V.—Financial Relations99By Lord Welby

V.—Financial Relations99By Lord Welby“The Channel forbids Union, the Ocean forbids separation. I demand the continued severance of the Parliament with a view to the continued everlasting unity of the Empire.”Terse words in which a great statesman summed up the relation of Ireland to England. The Home Rule Bill will give the sanction of law to Grattan's aphorism. It bids Ireland manage her own affairs, freeing her in her own house from official bondage to an unsympathetic consort. If the Act of Enfranchisement is drawn in a trustful and large spirit, it will, we may feel assured, end the feud of centuries, and create unity where the Act of Union has created enmity.The policy of Home Rule is wise in itself, and worthy the statesmanship of a nation always bold in the hour of need, and, as experience of its working is gained, it will commend itself more and more to the commonsense of a practical people, but the immediate success of the first Home Rule Act will depend greatly on the skill and wisdom with which the details of a complicated measure are devised, facing fairly the financial[pg 113]evils consequent on Tory obstinacy, and avoiding, in reasonable degree, offence to popular prejudice and existing interests.The provisions which will adjust the financial relations between the two nations are not among the least difficult of those details, and Parliament must solve the puzzling problem without delay. It must begin by temporarily giving local government in Ireland a fair start at the cost of the British tax-payer.Let us, in the first place, clear the ground from some doubtful arguments which, used as premises, will probably lead the unwary to false conclusions. A plea is often put forward that England is a rich country and Ireland a poor country, and it is argued that identical taxation therefore wrongs Ireland. But England is not a rich country, in the broad sense. It is a country in which there is vast accumulation of wealth, but in which, also, there is a great mass of poverty—poverty probably exceeding the poverty of Ireland, and, therefore, identical taxation if it wrongs the poor of Ireland, wrongs still more the poor of England. Critics arguing from this false premise contend that the extension of the Income-tax to Ireland was a wrong, that is to say, the wealthy man living in Ireland, where living is relatively cheap, ought not to contribute to the national expenditure on the same principle as the wealthy man living in England, where living is relatively dear; or, to put the argument in another form, it is sound finance to take Income-tax from a man in England, struggling on a few hundreds a year. It is unsound finance to take Income-tax from, say, the profits earned in Ireland by the Guinness firm. Nationalists, misled by the plea of Ireland's poverty, have relied on this argument, and Conservatives also have used it chiefly to discredit Mr. Gladstone, who extended the Income-tax to[pg 114]Ireland; but the argument is false in itself, and cannot be made the basis of sound financial legislation. As a matter of fact, taxes on articles of general consumption, on the necessaries of life, fall heavily on the poor, and the argument of over-taxation applies in great degree to the poor in the great towns of England, and to the poor in Ireland. If, then, the poor of Ireland are to be relieved, the poor of England must be relieved also, and identical taxation would still be the result. The statesman must find a truer gauge by which to measure the relative capacity of the two countries to bear taxation.Again, during the long discussion on financial relations, much time has been wasted in criticising that provision of the Act of Union, which fixed the respective contributions of Great Britain and Ireland to the common purposes of the Empire at the proportion of fifteen and two. That proportion, in fact, was not exacted, and it may be put aside as theoretical.A summary of recent financial history in Ireland will enable the reader to understand the circumstances in which Parliament takes up the problem of Home Rule. Towards the close of the eighteenth century the condition of Ireland was bad. England, selfish to the last degree in her commercial policy, treated Ireland as little better than a conquered country, and ruined her commercially and industrially by restrictions on her trade. Protestants and Catholics joined in patriotic resistance, and wrung at last freedom of trade in 1779, and an independent Parliament in 1782. Thenceforward for a time the financial administration of Ireland was regulated in accord with Irish interest. The country prospered financially under the new order. Large sums were spent in promoting agriculture and manufactures, and in grants for public works, and the[pg 115]country's finance was restored to order. During the years of peace, 1782 to 1793, Ireland contributed on the average £584,000 to military—that is to the common expenses of the Empire. The military expenditure of Great Britain in the peace years, 1786 to 1792, averaged £5,142,000. Ireland was then a most important factor in the State, for the population was to that of England in the proportion of nearly one to two.Pitt desired to establish reciprocity between the two countries and at the same time to obtain from Ireland a contribution on a fixed principle for the Navy, wise proposals worthy of the Minister; but the two Parliaments could not agree. That of England bowed to the pernicious claims of ascendancy and to the supposed interests of the commercial classes. Pitt was defeated. The French Revolution and a war lasting nearly twenty-two years followed, and in the midst of the war broke out the Rebellion of 1798. If the charge of the Irish debt at the outbreak of the war and the average civil expenditure of Ireland between 1793 and the Union is deducted from the average income of Ireland, the surplus constituted Ireland's real contribution to the common expenditure and it averaged about £900,000 a year. The year 1800 marks a great change of policy. Pitt put an end to the independent Parliament of Ireland and passed the Act of Union, bad in itself, and worse by the means which made it law. It sought to make the two countries one for all purposes of revenue, and that object was kept steadily in view.From 1800 to 1817 the United Parliament imposed taxes on both England and Ireland, but the Irish Treasury collected the Irish Revenue, defrayed the local expenditure of Ireland as sanctioned by the United Parliament and remitted the surplus in aid of the war expenditure. The greater part of the[pg 116]burthen fell upon Great Britain, but Ireland's share drained greatly her resources. Her revenue which had produced £1,837,000 in 1793, reached £7,305,000 in 1817, an increase of 300 per cent., while her contributions during the years of war to the common expenditure calculated on the principle adopted in the preceding paragraph amounted to about £3,000,000. During the same period Great Britain contributed to the war out of revenue about £43,000,000 on the annual average.In 1817 the Irish Treasury was abolished, the exchequers of the two countries were united, the British and Irish Revenues were paid alike into the one exchequer. The Irish local expenditure was defrayed from that exchequer under the check of the English Treasury, and the United Parliament imposed and repealed Irish taxes. From 1817 for many years Ireland fared badly. Her representatives in Parliament served her ill. Tories, Whigs, and independent members failed alike in making England understand Irish needs, and the British Parliament neglected Irish interests. The years between 1817 and 1842 mark the first period of Irish financial history dating from the war. It was a period of stagnation. Both countries required time to recover from the calamity incident to war; but the recovery would have been more rapid, even under heavy taxation, had not progress been retarded by the unwise legislation of protection, which fettered enterprise and restricted commerce. This evil, however, injured Great Britain more than Ireland. In 1824 the separate Customs Departments of the two countries were abolished. The trade between Great Britain and Ireland was treated as coasting, and from that time no official record has been kept of goods exported from and imported into both countries.In 1817 the taxes levied in England were similar to,[pg 117]but not identical with, those levied in Great Britain. Ireland was exempt from many taxes levied here, and in some cases, such as spirits, she paid a lower rate of duty. A period of profound peace enabled the government to remit taxation; but those remissions were chiefly made in deference to British interests, and in making them Irish interests were little considered. The truth of this statement is illustrated by the Revenue Returns. The estimated“true”100Revenue of Great Britain fell from £51,500,000 in 1820 to £46,250,000 in 1840, although population, and with it consumption, had increased. The“true”Revenue of Ireland in the same period rose from £5,250,000 to £5,500,000. But it must be added that many of the taxes remitted were taxesnot levied in Ireland. In respect to them Great Britain had to a certain extent a claim to prior consideration.The second period of financial history extended from 1842 to 1869, a period of rapid recovery and of great prosperity in Great Britain, but not so in Ireland. Famine fell upon her in 1846, and thinned her population, followed by emigration, which showed how poverty pressed upon the poor, while the Fenian movement of 1866 showed how widespread was the spirit of unrest. A highly cultivated Liberal statesman was Lord-Lieutenant during several years of the period. An interesting diary which he kept leaves the impression that the leading statesmen of the day were not reading the signs of the times, or gauging the gravity of a growing movement. This was hardly the period to choose for increasing the taxation of Ireland, nevertheless in 1853 Mr. Gladstone extended the[pg 118]Income-tax to Ireland, counterbalancing it in part by the remission of loans granted to Ireland during the famine—a very insufficient compensation. But the Income-tax did not touch the poor, and as I have pointed out there was no reason why the wealthy and comparatively well-to-do classes in Ireland should not contribute to the public expenditure like their brethren in Great Britain. This plea, however, does not extend to the spirit duties which during 1853 Mr. Gladstone and Mr. Disraeli raised to the level of the spirit duties in Great Britain. That tax undoubtedly was paid in great measure by the poorer classes.In one direction there was improvement. In 1842 Sir Robert Peel acceded to power, and inaugurated at once the policy of liberating trade which has conferred such benefits on Great Britain, and in a minor degree on Ireland. The era of prosperity which followed the adoption of the Free Trade policy increased greatly the consuming power of the people, and enabled Mr. Gladstone to largely reduce duties on the principal articles of food consumed by the poorer classes. For example, he and his successors reduced the tea duties from 2s. 2d. to 6d. and abolished the sugar duties. This was undoubtedly the true method of remedying the evil which underlies the plea that identical taxation wronged Ireland. I have shown that that evil was caused not by identical taxation, but by heavy taxes on food, which oppressed alike the poor of Ireland, and the more numerous poor of Great Britain. The policy adopted met the local grievance, by modifying if not removing the general grievance, and this remedy of the general grievance was only rendered possible by the growing prosperity of Great Britain. The poor of Ireland had therefore their full share of the benefit caused by the prosperity of Great Britain. The historian[pg 119]must give full weight to this consideration when he criticises the increase of the Irish spirit duty. There can be little doubt as to the verdict of history, if the choice lies between cheap whisky and dear food on the one side, and cheap food and dear whisky on the other. Between 1860 and 1900 the Customs and Excise duties which were reduced exceeded the like duties increased by some £22,000,000 a year, and Ireland had her share in the reduction.In 1864 a Committee of the House of Commons inquired into the taxation of Ireland, but it led to no useful result. In other directions the monotony of neglect continued. The Government and Parliament paid little or no attention to Irish needs. Ireland was the Cinderella of the three kingdoms, and fared accordingly.The third period ranged from 1869 to 1896. It might be termed the Home Rule period, for it includes the two Home Rule Bills of Mr. Gladstone, but it includes also other great measures relating to Ireland. Indeed, during the whole period of seventeen years Ireland engrossed, to a great degree, the attention of Parliament. The change was very remarkable. Up to 1869 England was indifferent to, or bored by, Ireland. She was stupid. She did not trouble herself to learn Irish wants, and she could not understand the spirit of Irish nationality. The Devon Commission, a Conservative Commission, appointed by a Conservative Minister, Sir Robert Peel, reported that 2,500,000 people in Ireland were on the verge of starvation, and gave warning of the evils, the perils, inherent in the Irish land system. England took no notice of either warning. The famine answered the first in cruel fashion. The second was pigeon-holed. Wise in her own Home administration, wise of late years in her[pg 120]Colonial administration, she knew no remedy for Ireland but force, and force is no remedy. She accepted, almost as matters of ordinary administration, Coercion Acts which marked with a black stigma most years of the century, unable to see that that fact alone was a disgrace to her statesmen, her Parliament, and her people.Early in the Home Rule days I heard a great English statesman say:“The first duty of a Government is to bring the people into agreement with the law; till it does that it fails in its first duty, and England has hitherto failed to bring Ireland into agreement with the law”—a truth well and forcibly expressed.In 1869 a man of great power and eloquence, wide views, and firm resolve became Prime Minister. He realised the habitual injustice of England to Ireland, and he saw the perils impending. By his strength of will he forced an unwilling country and an indifferent Parliament to devote its serious attention to Irish questions. He disestablished the Church. He was defeated on Irish education, but he laid the foundation of a land settlement by conferring on the tenants, in spite of strenuous opposition from the Tories, the rights of fair rents, fixity of tenure, and free sale, and his measures were marked by an earnest desire to deal liberally with Ireland to the utmost extent consistent with equity to the British tax-payer. Finally, when Ireland sent to Westminster more than four-fifths of her representatives pledged to Home Rule, he accepted this expression of the national will, and became a convert to the principle of Home Rule. I deal later in detail with his two Home Rule Bills of 1886 and 1893, which were defeated, and I need only here deal with finance of the third period, apart from the provision of the Home Rule Bills.[pg 121]Before Mr. Gladstone was converted to Home Rule, Home Rule finance attracted little attention. That eminent statistician, Sir Robert Giffen, made, indeed, in 1885, a singular suggestion to theStatistnewspaper, viz., that the Irish landlords should be bought out at the cost of the Imperial Exchequer, and that the rent charge, which would then be payable by the purchasing tenant, should be given to an Irish authority, in lieu of payments from the Exchequer, for the internal administration of Ireland.Again, Sir Robert wrote an article in theNineteenth Century Review, March, 1886, a few weeks before the introduction of the first Home Rule Bill, to show how unimportant, from a financial point of view, Ireland had become to us, and to suggest the expediency of devising some form of Government under which the special needs and circumstances of that country would receive more and better attention than they did under the existing arrangements. His figures might be, in some instances, doubtful, perhaps even incorrect, but it can hardly be denied that he made good his point. Sir Robert was, we see, greatly in advance, not only of the ordinary Briton, but of financial experts generally, both as regards the land question and also that of the Government of Ireland.Perhaps the most able thinker and writer on economic questions in the second half of the nineteenth century was the late Mr. Bagehot, and, in proof of the general indifference to Irish questions in England, it is notable that his collected works, ranging over a wide field in politics and literature, contain no paper on the government or condition of Ireland. Yet he had witnessed O'Connell, the famine, the depopulation of Ireland, the Committee on Irish Taxation, and the Fenian outbreak in 1866.[pg 122]In 1890 Mr. Goschen, as Chancellor of the Exchequer, in the Conservative Government, moved for a Committee of the House of Commons to consider the financial relations of England, Scotland, and Ireland. The Committee was instructed to inquire into the equity of their financial relations in regard to the resources and population of the three kingdoms. It had hitherto been much discussed whether Ireland could be regarded as a separate financial entity from the rest of the kingdom. The Irish Taxation Committee of 1864, of which Sir Stafford Northcote and Mr. Lowe were prominent members, had refused to admit the principle of such separate entity, and that had been generally the Conservative contention. But, in the reference to the Committee of 1890, the Conservative Government accepted the principle. The Home Rule Bills of 1886 and 1893 were, of course, based upon it. Thus, 1890 marks an important advance in the discussion, and thenceforward, by consent of both parties, the separate“entity”was established.After the rejection of the second Home Rule Bill the Liberal Government appointed a Royal Commission to inquire into the financial relations of the two countries and their relative taxable capacity. The Report of this Commission deserves attention, because it was exhaustive in its inquiries, because the information it laid before the public has since that time been generally used in discussion, and because many of the recommendations made were far-reaching and suggestive. There was, as might be expected, great difference of opinion. The Conservative members and the Nationalist members made their several Reports. Attention, however, may be directed to one of the Reports, because it received the concurrence of the Nationalist members and of three English members—one of whom was a very[pg 123]high, if not the highest, financial authority in the City of London, the two others retired Civil Servants who had been at the head of two great Departments of the State. Their conclusions were as follows:“(1) That Great Britain and Ireland must, for the purpose of this inquiry, be considered as separate entities.“(2) That the Act of Union imposed upon Ireland a burthen which, as events showed, she was unable to bear.“(3) That the increase of taxation laid upon Ireland between 1853 and 1860 was not justified by the then existing circumstances.“(4) That identity of rates of taxation does not necessarily involve equality of burthen.“(5) That whilst the actual tax revenue of Ireland is about one-eleventh of that of Great Britain, the relative taxable capacity of Ireland is very much smaller, and is not estimated by any of us as exceeding one-twentieth.”The three English members above mentioned presented a separate Report, recording at length their views on the questions referred to the Commission. I call attention to it, because reference is frequently made to it in the Report of Sir Henry Primrose's Committee, recently appointed to advise the Government upon the new Home Rule Bill.They pointed out that the whole taxation of Ireland increased from £2,900,000 in 1820, to over £6,600,000 in 1893, and that by far the larger part of this increase was derived from taxes on articles of consumption which fell most heavily on the poor; that the increase resulted only temporarily in an increase in the contribution to common expenditure which rose from £3,691,000 in 1820 to £5,396,000 in 1860, to fall to £1,966,000 in 1893, for the greater part of the increase had been absorbed in increase of Irish civil expenditure. This local expenditure amounted in Ireland to 19s. 7d. per head, while in Great Britain it only amounted to 11s. 9d. If the cost of administering Ireland had been reduced to the like[pg 124]cost in Great Britain, a saving of nearly £2,000,000 would have been realised.They thought that the expenditure in Ireland was conducted on a scale totally unsuitable to that country, that the industrial taxation, borne in Ireland mainly by the consumers of dutiable articles, was heavier than the masses of the Irish people ought to bear, that Irish taxation ought not to exceed one twentieth part of taxation of the United Kingdom, but they doubted whether Great Britain would consent to alter her whole system of taxation to meet the evil to Ireland. They objected totally to seeking a remedy in increased grants and doles, and they suggested that Ireland should levy her own taxes and provide for her own expenditure.Lastly, in answer to the objection that Ireland might impose new Customs duties, they held that to be unlikely, since Ireland rather than Great Britain would suffer by such a policy, because the market of Great Britain is of greater importance to Ireland than that of Ireland to Great Britain.The Royal Commission reported in 1896. The question of the financial relations remained then in practical abeyance till 1907. In that year the Government of Sir H. Campbell-Bannerman proposed to establish an Irish Council under the Lord-Lieutenant entrusted with the control and direction of certain administrative Departments. A sum was to be charged on the Consolidated Fund to enable the Council to meet the expenditure of the transferred Departments. This sum was fixed for the first five years at £4,164,000. This was simply a measure to decentralise administration, and to admit Irishmen to a share in Irish administration. It did not, however, obtain support in Ireland, and in consequence it was not pressed.We come now to the last stages in the story of Irish[pg 125]finance. The Government of Mr. Asquith decided to introduce the Third Home Rule Bill in the session of 1912, and in 1911 they appointed a Departmental Committee under Sir Henry Primrose to advise them. The able report of that Committee has been laid before Parliament, and it brings our information on the financial relations up to the latest date:They state the“true”Irish Revenue in 1895-6 to have been £8,034,000.They estimate“true”Revenue 1910-11 at 10,300,000.Increase £2,266,000.The“true”local expenditure in Ireland, 1895-6, £5,938,000.The“true”local expenditure 1910-11, 11,344,000.