LORDMAYO'SFOREIGNPOLICY
LORDMAYO'SFOREIGNPOLICY
When Lord Mayo entered on his Viceroyalty, three Asiatic States were in disorder beyond the North-Western Frontier, and two great Powers were stealthily but steadily advancing towards India through those disordered States. On the Punjab Frontier, Afghánistán had just emerged from six years of anarchy; and Russia was casting hungry eyes on Afghánistán as a line of approach to India. On the Sind Frontier, Balúchistán was the scene of a chronic struggle between the ruling power and the tribal Chiefs; while Persia was taking advantage of that struggle to encroach upon the Western Provinces of Balúchistán. In the far north, beyond Kashmír, the new Muhammadan State of Eastern Turkestán had erected itself on a ruined fragment of the Chinese Empire, and was looking eagerly out for recognition on the one side to Russia, and on the other side to the British Government of India.
Lord Mayo's foreign policy was therefore of necessity a Central Asian policy. Its immediate object wasto create out of the disordered territories of Afghánistán and Balúchistán two friendly powers, who should have not only the desire to be our friends, but also the strength which might make their friendship worth having. Its ulterior design was, by thus erecting a breakwater of faithful States around the North-Western Frontier of India, to counterbalance the ominous preponderance which Russia had lately acquired in Central Asia. Its result has been, as I mentioned in my opening chapter, to supply the necessary complement to the change inaugurated by Dalhousie; and to remove the relations of Russia and England in the East from the arena of Asiatic intrigue to the jurisdiction of European diplomacy.
During the seven years preceding Lord Mayo's arrival, the British policy towards Afghánistán had been subjected to an increasing strain, and a few months before his arrival that policy had manifestly broken down. Our relations with Afghánistán continued nominally on the basis laid down by Mr. [afterwards Lord] Lawrence and Major Lumsden in 1858. Its cardinal principle was, in Major Lumsden's words, 'to have as little to say to Afghánistán as possible, beyond maintaining friendly and intimate intercourse with thede factoGovernment.' But in 1863, on the death of the powerful Afghán ruler, Dost Muhammad, thede factoGovernment of Afghánistán disappeared. A war of succession followed among the sons and nephews of the late Amír. Sher Alí, the rightful successor, was for a time driven outof the field by his brother Afzul Khán, in 1866. Instead, therefore, of a singlede factoGovernment in Afghánistán—such as existed in 1858—there were at least two Rulers, each of whom claimed to be the Sovereign Power.
Lord Lawrence still endeavoured to maintain our relations with that country upon the basis laid down in 1858. Both the claimants to the succession asked for the recognition of the British Government. Lord Lawrence expressed his willingness to recognise either of them who should succeed in establishing ade factoGovernment. 'My friend,' he wrote to Afzul Khán, when he had obtained a footing in Kábul, 'the relations of this Government are with the actual Rulers of Afghánistán. If your Highness is able to consolidate your power in Kábul, and is sincerely desirous of being a friend and ally of the British Government, I shall be ready to accept your Highness as such.'
The Afgháns retorted that this policy was a direct premium upon successful revolt, and tended to render the establishment of any stable government in Afghánistán impossible. It amounted, in their view, to a declaration that the British Government, while anxious to obtain the support of the Afghán Ruler, was willing to turn against that Ruler the moment that a rebel made head against him, and to transfer its friendship to the rebel Chief. 'It is difficult,' said the indignant Afgháns, 'for any nation to get on with the English. The meaning of this letter wouldappear to be that the English desire that our family shall exterminate one another.... Without doubt they will have written the same to Sher Alí.'
Lord Lawrence did not shrink from accepting this situation. As a matter of fact, he was not only willing to recognise any successful claimant to the sovereignty of Afghánistán; he was also willing to extend that recognition to even a partially successful claimant, to the extent which such a claimant might have succeeded in dismembering the country. 'So long,' Lord Lawrence distinctly declared to Afzul Khán, 'as Amír Sher Alí holds Herát and maintains friendship with the British Government, I shall recognise him as Ruler of Herát, and shall reciprocate his amity. But, upon the same principle, I am prepared to recognise your Highness as Amír of Kábul and Kandahár, and I frankly offer your Highness in that capacity the peace and goodwill of the British Government.'
This policy, instead of making allies of the two claimants, excited the wrath of both. Sher Alí, on hearing of the above declaration, exclaimed, 'The English look to nothing but their own interests, and bide their time. Whosoever's side they see the strongest for the time, they turn to him as their friend. I will not waste precious life in entertaining false hopes from the English, and will enter into friendship with other Governments.'
There was another Government which was only too happy to accept the friendship thus offered. IfRussia could intervene as the ally of Afghánistán, and consolidate a sovereign power in that State, she would not only pose as the arbiter of Central Asia, but would also establish a commanding influence on the very frontier of India. Lord Lawrence, before he left India, recognised this fact. In the summer of 1868, Sher Alí, by a desperate effort, regained the throne, and entered Kábul in triumph. In September, 1868, he finally drove his rival claimants out of the country. Meanwhile Sir Henry Rawlinson had penned in England his memorable Minute of the 20th July, 1868. 'The fortunes of Sher Alí are again in the ascendant,' he wrote. 'He should be secured in our interests without delay. Provided he is unentangled with Russia, the restoration of his father's subsidy, and the moral support of the British Indian Government, would probably be sufficient to place him above all opposition, and to secure his fidelity; and it may indeed be necessary to furnish him with arms and officers, or even to place an auxiliary contingent at his disposal.'
