uncompensated by reductions elsewhere will be an additional charge. The payer of duties on tea, coffee, and spirits will not gain by a new tax on the sugar he consumes, and producers who use sugar as a material in their industries will be hampered.?

1 See particularly the series of articles in The Times during February and March.

? The case is even stronger with regard to a duty on corn, as it would be protective, and on a necessary.

The real problems in the taxation of commodities are (1) to decide what proportion of the total revenue required should be obtained by their use; and (2) to secure the least harassing and inexpensive arrangements as to the number of articles to be taxed, and the proper rates of duty on each. For nearly forty years this class of taxes has been concentrated on a small number of articles. with results most beneficial both to industry and to the revenue. The fact that over £50,000,000 are now annually obtained by excise and customs duties, is of itself a strong reason against any change in the direction of extension. An increase in amount of indirect taxation could hardly be regarded as just to the poorer classes, and any redistribution of the charge would not be likely to afford a gain in equitable apportionment. In this connexion the alterations in the wine duties now proposed may be considered. They are evidently open to the double objection of disturbing the course of trade, and, in a slight degree, reversing the wellestablished policy of favouring the less alcoholic beverages. If any change were to be made on purely fiscal grounds, beer would be the most eligible object for higher taxation; a readjustment generally of the relations of spirits and other liquors would have been more consistent and productive, though undoubtedly far more unpopular. The wine duties are, besides, so mixed up with questions of foreign and colonial trade and of reciprocity, that they require very delicate handling It is also to be urged that the taxation of commodities is not the best part of the revenue system to use for the purpose of making a balance : variation of duties, in order to discover the point of greatest yield with least inconvenience, are admissible, but the new additions cannot come under this head.

The second great division of revenue, including as it does income tax and death duties, supplies a smaller proportion of the State's income, and a considerable part of one of its constituents has been allocated to local finance. The great extension of the degressive system in the income tax has also somewhat lowered its yield. The latter circumstance, too, makes comparison with the rates of income tax in former years very misleading. For incomes under £700 the existing rates are lower, and for moderate incomes very much lower than the 8d. which is the nominal rate. Instead of


1 The debates on the wine duties and the concessions forced from the Chancellor of the Exchequer since the above was written, afford a strong confirmation of the statements made.

? As an illustration, the case of an income of £320 may be given. It now pays only 4d. on the whole amount, or less than in 1872, with the rate at 6d.

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