£5,406,000.Thus whereas Ireland in 1895-6 made a contribution of £2,066,000 to Imperial Expenditure, in 1910-11, not only did she make no contribution to Imperial Expenditure, but the British taxpayer was called on to contribute more than £1,000,000 towards Irish local expenditure. But Irish local expenditure is increasing under the heads of old-age pensions, land purchase, and expenses of the Government which will be established in Ireland under Home Rule. The Committee in consequence estimate:The Irish local expenditure in 1913-14 at £12,400,000.The Irish Revenue at 10,350,000.Deficit £2,050,000.[pg 126]for which provision must be made in the forthcoming measure.In order to meet the existing deficit, the Committee suggest that the British Exchequer should take over liability for all old-age pensions which had been actually granted at the date when the Home Rule Bill comes into operation. They estimate that liability at £3,000,000 a year, gradually, of course, diminishing. If necessary, the liability in whole or part of the Irish Constabulary Pensions (£400,000) might also be transferred to the British Exchequer. They advise that the obligation of Ireland to contribute to the Imperial expenditure should be affirmed, but that a settlement of the amount of the contribution should remain in abeyance; and lastly, that the guarantee of the Imperial Exchequer in respect of the Land Stock should remain, but that means should be taken to secure regular payment of the sum due from Ireland to the National Debt Commissioners.I shall contrast later the recommendations of the Committee with the actual provisions of the Home Rule Bill.I will now compare the finance of the three Home Rule Bills which have been submitted to Parliament, those of 1886, 1893 and 1912.The Bill of 1886Mr. Gladstone made it an essential condition of his plan that there should be an equitable distribution of Imperial charges and that Ireland should pay her fair proportion to the common expenses of the Empire. In 1885 that contribution was represented by the surplus of Irish Revenue remaining after deduction of the expenditure in Ireland on Irish services. He calculated in 1886 that the surplus above described[pg 127]provided a contribution by Ireland to Imperial expenditure equivalent to £2 where Great Britain contributed £23. This proportion contrasts with Mr. Pitt's arrangement in 1800 that Ireland should pay £2 where Great Britain paid £15. Mr. Gladstone proposed in future that where Great Britain paid £28, Ireland should pay £2, a concession of moment to Ireland, and he supported it on the following ground: he measured the taxable capacity of the two countries by (1) the Income-tax returns (2) the death duty returns, and (3) the valuation of property. Income-tax gave a proportion of £38 to £2, but he held Income-tax an imperfect test, because it was paid in Ireland on a lower valuation than in Great Britain and because many Irishmen receive dividends on securities which pay Income-tax in England. He thought that £34 to £2 would be nearer the true proportion. He held the death duties to be a better test and they showed a proportion of £26 to £2, while the valuation, lower in Ireland than in Great Britain, gave a proportion of £24 to £2. Arguing from these premises, he held that his proposed contribution of £2 to £28 was an equitable and even a generous arrangement, justified by the necessity of starting the Irish Legislative body with a balance to its credit.A table is given showing how the contribution was appropriated.The amount to be contributed by Ireland to Imperial expenditure being thus ascertained, the more difficult part of the problem remained, viz., how to provide the fund out of which the contribution would be payable and how to secure its payment. The plan which commended itself to him as insuring the fiscal unity of the three kingdoms, and giving absolute security to the British Exchequer, left the imposition and collection[pg 128]of Customs and Excise duties with the Imperial Government, and under Imperial control. This plan was to be carried into effect in the following manner. The Customs and Excise were to be levied under Acts of the Imperial Parliament, and were not to be subject to the control of the Irish Legislature. The Irish Legislature with that exception could impose taxes on Ireland. Under the Land Purchase Bill, which was to be introduced concurrently with the Home Rule Bill, a Receiver-General was to be appointed, into whose hands the Customs and Excise Duties and other taxes were to be paid, including taxes imposed by the Irish Parliament. The Imperial Receiver-General, having thus in hand all Imperial and local taxes levied in Ireland, would in the first instance pay out of them the Imperial charges. Apart from the Imperial charges there were other charges, strictly Irish, such as Judges' salaries, pensions, the salaries of existing civil servants, for the security of which the Bill provided. The Bill bound the Irish Parliament to impose taxes sufficient to meet such charges, and ordered them to be paid by the Receiver-General. The Receiver-General was to keep an Imperial and an Irish account. The Irish charges would of course be paid from the latter account. He was to carry the Customs and Excise Duties in the first instance to the Imperial account, and the local taxes to the Irish account, transferring to the Irish account the surplus of Custom and Excise, after payment of the Imperial contribution. He was subsequently to pay the balance remaining on the Irish account to the Irish Exchequer.An Imperial Court of Exchequer was established in Ireland to watch over the observance of the Act, and all Revenue acts were to be tried and defaults punished in that Court. The Bill further enabled the Irish[pg 129]Parliament to take over the Irish Post Office, if it should so desire, though it was Mr. Gladstone's opinion that it would be for the convenience of both countries if the Post Office were to remain under the control of the Postmaster-General.The Imperial contribution payable by Ireland was not to be increased for thirty years, though it might be reduced if the Imperial charge for Army, Navy and Imperial Civil expenditure for any year should be less than fifteen times the contribution paid by Ireland. In that case one-fifteenth of the diminution could be deducted from the Imperial contribution.Existing Civil Servants were retained in their offices at existing salaries. If the Irish Government were to desire their retirement, they would be retired on pensions. On the other hand, if at the end of two years the officers themselves desired to retire, they could do so, receiving pensions on the usual abolition of office scale.Supposing the Home Rule Bill to have become law the account of Irish finance would have stood thus:Receipts.Imperial taxes:Customs £1,880,000Excise £4,300,000Total £6,180,000Local taxes:Stamps £600,000Income-tax 6d. £550,000Total £1,150,000Non-tax revenue:Post Office £1,020,000Total: £8,350,000Expenditure.Contributions to Imperial expenditure on basis of one-fifteenth of Imperial expenditure:Debt charges £1,466,000Army and Navy £1,666,000Civil charges £110,000Total £3,242,000Sinking Fund on one-fifteenth of capital of debt £360,000Constabulary101£1,000,000Local Irish Civil charges £2,510,000Collection of revenue:Imperial taxes £170,000Local taxes £60,000Non-tax revenue £604,000Total £834,000Surplus £404,000Total £8,350,000[pg 130]When it is said that in 1885-1886 Ireland was paying to Imperial expenditure in the proportion of £2 to £23, that proportion was calculated on the whole gross Imperial expenditure, whereas Mr. Gladstone calculated the proportion of £2 to £28 on a military expenditure materially cut down, for he excluded from it charges which ought strictly to be called war charges, a modification very favourable to Ireland and reducing considerably her true contribution.He made another concession of great importance. He proposed to credit Ireland with the entire receipts levied in Ireland, but that was not a true test of the amount of taxation paid by Ireland. There are goods which pay duty in Great Britain, but which are consumed in Ireland, so conversely there are goods which pay duty in Ireland but are consumed in Great Britain. For instance, spirits, porter, and tobacco are largely exported duty paid from Ireland and are consumed in Great Britain, and Mr. Gladstone calculated that the excess of duties so paid in Ireland on goods consumed in Great Britain amounted to no less a sum than, £1,400,000 a year. That is of course British Revenue, and in striking a true account between the two countries it should be credited to Great Britain, not to Ireland. The Home Rule Bill, however, gave it to Ireland, a direct grant of £1,400,000102from Great Britain to Ireland, and if that amount be subtracted from the contribution of £2 to £28, it leaves the proportion £2 to £52 instead of £2 to £23.If we strike a balance between the contributions to be paid by Ireland to Great Britain under the Home Rule Bill, and the grants to be paid to Ireland, we shall arrive at the following result:[pg 131]Contribution from Ireland to Great Britain £3,602,000Grants from Great Britain to Ireland:Duties paid in Ireland on goods consumed in Great Britain £1,400,000Grant toward the Constabulary £500,000Total: £1,900,000Net contribution from Ireland to Imperial purposes (or nearly in the proportion of 2 to 60) £1,702,000If the Imperial contributionactuallypaid by Ireland in 1885 be equated on like principle, the proportion stated above at 2 to 23 will be similarly reduced.The Bill was defeated in the House of Commons, and therefore its provisions did not undergo the test of scrutiny in Committee.The provisions of this Bill illustrate the difficulties which attend the financial severance of the Irish from the British Government. High authorities thought at the time that Mr. Gladstone, in 1886, should have proceeded in the first instance by way of Resolutions establishing the principles upon which the Bill would be subsequently founded, and there is much to be said for that view. The main principles of the measure would have been established in the first instance after free and full discussion, and the details would have been adapted later to the principles then laid down. Mr. Gladstone himself, in his reply upon the Second Reading (June 7th, 1886,) indicated a course somewhat similar in its result. He said:“If an interval is granted us, and the circumstances of the present session require the withdrawal of the Bill, and it is to be re-introduced[pg 132]with amendment at an early date in the autumn, it is our duty to amend the Bill with every real amendment and improvement, and with whatever is calculated to make it more effective and more acceptable for the attainment of its end.”It must be remembered that there had been no sufficient time for the collection of the data on which an effective measure could be founded, and the collection of those data was a task of great difficulty, for the Departments did not possess them. The Government came into power in February, and the Bill was introduced on April 6th; thus there was no real opportunity for testing the value of the data collected in that short interval, or for gauging beforehand objections both to the principles and details of the scheme adopted, and experience proved that some of the objections were valid, though probably not insurmountable.The scheme was based on two principles which would be especially liable to criticism:(1) For thirty years Ireland was to contribute to Imperial charges as they then existed a fixed annual sum.(2) The Customs and Excise duties ascollectedin Ireland (i.e., not the“true”revenue) were to be credited to the Irish Government.The first of these principles would have been closely scrutinised in Committee, but probably in the main it could have held its ground. In the first place, it reduced considerably the Imperial contribution, consisting hitherto of the balance of revenue after payment of Irish charges. As Mr. Gladstone pointed out, the amount of military expenditure, on which the proportion of 2 to 28 was calculated, was considerably reduced, and Great Britain had to pay the difference, and so far the change was favourable[pg 133]to Ireland. In the second place, Irish expenditure was increasing, and under the existing system the balance of Irish revenue, constituting the Irish Imperial contribution, was, as the sequel lamentably proved, diminishing, and, a result not foreseen at the time, the wasteful and unsound finance which financial partnership entailed upon Ireland ere long extinguished it. The grant of autonomy was an effective check on this continued waste, otherwise the contribution of a fixed quota would soon have reduced the Irish Government to insolvency.The grant to Ireland of thecollectednot thetrueduties of Customs and Excise was open to grave objection. It presented her with the duties levied in Ireland on articles consumed in Great Britain, but if at any time the habits of the people, such as decrease in drinking, reduced this practical gift—estimated at £1,400,000, or if changes in law or practice transferred the payment of these duties from Ireland to Great Britain, the financial equilibrium of the scheme would be destroyed. This was a real danger as under the bonding system the British trader could, if he pleased, pay these duties in Great Britain.The decision that Ireland was not to be represented at Westminster led to a clumsy device for giving Ireland a voice in the Imperial Parliament when Irish interests were involved. This would be the resource if a war contribution had to be obtained.The scheme of 1886 can only, therefore, be regarded as a draft to be tested and modified in discussion and to form the basis of a revised and amended scheme.The Bill of 1893Mr. Gladstone introduced the second Home Rule Bill in February, 1893. In the discussion he pointed out[pg 134]how incredibly wasteful the method of governing Ireland was; the Irish Civil Government grants, which had averaged from 1833 to 1837 £762,000, had risen between 1888 and 1892 to £4,042,000, and the cost of local government in Ireland was twice as much per head as the like cost in England.Under the scheme of 1886 Irish representatives were not to sit in the Imperial Parliament, but the Government found that under existing financial arrangements there must be financial connection, unless Parliament was prepared to face a different system of trade laws between the two countries, and provision must be made for that connection. Mr. Gladstone, therefore, reversed the decision of the Government in 1886. He proposed to retain Irish representatives at Westminster, reduced in number to 80. They were not to vote on purely British questions, but in his opinion it would be difficult to make that distinction as far as the mass of business was concerned. The Irish representatives would not vote on any tax which was not to be levied in Ireland or on any grant of money for other than Imperial purposes as scheduled in the Bill. By this means Ireland would have a voice, if emergency, such as war, rendered fresh taxation necessary.In the interval between 1886 and 1893 knowledge had been gained to some extent as to what constituted the“true”revenue of Ireland, and the Inland Revenue thought it possible to levy in Great Britain the Excise duties collected in Ireland on articles consumed in Great Britain andvice versa. These Excise duties represented the greater part of the sum of £1,400,000, previously described as the difference between duties, so to speak, belonging to Ireland and duties collected in Ireland, a difference estimated in 1893 at £1,800,000. If Ireland retained that difference, as contemplated by the scheme[pg 135]of 1886, it was equivalent to a grant from Great Britain to Ireland. On the other hand the Customs were not able to make the separation thought possible by the Excise.With these facts before him Mr. Gladstone made an entire change in the financial scheme. As in 1886, he held that Ireland must make a proper contribution to Imperial expenditure, but he abandoned the principle, adopted in 1886, of obtaining that contribution by a quota of one-fifteenth of Imperial expenditure, that is a contribution of £2 by Ireland to £28 by Great Britain. He retained instead the whole of the Customs revenue collected in Ireland as the Irish contribution. He proposed that Great Britain should pay any excess of the charge of constabulary over £1,000,000, out of the contribution, the balance representing Ireland's share of Imperial expenditure. He justified the change on the ground that as the management of trade was reserved to the Imperial Government, the management of the Customs so closely connected with trade should be Imperial also. The Customs were expected to produce a net revenue of £2,370,000. He estimated it as equivalent to about 4 per cent. of Imperial expenditure whereas the actual contribution was about 12 per cent. The contribution would, of course, vary as the net Customs revenue rose or fell. On the other hand the Irish Government were to take all the rest of the“true”revenue of Ireland and to defray out of it all local Irish expenditure, including a fixed sum of £1,000,000 towards the cost of the constabulary and Dublin police, which were temporarily to remain Imperial services. Customs and Excise duties were to be regulated and collected by the Imperial authority which was also to fix postal rates; but all other taxes were to be imposed by the Irish Legislature.[pg 136]The interests of existing judges, and existing civil servants, and of her constabulary, which remained under the control of the Viceroy, were secured. The constabulary would be gradually replaced by a force under the control of the Irish authority. Two Exchequer Judges would be appointed to guard observance of the Act, and appeals lay to the Privy Council which would try on the motion of the Viceroy, or of the Secretary of State, any question as to invalidity of an Irish Act. These arrangements might after fifteen years be subject to revision in pursuance of an address to Her Majesty from the House of Commons or the Irish Legislative Assembly.The receipts and expenditure of the Irish Government under this scheme would have stood as follows:Receipts.(1) Excise true revenue exclusive of licences £3,220,000(2) Local taxes:Stamps, Income-tax, Excise licenses £1,495,000(3) Postal revenue £740,000(4) Other non-tax revenue £205,000Total £5,660,000Expenditure.(1) Civil Government charges, except Constabulary £3,210,000(2) Collection of Inland revenue £160,000(3) Postal service £790,000(4) Contribution to Irish Constabulary £1,000,000Total £5,160,000Surplus £500,000The Bill passed the House of Commons, but the financial clauses were greatly recast in Committee. The changes originated in the fact that the Inland revenue had overestimated the“true”revenue of Excise by a very considerable sum, and the error would have reduced to an insignificant sum the free starting balance for the Irish Government provided in the original scheme. Mr. Gladstone decided in consequence not to keep the Customs revenue as Ireland's contribution to Imperial expenditure, but to let that revenue fall into the common stock of Irish revenue and to[pg 137]take out of that common stock one third of the“true”Irish revenue. This third was to cover Ireland's contribution to Imperial expenditure together with one third of the cost of the Irish constabulary and Dublin police. Ireland was to meet all her local charges out of the remaining Irish revenue. The Imperial Government was to retain for six years the imposition and collection of all taxes; the Irish Government having only supplementary powers of taxation. At the end of six years the Irish contribution was to be revised, and Ireland would be empowered to impose taxes other than Customs and Excise, and she would collect taxes, the Customs alone being retained by the Imperial authorities. The“true”revenue derived from the Customs and Excise was to be ascertained by a Joint Committee of the Treasury and the Irish Government. The financial result of these changes is shown in the following figures:[pg 138](1) Customs:Revenue collected in Ireland £2,136,000Addestimated allowance for duties paid in Great Britain on articles consumed in Ireland £266,000Total estimated Irish revenue £2,402,000; Amount Payable to Irish Exchequer Two-Thirds £1,601,000(2) Excise:(a) Spirits. Revenue collected in Ireland £4,112,000Deductduties ascertained to be paid in Ireland on spirits consumed in Great Britain £1,872,000Total £2,240,000(b) Beer. Revenue collected in Ireland £811,000Deductestimated allowance for duties paid in Ireland on beer consumed in Great Britain £187,000Total £624,000(c) Licence duties collected in Ireland £194,000Total estimated £3,058,000; payable to Exchequer £2,039,000(3) Stamp duties collected in Ireland £707,000 estimated, £471,000 payable(4) Income-tax collected in Ireland £552,000 estimated, £368,000 payable(5) Crown Lands amount estimated to be due to £65,000 estimated, £43,000 payableTotal £6,784,000 estimated, £4,522,000 payable(6) Miscellaneous Irish Revenue £138,000 estimated, £138,000 payableTotals £6,922,000 estimated, £4,660,000 payableIrish Expenditure, 1892-3.(1) Civil Government charges (exclusive of Constabulary and salary of Lord-Lieutenant, but inclusive of local charges met out of local taxation account) £3,123,000(2) Constabulary charges (£1,459,000) two-thirds of £973,000(3) Estimated deficit on postal account £52,000Total £4,148,000Surplus £512,000Total £4,660,000[pg 139]The schemes of 1893 again illustrate the difficulties inherent in a severance of the two Exchequers. The revise left more points open for difference between the two Governments, and it had the serious defect of revision after the short interval of six years.The original scheme was far preferable. The retention of the Customs as the Imperial contribution reduced opportunity for conflicts of opinion to a minimum, and the interval of fifteen years before revision left ample time for the new Irish Government to put its house in order. I venture to think it would have been wise to make good the error in estimating the“true”revenue of Ireland (which invalidated the scheme) by an Imperial Grant, at all events for a time. Under the scheme the Imperial Government provided £500,000 for the constabulary. If it had granted £300,000 or £400,000 more, the net Imperial contribution derived from the Customs would have been reduced to say £1,400,000, not a large sacrifice for the end in view—reconciliation with Ireland.The Bill as amended passed the House of Commons but was thrown out in the Lords. This Parliament refused to accept Mr. Gladstone's proposals to give Ireland Home Rule, and nineteen years elapsed before a third Home Rule Bill was submitted to Parliament.In the three schemes of 1886 and 1893 the Imperial contribution was very similar, perhaps somewhat larger in 1893. In all three schemes, also, the net gain to the British Exchequer was reduced by the grant from that Exchequer of £500,000 to the cost of the Irish Constabulary.The difficulty of devising a financial scheme fairly simple and workable, which was experienced in 1886 and 1893, has been disappointing, but not discouraging. It was inevitable but it can be surmounted.