During the last four months of his rule, Lord Lawrence pondered deeply over these words. On the 4th of January, 1869, he sent a Despatch to the Secretary of State, which may fitly be regarded as the political testament of the wearied Viceroy. 'We think that endeavours might be made to come to a clear understanding with the Court of St. Petersburg as to its projects and designs in Central Asia, and that it might be given to understand in firm, butcourteous language, that it cannot be permitted to interfere in the affairs of Afghánistán or in those of any State which lies contiguous to our frontier.' 'Then we think that our relations to the Court of Teheran should be placed entirely under the Secretary of State for India, and that we should be empowered to give to anyde factoruler of Kábul some arms and ammunition and substantial pecuniary assistance, as well as moral support, as occasion may offer, but without any formal or defensive alliance.'
'I cannot bring my mind,' wrote Sir Stafford Northcote, then Secretary of State for India, 'to the proposal that we should subsidise first one, and then the other, according as accident brings up Sher Alí or Abdul Rahman to the head of affairs.'
Nine days after Lord Lawrence signed his political testament, Lord Mayo reached Calcutta. On the new Viceroy devolved the heavy responsibility of carrying out the transition policy, somewhat vaguely indicated by his predecessor, in such a way as to disclose no break in the continuity of the Indian Government. In March 1869, the Amír Sher Alí, who had meanwhile consolidated his power in Afghánistán, came in state to India to pay his respects to the new Governor-General. I do not propose to record the splendours of the Ambálá Darbár. All well-managed Darbárs are imposing, and form an oriental edition of the Field of the Cloth of Gold. I had the privilege of being a guest of the Viceroy at the historical gathering of troops, Native Princes, and Britishadministrators which encamped on the Ambálá Plain. But if I were to enter on the spectacular aspects of an Indian Viceroy's career this book would swell far beyond the limits assigned to it. My business is with the less imposing but more permanent work actually accomplished. From the moment the Amír crossed our frontier he was received with a magnificence of hospitality which deeply impressed him. At Lahor he let fall the words, 'I now begin to feel myself a King.'
Sher Alí came to India with five distinct objects in view. He desired, in the first place, a treaty. In the second place, he hoped for a fixed annual subsidy. In the third place, for assistance in arms or in men, to be given 'not when the British Government might think fit to grant, but when he might think it needful to solicit it.' In the fourth place, for a well-defined engagement, 'laying the British Government under an obligation to support the Afghán Government in any emergency; and not only that Government generally, but that Government as vested in himself and his direct descendants, and in no others.'1Finally, he cherished a desire that he might obtain some constructive act of recognition by the British Government in favour of his younger son, Abdullá Ján, whom he brought with him, and whom he wished to make his heir, to the exclusion of his elder son, Yákub Khán, who had helped him to win the throne.
1Minute in Council, by the Hon. Sir John Strachey, G.C.S.I., sometime acting Governor-General, dated 30th April, 1872.
In not one of these objects was the Amír successful. The first four were distinctly negatived; the fifth was not, I believe, even permitted to enter into the discussions. Lord Mayo adhered to a programme which he had deliberately put in writing before he left Calcutta. Yet, by tact and by conciliatory firmness, he sent the Amír away satisfied, and deeply impressed with the advantage of being on good terms with the British Power. 'We have distinctly intimated to the Amír,' he wrote, 'that under no circumstances shall a British soldier cross his frontier to assist him in coercing his rebellious subjects. That no fixed subsidy or money allowance will be given for any named period. That no promise of assistance in other ways will be made. That no treaty will be entered into, obliging us under every circumstance to recognise him and his descendants as rulers of Afghánistán. Yet that, by the most open and absolute present recognition, and by every public evidence of friendly disposition, of respect for his character, and interest in his fortunes, we are prepared to give him all the moral support in our power; and that, in addition, we are willing to assist him with money, arms, ammunition, Native artificers, and in other ways, whenever we deem it desirable so to do.'
These may seem but small concessions compared with the expectations which the Amír had formed. But they were all that Lord Mayo deemed it right to grant, and he granted them in such a way as torender the Amír a firm and grateful friend during the whole of his Viceroyalty.
The Amír, on his return to Kábul, initiated English improvements with an amusing promptitude. He forbade his troops and the inhabitants to wear arms between 10P.M.and 4A.M.He appointed night watchmen, and a judicial officer to hear petitions from the citizens. He established post offices. He substituted cash payments for the old practice of paying the Government servants by assignments of land or revenue. He ordered the shoemakers of Kábul to sell off all their old stock, and to make boots according to the English pattern! He dressed himself in the English costume of coat and pantaloons, and directed his officers to do the same! He organised a Council of State, composed of thirteen members, as a constitutional body for advising him in all departments of the administration. He remitted the more terrible forms of punishment, and pardoned several ancient enemies. In short, he did what in him lay to establish good government and win the confidence of his people. Rapid reforms, however, are usually short-lived. The most promising of them, namely, the substitution of cash payments for assignments on the revenue, was so violently opposed by the official class in Afghánistán, from the greatSardársdownwards, that, so far as I can learn, it was never really introduced.
