while four-fifths falls on the income-tax paying classes relatively insignificant in numbers, is not much more than offset by the restriction of employment attributable to the overtaxation of the owners of capital. We have already pointed out the danger of accepting the results of an inquiry into the primary incidence of taxation as in itself conclusive on the question; and another difficulty about such estimates as these is that they tend to stimulate the vehement assertion by both capital' and 'labour' of claims to fiscal treatment which either party may imagine to be favourable to itself. Neither in the raising nor in the spending of public revenues is it admissible to distinguish meticulously between the interests of different classes. All alike are concerned in the defence of the country, in the payment of the interest on the National Debt-for the power to raise vast sums from the holders of capital in time of war is quite as essential to the safety of the whole community as the power to enlist men for service in the field-in the maintenance of the industrial strength of the country; and in the amelioration of social conditions. But while the obligation of the wealthier classes to contribute more than a proportional share towards all these objects is fully admitted, it is allowable to point out that the Labour leaders would altogether repudiate most of these liabilities. They would not, for instance, admit the justice of any contribution by the classes they represent towards payment of the interest on the National Debt. From their vociferous championship of a nostrum like the 'capital levy,' it might indeed be imagined that the wage-earners do actually contribute towards this payment. But in point of fact they can only be said to do so in the sense that in so far as the charge for debt could be eliminated there would be more money available to be extracted from the income-tax paying class for 'social betterment.' For if their contribution to the revenue were computed, it would probably be found that by far the larger part of it is already being returned to them in the form of subsidies to services from which they alone directly benefit.* The latest * A return of Public Expenditure from Rates and Taxes under the Acts relating to the Relief of the Poor, Education Acts, including provision of meals, Old Age Pensions Acts, Housing Acts, Public Health Acts, of the Returns of the expenditure on the services grouped under the heading of Public Assistance, for which the public is indebted to the persistent and energetic pressure for some years past of Mr Geoffrey Drage, would show a total, if the expenditure of the Ministry of Labour be included, of something like 250 millions from Parliamentary votes and grants alone; and a figure of 400 millions (which did not include the Labour department cost) was accepted in a debate of April last as the total expended in the year 1921-22 under these heads from taxes and rates. It may be added that the number of beneficiaries was roughly estimated at 30 million persons out of a total population of 48 millions! The effect of such a system on the productive, and therefore the taxpaying, capacity of the wageearners need not be insisted on here; but Mr Drage does not exaggerate the financial danger when he describes it as a 'rake's progress' to bankruptcy. It cannot be too often repeated-though the question is always elusively treated by candidates for Parliament -that what is really undermining our public finance is the great development, fostered by the necessities and effects of the war, of State socialism in its many forms. There is all the difference in the world between a modified resort to measures which may be inconsistent with time-honoured maxims of political economy, to meet conditions which were becoming a scandal and disgrace and to effect, if possible, a general improvement in the standard of living among the poorer classes -between this and a policy of social betterment pushed to a point at which it is seen to be leading to the impoverishment of the whole community by drying up the capital funds indispensable to industry, and by discouraging the productive energies of the workers themselves. We believe that the idea which has so largely inspired social policy since (and even before) the armistice, that revolution in this country is only to be averted by a lavish distribution of pecuniary advantages to the wage-earners, is not only a delusion, but is also a libel on the intelligence and good sense of those classes. We are National Health Insurance, and National Unemployment Insurance Acts (see 189 of 1921 for 1920 and 139 of 1922 for 1921). the Ministry of Labour, 794 million pounds, 1921-22, was not included. The expenditure of inclined to think that there is a growing perception of the truth that the wage-earners are the worst sufferers from a taxation of the wealthier classes which restricts and diminishes employment; and that the working man, if he understood and realised the facts, would resent the position of parasitism to which he is being reduced, a position of increasing dependence upon, and therefore inferiority to, the other classes of the community. I do not think,' said Mr Asquith as Prime Minister in 1913, when the evil had not attained half its present proportions, that there is any doctrine more fatal to the root principle of democratic Government than that it should consist of the constant amelioration, at great cost to the community, of the social conditions of the less-favoured classes of the country, at the sole and exclusive expense of the other classes." 