[pg 140]The Bill of 1912In 1911, Mr. Asquith pledged the Government to take up again in the ensuing session the question of Home Rule. In 1910 the Conservative Party, at least a considerable part of it, in presence of a probable dissolution on the Parliament Bill, showed, as in 1885, a disposition to coquette with Home Rule, but the movement came to nothing, and the Party settled into determined opposition to the Home Rule policy, submitting themselves to the lead of the Ulster extremists, who preached sedition in no measured terms. In other respects, the prospects of Home Rule are fairly favourable. England, apart from Scotland, Wales, and Ireland, still returns a majority opposed to Home Rule, but public opinion does not show any signs of vigorous or violent opposition as in 1886. The Liberals, the Irish, and the Labour Party are united in its favour. The passing of the Land Acts is rapidly removing the agrarian evil, and the landlords have not the same cause for anxiety as formerly. The grant of Local Government is working well, and in spite of much poverty the condition of the people is improving. Lastly, the passing of the Parliament Act has made it possible, in spite of opposition in the Lords, to pass a Home Rule Act within the limits of the present Parliament.On April 11th, the Prime Minister introduced the Government Bill. He regarded it as the first step in a comprehensive policy of devolution. It retains permanently at Westminster 42 Irish Members, so that Ireland will have a voice, not only on questions in the Imperial Parliament which concern Ireland, but on questions of Imperial interest, such as war and peace. The Bill of 1886 reserved to the Imperial Parliament[pg 141]certain questions. The Bill of 1893 also made necessary reservations, though its tendency was towards more complete autonomy; but in the interval between 1893 and 1912 great changes have taken place, and the Imperial Government finds itself hampered by new liabilities. The Old-Age Pension Act, the Land Purchase Act of 1903, the National Insurance Act, and Labour Exchanges have added very greatly to Irish expenditure. On the other hand, the contribution to Imperial expenditure, unluckily for the British taxpayer, has disappeared. The problem is, therefore, a new one, and the Government solves it, at all events for the present, by keeping in its own hands a large number of Services, as will be seen hereafter.In 1885-6 Ireland contributed a surplus of considerably more than £2,000,000 to Imperial expenditure; in 1895-6, £2,000,000.103The Government estimates the true revenue of Ireland in 1912-13 at £10,839,000; and the expenditure on Irish services at £12,354,000. Therefore the new Irish Government will start with a deficit of £1,515,000. That deficit is now charged on the British taxpayer. It results from British management of Irish finance, for, on the one hand, Irish revenue is limited by the relatively limited means of Irish taxpayers; on the other hand, England has regulated Irish expenditure on the lavish scale of her own expenditure.The Government lays down certain principles on which Home Rule finance will be based:(1) Ireland must manage her own finance and[pg 142]must have powers of taxation consistent with leaving to the Imperial Government a field of taxation sufficiently wide for Imperial needs.(2) The Budgets of the two countries must not hamper each other.(3) Ireland must bear the cost of any increase arising hereafter on Irish services, but she must benefit by economies in those services.(4) She must have power to reduce taxation if her economies permit it.The scheme which will give effect to these principles may be described as follows.In the first place the Imperial Government retains in its own hands the imposition and collection of all Irish taxes, the Post Office duties alone excepted, which will be transferred to the Irish Government.Normalincrease in Irish Revenue will not be applied to Irish services. It will reduce the deficit. The Irish Government, however, will have supplementary powers of taxation.An Irish Exchequer and an Irish Consolidated Fund will be created, and an Irish Auditor-General appointed. Further, a joint Exchequer Board, consisting of Treasury and Irish officers, will adjust the accounts between the two Exchequers, based upon what it declares to be the actual cost of Irish services when the Act comes into operation. If the Irish Government, using its supplementary powers of taxation, increases or reduces taxes, the Exchequer Board will vary accordingly the sum to be paid by the British to the Irish Exchequer on account of Irish expenditure, and it will determine the effect of any other changes taking place in the relations between the two Exchequers. Lastly, if and when normal increase of Irish revenue puts an end, during a period of[pg 143]three years, to the existing deficit, the Exchequer Board will make a report to that effect, and the financial arrangement between the two countries will then be reconsidered in order to secure a fair contribution from Ireland to Imperial expenditure.The Government, as I have stated, estimates the revenue of 1912-13 at £10,839,000. That sum represents the whole“true”revenue of Ireland, viz., taxes and miscellaneous, £9,485,000; Post Office Revenue, £1,354,000. The Imperial Government adds to this revenue of £10,839,000 a free gift of £500,000 at the cost of the British taxpayer, in order to give the Irish Government a fair start. The total Irish income in the year 1912-13 will therefore be £11,339,000.On the other side of the account, the Imperial Government retains in its own hand various Irish Services, termed in the Bill“Reserved Services,”described later. It transfers from the British to the Irish Exchequer the sum allotted to Irish Expenditure (outside the Reserved Services), estimated in 1912-13 at £5,462,000, the cost of the Postal Service £1,600,000,104and £500,000, the free gift mentioned above, making a total transfer of £7,562,000.If in the future the sum of £5,462,000 allotted to Irish Expenditure and the free gift of £500,000 are exceeded, the Irish Legislature must provide the necessary ways and means.The transfer of £7,562,000 from the British to the Irish Exchequer leaves a balance on the British Exchequer on the Irish Account of £3,777,000105free[pg 144]to that extent to meet the charge of the Reserved Services.These Reserved Services are:(1) Old-age Pensions £2,664,000(2) National Insurance Labour Exchange £191,500(3) Land Purchase £761,000(4) Constabulary £1,377,500(5) Collection of Revenue £298,000Total £5,292,000Therefore the excess of Irish Expenditure in 1912-13 over Irish Revenue as provided results in a deficit of £1,515,000 payable by the British taxpayer, and if the free gift of £500,000 by the British taxpayer included in the provided revenue be added, the total charge on the British taxpayer in 1912-13 on account of Irish Expenditure is £2,015,000.This annual gift of £500,000 is after three years to diminish yearly by £50,000, until a minimum of £200,000 is reached, which will eventually represent the gift of Great Britain to Ireland, until prosperity or good management enables Ireland to pay her own way, and at the last to make a contribution to Imperial Expenditure.The Government estimates a normal growth in Irish Revenue of £200,000 a year, which, to the extent it is realised, will reduce the deficit payable by the British taxpayer.The Imperial guarantee on Irish Land Stock is to continue in full force.Effect of Future ModificationIf the Imperial Parliament increases or reduces taxation, the change will not affect the Irish Budget, for the transferred sum will remain unaltered.[pg 145]The Irish Parliament will have power to reduce taxes levied in Ireland. It will also have power to impose taxes. It may add at will to Excise duties, and if so the Customs duties on beer or spirits must vary with the Excise duties. It may levy new duties which do not interfere with the Imperial system of taxation—for instance, a house duty, or establishment licences. It may add to Income-tax or death duties, and also to Customs duties (other than beer and spirits) provided that the addition does not exceed 10 per cent. of their yield. This 10 per cent. resembles the“centimes additionels”which are levied in foreign countries on direct taxes, and are applicable there to local expenditure. But the Irish Parliament must not trench on Imperial taxes. This increase or reduction of Irish duties will not affect the British Exchequer, but it will increase or diminish the“sum transferred”to the Irish Exchequer.The Irish Parliament will not have power to tax articles not subject to Imperial taxes for the time being. If in the exercise of its power it differentiates Customs or Excise duties in the two countries, there will be a differential duty on such goods passing from one to the other.Public Works Loans granted before the passing of the Home Rule Act will remain under the management of the Imperial Government. Future loans will be managed by the Irish Government.The Irish Parliament will have power to raise loans on the security of the“transferred”revenue, sufficient provision being made for interest and sinking fund. If the Irish Government desires it, the Exchequer Board above-mentioned, may issue an Irish Loan, deducting the charge from the sum“transferred”to Ireland.Such are the provisions of the Bill. It cannot be[pg 146]denied that they appear complicated, but they will be found less so in practice. The machinery of financial administration in a great State is necessarily complicated, and a radical change in that machinery involves a multitude of changes in detail for which the reforming Act must provide. Root and branch opponents of Home Rule naturally criticise those provisions, and exaggerate withUlstervehemence the administrative difficulties which attend radical change, but the advocates of great measures, while recognising difficulties can take juster views of their extent, and they know that they can be surmounted.In the first place an expert body (the Exchequer Board) will interpret the financial provisions of the Act. It will consist of two members appointed by the Treasury and two by the Irish Government, and a chairman appointed by the Crown. Their decision is to be final. On these questions there is therefore no power reserved to the Imperial Government, which might cause friction. The Chairman should probably be a man of judicial rank. Possibly a case might arise in which a revision of the Board's decision would be needed. So far this important section of the machinery is not complicated. In the next place the Imperial Government remains responsible and liable for all the“reserved”services. Here again there is no complication.Thirdly, the Customs and Excise Clauses appear complicated, but they are for the most part machinery clauses, common to Revenue Acts.Fourthly, the Free Trade Clause offends of course the Unionist-Protectionist party, but its merits need not be discussed here. I venture to doubt where Ireland is likely to set up a Protectionist policy against Great Britain. Our market is too important to her. If such a policy were established, history tells us that British Protectionists will not[pg 147]consult Irish interests. Lastly a certain, but not a great, inconvenience will attend the taking of an official record of goods passing between the two countries essential to determining the true revenue of Ireland.Thus the apparent complications of the Bill dwindle greatly on examination. The Bill of 1912 is no doubt much less simple than that of 1893 as introduced by Mr. Gladstone, but that Bill was not, however, so simple as it appeared. It was based on the principle of autonomy, but it retained great powers in Imperial hands. In fact it gave autonomy as far as autonomy was practicable. Circumstances have changed much since 1893, and the problem is now in some respects easier. The pivot and crux of Mr. Gladstone's scheme, the Imperial contribution, has, for the time, disappeared.Sir Henry Primrose's Committee adopted unanimously and unhesitatingly the principle of simplicity. They recommend that the power of imposing and levying all taxation in Ireland, subject to reservations on questions of trade and of foreign relations should rest with the Irish Government. They urge that that policy accords with the general policy of Home Rule, as removing causes of friction, as avoiding need for revision of the arrangement (excepting a future question as to an Imperial contribution), it terminates the extravagance inherent in the partnership, and makes the responsibility of the Irish Government for Irish administration complete.The Committee examine the objections to the grant of complete power of taxation, viz., that (1) it would break up the fixed unity of the realm; (2) that it would impair facilities of trade between the two countries; (3) and that it is at variance with the principle of a Customs Union, said to be a feature common to federations.[pg 148]On the first point the Committee reply:(1) That in their view the Irish Government should have power to impose Customs duties only for the purpose of raising revenue, and that the Imperial Government should reserve questions of tariff, and foreign relations. Thus fiscal unity on important points would be maintained. For sixty years from the Union separate machinery existed for the collection of different rates of duty in the two countries. If Union could dispense with fiscal unity,a fortíorícan any less close form of association do so.(2) The Committee do not attach importance to the second objection. The Custom House does not seriously trammel the convenience of traders between this country and the Continent, and it was found endurable when the variance between England and Ireland was more formidable than now.(3) On the third objection the Committee argue that a Customs Union is indispensable, when the boundaries of federated states form a ring fence. It is not indispensable when, in a case like that of England and Ireland, the two countries are separated by sea.These reserves diminish, of course, the severe simplicity of the scheme, and the Committee's answers to objections admit some inconvenience to trade, but a great change like that of Home Rule must have some drawbacks, and in the opinion of Home Rulers, the end to be gained far more than compensates for slight inconveniences which attend its execution. It is certain, moreover, that, whatever may be the measure[pg 149]adopted, it will be necessary to take means for ascertaining the“true”Revenue of Ireland, and to that extent there must be some slight interference with trade.I agree with the Committee in their preference for the simplicity of complete autonomy.Sir Henry Primrose and his colleagues agree to a great extent with a Minority Report of the Financial Relations Committee (1896), signed by Lord Farrer, Mr. Bertram Currie and myself. The advantages of complete autonomy are obvious, and I cannot avoid a regret that it has not been possible to adopt it. I note, however, that the greatest Irish authority on Irish Government, Lord Macdonnell, though in favour of Home Rule, is entirely opposed to the grant of fixed autonomy to Ireland.We must not misunderstand the relations of the Committee to the Government. They were not appointed to draw a Home Rule Bill. They were to ascertain and consider the fiscal relations between Ireland and other parts of the United Kingdom as they exist to-day, paying special regard to the changes which have taken place in revenue and expenditure since 1896, the date of the Report of the Royal Commission; to distinguish between Irish Local Expenditure and Imperial Expenditure in Ireland; and to consider, in the event of Home Rule being established, how the revenue required to meet the necessary expenditure should be provided. The function of the Committee was, therefore, purely financial. They had to collect financial information, a necessary preliminary to a consideration of the Bill, and to advise as to the method of providing the revenue required. They had no mission to examine the political conditions which must be satisfied by a Bill designed to effect a Constitutional Revolution. That[pg 150]was the function of the Cabinet. The Committee, limiting itself to its instructions, recommended the method of raising revenue which they thought wisest, independently of any but financial considerations. The Government consider the question from a wider point of view. Their measure must be founded on policy as well as finance. They do not adopt the Committee's recommendations. They decide to retain for a time, more or less indefinite, a closer relation between the two financial systems. Much as I should like greater simplicity, a study of their measure leads me to the conclusion that its provisions are, in the main, wise. Let us then consider how far the provisions of the actual Bill satisfy the conditions needed to insure the success of Home Rule.In the first instance, and for an uncertain number of years, the Imperial Government keeps a tight hand upon the Irish Government. It reserves large powers enabling it to reject, postpone, or test the validity of Irish Bills. It regulates and levies all taxes, and fixes postal rates. It secures the interests of various classes of public servants, and retains temporarily the police under its own control. It fixes Irish Local Expenditure at a certain sum, and it issues that sum yearly to the Irish Government together with a free gift of £500,000 a year for three years, falling gradually to a permanent gift of £200,000.Normalincrease of Irish Revenue is appropriated to reduce the deficit to be borne by the British Exchequer. If, therefore, the Irish Government increases its own expenditure beyond the fixed sum allotted to it, it must find the revenue required, and for that purpose powers of taxation are given to it.The nursing hand of the mother is, in fact, present at every point of the Bill, but it must be remembered[pg 151]that a hostile step-mother may, at any time, replace the kindly mother.There is no escape from the conclusion that these reservations restrict the autonomous power of the Irish Government. On the other hand, the whole spirit of the Bill marks the greater part of them as temporary. The Bill, in fact, confers autonomy by gradual steps, and holds out prospects that eventually the relations between the two countries will be simple and workable. At the outset, and for some time onward, the Irish Government, freed from liability for the costly“reserved”services which the“partnership”has bestowed or inflicted on Ireland, will occupy itself with the organisation of its own home administration. It starts with no previous experience of administration, and it is clearly desirable that it should proceed by steps, gathering experience as it goes. Its field of work at first should not be too wide, and six years is not too long a period for it to reform and reconstitute its administrative organisation. This is its first duty, and it undertakes it under favourable conditions.In six years the constabulary will be transferred automatically from the charge of the Imperial Government to that of the Irish Government with the sum allotted to its support.106That sum will be increased by any saving which accrues to the British Exchequer from the transfer, and in determining that sum regard is to be had to theprospectof any increase or decrease[pg 152]in the cost of the service, expected to arise from causes not being matters of administration.In the next place, the Irish Parliament may, at any time, on twelve months' notice assume the legislative and executive control of three reserved services, viz., Old-age Pensions, National Insurance, and Labour Exchanges. If they are taken over, the sum transferred with them will be determined on the same principle as in the case of the constabulary. Autonomy, therefore, in regard to these services is granted to the Irish Government, and they will only be retained under the control of the Imperial Government, if, and so long as the Irish Government desires it.The Postmaster-General said in his speech on the introduction of the Bill that the old-age pension charge is now practically at its maximum, gradually diminishing, and the Primrose Committee (paragraph 54), estimate the charge at the time when the Bill becomes law at £3,000,000. The question then arises what will be the amount transferred, if the Irish Government, seeing its way to more economical administration, were to give at once the twelve months' notice and take over the service at the end of a year. It would not, I presume, be £2,664,000 the charge at which the Treasury in its“outline of financial provision”(paper 6154), estimated it in 1912-13, but £3,000,000, modified to some extent by the prospect of reduction.The cost of National Insurance and Labour Exchanges is estimated by the Treasury in 1912-13 at £191,500, increasing by £300,000 in ten or fifteen years. If the Irish Government were in like manner to take them over, the amount transferred would, I presume, be £190,000 with a sum added representing the prospect of increase.In the event then of those services being taken[pg 153]over by the Irish Government, they would considerably exceed their charges as estimated by the Treasury for 1912-13, and the excess would entail a corresponding increase of charge on the British taxpayer, to be counterbalanced gradually by the normal increase of Irish revenue, which the Postmaster-General estimates, with due reserve, at £200,000 a year, and by the gradual reduction (£50,000 a year) of the free gift of the British taxpayer from £500,000 to £200,000.It must be remembered that these increased charges on the British taxpayer are not the result of Home Rule, they are an inheritance from the“partnership.”When these services are transferred from the Imperial to the Irish Government, the Imperial Government will only retain control over the land purchase charges and the regulation and collection of taxes. The former will apparently remain permanently with the Imperial Government, involving an estimated increase of charge on the British taxpayers of £450,000 a year (Treasury Paper 6154). With regard to the latter, it is clearly desirable that at the outset the Imperial Government should be responsible for levying and collecting taxes. If difficulties on that subject should arise in parts of Ireland, the Imperial Government will settle them with an authority which the new Irish Government cannot possess. Clause 26, however, holds out a possibility hereafter of extended autonomy to Ireland. If for three years the revenue of Ireland exceeds the expenditure on Irish services by the Imperial and Irish Governments, the Parliament of the United Kingdom will revise the financial provisions of the Home Rule Act, with a view to securing a proper contribution from Irish revenues to Imperial expenditure, and extending the powers of the Irish Governmentwith respect to the[pg 154]imposition and collection of taxes, and if extension were then granted in a liberal spirit, there would be little left to desire.ConclusionI have thus traced the gradual progress towards autonomy contemplated by the Act. It justifies the conclusion that the Government favours autonomy, but seeks to achieve that end gradually and tentatively. With the path thus marked out, it lies with the nation to pursue steadily and resolvedly the great end of reconciliation with Ireland.It is impossible to consider Home Rule in its financial aspect, without casting a look backward and comparing the result which would have followed the grant of Home Rule in 1886 with the result which has followed its refusal. In the former case Ireland would have been reconciled long ago. She would have been mistress in her own house, and it would have been her interest as well as her policy so to conduct her administration as to insure the success of her autonomy. She would have had full opportunity for reorganising her establishments on a reasonable scale, substituting for an expensive military police an ordinary police, with a saving, as Mr. Gladstone once pointed out, of £900,000 a year. She would have been able to maintain the reasonable contribution to Imperial expenditure which it is her duty as an integral part of the United Kingdom to provide. It would have been worth the while of Great Britain to make a great sacrifice at the outset to attain this solution of the Irish problem, and long before now the solution would have been complete.The Conservative Party refused Home Rule. They have held power during sixteen out of the twenty-five[pg 155]years elapsed in the interval, and they have had full opportunity to try their alternative policy. That policy has not indeed been the twenty years of“resolute Government,”a euphemism for coercion, advocated by Lord Salisbury. They have tried a policy of bribes and doles, with the result that the Imperial contribution of over £2,000,000 made in 1885 has been dissipated, and that Irish local expenditure alone shows now a deficit of £1,500,000 and a steadily increasing deficit. In short, a total burthen of between £3,500,000 and £4,000,000 has been inflicted on the British taxpayer. The Leader of the Conservatives has now announced with splendid audacity that if the“partnership”continues, if the Conservatives are allowed still to mis-rule Ireland, and to maintain the baleful spirit of ascendancy, they will endeavour to develop in every possible way the resources of Ireland. That is to say, the policy of bribes and doles is to continue at the expense of the British taxpayer. Let the British taxpayer note that, and let him note also that the Conservative Party will find the ways and means for these bribes and doles not by taxes on the wealthy, but by taxes on the food of the people. Ireland will accept the doles; but she will not be satisfied. She will still clamour at our gates for Home Rule, as she has clamoured since 1886, and she will get Home Rule, but the burthen on the British taxpayer will be then how much greater than now?[pg 156]AppendixThis Report of the Primrose Committee, the Treasury outline of financial provisions, and the speech of the Postmaster-General on the introduction of the Bill offer some vague estimates, perhaps more properly guesses, of Irish finance, one of which, Old-age Pensions, extends to twenty years. It may be interesting to throw these figures together, not (God forbid) as an estimate, but as illustrating opinion prevalent among the experts engaged in the preparation of the Bill.Income:Estimate for the year 1912-1913 10,839,000Addfree gift of £500,000 to be reduced in nine years to 200,000The Postmaster-General's Estimate of £200,000 normal yearly increase of revenue in twenty years 4,000,000Income in twenty years (round figures) 15,000,000Expenditure:Sum transferred to Ireland 1912-1913 5,462,000Post Office, 1912-1913 1,600,000Old-age pensions (Treasury Paper) 2,800,000Land purchase (£761,000 in 1912-1913 increased by £450,000) 1,211,000Insurance £191,500 in 1912-1913 increased by £300,000 491,500(Say) 11,564,500-11,600,000Balance available for Constabulary, collection of Revenue, Imperial contribution and Irish services.It must be recollected that the Irish Government has to provide for increase of Irish services beyond £5,462,000 by taxation.[pg 157]