'Surround India,' wrote Lord Mayo, shortly after the Ambálá Darbár, 'with strong, friendly, and independent States, who will have more interest inkeeping well with us than with any other Power, and we are safe.' 'Our influence,' he says in another letter, 'has been considerably strengthened, both in our own territories and also in the States of Central Asia, by the Ambálá meeting; and if we can only persuade people that our policy really is non-intervention and peace, that England is at this moment the only non-aggressive Power in Asia, we should stand on a pinnacle of power that we have never enjoyed before.'
Lord Mayo's next object was to open conciliatory relations with Russia by honestly explaining the real nature of the change which had taken place. He accepted Russia's splendid vitality in Central Asia as a fact neither to be shirked nor condemned, but as one which, by vigilant firmness, might be rendered harmless to ourselves. The formal relations between the Courts of St. James and St. Petersburg are of course conducted by the Foreign Office in England. But Lord Mayo's travels in Russia had given him an insight into the strong personal element in the working of the Russian official system, and had made several of the Russian Ministers his warm friends for life. Without interfering, therefore, with the regular relations between the two Courts, he thought it might be advantageous that an unofficial interchange of views should take place between the high officers connected with the actual administration of Asiatic affairs.
He therefore took the opportunity of a distinguished Bengal Civilian going home on leave, to authorise him,if it met with the concurrence of Her Majesty's Ministers, to give assurances to the leading Russian officials of his peaceful policy, and to enter into frank and friendly explanations on Central Asian affairs. Sir Douglas (then Mr.) Forsyth reached St. Petersburg in October 1869. The result of the confidential interchange of opinions which followed was the acceptance of Lord Mayo's view that the best security for peace in Central Asia consisted in maintaining the great States on the Indian frontier in a position of effective independence. Efforts were also made to prevent the recurrence of those unauthorised aggressions by Russian frontier officers, which had kept Central Asia in perpetual turmoil. Of these efforts it may be briefly said that they were successful during the term of Lord Mayo's Viceroyalty.
In the interviews of Sir Douglas Forsyth with the Russian Minister of War and the Minister of the Asiatic Department it was agreed that Russia should respect as Afghánistán all the Provinces which Sher Alí then held, that the Oxus should be the boundary line of Sher Alí's dominions on the north, and that both England and Russia should do their best to prevent aggressions by the Asiatic States under their control. Lord Mayo lost no time in securing for Sher Alí the guarantee of a recognised boundary against the Amír's neighbours in Central Asia. In 1871 the Russians, however, raised grave objections to Badakshán being included within the Afghán line. This question was settled by friendly negotiationsin 1872. In January, 1873, Count Schouvaloff arrived in London to personally express the Emperor's sanction to the disputed territories being recognised as part of Afghánistán. Subsequent delimitations have given precision to the frontier. But practically it may be said that Afghánistán, as territorially defined by Lord Mayo in 1869, remained substantially the Afghánistán of the following twenty years.
Having thus placed the affairs of Afghánistán on a satisfactory footing, Lord Mayo turned his attention to the great territories which stretch southward from it along our Sind Frontier and eastwards to Persia. He found that our relations with these territories, loosely named Balúchistán or Khelát, were perplexed by two distinct sets of complications—one external, the other internal. The first referred to the frontier between Balúchistán and Persia. This had never been settled, and had for generations formed the arena of mutual aggressions and sanguinary raids. The internal complication arose from the ill-defined position of the Khán or Ruler towards his nobility. According to one party in Khelát, the Khán is the Sovereign of the State; according to another, he is the head of a confederacy of Chiefs. The net result was, that what between wars of extermination on the Persian Frontier, and the internecine struggle between the royalist and oligarchic parties within the State, Balúchistán knew no rest, and might at any moment prove a troublesome neighbour. Her internal rebellions andher border feuds rendered it very hard to discover with whom the actual authority rested, or how far it extended, and made it difficult for the British Government to take measures for the consolidation of the titular ruler's power.
Lord Mayo vigorously addressed himself to the solution of both the external and the internal problem of Balúchistán. His action led to the demarcation of a political boundary between Afghánistán and Persia; which practically put an end to the aggressions of the latter. He displayed not less vigour in trying to help Balúchistán to evolve from her conflicting factions a stable and permanent central power. The task proved a most difficult one. Each of the great parties in Balúchistán had a real basis of right on which to found its claims. The nobles could show that they had frequently controlled the Khán, and compelled him to act as the head of a confederacy of Chiefs rather than as a supreme ruler. The Khán could prove that although he had from time to time succumbed to his rebellious barons, yet that he had only done so after a struggle, and that he had exercised his royal authority whenever he again found himself strong enough.
The question resembled the worn-out discussion as to whether England was or was not a limited monarchy under the Plantagenets. The constitutional difficulties in Balúchistán were embittered by wrongs both great and recent on both sides; and at the time of Lord Mayo's death, its consolidation into awell-governed kingdom yet remained to be accomplished. He lived, however, to see his efforts bear fruit in a period of unwonted rest to its unhappy population, and to place the whole problem in a fair train for settlement. Before his sudden end, he had the satisfaction of being able to authorise a high British officer to act as arbitrator between the Khán and the tribal Chiefs.