'You must not,' said Mr Lloyd George on the same occasion, 'leave a class which has great political power and control without any share of responsibility.' This, however, is precisely what our present system does. If we may judge from the expenditure programme of their leaders, the sense of responsibility among the wagecarning classes in regard to national finance is practically non-existent, in spite of the appreciable burden which indirect taxation undoubtedly imposes upon them. There can be no security against the ruinous liabilities involved in the claim for social betterment, which is the present obsession of the Labour leaders, until the wageearners come to realise that they can in no case escape a preponderant share of the cost; until, as it has been pithily expressed, it is made clear that every five pounds spent in endowing unemployment out of the taxes or building houses out of the rates, drives another workman out of employment for a week'; or alternatively, until responsibility can be brought home to them in some form which they can appreciate. Mr Austen Chamberlain, while endorsing the views of the Government speakers in 1913 above quoted, remarked that he would put the limit of total exemption very low indeed, and would not exclude any one who was able to maintain himself.' As a result, however, of the Income Tax Commission, which he himself appointed in 1919, the exemption limit, so far from being lowered, the same on the political post This nsibility.' system does. E ogramme of the the wage mong finance is prac s, drives another work hile endorsing the vie was very considerably raised, and the burden on wages correspondingly reduced. The Commissioners, indeed, almost contemptuously dismissed any argument in favour of direct taxation upon the wage-earners. From the political, and merely fiscal, points of view, they were no doubt wise in their generation; but it was a surrender of constitutional principle for which the country will continue to pay dearly until some effective means of reasserting it can be discovered. On the whole, then, we do not think that there would be any reality in an outcry of reaction, should some readjustment of the burden of taxation come up for consideration, since many of the evils affecting the poorer classes are directly traceable to its present incidence. It is, after all, in the true interest, not only of the masses of the people, but also of the Labour leaders themselves, who are hoping, sooner or later, to take a responsible part in the Government of the country, that they should revise the views they now profess, whether in good faith or not, as to the unlimited possibilities of the taxation of capital and of property owners. For a Labour Administration might easily find itself in the awkward predicament of having to finance a gigantic structure of State socialism without the assistance of the layer of the golden eggs, a shy bird who will take to her wings quickly enough if her nest is too often raided. So much it has seemed necessary to say on the subject of the present incidence of our imperial taxation as a subject for inquiry. But, however carefully and 'scientifically' taxes may be adjusted, if the total is excessive, they cannot fail to be burdensome and oppressive to all classes. Reduction of expenditure, therefore, remains the first and greatest desideratum. So far as a general desire to enforce economy goes, the prospect is not unfavourable. It is perhaps not too much to say that all parties paid lip-service to economy during the late General Election; and a significant and encouraging feature of this election, compared with others for many years past, has been the absence of any appeal in responsible quarters to popular cupidity, or of attempts to bribe the voters by promises impossible of fulfilment. A considerable majority in the new House of Commons will, therefore, it may be expected, approach the question of economy in a spirit very different from that of the late Coalition majority, and give earnest support to the efforts of a trusted and capable Chancellor of the Exchequer who has unequivocally expressed his determination to 'break expenditure.' That the minor economies on the lines of the Geddes Report will continue to be effected, there can, of course, be no doubt. But much more than this is wanted, and there is undoubtedly a wide field awaiting a Government which is prepared to tackle big questions in a persistent and courageous manner, and to embark on a course of well-considered and thorough-going administrative reform. Sufficient reference has been made to a prime cause of financial embarrassment, all-pervasive State socialism, that bottomless pit which threatens to engulf the whole fortune of the community. Until we have an organised public opinion in the country and in Parliament which is determined to force upon governments a reversal of their whole attitude on this question, there can be no hope of stemming at its source the torrent of imperial and local expenditure. The present time of acute trade depression and much deplorable destitution and distress, moreover, is not favourable to an immediate application of rigorous principles to the dole system; but there is little doubt that if, in place of the general spirit of laxity in the administration of all this class of expenditure, local and central, strong heads of departments were to punish and discourage waste, tighten up control, and prevent overlapping and duplication, a very great deal more than is imagined could be done in the way of saving money. Less immediate results are attainable in another field in which, however, there are immense prospective possibilities. A radical revision of the relations between imperial and local finance and the present extravagantly wasteful system of grants-in-aid, has been talked of for thirty years or more; but nothing has been done except to tinker at the question with results increasingly unfortunate to financial control. Divided responsibility is the worst enemy of economy. To create effective control, locally and centrally, would involve a fundamental reconstitution and reorganisation of both |