V.—Financial Relations99By Lord Welby“The Channel forbids Union, the Ocean forbids separation. I demand the continued severance of the Parliament with a view to the continued everlasting unity of the Empire.”Terse words in which a great statesman summed up the relation of Ireland to England. The Home Rule Bill will give the sanction of law to Grattan's aphorism. It bids Ireland manage her own affairs, freeing her in her own house from official bondage to an unsympathetic consort. If the Act of Enfranchisement is drawn in a trustful and large spirit, it will, we may feel assured, end the feud of centuries, and create unity where the Act of Union has created enmity.The policy of Home Rule is wise in itself, and worthy the statesmanship of a nation always bold in the hour of need, and, as experience of its working is gained, it will commend itself more and more to the commonsense of a practical people, but the immediate success of the first Home Rule Act will depend greatly on the skill and wisdom with which the details of a complicated measure are devised, facing fairly the financial[pg 113]evils consequent on Tory obstinacy, and avoiding, in reasonable degree, offence to popular prejudice and existing interests.The provisions which will adjust the financial relations between the two nations are not among the least difficult of those details, and Parliament must solve the puzzling problem without delay. It must begin by temporarily giving local government in Ireland a fair start at the cost of the British tax-payer.Let us, in the first place, clear the ground from some doubtful arguments which, used as premises, will probably lead the unwary to false conclusions. A plea is often put forward that England is a rich country and Ireland a poor country, and it is argued that identical taxation therefore wrongs Ireland. But England is not a rich country, in the broad sense. It is a country in which there is vast accumulation of wealth, but in which, also, there is a great mass of poverty—poverty probably exceeding the poverty of Ireland, and, therefore, identical taxation if it wrongs the poor of Ireland, wrongs still more the poor of England. Critics arguing from this false premise contend that the extension of the Income-tax to Ireland was a wrong, that is to say, the wealthy man living in Ireland, where living is relatively cheap, ought not to contribute to the national expenditure on the same principle as the wealthy man living in England, where living is relatively dear; or, to put the argument in another form, it is sound finance to take Income-tax from a man in England, struggling on a few hundreds a year. It is unsound finance to take Income-tax from, say, the profits earned in Ireland by the Guinness firm. Nationalists, misled by the plea of Ireland's poverty, have relied on this argument, and Conservatives also have used it chiefly to discredit Mr. Gladstone, who extended the Income-tax to[pg 114]Ireland; but the argument is false in itself, and cannot be made the basis of sound financial legislation. As a matter of fact, taxes on articles of general consumption, on the necessaries of life, fall heavily on the poor, and the argument of over-taxation applies in great degree to the poor in the great towns of England, and to the poor in Ireland. If, then, the poor of Ireland are to be relieved, the poor of England must be relieved also, and identical taxation would still be the result. The statesman must find a truer gauge by which to measure the relative capacity of the two countries to bear taxation.Again, during the long discussion on financial relations, much time has been wasted in criticising that provision of the Act of Union, which fixed the respective contributions of Great Britain and Ireland to the common purposes of the Empire at the proportion of fifteen and two. That proportion, in fact, was not exacted, and it may be put aside as theoretical.A summary of recent financial history in Ireland will enable the reader to understand the circumstances in which Parliament takes up the problem of Home Rule. Towards the close of the eighteenth century the condition of Ireland was bad. England, selfish to the last degree in her commercial policy, treated Ireland as little better than a conquered country, and ruined her commercially and industrially by restrictions on her trade. Protestants and Catholics joined in patriotic resistance, and wrung at last freedom of trade in 1779, and an independent Parliament in 1782. Thenceforward for a time the financial administration of Ireland was regulated in accord with Irish interest. The country prospered financially under the new order. Large sums were spent in promoting agriculture and manufactures, and in grants for public works, and the[pg 115]country's finance was restored to order. During the years of peace, 1782 to 1793, Ireland contributed on the average £584,000 to military—that is to the common expenses of the Empire. The military expenditure of Great Britain in the peace years, 1786 to 1792, averaged £5,142,000. Ireland was then a most important factor in the State, for the population was to that of England in the proportion of nearly one to two.Pitt desired to establish reciprocity between the two countries and at the same time to obtain from Ireland a contribution on a fixed principle for the Navy, wise proposals worthy of the Minister; but the two Parliaments could not agree. That of England bowed to the pernicious claims of ascendancy and to the supposed interests of the commercial classes. Pitt was defeated. The French Revolution and a war lasting nearly twenty-two years followed, and in the midst of the war broke out the Rebellion of 1798. If the charge of the Irish debt at the outbreak of the war and the average civil expenditure of Ireland between 1793 and the Union is deducted from the average income of Ireland, the surplus constituted Ireland's real contribution to the common expenditure and it averaged about £900,000 a year. The year 1800 marks a great change of policy. Pitt put an end to the independent Parliament of Ireland and passed the Act of Union, bad in itself, and worse by the means which made it law. It sought to make the two countries one for all purposes of revenue, and that object was kept steadily in view.From 1800 to 1817 the United Parliament imposed taxes on both England and Ireland, but the Irish Treasury collected the Irish Revenue, defrayed the local expenditure of Ireland as sanctioned by the United Parliament and remitted the surplus in aid of the war expenditure. The greater part of the[pg 116]burthen fell upon Great Britain, but Ireland's share drained greatly her resources. Her revenue which had produced £1,837,000 in 1793, reached £7,305,000 in 1817, an increase of 300 per cent., while her contributions during the years of war to the common expenditure calculated on the principle adopted in the preceding paragraph amounted to about £3,000,000. During the same period Great Britain contributed to the war out of revenue about £43,000,000 on the annual average.In 1817 the Irish Treasury was abolished, the exchequers of the two countries were united, the British and Irish Revenues were paid alike into the one exchequer. The Irish local expenditure was defrayed from that exchequer under the check of the English Treasury, and the United Parliament imposed and repealed Irish taxes. From 1817 for many years Ireland fared badly. Her representatives in Parliament served her ill. Tories, Whigs, and independent members failed alike in making England understand Irish needs, and the British Parliament neglected Irish interests. The years between 1817 and 1842 mark the first period of Irish financial history dating from the war. It was a period of stagnation. Both countries required time to recover from the calamity incident to war; but the recovery would have been more rapid, even under heavy taxation, had not progress been retarded by the unwise legislation of protection, which fettered enterprise and restricted commerce. This evil, however, injured Great Britain more than Ireland. In 1824 the separate Customs Departments of the two countries were abolished. The trade between Great Britain and Ireland was treated as coasting, and from that time no official record has been kept of goods exported from and imported into both countries.In 1817 the taxes levied in England were similar to,[pg 117]but not identical with, those levied in Great Britain. Ireland was exempt from many taxes levied here, and in some cases, such as spirits, she paid a lower rate of duty. A period of profound peace enabled the government to remit taxation; but those remissions were chiefly made in deference to British interests, and in making them Irish interests were little considered. The truth of this statement is illustrated by the Revenue Returns. The estimated“true”100Revenue of Great Britain fell from £51,500,000 in 1820 to £46,250,000 in 1840, although population, and with it consumption, had increased. The“true”Revenue of Ireland in the same period rose from £5,250,000 to £5,500,000. But it must be added that many of the taxes remitted were taxesnot levied in Ireland. In respect to them Great Britain had to a certain extent a claim to prior consideration.The second period of financial history extended from 1842 to 1869, a period of rapid recovery and of great prosperity in Great Britain, but not so in Ireland. Famine fell upon her in 1846, and thinned her population, followed by emigration, which showed how poverty pressed upon the poor, while the Fenian movement of 1866 showed how widespread was the spirit of unrest. A highly cultivated Liberal statesman was Lord-Lieutenant during several years of the period. An interesting diary which he kept leaves the impression that the leading statesmen of the day were not reading the signs of the times, or gauging the gravity of a growing movement. This was hardly the period to choose for increasing the taxation of Ireland, nevertheless in 1853 Mr. Gladstone extended the[pg 118]Income-tax to Ireland, counterbalancing it in part by the remission of loans granted to Ireland during the famine—a very insufficient compensation. But the Income-tax did not touch the poor, and as I have pointed out there was no reason why the wealthy and comparatively well-to-do classes in Ireland should not contribute to the public expenditure like their brethren in Great Britain. This plea, however, does not extend to the spirit duties which during 1853 Mr. Gladstone and Mr. Disraeli raised to the level of the spirit duties in Great Britain. That tax undoubtedly was paid in great measure by the poorer classes.In one direction there was improvement. In 1842 Sir Robert Peel acceded to power, and inaugurated at once the policy of liberating trade which has conferred such benefits on Great Britain, and in a minor degree on Ireland. The era of prosperity which followed the adoption of the Free Trade policy increased greatly the consuming power of the people, and enabled Mr. Gladstone to largely reduce duties on the principal articles of food consumed by the poorer classes. For example, he and his successors reduced the tea duties from 2s. 2d. to 6d. and abolished the sugar duties. This was undoubtedly the true method of remedying the evil which underlies the plea that identical taxation wronged Ireland. I have shown that that evil was caused not by identical taxation, but by heavy taxes on food, which oppressed alike the poor of Ireland, and the more numerous poor of Great Britain. The policy adopted met the local grievance, by modifying if not removing the general grievance, and this remedy of the general grievance was only rendered possible by the growing prosperity of Great Britain. The poor of Ireland had therefore their full share of the benefit caused by the prosperity of Great Britain. The historian[pg 119]must give full weight to this consideration when he criticises the increase of the Irish spirit duty. There can be little doubt as to the verdict of history, if the choice lies between cheap whisky and dear food on the one side, and cheap food and dear whisky on the other. Between 1860 and 1900 the Customs and Excise duties which were reduced exceeded the like duties increased by some £22,000,000 a year, and Ireland had her share in the reduction.In 1864 a Committee of the House of Commons inquired into the taxation of Ireland, but it led to no useful result. In other directions the monotony of neglect continued. The Government and Parliament paid little or no attention to Irish needs. Ireland was the Cinderella of the three kingdoms, and fared accordingly.The third period ranged from 1869 to 1896. It might be termed the Home Rule period, for it includes the two Home Rule Bills of Mr. Gladstone, but it includes also other great measures relating to Ireland. Indeed, during the whole period of seventeen years Ireland engrossed, to a great degree, the attention of Parliament. The change was very remarkable. Up to 1869 England was indifferent to, or bored by, Ireland. She was stupid. She did not trouble herself to learn Irish wants, and she could not understand the spirit of Irish nationality. The Devon Commission, a Conservative Commission, appointed by a Conservative Minister, Sir Robert Peel, reported that 2,500,000 people in Ireland were on the verge of starvation, and gave warning of the evils, the perils, inherent in the Irish land system. England took no notice of either warning. The famine answered the first in cruel fashion. The second was pigeon-holed. Wise in her own Home administration, wise of late years in her[pg 120]Colonial administration, she knew no remedy for Ireland but force, and force is no remedy. She accepted, almost as matters of ordinary administration, Coercion Acts which marked with a black stigma most years of the century, unable to see that that fact alone was a disgrace to her statesmen, her Parliament, and her people.Early in the Home Rule days I heard a great English statesman say:“The first duty of a Government is to bring the people into agreement with the law; till it does that it fails in its first duty, and England has hitherto failed to bring Ireland into agreement with the law”—a truth well and forcibly expressed.In 1869 a man of great power and eloquence, wide views, and firm resolve became Prime Minister. He realised the habitual injustice of England to Ireland, and he saw the perils impending. By his strength of will he forced an unwilling country and an indifferent Parliament to devote its serious attention to Irish questions. He disestablished the Church. He was defeated on Irish education, but he laid the foundation of a land settlement by conferring on the tenants, in spite of strenuous opposition from the Tories, the rights of fair rents, fixity of tenure, and free sale, and his measures were marked by an earnest desire to deal liberally with Ireland to the utmost extent consistent with equity to the British tax-payer. Finally, when Ireland sent to Westminster more than four-fifths of her representatives pledged to Home Rule, he accepted this expression of the national will, and became a convert to the principle of Home Rule. I deal later in detail with his two Home Rule Bills of 1886 and 1893, which were defeated, and I need only here deal with finance of the third period, apart from the provision of the Home Rule Bills.[pg 121]Before Mr. Gladstone was converted to Home Rule, Home Rule finance attracted little attention. That eminent statistician, Sir Robert Giffen, made, indeed, in 1885, a singular suggestion to theStatistnewspaper, viz., that the Irish landlords should be bought out at the cost of the Imperial Exchequer, and that the rent charge, which would then be payable by the purchasing tenant, should be given to an Irish authority, in lieu of payments from the Exchequer, for the internal administration of Ireland.Again, Sir Robert wrote an article in theNineteenth Century Review, March, 1886, a few weeks before the introduction of the first Home Rule Bill, to show how unimportant, from a financial point of view, Ireland had become to us, and to suggest the expediency of devising some form of Government under which the special needs and circumstances of that country would receive more and better attention than they did under the existing arrangements. His figures might be, in some instances, doubtful, perhaps even incorrect, but it can hardly be denied that he made good his point. Sir Robert was, we see, greatly in advance, not only of the ordinary Briton, but of financial experts generally, both as regards the land question and also that of the Government of Ireland.Perhaps the most able thinker and writer on economic questions in the second half of the nineteenth century was the late Mr. Bagehot, and, in proof of the general indifference to Irish questions in England, it is notable that his collected works, ranging over a wide field in politics and literature, contain no paper on the government or condition of Ireland. Yet he had witnessed O'Connell, the famine, the depopulation of Ireland, the Committee on Irish Taxation, and the Fenian outbreak in 1866.[pg 122]In 1890 Mr. Goschen, as Chancellor of the Exchequer, in the Conservative Government, moved for a Committee of the House of Commons to consider the financial relations of England, Scotland, and Ireland. The Committee was instructed to inquire into the equity of their financial relations in regard to the resources and population of the three kingdoms. It had hitherto been much discussed whether Ireland could be regarded as a separate financial entity from the rest of the kingdom. The Irish Taxation Committee of 1864, of which Sir Stafford Northcote and Mr. Lowe were prominent members, had refused to admit the principle of such separate entity, and that had been generally the Conservative contention. But, in the reference to the Committee of 1890, the Conservative Government accepted the principle. The Home Rule Bills of 1886 and 1893 were, of course, based upon it. Thus, 1890 marks an important advance in the discussion, and thenceforward, by consent of both parties, the separate“entity”was established.After the rejection of the second Home Rule Bill the Liberal Government appointed a Royal Commission to inquire into the financial relations of the two countries and their relative taxable capacity. The Report of this Commission deserves attention, because it was exhaustive in its inquiries, because the information it laid before the public has since that time been generally used in discussion, and because many of the recommendations made were far-reaching and suggestive. There was, as might be expected, great difference of opinion. The Conservative members and the Nationalist members made their several Reports. Attention, however, may be directed to one of the Reports, because it received the concurrence of the Nationalist members and of three English members—one of whom was a very[pg 123]high, if not the highest, financial authority in the City of London, the two others retired Civil Servants who had been at the head of two great Departments of the State. Their conclusions were as follows:“(1) That Great Britain and Ireland must, for the purpose of this inquiry, be considered as separate entities.“(2) That the Act of Union imposed upon Ireland a burthen which, as events showed, she was unable to bear.“(3) That the increase of taxation laid upon Ireland between 1853 and 1860 was not justified by the then existing circumstances.“(4) That identity of rates of taxation does not necessarily involve equality of burthen.