Due north of India, beyond Kashmír and the Himálayas, another State made pressing claims on Lord Mayo's attention. This State was known as Eastern Turkestán. It owed its origin to one of those revivals, partly religious, partly political, which at that time threatened to dismember the Chinese Empire. The Panthays had proved the efficacy of such a revival by the establishment of an independent Muhammadan State in the south-west of China. The Chinese Musalmáns of the Desert of Gobi on the far north-western frontier followed their example, and ended by raising their rebellion to the dignity of a holy war. The Chinese authorities were expelled and all who supported them were massacred. In 1864 the new Musalmán Power, composed of very heterogeneous elements, found itself in possession of Eastern Turkestán. After a further struggle among the victors, Yákúb Kushbegí, a brave soldier of fortune, emerged in 1869 as the Ruler of the vast central territory which stretched eastwards from the Pamír Steppe to the Chinese Frontier, and from the British-protected State of Kashmír on the south tothe Russian outposts on the Shan and Muzart ranges on the north.
In January, 1870, an envoy from the new Ruler arrived in India to solicit,inter alia,that a British officer might accompany him back on a friendly visit to his master. Lord Mayo consented to send Mr. Douglas Forsyth on one express condition—that in no sense was the visit to be a mission, nor was it to have a diplomatic object.
Mr. Forsyth was to abstain from taking part in any political questions, or in any internal disputes, further than repeating the general advice already given to Yákúb's envoy by Lord Mayo: namely, that Yákúb would best consult the interests of his kingdom by a watchful, just, and vigorous government; by strengthening the defences of his frontier; and above all, by not interfering in the political affairs of other States, or in the quarrels of Chiefs or tribes that did not directly concern his own interests. Mr. Forsyth was to limit his stay in the country, so as to run no risk of finding the Himálayan passes closed by the winter's snow, and of thus being detained in Yárkand till the following year. He was to collect full and trustworthy information concerning the nature and resources of Eastern Turkestán and the neighbouring countries, their recent history, their present political condition, their capabilities for trade, the Indian staples most in demand, their price in the Yárkand market, and the articles which could be most profitably brought to India in exchange.
Mr. Forsyth, on his arrival in the Yárkand territory, found that Yákúb had not yet succeeded in consolidating his dominions. He scrupulously abstained from being drawn into political discussions of any sort, and after a brief halt at the southern capital, Yárkand, to refit his camp with provisions and beasts of burden, he returned to India. He brought back complete information regarding the most practicable routes across the Himálayas, the industrial capabilities and resources of the country, its recent history, and the actual position of its Ruler. From first to last he made it clearly understood that his mission was of a purely tentative and commercial character.
As a part of the same policy, Lord Mayo opened up a free trade-route through the Chang Chenmu valley by a treaty with Kashmír, and placed the transit of Indian merchandise across the Himálayas on a securer basis. The traffic which will pay the cost of carriage across the snowy altitudes of Central Asia can never seem great, when expressed in figures and compared with the enormous sea-borne exports and imports of India. But it is a very lucrative one to certain classes in the inland and warlike Province of the Punjab, whose population we were trying to habituate to peaceful industry by every ameliorating influence of wealth and commerce.
I have now described the measures which Lord Mayo took in pursuance of his fixed resolve to create a cordon of friendly and well-governed States on our western and northern frontier, from Balúchistán onthe Arabian Sea, round by Afghánistán, to Eastern Turkestán. He acted in the same spirit to his neighbours along the north-eastern and south-eastern borders of the British dominions. Towards Nepál he maintained an attitude alike firm, friendly, and dignified, and consolidated the satisfactory relations which he found existing with that State. On the north-east of Bengal he may be said to have created a frontier, by means of the Lúshai Expedition, and to have given to those long distracted regions a period of quiet and peace. Proceeding farther south, we find him equally busy in Burma, restraining the warlike propensities of the king, developing trade relations, and enforcing respect for the British Power. But the hard work of his foreign policy lay on the western and north-western frontier, and I have given so much space to its narration, that I must close this chapter without branching out into less essential details.
LORDMAYO'SFINANCIALREFORMS
LORDMAYO'SFINANCIALREFORMS
The financial history of Lord Mayo's Viceroyalty divides itself into two parts. The first narrates the resolute stand which, at the outset of his administration, he found himself compelled to make against deficit. The second records the measures by which, after grappling with the immediate crisis, he endeavoured to reform certain grave defects in the financial system, and to bring about a permanent equilibrium between the revenue and the expenditure of India.
When Lord Mayo received charge of the country the financial position stood thus. The conquests and accretions of a century had left behind a British Indian Empire nearly equal in size to all Europe less Russia, with a population of close on 200 millions in our own Provinces, and 50 millions in the Feudatory States. The cost of creating that Empire was represented in 1869-70 by a Public Debt of 102 millions sterling; together with another debt of 91 millions sterling expended on the guaranteed railways and other productive public works. Of the Public Debt, aggregating 102 millions, about 52 millions maybe taken as the charges of establishing the British Power in India, and 50 millions as the price of reconquering and reorganising the Empire after the Mutiny of 1857. The 102 millions represented, however, not alone the cost of wars and conquests. For the English in India had to construct for themselves the whole fabric of a civilised government. That material fabric included roads, public offices, barracks, courts, jails, schools, hospitals; and this vast outlay explains in part the frequent financial deficits to which I shall presently refer. The other debt of 91 millions represented the cost of constructing 4265 miles of opened railway, and of defending great tracts from famine by canals.1The two debts aggregated a capital of 193 millions sterling laid out in conquering, establishing, and organising the British India of 1869-70, the first year of Lord Mayo's rule. The revenue amounted to 509 millions of rupees, then equivalent to over 46 millions sterling: namely 33½ millions of taxation from the people, or about 3s. 4d. per head, and 12½ millions from opium, public works, &c., not of the nature of actual Indian taxation.2
1To facilitate reference by the reader I take the above figures as given in the Parliamentary Abstract, Twenty-third Number, 1889, p. 300. But in the subsequent and more detailed statements (except in direct quotations from State Papers), I convert the rupee for the sake of accuracy at 1s. 10d., its value at the time. Where my figures seem to differ from those in certain of the Blue Books, the explanation usually is that the Blue Books take the rupee at its nominal value of 2s.
