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ART. III.-1. Hansard's Parliamentary Debates, 1883. Vol. II. Speech of the Chancellor of the Exchequer, April 5th, 1883. 2. The Finance Accounts of the United Kingdom of Great Britain and Ireland, for the financial years 1862-3 to 1882-3.

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PART from the controversial matters which Mr. Childers chose to import into it, the Budget of last year was commonplace in the extreme. We have no intention of following the Chancellor of the Exchequer in his endeavors to throw upon his predecessors the responsibility of a large part of what he called the extraordinary expenditure of the year. The common sense of those, who have troubled themselves to study the questions at issue, has already pronounced upon them. Nor is it our intention to discuss the financial policy of the present or the late Government: our object is a much wider, and, we venture to think, a more important one. We would only remark, in passing, that nothing could be less candid or less reasonable than the attempt to hold Lord Beaconsfield's Government responsible either for the Egyptian or even for the South African war. The annexation of the Transvaal, the Joint Protectorate of Egypt, originated with the late Government; but had that Government remained in power, the Boers would never have revolted, and Arabi would never have dreamed of defying the power of England in the hands of Ministers who they well knew were ready to maintain her honor and defend her interests. We are concerned, however, with this part of the expenditure only in its character as exceptional or extraordinary. Unhappily, if extraordinary in a technical, it is by no means exceptional in a practical sense. Wars like those in South Africa and Egypt may fairly be treated as extraordinary in their relation to the finance of a particular year, but wars of this kind-our so-called little wars-occur so frequently, are so necessary and inevitable an incident of our vast empire, that they must be considered as a regular and unavoidable part of our average financial burdens; and thus the ordinary and the average expenditure are unfortunately two very different matters. The total expenditure of last year was almost exactly 89 millions. For purposes of comparison we ought to deduct, first, the extraordinary war expenditure, and secondly, the cost of the Post-office. The latter forms no part either of the taxation or of the proper expenditure of the country. The Post-office, including the Telegraphs, is not properly a part of the necessary service of the State, but a business of enormous extent and very complicated character, carried on by the Government at a very

large profit. The profit alone properly enters into the financial accounts of the year. The practice of including the whole expenditure and receipts, however constitutional, introduces a misleading element into the national accounts, and especially into financial comparisons extending over several years. It is, however, very easy to separate both these elements from the accounts of the year. The result leaves a real 'ordinary' expenditure of about 80 millions. Bearing in mind, as we have already observed, that the extraordinary expenditure is not exceptional, but recurrent, that upon an average of years a considerable sum must be added to the ordinary expenditure on account of our little wars, 80 millions is the total expenditure of the year 1882-3 for purposes of historical and financial comparison.

For such purposes it is not worth while, and would be inconvenient, to carry our retrospect further back than the last twenty years. The year 1862 may be considered as the practical commencement of a new financial era. The financial history of the period preceding the Crimean War is for present purposes an old almanac.' The fiscal system of the twenty years preceding 1862 was in a state of flux, if not of revolution. Those twenty years witnessed the introduction and completion of the great fiscal change from Protection to Free-trade. Mr. Gladstone's second financial administration completed the revolution commenced in the last administration of Sir Robert Peel. In 1862 Mr. Gladstone had fulfilled his master's work by the arrangements connected with the French Treaty and the abolition of the so-called taxes upon knowledge. There remained no tax essentially distinct in character from those which have since that time filled the national Exchequer, for the taxes on sugar and corn were strictly analogous to those that are still imposed on tea and coffee. The years immediately preceding 1862 had witnessed a revolution in expenditure almost as great as that which had taken place in our system of taxation. The Crimean War and the Indian Mutiny had impressed upon the nation at large, even more deeply than upon its leading statesmen, the paramount necessity of providing in a new fashion and on a new scale for the defence of the country. Lord Palmerston, who gave the tone to the policy of that time, was the first English Minister to discern the change that had come over the temper of the people. He saw that parsimony had ceased to be a paramount popular object, that efficiency rather than economy, administrative reform rather than retrenchment, were the dominant ideas of the day; that the maintenance of our maritime supremacy, and an effective provision for the military necessities

of the empire, were of more account in popular estimation than the remission of taxes or the limitation of expenditure. He saw that the country was not only wealthy, but conscious of its wealth; and that, without increasing the burdens of the people, the revenue would steadily increase at a rate sufficient to meet the new scale of expenditure, provided only that the available resources of the Exchequer were not rashly or needlessly thrown away. He acted upon this knowledge, and since his accession to the Premiership a new standard of efficiency, a new rate of national outlay, a preference of efficiency to parsimony, utterly contrary to the temper that had prevailed from 1832 to 1852, have governed the policy of successive administrations and the conduct of successive Parliaments. The year 1862, then, is the first which can fairly be compared with the present; the first in which both the present principles of expenditure and the present system of revenue were in force together.