“(5) That whilst the actual tax revenue of Ireland is about one-eleventh of that of Great Britain, the relative taxable capacity of Ireland is very much smaller, and is not estimated by any of us as exceeding one-twentieth.”The three English members above mentioned presented a separate Report, recording at length their views on the questions referred to the Commission. I call attention to it, because reference is frequently made to it in the Report of Sir Henry Primrose's Committee, recently appointed to advise the Government upon the new Home Rule Bill.They pointed out that the whole taxation of Ireland increased from £2,900,000 in 1820, to over £6,600,000 in 1893, and that by far the larger part of this increase was derived from taxes on articles of consumption which fell most heavily on the poor; that the increase resulted only temporarily in an increase in the contribution to common expenditure which rose from £3,691,000 in 1820 to £5,396,000 in 1860, to fall to £1,966,000 in 1893, for the greater part of the increase had been absorbed in increase of Irish civil expenditure. This local expenditure amounted in Ireland to 19s. 7d. per head, while in Great Britain it only amounted to 11s. 9d. If the cost of administering Ireland had been reduced to the like[pg 124]cost in Great Britain, a saving of nearly £2,000,000 would have been realised.They thought that the expenditure in Ireland was conducted on a scale totally unsuitable to that country, that the industrial taxation, borne in Ireland mainly by the consumers of dutiable articles, was heavier than the masses of the Irish people ought to bear, that Irish taxation ought not to exceed one twentieth part of taxation of the United Kingdom, but they doubted whether Great Britain would consent to alter her whole system of taxation to meet the evil to Ireland. They objected totally to seeking a remedy in increased grants and doles, and they suggested that Ireland should levy her own taxes and provide for her own expenditure.Lastly, in answer to the objection that Ireland might impose new Customs duties, they held that to be unlikely, since Ireland rather than Great Britain would suffer by such a policy, because the market of Great Britain is of greater importance to Ireland than that of Ireland to Great Britain.The Royal Commission reported in 1896. The question of the financial relations remained then in practical abeyance till 1907. In that year the Government of Sir H. Campbell-Bannerman proposed to establish an Irish Council under the Lord-Lieutenant entrusted with the control and direction of certain administrative Departments. A sum was to be charged on the Consolidated Fund to enable the Council to meet the expenditure of the transferred Departments. This sum was fixed for the first five years at £4,164,000. This was simply a measure to decentralise administration, and to admit Irishmen to a share in Irish administration. It did not, however, obtain support in Ireland, and in consequence it was not pressed.We come now to the last stages in the story of Irish[pg 125]finance. The Government of Mr. Asquith decided to introduce the Third Home Rule Bill in the session of 1912, and in 1911 they appointed a Departmental Committee under Sir Henry Primrose to advise them. The able report of that Committee has been laid before Parliament, and it brings our information on the financial relations up to the latest date:They state the“true”Irish Revenue in 1895-6 to have been £8,034,000.They estimate“true”Revenue 1910-11 at 10,300,000.Increase £2,266,000.The“true”local expenditure in Ireland, 1895-6, £5,938,000.The“true”local expenditure 1910-11, 11,344,000.£5,406,000.Thus whereas Ireland in 1895-6 made a contribution of £2,066,000 to Imperial Expenditure, in 1910-11, not only did she make no contribution to Imperial Expenditure, but the British taxpayer was called on to contribute more than £1,000,000 towards Irish local expenditure. But Irish local expenditure is increasing under the heads of old-age pensions, land purchase, and expenses of the Government which will be established in Ireland under Home Rule. The Committee in consequence estimate:The Irish local expenditure in 1913-14 at £12,400,000.The Irish Revenue at 10,350,000.Deficit £2,050,000.[pg 126]for which provision must be made in the forthcoming measure.In order to meet the existing deficit, the Committee suggest that the British Exchequer should take over liability for all old-age pensions which had been actually granted at the date when the Home Rule Bill comes into operation. They estimate that liability at £3,000,000 a year, gradually, of course, diminishing. If necessary, the liability in whole or part of the Irish Constabulary Pensions (£400,000) might also be transferred to the British Exchequer. They advise that the obligation of Ireland to contribute to the Imperial expenditure should be affirmed, but that a settlement of the amount of the contribution should remain in abeyance; and lastly, that the guarantee of the Imperial Exchequer in respect of the Land Stock should remain, but that means should be taken to secure regular payment of the sum due from Ireland to the National Debt Commissioners.I shall contrast later the recommendations of the Committee with the actual provisions of the Home Rule Bill.I will now compare the finance of the three Home Rule Bills which have been submitted to Parliament, those of 1886, 1893 and 1912.The Bill of 1886Mr. Gladstone made it an essential condition of his plan that there should be an equitable distribution of Imperial charges and that Ireland should pay her fair proportion to the common expenses of the Empire. In 1885 that contribution was represented by the surplus of Irish Revenue remaining after deduction of the expenditure in Ireland on Irish services. He calculated in 1886 that the surplus above described[pg 127]provided a contribution by Ireland to Imperial expenditure equivalent to £2 where Great Britain contributed £23. This proportion contrasts with Mr. Pitt's arrangement in 1800 that Ireland should pay £2 where Great Britain paid £15. Mr. Gladstone proposed in future that where Great Britain paid £28, Ireland should pay £2, a concession of moment to Ireland, and he supported it on the following ground: he measured the taxable capacity of the two countries by (1) the Income-tax returns (2) the death duty returns, and (3) the valuation of property. Income-tax gave a proportion of £38 to £2, but he held Income-tax an imperfect test, because it was paid in Ireland on a lower valuation than in Great Britain and because many Irishmen receive dividends on securities which pay Income-tax in England. He thought that £34 to £2 would be nearer the true proportion. He held the death duties to be a better test and they showed a proportion of £26 to £2, while the valuation, lower in Ireland than in Great Britain, gave a proportion of £24 to £2. Arguing from these premises, he held that his proposed contribution of £2 to £28 was an equitable and even a generous arrangement, justified by the necessity of starting the Irish Legislative body with a balance to its credit.A table is given showing how the contribution was appropriated.The amount to be contributed by Ireland to Imperial expenditure being thus ascertained, the more difficult part of the problem remained, viz., how to provide the fund out of which the contribution would be payable and how to secure its payment. The plan which commended itself to him as insuring the fiscal unity of the three kingdoms, and giving absolute security to the British Exchequer, left the imposition and collection[pg 128]of Customs and Excise duties with the Imperial Government, and under Imperial control. This plan was to be carried into effect in the following manner. The Customs and Excise were to be levied under Acts of the Imperial Parliament, and were not to be subject to the control of the Irish Legislature. The Irish Legislature with that exception could impose taxes on Ireland. Under the Land Purchase Bill, which was to be introduced concurrently with the Home Rule Bill, a Receiver-General was to be appointed, into whose hands the Customs and Excise Duties and other taxes were to be paid, including taxes imposed by the Irish Parliament. The Imperial Receiver-General, having thus in hand all Imperial and local taxes levied in Ireland, would in the first instance pay out of them the Imperial charges. Apart from the Imperial charges there were other charges, strictly Irish, such as Judges' salaries, pensions, the salaries of existing civil servants, for the security of which the Bill provided. The Bill bound the Irish Parliament to impose taxes sufficient to meet such charges, and ordered them to be paid by the Receiver-General. The Receiver-General was to keep an Imperial and an Irish account. The Irish charges would of course be paid from the latter account. He was to carry the Customs and Excise Duties in the first instance to the Imperial account, and the local taxes to the Irish account, transferring to the Irish account the surplus of Custom and Excise, after payment of the Imperial contribution. He was subsequently to pay the balance remaining on the Irish account to the Irish Exchequer.An Imperial Court of Exchequer was established in Ireland to watch over the observance of the Act, and all Revenue acts were to be tried and defaults punished in that Court. The Bill further enabled the Irish[pg 129]Parliament to take over the Irish Post Office, if it should so desire, though it was Mr. Gladstone's opinion that it would be for the convenience of both countries if the Post Office were to remain under the control of the Postmaster-General.The Imperial contribution payable by Ireland was not to be increased for thirty years, though it might be reduced if the Imperial charge for Army, Navy and Imperial Civil expenditure for any year should be less than fifteen times the contribution paid by Ireland. In that case one-fifteenth of the diminution could be deducted from the Imperial contribution.Existing Civil Servants were retained in their offices at existing salaries. If the Irish Government were to desire their retirement, they would be retired on pensions. On the other hand, if at the end of two years the officers themselves desired to retire, they could do so, receiving pensions on the usual abolition of office scale.Supposing the Home Rule Bill to have become law the account of Irish finance would have stood thus:Receipts.Imperial taxes:Customs £1,880,000Excise £4,300,000Total £6,180,000Local taxes:Stamps £600,000Income-tax 6d. £550,000Total £1,150,000Non-tax revenue:Post Office £1,020,000Total: £8,350,000Expenditure.Contributions to Imperial expenditure on basis of one-fifteenth of Imperial expenditure:Debt charges £1,466,000Army and Navy £1,666,000Civil charges £110,000Total £3,242,000Sinking Fund on one-fifteenth of capital of debt £360,000Constabulary101£1,000,000Local Irish Civil charges £2,510,000Collection of revenue:Imperial taxes £170,000Local taxes £60,000Non-tax revenue £604,000Total £834,000Surplus £404,000Total £8,350,000[pg 130]When it is said that in 1885-1886 Ireland was paying to Imperial expenditure in the proportion of £2 to £23, that proportion was calculated on the whole gross Imperial expenditure, whereas Mr. Gladstone calculated the proportion of £2 to £28 on a military expenditure materially cut down, for he excluded from it charges which ought strictly to be called war charges, a modification very favourable to Ireland and reducing considerably her true contribution.He made another concession of great importance. He proposed to credit Ireland with the entire receipts levied in Ireland, but that was not a true test of the amount of taxation paid by Ireland. There are goods which pay duty in Great Britain, but which are consumed in Ireland, so conversely there are goods which pay duty in Ireland but are consumed in Great Britain. For instance, spirits, porter, and tobacco are largely exported duty paid from Ireland and are consumed in Great Britain, and Mr. Gladstone calculated that the excess of duties so paid in Ireland on goods consumed in Great Britain amounted to no less a sum than, £1,400,000 a year. That is of course British Revenue, and in striking a true account between the two countries it should be credited to Great Britain, not to Ireland. The Home Rule Bill, however, gave it to Ireland, a direct grant of £1,400,000102from Great Britain to Ireland, and if that amount be subtracted from the contribution of £2 to £28, it leaves the proportion £2 to £52 instead of £2 to £23.If we strike a balance between the contributions to be paid by Ireland to Great Britain under the Home Rule Bill, and the grants to be paid to Ireland, we shall arrive at the following result:[pg 131]Contribution from Ireland to Great Britain £3,602,000Grants from Great Britain to Ireland:Duties paid in Ireland on goods consumed in Great Britain £1,400,000Grant toward the Constabulary £500,000Total: £1,900,000Net contribution from Ireland to Imperial purposes (or nearly in the proportion of 2 to 60) £1,702,000If the Imperial contributionactuallypaid by Ireland in 1885 be equated on like principle, the proportion stated above at 2 to 23 will be similarly reduced.The Bill was defeated in the House of Commons, and therefore its provisions did not undergo the test of scrutiny in Committee.The provisions of this Bill illustrate the difficulties which attend the financial severance of the Irish from the British Government. High authorities thought at the time that Mr. Gladstone, in 1886, should have proceeded in the first instance by way of Resolutions establishing the principles upon which the Bill would be subsequently founded, and there is much to be said for that view. The main principles of the measure would have been established in the first instance after free and full discussion, and the details would have been adapted later to the principles then laid down. Mr. Gladstone himself, in his reply upon the Second Reading (June 7th, 1886,) indicated a course somewhat similar in its result. He said:“If an interval is granted us, and the circumstances of the present session require the withdrawal of the Bill, and it is to be re-introduced[pg 132]with amendment at an early date in the autumn, it is our duty to amend the Bill with every real amendment and improvement, and with whatever is calculated to make it more effective and more acceptable for the attainment of its end.”It must be remembered that there had been no sufficient time for the collection of the data on which an effective measure could be founded, and the collection of those data was a task of great difficulty, for the Departments did not possess them. The Government came into power in February, and the Bill was introduced on April 6th; thus there was no real opportunity for testing the value of the data collected in that short interval, or for gauging beforehand objections both to the principles and details of the scheme adopted, and experience proved that some of the objections were valid, though probably not insurmountable.The scheme was based on two principles which would be especially liable to criticism:(1) For thirty years Ireland was to contribute to Imperial charges as they then existed a fixed annual sum.(2) The Customs and Excise duties ascollectedin Ireland (i.e., not the“true”revenue) were to be credited to the Irish Government.The first of these principles would have been closely scrutinised in Committee, but probably in the main it could have held its ground. In the first place, it reduced considerably the Imperial contribution, consisting hitherto of the balance of revenue after payment of Irish charges. As Mr. Gladstone pointed out, the amount of military expenditure, on which the proportion of 2 to 28 was calculated, was considerably reduced, and Great Britain had to pay the difference, and so far the change was favourable[pg 133]to Ireland. In the second place, Irish expenditure was increasing, and under the existing system the balance of Irish revenue, constituting the Irish Imperial contribution, was, as the sequel lamentably proved, diminishing, and, a result not foreseen at the time, the wasteful and unsound finance which financial partnership entailed upon Ireland ere long extinguished it. The grant of autonomy was an effective check on this continued waste, otherwise the contribution of a fixed quota would soon have reduced the Irish Government to insolvency.The grant to Ireland of thecollectednot thetrueduties of Customs and Excise was open to grave objection. It presented her with the duties levied in Ireland on articles consumed in Great Britain, but if at any time the habits of the people, such as decrease in drinking, reduced this practical gift—estimated at £1,400,000, or if changes in law or practice transferred the payment of these duties from Ireland to Great Britain, the financial equilibrium of the scheme would be destroyed. This was a real danger as under the bonding system the British trader could, if he pleased, pay these duties in Great Britain.The decision that Ireland was not to be represented at Westminster led to a clumsy device for giving Ireland a voice in the Imperial Parliament when Irish interests were involved. This would be the resource if a war contribution had to be obtained.The scheme of 1886 can only, therefore, be regarded as a draft to be tested and modified in discussion and to form the basis of a revised and amended scheme.The Bill of 1893Mr. Gladstone introduced the second Home Rule Bill in February, 1893. In the discussion he pointed out[pg 134]how incredibly wasteful the method of governing Ireland was; the Irish Civil Government grants, which had averaged from 1833 to 1837 £762,000, had risen between 1888 and 1892 to £4,042,000, and the cost of local government in Ireland was twice as much per head as the like cost in England.Under the scheme of 1886 Irish representatives were not to sit in the Imperial Parliament, but the Government found that under existing financial arrangements there must be financial connection, unless Parliament was prepared to face a different system of trade laws between the two countries, and provision must be made for that connection. Mr. Gladstone, therefore, reversed the decision of the Government in 1886. He proposed to retain Irish representatives at Westminster, reduced in number to 80. They were not to vote on purely British questions, but in his opinion it would be difficult to make that distinction as far as the mass of business was concerned. The Irish representatives would not vote on any tax which was not to be levied in Ireland or on any grant of money for other than Imperial purposes as scheduled in the Bill. By this means Ireland would have a voice, if emergency, such as war, rendered fresh taxation necessary.In the interval between 1886 and 1893 knowledge had been gained to some extent as to what constituted the“true”revenue of Ireland, and the Inland Revenue thought it possible to levy in Great Britain the Excise duties collected in Ireland on articles consumed in Great Britain andvice versa. These Excise duties represented the greater part of the sum of £1,400,000, previously described as the difference between duties, so to speak, belonging to Ireland and duties collected in Ireland, a difference estimated in 1893 at £1,800,000. If Ireland retained that difference, as contemplated by the scheme[pg 135]of 1886, it was equivalent to a grant from Great Britain to Ireland. On the other hand the Customs were not able to make the separation thought possible by the Excise.With these facts before him Mr. Gladstone made an entire change in the financial scheme. As in 1886, he held that Ireland must make a proper contribution to Imperial expenditure, but he abandoned the principle, adopted in 1886, of obtaining that contribution by a quota of one-fifteenth of Imperial expenditure, that is a contribution of £2 by Ireland to £28 by Great Britain. He retained instead the whole of the Customs revenue collected in Ireland as the Irish contribution. He proposed that Great Britain should pay any excess of the charge of constabulary over £1,000,000, out of the contribution, the balance representing Ireland's share of Imperial expenditure. He justified the change on the ground that as the management of trade was reserved to the Imperial Government, the management of the Customs so closely connected with trade should be Imperial also. The Customs were expected to produce a net revenue of £2,370,000. He estimated it as equivalent to about 4 per cent. of Imperial expenditure whereas the actual contribution was about 12 per cent. The contribution would, of course, vary as the net Customs revenue rose or fell. On the other hand the Irish Government were to take all the rest of the“true”revenue of Ireland and to defray out of it all local Irish expenditure, including a fixed sum of £1,000,000 towards the cost of the constabulary and Dublin police, which were temporarily to remain Imperial services. Customs and Excise duties were to be regulated and collected by the Imperial authority which was also to fix postal rates; but all other taxes were to be imposed by the Irish Legislature.[pg 136]The interests of existing judges, and existing civil servants, and of her constabulary, which remained under the control of the Viceroy, were secured. The constabulary would be gradually replaced by a force under the control of the Irish authority. Two Exchequer Judges would be appointed to guard observance of the Act, and appeals lay to the Privy Council which would try on the motion of the Viceroy, or of the Secretary of State, any question as to invalidity of an Irish Act. These arrangements might after fifteen years be subject to revision in pursuance of an address to Her Majesty from the House of Commons or the Irish Legislative Assembly.The receipts and expenditure of the Irish Government under this scheme would have stood as follows:Receipts.(1) Excise true revenue exclusive of licences £3,220,000(2) Local taxes:Stamps, Income-tax, Excise licenses £1,495,000(3) Postal revenue £740,000(4) Other non-tax revenue £205,000Total £5,660,000Expenditure.(1) Civil Government charges, except Constabulary £3,210,000(2) Collection of Inland revenue £160,000(3) Postal service £790,000(4) Contribution to Irish Constabulary £1,000,000Total £5,160,000Surplus £500,000The Bill passed the House of Commons, but the financial clauses were greatly recast in Committee. The changes originated in the fact that the Inland revenue had overestimated the“true”revenue of Excise by a very considerable sum, and the error would have reduced to an insignificant sum the free starting balance for the Irish Government provided in the original scheme. Mr. Gladstone decided in consequence not to keep the Customs revenue as Ireland's contribution to Imperial expenditure, but to let that revenue fall into the common stock of Irish revenue and to[pg 137]take out of that common stock one third of the“true”Irish revenue. This third was to cover Ireland's contribution to Imperial expenditure together with one third of the cost of the Irish constabulary and Dublin police. Ireland was to meet all her local charges out of the remaining Irish revenue. The Imperial Government was to retain for six years the imposition and collection of all taxes; the Irish Government having only supplementary powers of taxation. At the end of six years the Irish contribution was to be revised, and Ireland would be empowered to impose taxes other than Customs and Excise, and she would collect taxes, the Customs alone being retained by the Imperial authorities. The“true”revenue derived from the Customs and Excise was to be ascertained by a Joint Committee of the Treasury and the Irish Government. The financial result of these changes is shown in the following figures:[pg 138](1) Customs:Revenue collected in Ireland £2,136,000Addestimated allowance for duties paid in Great Britain on articles consumed in Ireland £266,000Total estimated Irish revenue £2,402,000; Amount Payable to Irish Exchequer Two-Thirds £1,601,000(2) Excise:(a) Spirits. Revenue collected in Ireland £4,112,000Deductduties ascertained to be paid in Ireland on spirits consumed in Great Britain £1,872,000Total £2,240,000(b) Beer. Revenue collected in Ireland £811,000Deductestimated allowance for duties paid in Ireland on beer consumed in Great Britain £187,000Total £624,000(c) Licence duties collected in Ireland £194,000Total estimated £3,058,000; payable to Exchequer £2,039,000(3) Stamp duties collected in Ireland £707,000 estimated, £471,000 payable(4) Income-tax collected in Ireland £552,000 estimated, £368,000 payable(5) Crown Lands amount estimated to be due to £65,000 estimated, £43,000 payableTotal £6,784,000 estimated, £4,522,000 payable(6) Miscellaneous Irish Revenue £138,000 estimated, £138,000 payableTotals £6,922,000 estimated, £4,660,000 payableIrish Expenditure, 1892-3.