2For details of this calculation, see my largerLife of Lord Mayo,vol. ii, p. 6: 2nd Ed., 1876.
Alike in regard to the amount of the Public Debt of British India and to the burden of taxation upon the people, the finances of that country may seem to compare favourably with those of almost any State in the world. But a nearer examination discloses a different aspect. Small as were the demands of the Treasury upon the tax-payer, it had been found impossible to augment them to the level required for the maintenance of efficient administration. Several of the highest of our Indian authorities believed that it would be perilous to do so. The half-century which preceded Lord Mayo's arrival in India had presented a long series of financial shortcomings. Of the fifty-five years beginning with 1814-15, and ending with 1868-69, only sixteen had shown a surplus, while thirty-nine had been years of deficit. The total of the surplus amounted to about 12½ millions sterling; the deficits exceeded 75½ millions of pounds. The period immediately preceding Lord Mayo's arrival was, if possible, even more discouraging. The last three years from 1866 to 1869, had left behind deficits aggregating 5¾ millions sterling. This was for 'ordinary' expenditure alone. If we add the outlay on 'extraordinary' (or reproductive) public works, the total excess of expenditure over revenue in the three years preceding Lord Mayo's first Budget amounted to the vast sum of 11 millions sterling.
Nor was the chronic inadequacy of the Revenue the gravest source of disquietude. The Budget estimates, although framed with the utmost care which the thenexisting system allowed of, were constantly falsified by the results. During the two years from 1867 to 1869 the Budget estimates had shown a surplus aggregating over 3½ millions, while the actual results disclosed a deficit aggregating close on 3½ millions. Lord Mayo was thus called to deal not only with a chronic deficit, but with a financial system which allowed of an aggregate error in the Budget estimates to the extent of 7 millions sterling on the wrong side during the two years preceding his rule.
Lord Mayo found therefore three financial tasks imposed on him. He had first of all to attack the immediate deficit: amounting to 2½ millions in the year immediately preceding his rule. In the second place he had to reform the whole financial system, which allowed of the Budget estimates being annually falsified by the actual results. In the third place he had to devise and to enforce measures of economy sufficiently stringent to place the finances on a sound footing for the future. With how resolute a will he carried out this work, the following pages will disclose. But before entering on that memorable struggle I may briefly exhibit its results. The subjoined statement shows more forcibly than any words of mine what those results meant to India. The three years preceding Lord Mayo's rule had left a deficit of 5¾ millions in 'ordinary' expenditure alone. In the very first year of his rule he established an equilibrium in the finances of India, and produced a small surplus. The three years which followed his reformsleft an aggregate surplus of 5¾ millions, and that period of surplus was only interrupted by the Behar famine two years after his death.
Bird's-eye view of the results of Lord Mayo's Financial Administration.
Bird's-eye view of the results of Lord Mayo's Financial Administration.
Total deficit of threeyears reduced toSterling.
Total surplus for threeyears reduced toSterling.
The four continuous years of surplus which thus resulted from Lord Mayo's measures had only one precedent during the period from 1842 onwards, for which the Parliamentary Abstract gives the returns. That single precedent is found in the years 1849 to 1853, under the rule of the great Governor-General, Dalhousie. Nor has there been any subsequent example of four consecutive years of surplus since Lord Mayo's Viceroyalty down to the present date (1891).
Sir Richard Temple, the Finance Minister, was like Lord Mayo in his first year of office. Warned by the disappointments of his predecessors, Sir Richard Temple framed a very cautious Budget for 1869-70,and estimated for a small surplus of £48,263. It soon appeared, however, that no amount of caution would avail to prevent the falsification of the Budget estimates under the system upon which they were then made up. The first symptoms which caused Lord Mayo alarm was the discovery that the cash balances in the treasuries proved lower than had been estimated by his predecessor. Lord Mayo's anxiety increased as the actual facts of the financial year previous to his accession, 1868-69, became finally known. Item after item turned out worse than had been expected, until the deficit of £889,598, as estimated in March, 1869, grew to the vast sum of £2,542,861, as ascertained from the completed accounts a few months later.
Nor did the disastrous discrepancy appear only in the Actuals of 1868-69. Circumstances occurred to raise a suspicion in Lord Mayo's mind that the same fate might be in store for the finances of the current year, 1869-70. His inquiries led him to order a re-examination of the whole Budget estimates. These estimates, viewed in the light of the actual results of 1868-69, disclosed an inevitable deficit of £1,650,000 for the current year 1869-70, in place of the surplus of £48,263, as announced by the Budget in March. Lord Mayo's perplexities were increased by the circumstance that Sir Richard Temple, after duly delivering the Budget for 1869-70, had found himself compelled to proceed to England on six months' leave. Sir Richard's experience and knowledge were nottherefore available at the moment when the Viceroy, in his first months of office, found a new abyss of deficit suddenly open under his feet. Fortunately he had the aid of Mr., now Sir John, Strachey, who was carrying on the duties of Finance Minister during Sir Richard's absence.