The total expenditure of 1862-3 was 702 millions, of which sum one million was devoted to fortifications paid for by a loan of short period. The expenditure of the Post-office was not then included in the national accounts, and striking this out, the increase of ordinary expenditure in the last twenty years amounts to something more than 10 millions sterling. No part of this great increase is due to the defensive services of the country. The Army and Navy cost in 1862-3, 271⁄2 millions; last year, excluding the extraordinary expenditure, as estimated by Mr. Childers, their cost fell short of 26 millions. The enhancement of expenditure is due principally to two great changes. In 1862-3 the charges on the Consolidated Fund amounted to 28 millions, they now exceed 31 millions-an increase mainly due to the recent policy of paying off a portion of the National Debt by means of terminable annuities. Certain terminable annuities having fallen in in the interval, the sum devoted to the reduction of debt is larger than appears upon the face of the account. The Civil Service estimates again were in 1863 8 millions; they now exceed 174 millions.

To the first of these additions to our expenditure comparatively few politicians will object. A very great change has come over public opinion on the subject of the debt during the last ten or twelve years. To the last generation it seemed that, inasmuch as the national wealth was steadily and rapidly increasing, the debt could be no cause of anxiety to ourselves, no trouble to our posterity. If the country could in 1815 endure a burden of about 900 millions, that burden in 1915 would scarcely be worth consideration. In spite of the constant reductions of taxation, the revenue was steadily increasing, and was at the

same time a constantly decreasing proportion of the national wealth. Not merely to men like Mr. Cobden and Mr. Bright, disposed by temper and by their own special political interests to exaggerate the practical burden of taxation, but to such statesmen as Sir Robert Peel, the weight of the taxes, which yielded little more than 50 millions, had appeared in 1840 a serious load upon the income of the country. To Lord Palmerston and his contemporaries, twenty years later, a much larger revenue seemed to flow in almost insensibly, without necessitating a single tax that really interfered with trade or was practically felt by the mass of the people. Of national imposts, the income tax alone was consciously and severely felt by those who paid it, and of late years the income-tax has undergone repeated and, on the whole, permanent reductions. The interest of the debt, which in 1842 constituted more than one-half the whole fiscal burden of the country, would now be, if it had not been increased for the advantage of future generations, somewhat less than one-third of the national expenditure. Yet before the great depression of trade in 1874, before the serious depletions of revenue we shall presently have to consider, the reduction of the debt had been taken in hand in earnest; even while the revenue was still increasing by 'leaps and bounds,' and while the then Chancellor of the Exchequer, and apparently Mr. Gladstone himself, believed that the increase would be permanent. So great a change in the tone of public opinion, under circumstances which with scarcely a single exception tended in an opposite direction, is a somewhat strange historical phenomenon, and is probably due rather to the influence of individual statesmen-especially to the fact that the ablest financiers of both parties happened to agree upon the point-than to any spontaneous change of popular feeling. It is true that many able writers had, even twenty years ago, begun to take an unfavourable view of the financial future of England. They argued that we were exhausting our coal and iron, upon our practical monopoly of which our manufacturing supremacy depended. They pointed out that foreign countries were rivalling us in this or that branch of industry hitherto our own, and that the United States were beginning to realize the value of their extensive and apparently illimitable coal and iron fields, which, as soon as the growth of population should render them practically available, must give our most formidable rivals an irresistible and constantly increasing advantage. But such views, however sound, however logical, were in outward semblance at least too pessimist to make a deep or speedy impression upon the country at large at a time of great and increasing prosperity.

They probably affected men like Mr. Gladstone and Sir Stafford Northcote infinitely more than ordinary merchants or manufacturers. No doubt the example of the United States, which had no sooner emerged from the costliest of all wars than they proceeded to reduce by the heaviest of all existing taxation a debt without historical parallel, exercised no little influence over the popular imagination of England. Still the national determination to reduce the debt was hardly spontaneous. The credit of initiating the reduction belongs to the two statesmen we have named, and the economists whose views they adopted; the public, with unusual good sense and patience, allowed itself to be governed by the advice of those it was accustomed to trust, without sharing their view of remote and questionable perils.

The enormous addition to the cost of the Civil Service-in other words, to the expense of the ordinary administrationhas not been similarly the result of a policy deliberately adopted. The estimates have grown from year to year in consequence of administrative and legislative measures, whose financial bearing has hardly been taken into consideration. New functions have been imposed upon the Government; the rapid progress of civilization, the constantly rising standard of national demands and of public expectations, measures like the extension of the Factory Acts to all industries in which women and children are employed, the tendency to centralization, which requires the State to inspect and superintend so many matters formerly left to local authorities; above all, the increased requirements resulting from the Education Act of 1870, and the previous and subsequent developments of our educational policy, have year by year added to the cost of civil government, and have finally doubled it in the course of twenty years; while the naval and military expenditure remains practically unaltered in amount. Education, science, and art, absorb 41⁄2 millions, or nearly half the total increase. The mere growth of our population must of course enhance the cost of civil administration, and in the last twenty years that population has increased by 20 per cent. At the same time the total' ordinary expenditure-unhappily a different thing from the average annual expenditure-has only increased by 14 per cent., while the actual expenditure of 1882-3, a year of exceptionally heavy charges, is but 27 per cent. more than that of 1862-3. Of this, at any rate, there can be no doubt, that the 89, or more properly 85, millions of 1883 are not a heavier burden upon the wealth of England than the 70 millions of twenty years back.

A more important, perhaps, certainly a more interesting phenomenon, both from an historical and a prospective point of