(1) Civil Government charges (exclusive of Constabulary and salary of Lord-Lieutenant, but inclusive of local charges met out of local taxation account) £3,123,000(2) Constabulary charges (£1,459,000) two-thirds of £973,000(3) Estimated deficit on postal account £52,000Total £4,148,000Surplus £512,000Total £4,660,000[pg 139]The schemes of 1893 again illustrate the difficulties inherent in a severance of the two Exchequers. The revise left more points open for difference between the two Governments, and it had the serious defect of revision after the short interval of six years.The original scheme was far preferable. The retention of the Customs as the Imperial contribution reduced opportunity for conflicts of opinion to a minimum, and the interval of fifteen years before revision left ample time for the new Irish Government to put its house in order. I venture to think it would have been wise to make good the error in estimating the“true”revenue of Ireland (which invalidated the scheme) by an Imperial Grant, at all events for a time. Under the scheme the Imperial Government provided £500,000 for the constabulary. If it had granted £300,000 or £400,000 more, the net Imperial contribution derived from the Customs would have been reduced to say £1,400,000, not a large sacrifice for the end in view—reconciliation with Ireland.The Bill as amended passed the House of Commons but was thrown out in the Lords. This Parliament refused to accept Mr. Gladstone's proposals to give Ireland Home Rule, and nineteen years elapsed before a third Home Rule Bill was submitted to Parliament.In the three schemes of 1886 and 1893 the Imperial contribution was very similar, perhaps somewhat larger in 1893. In all three schemes, also, the net gain to the British Exchequer was reduced by the grant from that Exchequer of £500,000 to the cost of the Irish Constabulary.The difficulty of devising a financial scheme fairly simple and workable, which was experienced in 1886 and 1893, has been disappointing, but not discouraging. It was inevitable but it can be surmounted.[pg 140]The Bill of 1912In 1911, Mr. Asquith pledged the Government to take up again in the ensuing session the question of Home Rule. In 1910 the Conservative Party, at least a considerable part of it, in presence of a probable dissolution on the Parliament Bill, showed, as in 1885, a disposition to coquette with Home Rule, but the movement came to nothing, and the Party settled into determined opposition to the Home Rule policy, submitting themselves to the lead of the Ulster extremists, who preached sedition in no measured terms. In other respects, the prospects of Home Rule are fairly favourable. England, apart from Scotland, Wales, and Ireland, still returns a majority opposed to Home Rule, but public opinion does not show any signs of vigorous or violent opposition as in 1886. The Liberals, the Irish, and the Labour Party are united in its favour. The passing of the Land Acts is rapidly removing the agrarian evil, and the landlords have not the same cause for anxiety as formerly. The grant of Local Government is working well, and in spite of much poverty the condition of the people is improving. Lastly, the passing of the Parliament Act has made it possible, in spite of opposition in the Lords, to pass a Home Rule Act within the limits of the present Parliament.On April 11th, the Prime Minister introduced the Government Bill. He regarded it as the first step in a comprehensive policy of devolution. It retains permanently at Westminster 42 Irish Members, so that Ireland will have a voice, not only on questions in the Imperial Parliament which concern Ireland, but on questions of Imperial interest, such as war and peace. The Bill of 1886 reserved to the Imperial Parliament[pg 141]certain questions. The Bill of 1893 also made necessary reservations, though its tendency was towards more complete autonomy; but in the interval between 1893 and 1912 great changes have taken place, and the Imperial Government finds itself hampered by new liabilities. The Old-Age Pension Act, the Land Purchase Act of 1903, the National Insurance Act, and Labour Exchanges have added very greatly to Irish expenditure. On the other hand, the contribution to Imperial expenditure, unluckily for the British taxpayer, has disappeared. The problem is, therefore, a new one, and the Government solves it, at all events for the present, by keeping in its own hands a large number of Services, as will be seen hereafter.In 1885-6 Ireland contributed a surplus of considerably more than £2,000,000 to Imperial expenditure; in 1895-6, £2,000,000.103The Government estimates the true revenue of Ireland in 1912-13 at £10,839,000; and the expenditure on Irish services at £12,354,000. Therefore the new Irish Government will start with a deficit of £1,515,000. That deficit is now charged on the British taxpayer. It results from British management of Irish finance, for, on the one hand, Irish revenue is limited by the relatively limited means of Irish taxpayers; on the other hand, England has regulated Irish expenditure on the lavish scale of her own expenditure.The Government lays down certain principles on which Home Rule finance will be based:(1) Ireland must manage her own finance and[pg 142]must have powers of taxation consistent with leaving to the Imperial Government a field of taxation sufficiently wide for Imperial needs.(2) The Budgets of the two countries must not hamper each other.(3) Ireland must bear the cost of any increase arising hereafter on Irish services, but she must benefit by economies in those services.(4) She must have power to reduce taxation if her economies permit it.The scheme which will give effect to these principles may be described as follows.In the first place the Imperial Government retains in its own hands the imposition and collection of all Irish taxes, the Post Office duties alone excepted, which will be transferred to the Irish Government.Normalincrease in Irish Revenue will not be applied to Irish services. It will reduce the deficit. The Irish Government, however, will have supplementary powers of taxation.An Irish Exchequer and an Irish Consolidated Fund will be created, and an Irish Auditor-General appointed. Further, a joint Exchequer Board, consisting of Treasury and Irish officers, will adjust the accounts between the two Exchequers, based upon what it declares to be the actual cost of Irish services when the Act comes into operation. If the Irish Government, using its supplementary powers of taxation, increases or reduces taxes, the Exchequer Board will vary accordingly the sum to be paid by the British to the Irish Exchequer on account of Irish expenditure, and it will determine the effect of any other changes taking place in the relations between the two Exchequers. Lastly, if and when normal increase of Irish revenue puts an end, during a period of[pg 143]three years, to the existing deficit, the Exchequer Board will make a report to that effect, and the financial arrangement between the two countries will then be reconsidered in order to secure a fair contribution from Ireland to Imperial expenditure.The Government, as I have stated, estimates the revenue of 1912-13 at £10,839,000. That sum represents the whole“true”revenue of Ireland, viz., taxes and miscellaneous, £9,485,000; Post Office Revenue, £1,354,000. The Imperial Government adds to this revenue of £10,839,000 a free gift of £500,000 at the cost of the British taxpayer, in order to give the Irish Government a fair start. The total Irish income in the year 1912-13 will therefore be £11,339,000.On the other side of the account, the Imperial Government retains in its own hand various Irish Services, termed in the Bill“Reserved Services,”described later. It transfers from the British to the Irish Exchequer the sum allotted to Irish Expenditure (outside the Reserved Services), estimated in 1912-13 at £5,462,000, the cost of the Postal Service £1,600,000,104and £500,000, the free gift mentioned above, making a total transfer of £7,562,000.If in the future the sum of £5,462,000 allotted to Irish Expenditure and the free gift of £500,000 are exceeded, the Irish Legislature must provide the necessary ways and means.The transfer of £7,562,000 from the British to the Irish Exchequer leaves a balance on the British Exchequer on the Irish Account of £3,777,000105free[pg 144]to that extent to meet the charge of the Reserved Services.These Reserved Services are:(1) Old-age Pensions £2,664,000(2) National Insurance Labour Exchange £191,500(3) Land Purchase £761,000(4) Constabulary £1,377,500(5) Collection of Revenue £298,000Total £5,292,000Therefore the excess of Irish Expenditure in 1912-13 over Irish Revenue as provided results in a deficit of £1,515,000 payable by the British taxpayer, and if the free gift of £500,000 by the British taxpayer included in the provided revenue be added, the total charge on the British taxpayer in 1912-13 on account of Irish Expenditure is £2,015,000.This annual gift of £500,000 is after three years to diminish yearly by £50,000, until a minimum of £200,000 is reached, which will eventually represent the gift of Great Britain to Ireland, until prosperity or good management enables Ireland to pay her own way, and at the last to make a contribution to Imperial Expenditure.The Government estimates a normal growth in Irish Revenue of £200,000 a year, which, to the extent it is realised, will reduce the deficit payable by the British taxpayer.The Imperial guarantee on Irish Land Stock is to continue in full force.Effect of Future ModificationIf the Imperial Parliament increases or reduces taxation, the change will not affect the Irish Budget, for the transferred sum will remain unaltered.[pg 145]The Irish Parliament will have power to reduce taxes levied in Ireland. It will also have power to impose taxes. It may add at will to Excise duties, and if so the Customs duties on beer or spirits must vary with the Excise duties. It may levy new duties which do not interfere with the Imperial system of taxation—for instance, a house duty, or establishment licences. It may add to Income-tax or death duties, and also to Customs duties (other than beer and spirits) provided that the addition does not exceed 10 per cent. of their yield. This 10 per cent. resembles the“centimes additionels”which are levied in foreign countries on direct taxes, and are applicable there to local expenditure. But the Irish Parliament must not trench on Imperial taxes. This increase or reduction of Irish duties will not affect the British Exchequer, but it will increase or diminish the“sum transferred”to the Irish Exchequer.The Irish Parliament will not have power to tax articles not subject to Imperial taxes for the time being. If in the exercise of its power it differentiates Customs or Excise duties in the two countries, there will be a differential duty on such goods passing from one to the other.Public Works Loans granted before the passing of the Home Rule Act will remain under the management of the Imperial Government. Future loans will be managed by the Irish Government.The Irish Parliament will have power to raise loans on the security of the“transferred”revenue, sufficient provision being made for interest and sinking fund. If the Irish Government desires it, the Exchequer Board above-mentioned, may issue an Irish Loan, deducting the charge from the sum“transferred”to Ireland.Such are the provisions of the Bill. It cannot be[pg 146]denied that they appear complicated, but they will be found less so in practice. The machinery of financial administration in a great State is necessarily complicated, and a radical change in that machinery involves a multitude of changes in detail for which the reforming Act must provide. Root and branch opponents of Home Rule naturally criticise those provisions, and exaggerate withUlstervehemence the administrative difficulties which attend radical change, but the advocates of great measures, while recognising difficulties can take juster views of their extent, and they know that they can be surmounted.In the first place an expert body (the Exchequer Board) will interpret the financial provisions of the Act. It will consist of two members appointed by the Treasury and two by the Irish Government, and a chairman appointed by the Crown. Their decision is to be final. On these questions there is therefore no power reserved to the Imperial Government, which might cause friction. The Chairman should probably be a man of judicial rank. Possibly a case might arise in which a revision of the Board's decision would be needed. So far this important section of the machinery is not complicated. In the next place the Imperial Government remains responsible and liable for all the“reserved”services. Here again there is no complication.Thirdly, the Customs and Excise Clauses appear complicated, but they are for the most part machinery clauses, common to Revenue Acts.Fourthly, the Free Trade Clause offends of course the Unionist-Protectionist party, but its merits need not be discussed here. I venture to doubt where Ireland is likely to set up a Protectionist policy against Great Britain. Our market is too important to her. If such a policy were established, history tells us that British Protectionists will not[pg 147]consult Irish interests. Lastly a certain, but not a great, inconvenience will attend the taking of an official record of goods passing between the two countries essential to determining the true revenue of Ireland.Thus the apparent complications of the Bill dwindle greatly on examination. The Bill of 1912 is no doubt much less simple than that of 1893 as introduced by Mr. Gladstone, but that Bill was not, however, so simple as it appeared. It was based on the principle of autonomy, but it retained great powers in Imperial hands. In fact it gave autonomy as far as autonomy was practicable. Circumstances have changed much since 1893, and the problem is now in some respects easier. The pivot and crux of Mr. Gladstone's scheme, the Imperial contribution, has, for the time, disappeared.Sir Henry Primrose's Committee adopted unanimously and unhesitatingly the principle of simplicity. They recommend that the power of imposing and levying all taxation in Ireland, subject to reservations on questions of trade and of foreign relations should rest with the Irish Government. They urge that that policy accords with the general policy of Home Rule, as removing causes of friction, as avoiding need for revision of the arrangement (excepting a future question as to an Imperial contribution), it terminates the extravagance inherent in the partnership, and makes the responsibility of the Irish Government for Irish administration complete.The Committee examine the objections to the grant of complete power of taxation, viz., that (1) it would break up the fixed unity of the realm; (2) that it would impair facilities of trade between the two countries; (3) and that it is at variance with the principle of a Customs Union, said to be a feature common to federations.[pg 148]On the first point the Committee reply:(1) That in their view the Irish Government should have power to impose Customs duties only for the purpose of raising revenue, and that the Imperial Government should reserve questions of tariff, and foreign relations. Thus fiscal unity on important points would be maintained. For sixty years from the Union separate machinery existed for the collection of different rates of duty in the two countries. If Union could dispense with fiscal unity,a fortíorícan any less close form of association do so.(2) The Committee do not attach importance to the second objection. The Custom House does not seriously trammel the convenience of traders between this country and the Continent, and it was found endurable when the variance between England and Ireland was more formidable than now.(3) On the third objection the Committee argue that a Customs Union is indispensable, when the boundaries of federated states form a ring fence. It is not indispensable when, in a case like that of England and Ireland, the two countries are separated by sea.These reserves diminish, of course, the severe simplicity of the scheme, and the Committee's answers to objections admit some inconvenience to trade, but a great change like that of Home Rule must have some drawbacks, and in the opinion of Home Rulers, the end to be gained far more than compensates for slight inconveniences which attend its execution. It is certain, moreover, that, whatever may be the measure[pg 149]adopted, it will be necessary to take means for ascertaining the“true”Revenue of Ireland, and to that extent there must be some slight interference with trade.I agree with the Committee in their preference for the simplicity of complete autonomy.Sir Henry Primrose and his colleagues agree to a great extent with a Minority Report of the Financial Relations Committee (1896), signed by Lord Farrer, Mr. Bertram Currie and myself. The advantages of complete autonomy are obvious, and I cannot avoid a regret that it has not been possible to adopt it. I note, however, that the greatest Irish authority on Irish Government, Lord Macdonnell, though in favour of Home Rule, is entirely opposed to the grant of fixed autonomy to Ireland.We must not misunderstand the relations of the Committee to the Government. They were not appointed to draw a Home Rule Bill. They were to ascertain and consider the fiscal relations between Ireland and other parts of the United Kingdom as they exist to-day, paying special regard to the changes which have taken place in revenue and expenditure since 1896, the date of the Report of the Royal Commission; to distinguish between Irish Local Expenditure and Imperial Expenditure in Ireland; and to consider, in the event of Home Rule being established, how the revenue required to meet the necessary expenditure should be provided. The function of the Committee was, therefore, purely financial. They had to collect financial information, a necessary preliminary to a consideration of the Bill, and to advise as to the method of providing the revenue required. They had no mission to examine the political conditions which must be satisfied by a Bill designed to effect a Constitutional Revolution. That[pg 150]was the function of the Cabinet. The Committee, limiting itself to its instructions, recommended the method of raising revenue which they thought wisest, independently of any but financial considerations. The Government consider the question from a wider point of view. Their measure must be founded on policy as well as finance. They do not adopt the Committee's recommendations. They decide to retain for a time, more or less indefinite, a closer relation between the two financial systems. Much as I should like greater simplicity, a study of their measure leads me to the conclusion that its provisions are, in the main, wise. Let us then consider how far the provisions of the actual Bill satisfy the conditions needed to insure the success of Home Rule.In the first instance, and for an uncertain number of years, the Imperial Government keeps a tight hand upon the Irish Government. It reserves large powers enabling it to reject, postpone, or test the validity of Irish Bills. It regulates and levies all taxes, and fixes postal rates. It secures the interests of various classes of public servants, and retains temporarily the police under its own control. It fixes Irish Local Expenditure at a certain sum, and it issues that sum yearly to the Irish Government together with a free gift of £500,000 a year for three years, falling gradually to a permanent gift of £200,000.Normalincrease of Irish Revenue is appropriated to reduce the deficit to be borne by the British Exchequer. If, therefore, the Irish Government increases its own expenditure beyond the fixed sum allotted to it, it must find the revenue required, and for that purpose powers of taxation are given to it.The nursing hand of the mother is, in fact, present at every point of the Bill, but it must be remembered[pg 151]that a hostile step-mother may, at any time, replace the kindly mother.There is no escape from the conclusion that these reservations restrict the autonomous power of the Irish Government. On the other hand, the whole spirit of the Bill marks the greater part of them as temporary. The Bill, in fact, confers autonomy by gradual steps, and holds out prospects that eventually the relations between the two countries will be simple and workable. At the outset, and for some time onward, the Irish Government, freed from liability for the costly“reserved”services which the“partnership”has bestowed or inflicted on Ireland, will occupy itself with the organisation of its own home administration. It starts with no previous experience of administration, and it is clearly desirable that it should proceed by steps, gathering experience as it goes. Its field of work at first should not be too wide, and six years is not too long a period for it to reform and reconstitute its administrative organisation. This is its first duty, and it undertakes it under favourable conditions.In six years the constabulary will be transferred automatically from the charge of the Imperial Government to that of the Irish Government with the sum allotted to its support.106That sum will be increased by any saving which accrues to the British Exchequer from the transfer, and in determining that sum regard is to be had to theprospectof any increase or decrease[pg 152]in the cost of the service, expected to arise from causes not being matters of administration.In the next place, the Irish Parliament may, at any time, on twelve months' notice assume the legislative and executive control of three reserved services, viz., Old-age Pensions, National Insurance, and Labour Exchanges. If they are taken over, the sum transferred with them will be determined on the same principle as in the case of the constabulary. Autonomy, therefore, in regard to these services is granted to the Irish Government, and they will only be retained under the control of the Imperial Government, if, and so long as the Irish Government desires it.The Postmaster-General said in his speech on the introduction of the Bill that the old-age pension charge is now practically at its maximum, gradually diminishing, and the Primrose Committee (paragraph 54), estimate the charge at the time when the Bill becomes law at £3,000,000. The question then arises what will be the