The disclosures which the last paragraph speaks of with smooth certitude, revealed themselves in 1869 only glimpse by glimpse, and amid a wide divergence of opinion on the part of the responsible advisers of the Government. It required the resolute exercise of his individual will to enable the new Viceroy to tear the truth out of the conflicting accounts, and to get at the whole facts of the situation. 'I am beginning to find,' he wrote to a friend, as early as May, 1869, 'that our finances are not in as comfortable a state as they ought to be. The enormous distances, the number of treasuries, and the complicity of accounts as between each, render accurate forecasts and rapid information almost insurmountably difficult. The waste of public money is great, and I have been obliged to take strong measures, and say some very hard things about it.'3
3The Earl of Mayo to Sir Stafford Northcote, 16th May, 1869.
Each week found the Viceroy poring with a deeper anxiety and a graver face over the accounts. As he probed into their hollow places, he found one estimate after another break down beneath his scrutiny. His letters and papers during that summer disclose, scene by scene, and with a painful tension of personalresponsibility, the slowly developing drama of deficit; but throughout every line breathes a firm resolve that, cost him what it might in ease and popularity, he would establish and maintain equilibrium in the finances of India. Three months after the letter above quoted, he wrote to Sir Henry Durand: 'I have just received information which leads me to believe that in two items of revenue alone, we may look for a decrease of half a million in the first quarter of 1869-70. Now it is our clear duty to do all that we can to meet this.I am determined not to have another deficit,even if it leads to the diminution of the Army, the reduction of Civil Establishments, and the stoppage of Public Works. The longer I look at the thing, the more I am convinced that our financial position is one of great weakness; and that our national safety absolutely requires that it should be dealt with at once, and in a very summary manner.' 'I should be sorry,' he wrote to the Duke of Argyll, 'to say how much I feel the hard lot that is now cast upon us, to recover the finances from a state of deficit. But unless we have a war, which God forbid, we will do it.'
Lord Mayo mapped out for himself two distinct methods of dealing with the situation. In the first place, he resolved that the circumstances were so grave as to demand immediate measures for meeting the impending deficit without waiting to the end of the Financial Year. In the second place, he determined to attack the permanent causes whichhad led to deficit, and to prevent their recurrence by a systematic readjustment of the finances.
The first step taken by Lord Mayo and Sir John Strachey was to reduce the overgrown grant for Public Works by about £800,000,—a measure suggested and carried out with unsparing faithfulness by Colonel, now Lieut.-General, Richard Strachey, then Secretary to the Government of India in the Public Works Department. Other Departments, equally important and equally clamorous, had augmented their expenditure at a rapid rate. In fact, the ten years which had elapsed since the dominions of the Company passed to the Crown had seen the administration rendered more efficient in many ways; and the cost of the improvements, however admirable they were in themselves, had in the aggregate become too great for the revenues to bear. In addition to the reduction of £800,000 for Public Works, Lord Mayo found himself compelled to curtail temporarily by £350,000 the grants to the spending Departments which had received so rapid a development during the decade since India passed to the Crown. The whole saving amounted to £1,150,000 during the current year 1869-70.
It became apparent, however, that reductions alone would not suffice to produce equilibrium. Lord Mayo had therefore to decide whether he would permit the Budget arrangements of the year to stand, with the knowledge that they would result in deficit, or resort to the unusual, and in India almost unprecedented,expedient of additional taxation in the middle of the year. He decided, after careful inquiry, that the circumstances demanded the latter course. Had the threatened deficit been preceded by a period of prosperity and financial accuracy, he would not have deemed so severe a policy needful. But the public expenditure had, during three consecutive years, largely exceeded the revenue, and Lord Mayo found that solvency could only be secured, in the first place, by immediate and most stringent measures; in the second place, by a permanent improvement in the finances to the extent of three millions sterling a year. I mean, of course, the aggregate improvement derived from the twofold sources of reduced expenditure and increased taxation.
For these and other cogent reasons, Lord Mayo determined to make it clear by measures of unmistakable vigour that his Government was resolved to place the finances upon a permanently sound basis. He raised the income tax from 1 to 2½ per cent. during the second half of the financial year, and enhanced the salt duty in Madras and Bombay. The former measure was estimated to add £320,000 and the latter £180,000 to the revenue of the year; total, £500,000.
By means of this half-million of increased taxation, and the £1,150,000 of reduced expenditure, Lord Mayo hoped to cover the estimated deficit of the current year, namely, £1,650,000. He thus explained his views to the Secretary of State.
'While the accumulated deficits of the three yearsending with 1868-69 have amounted to 5¾ millions, the cash balances in our Indian treasuries have fallen from £13,770,000 at the close of 1865-66 to £10,360,000 at the close of 1868-69, and, notwithstanding our recent loan of £2,400,000, are at this moment lower than they have been at this season for many years. During the same period our debt has been increased by 6½ millions, of which not more than 3 millions have been spent on reproductive works.4Your Grace has reminded us that successive Secretaries of State have enjoined us so to frame our estimates as to show a probable surplus of from half a million to a million sterling. We entirely agree with your Grace in acknowledging the soundness of this policy. We have no doubt that, excluding charges for Extraordinary Works provided for by loan, our expenditure in time of peace ought to be so adjusted to our income as to leave an annual surplus of not less than one million. The necessary conclusion to which we are thus led is, that nothing short of a permanent improvement in the balance now subsisting between our annual income and expenditure of at least three millions sterling will suffice to place our finances in a really satisfactory condition. How, by reducing our expenditure and increasing our income, we can best obtain such a result, is the problem that we have now to solve.
'We are satisfied that there is only one coursewhich we can properly follow. We must no longer continue to make good the deficit of each succeeding year by adding to the public debt. And we must determine, whatever be the difficulty of the task, that there shall henceforth be no room for doubt that, in time of peace, our income will always be in excess of our ordinary expenditure.'
4Par. 71 of Despatch to Secretary of State No. 240, dated 20th Sept. 1869.
I have mentioned the immediate measures by which Lord Mayo endeavoured to stay the impending deficit. But he felt that such measures strained the whole mechanism of the Government; that to stop public works on a sudden involved waste of material, while the increase of taxation during the current year disclosed in a most undesirable manner the shortcomings of our system, and might prove a cause of perilous discontent among the Indian people. 'We have played our last card,' he once said in conversation, 'and we have nothing left in our hands to fall back upon, except to devise measures which will prevent the recurrence of a similar crisis hereafter.' He accordingly resolved to find a permanent remedy, by removing the causes of the financial misfortunes in past years.
His reforms divide themselves into three branches. First, improvements in the mechanism of the Financial Department of the Supreme Government itself. Lord Mayo thought that it would be vain to ask the Local Governments to set their houses in order, if they could point to confusion or want of prevision in his own. Second, the more rigid enforcement on the Local Governments of economy in framing theirestimates, and of accuracy in keeping within them. While thus increasing their fiscal responsibility, Lord Mayo also extended their financial powers. Third, a systematic and permanent readjustment of the revenues and the expenditure.
First, as regards defects in the mechanism of the Financial Department, Lord Mayo found that the disastrous series of fiscal surprises were due in part to unpunctuality in the submission of the yearly estimates by the Local Governments and Departments, so that the Supreme Government had not sufficient time to examine and collate the accounts before the season for delivering the financial statement arrived. He discovered, also, grave deficiencies in the Financial Department itself as regards intelligent observation of the progress of the finances during the year. While, therefore, the Local Governments throughout India were complaining of the number and complexity of the statistical returns required from them, the last act in the process which would have rendered these returns fruitful of results, namely, their careful collation by the Finance Department, was inefficiently performed.
Without such final collation, the gathering of statistics is indeed a thankless task. I merely repeat the statement of the Member of the Government best qualified to speak on the subject, when I say that, up to Lord Mayo's time, no sufficient provision existed for the intelligent use of the statistical materials which daily poured in. It did not seem to be understood that the toil expended by scatteredDepartments upon the compilation of returns can bear no fruit unless they are intelligently studied by the central bureau for which they are compiled. Statistics as they existed in India before Lord Mayo's rule were sorrowful memorials of faithful subordinate labour, rendered unavailing by the indifference or neglect of higher officials.
The financial collapse in 1869, forming as it did one of a series of similar catastrophes, gave a new impulse to better work. The preparation of classified statistics was undertaken on a systematic basis and with an extended scope. Having thus put his own house in order, Lord Mayo took measures to ensure punctuality in the submission of the Estimates by Local Governments and Departments. He also organised, or to speak more correctly, remodelled a system by which the Supreme Government now obtains full information bearing upon the progress of the finances month by month. Mr. Chapman, the Secretary to the Department and the officer most competent to speak, thus wrote of the results:—'It is not too much to say that it has become impossible for the Government to remain long ignorant of any important fact affecting the finances. Expectation may be disappointed, misfortune or mistakes may occur; but the Government will at least be promptly informed of the event, and it is difficult to exaggerate the importance of promptitude in this respect.'
The second great branch of Lord Mayo's financial reforms consisted in his more rigid enforcement ofeconomy upon the Local Governments. A fertile source of financial difficulty has always existed in the division of the British administration of India into a number of governments, separated from, although subordinate to, the Governor-General in Council. Before Lord Mayo's Viceroyalty the separate governments, while so far independent entities as to be responsible for the civil administration and improvement of their several Provinces at the cost of the imperial revenues, had, in regard to their revenues, no independent financial powers. Towards the end of every year, each Local Government presented to the Governor-General in Council its estimates of expenditure during the coming twelve months. The Governor-General in Council, after comparing these aggregate estimates with the expected revenue from all India, granted to each Local Government such sums as could be spared for its local services.
The system acted in a manner most unfavourable to economy. The Local Governments were under no compulsion to adjust their expenditure to any limited scale of income, and several of them fell into the habit of framing their demands upon the Imperial Treasury, with an eye rather to what they would like to spend than what was absolutely required. 'Practically,' writes one who had the official control of the system, 'the more a Government asked, the more it got; the relative requirements of the Local Governments being measured by their relative demands. Accordingly they asked freely andincreasingly. Again, knowing that any money saved at the end of the year was lost to the provincial administration, a Local Government was little anxious to save.' These words, while representing the facts, do not necessarily involve a reproach. In India more money can be spent with advantage on almost every branch of the administration than the revenues will permit.