amount transferred, if the Irish Government, seeing its way to more economical administration, were to give at once the twelve months' notice and take over the service at the end of a year. It would not, I presume, be £2,664,000 the charge at which the Treasury in its“outline of financial provision”(paper 6154), estimated it in 1912-13, but £3,000,000, modified to some extent by the prospect of reduction.The cost of National Insurance and Labour Exchanges is estimated by the Treasury in 1912-13 at £191,500, increasing by £300,000 in ten or fifteen years. If the Irish Government were in like manner to take them over, the amount transferred would, I presume, be £190,000 with a sum added representing the prospect of increase.In the event then of those services being taken[pg 153]over by the Irish Government, they would considerably exceed their charges as estimated by the Treasury for 1912-13, and the excess would entail a corresponding increase of charge on the British taxpayer, to be counterbalanced gradually by the normal increase of Irish revenue, which the Postmaster-General estimates, with due reserve, at £200,000 a year, and by the gradual reduction (£50,000 a year) of the free gift of the British taxpayer from £500,000 to £200,000.It must be remembered that these increased charges on the British taxpayer are not the result of Home Rule, they are an inheritance from the“partnership.”When these services are transferred from the Imperial to the Irish Government, the Imperial Government will only retain control over the land purchase charges and the regulation and collection of taxes. The former will apparently remain permanently with the Imperial Government, involving an estimated increase of charge on the British taxpayers of £450,000 a year (Treasury Paper 6154). With regard to the latter, it is clearly desirable that at the outset the Imperial Government should be responsible for levying and collecting taxes. If difficulties on that subject should arise in parts of Ireland, the Imperial Government will settle them with an authority which the new Irish Government cannot possess. Clause 26, however, holds out a possibility hereafter of extended autonomy to Ireland. If for three years the revenue of Ireland exceeds the expenditure on Irish services by the Imperial and Irish Governments, the Parliament of the United Kingdom will revise the financial provisions of the Home Rule Act, with a view to securing a proper contribution from Irish revenues to Imperial expenditure, and extending the powers of the Irish Governmentwith respect to the[pg 154]imposition and collection of taxes, and if extension were then granted in a liberal spirit, there would be little left to desire.ConclusionI have thus traced the gradual progress towards autonomy contemplated by the Act. It justifies the conclusion that the Government favours autonomy, but seeks to achieve that end gradually and tentatively. With the path thus marked out, it lies with the nation to pursue steadily and resolvedly the great end of reconciliation with Ireland.It is impossible to consider Home Rule in its financial aspect, without casting a look backward and comparing the result which would have followed the grant of Home Rule in 1886 with the result which has followed its refusal. In the former case Ireland would have been reconciled long ago. She would have been mistress in her own house, and it would have been her interest as well as her policy so to conduct her administration as to insure the success of her autonomy. She would have had full opportunity for reorganising her establishments on a reasonable scale, substituting for an expensive military police an ordinary police, with a saving, as Mr. Gladstone once pointed out, of £900,000 a year. She would have been able to maintain the reasonable contribution to Imperial expenditure which it is her duty as an integral part of the United Kingdom to provide. It would have been worth the while of Great Britain to make a great sacrifice at the outset to attain this solution of the Irish problem, and long before now the solution would have been complete.The Conservative Party refused Home Rule. They have held power during sixteen out of the twenty-five[pg 155]years elapsed in the interval, and they have had full opportunity to try their alternative policy. That policy has not indeed been the twenty years of“resolute Government,”a euphemism for coercion, advocated by Lord Salisbury. They have tried a policy of bribes and doles, with the result that the Imperial contribution of over £2,000,000 made in 1885 has been dissipated, and that Irish local expenditure alone shows now a deficit of £1,500,000 and a steadily increasing deficit. In short, a total burthen of between £3,500,000 and £4,000,000 has been inflicted on the British taxpayer. The Leader of the Conservatives has now announced with splendid audacity that if the“partnership”continues, if the Conservatives are allowed still to mis-rule Ireland, and to maintain the baleful spirit of ascendancy, they will endeavour to develop in every possible way the resources of Ireland. That is to say, the policy of bribes and doles is to continue at the expense of the British taxpayer. Let the British taxpayer note that, and let him note also that the Conservative Party will find the ways and means for these bribes and doles not by taxes on the wealthy, but by taxes on the food of the people. Ireland will accept the doles; but she will not be satisfied. She will still clamour at our gates for Home Rule, as she has clamoured since 1886, and she will get Home Rule, but the burthen on the British taxpayer will be then how much greater than now?[pg 156]AppendixThis Report of the Primrose Committee, the Treasury outline of financial provisions, and the speech of the Postmaster-General on the introduction of the Bill offer some vague estimates, perhaps more properly guesses, of Irish finance, one of which, Old-age Pensions, extends to twenty years. It may be interesting to throw these figures together, not (God forbid) as an estimate, but as illustrating opinion prevalent among the experts engaged in the preparation of the Bill.Income:Estimate for the year 1912-1913 10,839,000Addfree gift of £500,000 to be reduced in nine years to 200,000The Postmaster-General's Estimate of £200,000 normal yearly increase of revenue in twenty years 4,000,000Income in twenty years (round figures) 15,000,000Expenditure:Sum transferred to Ireland 1912-1913 5,462,000Post Office, 1912-1913 1,600,000Old-age pensions (Treasury Paper) 2,800,000Land purchase (£761,000 in 1912-1913 increased by £450,000) 1,211,000Insurance £191,500 in 1912-1913 increased by £300,000 491,500(Say) 11,564,500-11,600,000Balance available for Constabulary, collection of Revenue, Imperial contribution and Irish services.It must be recollected that the Irish Government has to provide for increase of Irish services beyond £5,462,000 by taxation.[pg 157]

V.—Financial Relations99By Lord Welby“The Channel forbids Union, the Ocean forbids separation. I demand the continued severance of the Parliament with a view to the continued everlasting unity of the Empire.”Terse words in which a great statesman summed up the relation of Ireland to England. The Home Rule Bill will give the sanction of law to Grattan's aphorism. It bids Ireland manage her own affairs, freeing her in her own house from official bondage to an unsympathetic consort. If the Act of Enfranchisement is drawn in a trustful and large spirit, it will, we may feel assured, end the feud of centuries, and create unity where the Act of Union has created enmity.The policy of Home Rule is wise in itself, and worthy the statesmanship of a nation always bold in the hour of need, and, as experience of its working is gained, it will commend itself more and more to the commonsense of a practical people, but the immediate success of the first Home Rule Act will depend greatly on the skill and wisdom with which the details of a complicated measure are devised, facing fairly the financial[pg 113]evils consequent on Tory obstinacy, and avoiding, in reasonable degree, offence to popular prejudice and existing interests.The provisions which will adjust the financial relations between the two nations are not among the least difficult of those details, and Parliament must solve the puzzling problem without delay. It must begin by temporarily giving local government in Ireland a fair start at the cost of the British tax-payer.Let us, in the first place, clear the ground from some doubtful arguments which, used as premises, will probably lead the unwary to false conclusions. A plea is often put forward that England is a rich country and Ireland a poor country, and it is argued that identical taxation therefore wrongs Ireland. But England is not a rich country, in the broad sense. It is a country in which there is vast accumulation of wealth, but in which, also, there is a great mass of poverty—poverty probably exceeding the poverty of Ireland, and, therefore, identical taxation if it wrongs the poor of Ireland, wrongs still more the poor of England. Critics arguing from this false premise contend that the extension of the Income-tax to Ireland was a wrong, that is to say, the wealthy man living in Ireland, where living is relatively cheap, ought not to contribute to the national expenditure on the same principle as the wealthy man living in England, where living is relatively dear; or, to put the argument in another form, it is sound finance to take Income-tax from a man in England, struggling on a few hundreds a year. It is unsound finance to take Income-tax from, say, the profits earned in Ireland by the Guinness firm. Nationalists, misled by the plea of Ireland's poverty, have relied on this argument, and Conservatives also have used it chiefly to discredit Mr. Gladstone, who extended the Income-tax to[pg 114]Ireland; but the argument is false in itself, and cannot be made the basis of sound financial legislation. As a matter of fact, taxes on articles of general consumption, on the necessaries of life, fall heavily on the poor, and the argument of over-taxation applies in great degree to the poor in the great towns of England, and to the poor in Ireland. If, then, the poor of Ireland are to be relieved, the poor of England must be relieved also, and identical taxation would still be the result. The statesman must find a truer gauge by which to measure the relative capacity of the two countries to bear taxation.Again, during the long discussion on financial relations, much time has been wasted in criticising that provision of the Act of Union, which fixed the respective contributions of Great Britain and Ireland to the common purposes of the Empire at the proportion of fifteen and two. That proportion, in fact, was not exacted, and it may be put aside as theoretical.A summary of recent financial history in Ireland will enable the reader to understand the circumstances in which Parliament takes up the problem of Home Rule. Towards the close of the eighteenth century the condition of Ireland was bad. England, selfish to the last degree in her commercial policy, treated Ireland as little better than a conquered country, and ruined her commercially and industrially by restrictions on her trade. Protestants and Catholics joined in patriotic resistance, and wrung at last freedom of trade in 1779, and an independent Parliament in 1782. Thenceforward for a time the financial administration of Ireland was regulated in accord with Irish interest. The country prospered financially under the new order. Large sums were spent in promoting agriculture and manufactures, and in grants for public works, and the[pg 115]country's finance was restored to order. During the years of peace, 1782 to 1793, Ireland contributed on the average £584,000 to military—that is to the common expenses of the Empire. The military expenditure of Great Britain in the peace years, 1786 to 1792, averaged £5,142,000. Ireland was then a most important factor in the State, for the population was to that of England in the proportion of nearly one to two.Pitt desired to establish reciprocity between the two countries and at the same time to obtain from Ireland a contribution on a fixed principle for the Navy, wise proposals worthy of the Minister; but the two Parliaments could not agree. That of England bowed to the pernicious claims of ascendancy and to the supposed interests of the commercial classes. Pitt was defeated. The French Revolution and a war lasting nearly twenty-two years followed, and in the midst of the war broke out the Rebellion of 1798. If the charge of the Irish debt at the outbreak of the war and the average civil expenditure of Ireland between 1793 and the Union is deducted from the average income of Ireland, the surplus constituted Ireland's real contribution to the common expenditure and it averaged about £900,000 a year. The year 1800 marks a great change of policy. Pitt put an end to the independent Parliament of Ireland and passed the Act of Union, bad in itself, and worse by the means which made it law. It sought to make the two countries one for all purposes of revenue, and that object was kept steadily in view.From 1800 to 1817 the United Parliament imposed taxes on both England and Ireland, but the Irish Treasury collected the Irish Revenue, defrayed the local expenditure of Ireland as sanctioned by the United Parliament and remitted the surplus in aid of the war expenditure. The greater part of the[pg 116]burthen fell upon Great Britain, but Ireland's share drained greatly her resources. Her revenue which had produced £1,837,000 in 1793, reached £7,305,000 in 1817, an increase of 300 per cent., while her contributions during the years of war to the common expenditure calculated on the principle adopted in the preceding paragraph amounted to about £3,000,000. During the same period Great Britain contributed to the war out of revenue about £43,000,000 on the annual average.In 1817 the Irish Treasury was abolished, the exchequers of the two countries were united, the British and Irish Revenues were paid alike into the one exchequer. The Irish local expenditure was defrayed from that exchequer under the check of the English Treasury, and the United Parliament imposed and repealed Irish taxes. From 1817 for many years Ireland fared badly. Her representatives in Parliament served her ill. Tories, Whigs, and independent members failed alike in making England understand Irish needs, and the British Parliament neglected Irish interests. The years between 1817 and 1842 mark the first period of Irish financial history dating from the war. It was a period of stagnation. Both countries required time to recover from the calamity incident to war; but the recovery would have been more rapid, even under heavy taxation, had not progress been retarded by the unwise legislation of protection, which fettered enterprise and restricted commerce. This evil, however, injured Great Britain more than Ireland. In 1824 the separate Customs Departments of the two countries were abolished. The trade between Great Britain and Ireland was treated as coasting, and from that time no official record has been kept of goods exported from and imported into both countries.In 1817 the taxes levied in England were similar to,[pg 117]but not identical with, those levied in Great Britain. Ireland was exempt from many taxes levied here, and in some cases, such as spirits, she paid a lower rate of duty. A period of profound peace enabled the government to remit taxation; but those remissions were chiefly made in deference to British interests, and in making them Irish interests were little considered. The truth of this statement is illustrated by the Revenue Returns. The estimated“true”100Revenue of Great Britain fell from £51,500,000 in 1820 to £46,250,000 in 1840, although population, and with it consumption, had increased. The“true”Revenue of Ireland in the same period rose from £5,250,000 to £5,500,000. But it must be added that many of the taxes remitted were taxesnot levied in Ireland. In respect to them Great Britain had to a certain extent a claim to prior consideration.The second period of financial history extended from 1842 to 1869, a period of rapid recovery and of great prosperity in Great Britain, but not so in Ireland. Famine fell upon her in 1846, and thinned her population, followed by emigration, which showed how poverty pressed upon the poor, while the Fenian movement of 1866 showed how widespread was the spirit of unrest. A highly cultivated Liberal statesman was Lord-Lieutenant during several years of the period. An interesting diary which he kept leaves the impression that the leading statesmen of the day were not reading the signs of the times, or gauging the gravity of a growing movement. This was hardly the period to choose for increasing the taxation of Ireland, nevertheless in 1853 Mr. Gladstone extended the[pg 118]Income-tax to Ireland, counterbalancing it in part by the remission of loans granted to Ireland during the famine—a very insufficient compensation. But the Income-tax did not touch the poor, and as I have pointed out there was no reason why the wealthy and comparatively well-to-do classes in Ireland should not contribute to the public expenditure like their brethren in Great Britain. This plea, however, does not extend to the spirit duties which during 1853 Mr. Gladstone and Mr. Disraeli raised to the level of the spirit duties in Great Britain. That tax undoubtedly was paid in great measure by the poorer classes.In one direction there was improvement. In 1842 Sir Robert Peel acceded to power, and inaugurated at once the policy of liberating trade which has conferred such benefits on Great Britain, and in a minor degree on Ireland. The era of prosperity which followed the adoption of the Free Trade policy increased greatly the consuming power of the people, and enabled Mr. Gladstone to largely reduce duties on the principal articles of food consumed by the poorer classes. For example, he and his successors reduced the tea duties from 2s. 2d. to 6d. and abolished the sugar duties. This was undoubtedly the true method of remedying the evil which underlies the plea that identical taxation wronged Ireland. I have shown that that evil was caused not by identical taxation, but by heavy taxes on food, which oppressed alike the poor of Ireland, and the more numerous poor of Great Britain. The policy adopted met the local grievance, by modifying if not removing the general grievance, and this remedy of the general grievance was only rendered possible by the growing prosperity of Great Britain. The poor of Ireland had therefore their full share of the benefit caused by the prosperity of Great Britain. The historian[pg 119]must give full weight to this consideration when he criticises the increase of the Irish spirit duty. There can be little doubt as to the verdict of history, if the choice lies between cheap whisky and dear food on the one side, and cheap food and dear whisky on the other. Between 1860 and 1900 the Customs and Excise duties which were reduced exceeded the like duties increased by some £22,000,000 a year, and Ireland had her share in the reduction.In 1864 a Committee of the House of Commons inquired into the taxation of Ireland, but it led to no useful result. In other directions the monotony of neglect continued. The Government and Parliament paid little or no attention to Irish needs. Ireland was the Cinderella of the three kingdoms, and fared accordingly.The third period ranged from 1869 to 1896. It might be termed the Home Rule period, for it includes the two Home Rule Bills of Mr. Gladstone, but it includes also other great measures relating to Ireland. Indeed, during the whole period of seventeen years Ireland engrossed, to a great degree, the attention of Parliament. The change was very remarkable. Up to 1869 England was indifferent to, or bored by, Ireland. She was stupid. She did not trouble herself to learn Irish wants, and she could not understand the spirit of Irish nationality. The Devon Commission, a Conservative Commission, appointed by a Conservative Minister, Sir Robert Peel, reported that 2,500,000 people in Ireland were on the verge of starvation, and gave warning of the evils, the perils, inherent in the Irish land system. England took no notice of either warning. The famine answered the first in cruel fashion. The second was pigeon-holed. Wise in her own Home administration, wise of late years in her[pg 120]Colonial administration, she knew no remedy for Ireland but force, and force is no remedy. She accepted, almost as matters of ordinary administration, Coercion Acts which marked with a black stigma most years of the century, unable to see that that fact alone was a disgrace to her statesmen, her Parliament, and her people.Early in the Home Rule days I heard a great English statesman say:“The first duty of a Government is to bring the people into agreement with the law; till it does that it fails in its first duty, and England has hitherto failed to bring Ireland into agreement with the law”—a truth well and forcibly expressed.In 1869 a man of great power and eloquence, wide views, and firm resolve became Prime Minister. He realised the habitual injustice of England to Ireland, and he saw the perils impending. By his strength of will he forced an unwilling country and an indifferent Parliament to devote its serious attention to Irish questions. He disestablished the Church. He was defeated on Irish education, but he laid the foundation of a land settlement by conferring on the tenants, in spite of strenuous opposition from the Tories, the rights of fair rents, fixity of tenure, and free sale, and his measures were marked by an earnest desire to deal liberally with Ireland to the utmost extent consistent with equity to the British tax-payer. Finally, when Ireland sent to Westminster more than four-fifths of her representatives pledged to Home Rule, he accepted this expression of the national will, and became a convert to the principle of Home Rule. I deal later in detail with his two Home Rule Bills of 1886 and 1893, which were defeated, and I need only here deal with finance of the third period, apart from the provision of the Home Rule Bills.[pg 121]Before Mr. Gladstone was converted to Home Rule, Home Rule finance attracted little attention. That eminent statistician, Sir Robert Giffen, made, indeed, in 1885, a singular suggestion to theStatistnewspaper, viz., that the Irish landlords should be bought out at the cost of the Imperial Exchequer, and that the rent charge, which would then be payable by the purchasing tenant, should be given to an Irish authority, in lieu of payments from the Exchequer, for the internal administration of Ireland.Again, Sir Robert wrote an article in theNineteenth Century Review, March, 1886, a few weeks before the introduction of the first Home Rule Bill, to show how unimportant, from a financial point of view, Ireland had become to us, and to suggest the expediency of devising some form of Government under which the special needs and circumstances of that country would receive more and better attention than they did under the existing arrangements. His figures might be, in some instances, doubtful, perhaps even incorrect, but it can hardly be denied that he made good his point. Sir Robert was, we see, greatly in advance, not only of the ordinary Briton, but of financial experts generally, both as regards the land question and also that of the Government of Ireland.Perhaps the most able thinker and writer on economic questions in the second half of the nineteenth century was the late Mr. Bagehot, and, in proof of the general indifference to Irish questions in England, it is notable that his collected works, ranging over a wide field in politics and literature, contain no paper on the government or condition of Ireland. Yet he had witnessed O'Connell, the famine, the depopulation of Ireland, the Committee on Irish Taxation, and the Fenian outbreak in 1866.