Lord Mayo clearly discerned that, in order to secure the co-operation of the Local Governments in the work of financial reform, he must invest those Governments with a share of the financial responsibility. After an exhaustive preliminary correspondence with each separate Administration, he issued a Resolution on the 14th December, 1870, which may be called the Charter of the Provincial Governments. By this document, which in due time received the approval of the Secretary of State, a fixed yearly consolidated grant was made to each Government, to enable it to defray the cost of its principal services, exclusive of the Army, but including Public Works. The grants thus made were final, for a period usually of five years, and were liable to reduction only in case of severe financial distress happening to the Supreme Government. They belong absolutely to the respective Local Governments. No savings from any one of them revert to the Imperial Treasury. Their distribution is left to the discretion of the Local Governments, without interference on the part of the Governor-General in Council.
The services thus made over to them included theprotection of person and property, the education of the people, the record of changes or transfers connected with landed property, sanitation, Local Public Works, and a number of minor branches of government. For official purposes they were grouped as follows: Jails, Registration, Police, Education, Medical Services (except 'Medical Establishments'), Printing (an enormous item in India), Roads, Civil Buildings, and various Public Works, Miscellaneous Public Improvements, and various minor services.
This well-jointed system of Provincial and Imperial Finance continues to be the basis of Indian Finance to this day. It has received further developments since Lord Mayo's time, but its principles remain unchanged. Sir John Strachey thus summarised the state of things which preceded it:—
'For many years before Lord Mayo became Viceroy, the ordinary financial condition of India had been one of chronic deficit, and one of the main causes of this state of affairs was the impossibility of resisting the constantly increasing demands of the Local Governments for the means of providing many kinds of improvement in the administration of their respective Provinces. Their demands were practically unlimited, because there was almost no limit to their legitimate wants. The Local Governments had no means of knowing the measure by which their annual demands upon the Government of India ought to be regulated. They had a purse to draw upon of unlimited, because of unknown, depth. They saw on every side thenecessity for improvements, and their constant and justifiable desire was to obtain for their own Provinces and people as large a share as they could persuade the Government of India to give them out of the general revenues of the Empire. They found by experience, that the less economy they practised, and the more importunate their demands, the more likely they were to persuade the Government of India of the urgency of their requirements. In representing those requirements they felt that they did what was right; and they left to the Government of India, which had taken the task upon itself, the responsibility of refusing to provide the necessary means.
'The Government of India had totally failed to check the constant demands for increased expenditure. There was but one remedy: namely, to prevent the demands being made; and this could only be done by imposing on the Local Governments a real and an effectual responsibility for maintaining equilibrium in their local finances. There could be no standard of economy until apparent requirements were made absolutely dependent upon known available means. It was impossible for either the Supreme or Local Governments to say what portion of the provincial revenues was properly applicable to local wants. The revenues of the whole of India went into a common fund, and to determine how much of this fund ought fairly to be given to one Province and how much to another, was impracticable.'
'The distribution of the public income,'Major-General R. Strachey wrote, 'degenerates into something like a scramble, in which the most violent has the advantage. As local economy leads to no local advantage, the stimulus to avoid waste is reduced to a minimum. So as no local growth of the income leads to an increase of the local means of improvement, the interest in developing the public revenues is also brought down to the lowest level.' It is right to add that the reforms by which Lord Mayo put an end to this unprofitable state of things were in a large measure due to the initiative of General Richard Strachey, supported by the administrative authority and experience of his brother, Sir John Strachey. But the question of Local Finance first presented itself to Lord Mayo during his inquiries in the India Office, and he discussed it at Madras on his way out to Calcutta.
Lord Mayo's third and heaviest task was the permanent readjustment of the revenues to the expenditure. He accomplished this task partly by new taxation, but chiefly by economy and retrenchment. On his arrival in January, 1869, Lord Mayo found two Despatches awaiting his consideration. One was a Despatch from his predecessor, Lord Lawrence, urging on the Secretary of State the imposition of an income tax; or, more strictly, the expansion of the certificate tax into an income tax for the year 1869-70 then about to begin. The other was a Despatch from the Secretary of State sanctioning the proposal. Lord Mayo's first measure with a view to raising the revenues of India was, therefore, to carryout this decision which had been arrived at before he reached India, and to levy an income tax. By efforts to equalise the salt duty in certain provinces, and at the same time to develop new sources of salt supply, and to cheapen the cost of carriage, he laid the foundation of a further increase of revenue, with the least possible addition to the burdens of the people.
It was, however, to economy rather than to increased taxation that Lord Mayo looked for a surplus. Indeed, he strongly felt the necessity of abandoning some of the old objectionable forms of Indian taxation, such as the export duties; and he made a beginning by abolishing the export duty on wheat. On the other hand, every Department of Expenditure was keenly scrutinised, and severely cut down to the lowest point compatible with efficiency. As a matter of fact, and notwithstanding the new income-tax, the total revenue which he levied from India during his three years of office averaged nearly a million less than the revenue levied during the year 1868-69 preceding his Viceroyalty; while the expenditure averaged about five millions per annum less than that of the year preceding his Viceroyalty. The following table exhibits the results of the system of vigilant economy by which Lord Mayo converted a series of years of deficit into a series of years of surplus. For purposes of reference to the Parliamentary accounts it reproduces the conversion at the then official rate. It does not, accordingly, show the exact balance in sterling, as worked out for the tableabove.