[pg 122]In 1890 Mr. Goschen, as Chancellor of the Exchequer, in the Conservative Government, moved for a Committee of the House of Commons to consider the financial relations of England, Scotland, and Ireland. The Committee was instructed to inquire into the equity of their financial relations in regard to the resources and population of the three kingdoms. It had hitherto been much discussed whether Ireland could be regarded as a separate financial entity from the rest of the kingdom. The Irish Taxation Committee of 1864, of which Sir Stafford Northcote and Mr. Lowe were prominent members, had refused to admit the principle of such separate entity, and that had been generally the Conservative contention. But, in the reference to the Committee of 1890, the Conservative Government accepted the principle. The Home Rule Bills of 1886 and 1893 were, of course, based upon it. Thus, 1890 marks an important advance in the discussion, and thenceforward, by consent of both parties, the separate“entity”was established.After the rejection of the second Home Rule Bill the Liberal Government appointed a Royal Commission to inquire into the financial relations of the two countries and their relative taxable capacity. The Report of this Commission deserves attention, because it was exhaustive in its inquiries, because the information it laid before the public has since that time been generally used in discussion, and because many of the recommendations made were far-reaching and suggestive. There was, as might be expected, great difference of opinion. The Conservative members and the Nationalist members made their several Reports. Attention, however, may be directed to one of the Reports, because it received the concurrence of the Nationalist members and of three English members—one of whom was a very[pg 123]high, if not the highest, financial authority in the City of London, the two others retired Civil Servants who had been at the head of two great Departments of the State. Their conclusions were as follows:“(1) That Great Britain and Ireland must, for the purpose of this inquiry, be considered as separate entities.“(2) That the Act of Union imposed upon Ireland a burthen which, as events showed, she was unable to bear.“(3) That the increase of taxation laid upon Ireland between 1853 and 1860 was not justified by the then existing circumstances.“(4) That identity of rates of taxation does not necessarily involve equality of burthen.“(5) That whilst the actual tax revenue of Ireland is about one-eleventh of that of Great Britain, the relative taxable capacity of Ireland is very much smaller, and is not estimated by any of us as exceeding one-twentieth.”The three English members above mentioned presented a separate Report, recording at length their views on the questions referred to the Commission. I call attention to it, because reference is frequently made to it in the Report of Sir Henry Primrose's Committee, recently appointed to advise the Government upon the new Home Rule Bill.They pointed out that the whole taxation of Ireland increased from £2,900,000 in 1820, to over £6,600,000 in 1893, and that by far the larger part of this increase was derived from taxes on articles of consumption which fell most heavily on the poor; that the increase resulted only temporarily in an increase in the contribution to common expenditure which rose from £3,691,000 in 1820 to £5,396,000 in 1860, to fall to £1,966,000 in 1893, for the greater part of the increase had been absorbed in increase of Irish civil expenditure. This local expenditure amounted in Ireland to 19s. 7d. per head, while in Great Britain it only amounted to 11s. 9d. If the cost of administering Ireland had been reduced to the like[pg 124]cost in Great Britain, a saving of nearly £2,000,000 would have been realised.They thought that the expenditure in Ireland was conducted on a scale totally unsuitable to that country, that the industrial taxation, borne in Ireland mainly by the consumers of dutiable articles, was heavier than the masses of the Irish people ought to bear, that Irish taxation ought not to exceed one twentieth part of taxation of the United Kingdom, but they doubted whether Great Britain would consent to alter her whole system of taxation to meet the evil to Ireland. They objected totally to seeking a remedy in increased grants and doles, and they suggested that Ireland should levy her own taxes and provide for her own expenditure.Lastly, in answer to the objection that Ireland might impose new Customs duties, they held that to be unlikely, since Ireland rather than Great Britain would suffer by such a policy, because the market of Great Britain is of greater importance to Ireland than that of Ireland to Great Britain.The Royal Commission reported in 1896. The question of the financial relations remained then in practical abeyance till 1907. In that year the Government of Sir H. Campbell-Bannerman proposed to establish an Irish Council under the Lord-Lieutenant entrusted with the control and direction of certain administrative Departments. A sum was to be charged on the Consolidated Fund to enable the Council to meet the expenditure of the transferred Departments. This sum was fixed for the first five years at £4,164,000. This was simply a measure to decentralise administration, and to admit Irishmen to a share in Irish administration. It did not, however, obtain support in Ireland, and in consequence it was not pressed.We come now to the last stages in the story of Irish[pg 125]finance. The Government of Mr. Asquith decided to introduce the Third Home Rule Bill in the session of 1912, and in 1911 they appointed a Departmental Committee under Sir Henry Primrose to advise them. The able report of that Committee has been laid before Parliament, and it brings our information on the financial relations up to the latest date:They state the“true”Irish Revenue in 1895-6 to have been £8,034,000.They estimate“true”Revenue 1910-11 at 10,300,000.Increase £2,266,000.The“true”local expenditure in Ireland, 1895-6, £5,938,000.The“true”local expenditure 1910-11, 11,344,000.£5,406,000.Thus whereas Ireland in 1895-6 made a contribution of £2,066,000 to Imperial Expenditure, in 1910-11, not only did she make no contribution to Imperial Expenditure, but the British taxpayer was called on to contribute more than £1,000,000 towards Irish local expenditure. But Irish local expenditure is increasing under the heads of old-age pensions, land purchase, and expenses of the Government which will be established in Ireland under Home Rule. The Committee in consequence estimate:The Irish local expenditure in 1913-14 at £12,400,000.The Irish Revenue at 10,350,000.Deficit £2,050,000.[pg 126]for which provision must be made in the forthcoming measure.In order to meet the existing deficit, the Committee suggest that the British Exchequer should take over liability for all old-age pensions which had been actually granted at the date when the Home Rule Bill comes into operation. They estimate that liability at £3,000,000 a year, gradually, of course, diminishing. If necessary, the liability in whole or part of the Irish Constabulary Pensions (£400,000) might also be transferred to the British Exchequer. They advise that the obligation of Ireland to contribute to the Imperial expenditure should be affirmed, but that a settlement of the amount of the contribution should remain in abeyance; and lastly, that the guarantee of the Imperial Exchequer in respect of the Land Stock should remain, but that means should be taken to secure regular payment of the sum due from Ireland to the National Debt Commissioners.I shall contrast later the recommendations of the Committee with the actual provisions of the Home Rule Bill.I will now compare the finance of the three Home Rule Bills which have been submitted to Parliament, those of 1886, 1893 and 1912.The Bill of 1886Mr. Gladstone made it an essential condition of his plan that there should be an equitable distribution of Imperial charges and that Ireland should pay her fair proportion to the common expenses of the Empire. In 1885 that contribution was represented by the surplus of Irish Revenue remaining after deduction of the expenditure in Ireland on Irish services. He calculated in 1886 that the surplus above described[pg 127]provided a contribution by Ireland to Imperial expenditure equivalent to £2 where Great Britain contributed £23. This proportion contrasts with Mr. Pitt's arrangement in 1800 that Ireland should pay £2 where Great Britain paid £15. Mr. Gladstone proposed in future that where Great Britain paid £28, Ireland should pay £2, a concession of moment to Ireland, and he supported it on the following ground: he measured the taxable capacity of the two countries by (1) the Income-tax returns (2) the death duty returns, and (3) the valuation of property. Income-tax gave a proportion of £38 to £2, but he held Income-tax an imperfect test, because it was paid in Ireland on a lower valuation than in Great Britain and because many Irishmen receive dividends on securities which pay Income-tax in England. He thought that £34 to £2 would be nearer the true proportion. He held the death duties to be a better test and they showed a proportion of £26 to £2, while the valuation, lower in Ireland than in Great Britain, gave a proportion of £24 to £2. Arguing from these premises, he held that his proposed contribution of £2 to £28 was an equitable and even a generous arrangement, justified by the necessity of starting the Irish Legislative body with a balance to its credit.A table is given showing how the contribution was appropriated.The amount to be contributed by Ireland to Imperial expenditure being thus ascertained, the more difficult part of the problem remained, viz., how to provide the fund out of which the contribution would be payable and how to secure its payment. The plan which commended itself to him as insuring the fiscal unity of the three kingdoms, and giving absolute security to the British Exchequer, left the imposition and collection[pg 128]of Customs and Excise duties with the Imperial Government, and under Imperial control. This plan was to be carried into effect in the following manner. The Customs and Excise were to be levied under Acts of the Imperial Parliament, and were not to be subject to the control of the Irish Legislature. The Irish Legislature with that exception could impose taxes on Ireland. Under the Land Purchase Bill, which was to be introduced concurrently with the Home Rule Bill, a Receiver-General was to be appointed, into whose hands the Customs and Excise Duties and other taxes were to be paid, including taxes imposed by the Irish Parliament. The Imperial Receiver-General, having thus in hand all Imperial and local taxes levied in Ireland, would in the first instance pay out of them the Imperial charges. Apart from the Imperial charges there were other charges, strictly Irish, such as Judges' salaries, pensions, the salaries of existing civil servants, for the security of which the Bill provided. The Bill bound the Irish Parliament to impose taxes sufficient to meet such charges, and ordered them to be paid by the Receiver-General. The Receiver-General was to keep an Imperial and an Irish account. The Irish charges would of course be paid from the latter account. He was to carry the Customs and Excise Duties in the first instance to the Imperial account, and the local taxes to the Irish account, transferring to the Irish account the surplus of Custom and Excise, after payment of the Imperial contribution. He was subsequently to pay the balance remaining on the Irish account to the Irish Exchequer.An Imperial Court of Exchequer was established in Ireland to watch over the observance of the Act, and all Revenue acts were to be tried and defaults punished in that Court. The Bill further enabled the Irish[pg 129]Parliament to take over the Irish Post Office, if it should so desire, though it was Mr. Gladstone's opinion that it would be for the convenience of both countries if the Post Office were to remain under the control of the Postmaster-General.The Imperial contribution payable by Ireland was not to be increased for thirty years, though it might be reduced if the Imperial charge for Army, Navy and Imperial Civil expenditure for any year should be less than fifteen times the contribution paid by Ireland. In that case one-fifteenth of the diminution could be deducted from the Imperial contribution.Existing Civil Servants were retained in their offices at existing salaries. If the Irish Government were to desire their retirement, they would be retired on pensions. On the other hand, if at the end of two years the officers themselves desired to retire, they could do so, receiving pensions on the usual abolition of office scale.Supposing the Home Rule Bill to have become law the account of Irish finance would have stood thus:Receipts.Imperial taxes:Customs £1,880,000Excise £4,300,000Total £6,180,000Local taxes:Stamps £600,000Income-tax 6d. £550,000Total £1,150,000Non-tax revenue:Post Office £1,020,000Total: £8,350,000Expenditure.Contributions to Imperial expenditure on basis of one-fifteenth of Imperial expenditure:Debt charges £1,466,000Army and Navy £1,666,000Civil charges £110,000Total £3,242,000Sinking Fund on one-fifteenth of capital of debt £360,000Constabulary101£1,000,000Local Irish Civil charges £2,510,000Collection of revenue:Imperial taxes £170,000Local taxes £60,000Non-tax revenue £604,000Total £834,000Surplus £404,000Total £8,350,000[pg 130]When it is said that in 1885-1886 Ireland was paying to Imperial expenditure in the proportion of £2 to £23, that proportion was calculated on the whole gross Imperial expenditure, whereas Mr. Gladstone calculated the proportion of £2 to £28 on a military expenditure materially cut down, for he excluded from it charges which ought strictly to be called war charges, a modification very favourable to Ireland and reducing considerably her true contribution.He made another concession of great importance. He proposed to credit Ireland with the entire receipts levied in Ireland, but that was not a true test of the amount of taxation paid by Ireland. There are goods which pay duty in Great Britain, but which are consumed in Ireland, so conversely there are goods which pay duty in Ireland but are consumed in Great Britain. For instance, spirits, porter, and tobacco are largely exported duty paid from Ireland and are consumed in Great Britain, and Mr. Gladstone calculated that the excess of duties so paid in Ireland on goods consumed in Great Britain amounted to no less a sum than, £1,400,000 a year. That is of course British Revenue, and in striking a true account between the two countries it should be credited to Great Britain, not to Ireland. The Home Rule Bill, however, gave it to Ireland, a direct grant of £1,400,000102from Great Britain to Ireland, and if that amount be subtracted from the contribution of £2 to £28, it leaves the proportion £2 to £52 instead of £2 to £23.If we strike a balance between the contributions to be paid by Ireland to Great Britain under the Home Rule Bill, and the grants to be paid to Ireland, we shall arrive at the following result:[pg 131]Contribution from Ireland to Great Britain £3,602,000Grants from Great Britain to Ireland:Duties paid in Ireland on goods consumed in Great Britain £1,400,000Grant toward the Constabulary £500,000Total: £1,900,000Net contribution from Ireland to Imperial purposes (or nearly in the proportion of 2 to 60) £1,702,000If the Imperial contributionactuallypaid by Ireland in 1885 be equated on like principle, the proportion stated above at 2 to 23 will be similarly reduced.The Bill was defeated in the House of Commons, and therefore its provisions did not undergo the test of scrutiny in Committee.The provisions of this Bill illustrate the difficulties which attend the financial severance of the Irish from the British Government. High authorities thought at the time that Mr. Gladstone, in 1886, should have proceeded in the first instance by way of Resolutions establishing the principles upon which the Bill would be subsequently founded, and there is much to be said for that view. The main principles of the measure would have been established in the first instance after free and full discussion, and the details would have been adapted later to the principles then laid down. Mr. Gladstone himself, in his reply upon the Second Reading (June 7th, 1886,) indicated a course somewhat similar in its result. He said:“If an interval is granted us, and the circumstances of the present session require the withdrawal of the Bill, and it is to be re-introduced[pg 132]with amendment at an early date in the autumn, it is our duty to amend the Bill with every real amendment and improvement, and with whatever is calculated to make it more effective and more acceptable for the attainment of its end.”It must be remembered that there had been no sufficient time for the collection of the data on which an effective measure could be founded, and the collection of those data was a task of great difficulty, for the Departments did not possess them. The Government came into power in February, and the Bill was introduced on April 6th; thus there was no real opportunity for testing the value of the data collected in that short interval, or for gauging beforehand objections both to the principles and details of the scheme adopted, and experience proved that some of the objections were valid, though probably not insurmountable.The scheme was based on two principles which would be especially liable to criticism:(1) For thirty years Ireland was to contribute to Imperial charges as they then existed a fixed annual sum.(2) The Customs and Excise duties ascollectedin Ireland (i.e., not the“true”revenue) were to be credited to the Irish Government.The first of these principles would have been closely scrutinised in Committee, but probably in the main it could have held its ground. In the first place, it reduced considerably the Imperial contribution, consisting hitherto of the balance of revenue after payment of Irish charges. As Mr. Gladstone pointed out, the amount of military expenditure, on which the proportion of 2 to 28 was calculated, was considerably reduced, and Great Britain had to pay the difference, and so far the change was favourable[pg 133]to Ireland. In the second place, Irish expenditure was increasing, and under the existing system the balance of Irish revenue, constituting the Irish Imperial contribution, was, as the sequel lamentably proved, diminishing, and, a result not foreseen at the time, the wasteful and unsound finance which financial partnership entailed upon Ireland ere long extinguished it. The grant of autonomy was an effective check on this continued waste, otherwise the contribution of a fixed quota would soon have reduced the Irish Government to insolvency.The grant to Ireland of thecollectednot thetrueduties of Customs and Excise was open to grave objection. It presented her with the duties levied in Ireland on articles consumed in Great Britain, but if at any time the habits of the people, such as decrease in drinking, reduced this practical gift—estimated at £1,400,000, or if changes in law or practice transferred the payment of these duties from Ireland to Great Britain, the financial equilibrium of the scheme would be destroyed. This was a real danger as under the bonding system the British trader could, if he pleased, pay these duties in Great Britain.The decision that Ireland was not to be represented at Westminster led to a clumsy device for giving Ireland a voice in the Imperial Parliament when Irish interests were involved. This would be the resource if a war contribution had to be obtained.The scheme of 1886 can only, therefore, be regarded as a draft to be tested and modified in discussion and to form the basis of a revised and amended scheme.The Bill of 1893Mr. Gladstone introduced the second Home Rule Bill in February, 1893. In the discussion he pointed out[pg 134]how incredibly wasteful the method of governing Ireland was; the Irish Civil Government grants, which had averaged from 1833 to 1837 £762,000, had risen between 1888 and 1892 to £4,042,000, and the cost of local government in Ireland was twice as much per head as the like cost in England.Under the scheme of 1886 Irish representatives were not to sit in the Imperial Parliament, but the Government found that under existing financial arrangements there must be financial connection, unless Parliament was prepared to face a different system of trade laws between the two countries, and provision must be made for that connection. Mr. Gladstone, therefore, reversed the decision of the Government in 1886. He proposed to retain Irish representatives at Westminster, reduced in number to 80. They were not to vote on purely British questions, but in his opinion it would be difficult to make that distinction as far as the mass of business was concerned. The Irish representatives would not vote on any tax which was not to be levied in Ireland or on any grant of money for other than Imperial purposes as scheduled in the Bill. By this means Ireland would have a voice, if emergency, such as war, rendered fresh taxation necessary.In the interval between 1886 and 1893 knowledge had been gained to some extent as to what constituted the“true”revenue of Ireland, and the Inland Revenue thought it possible to levy in Great Britain the Excise duties collected in Ireland on articles consumed in Great Britain andvice versa. These Excise duties represented the greater part of the sum of £1,400,000, previously described as the difference between duties, so to speak, belonging to Ireland and duties collected in Ireland, a difference estimated in 1893 at £1,800,000. If Ireland retained that difference, as contemplated by the scheme[pg 135]of 1886, it was equivalent to a grant from Great Britain to Ireland. On the other hand the Customs were not able to make the separation thought possible by the Excise.With these facts before him Mr. Gladstone made an entire change in the financial scheme. As in 1886, he held that Ireland must make a proper contribution to Imperial expenditure, but he abandoned the principle, adopted in 1886, of obtaining that contribution by a quota of one-fifteenth of Imperial expenditure, that is a contribution of £2 by Ireland to £28 by Great Britain. He retained instead the whole of the Customs revenue collected in Ireland as the Irish contribution. He proposed that Great Britain should pay any excess of the charge of constabulary over £1,000,000, out of the contribution, the balance representing Ireland's share of Imperial expenditure. He justified the change on the ground that as the management of trade was reserved to the Imperial Government, the management of the Customs so closely connected with trade should be Imperial also. The Customs were expected to produce a net revenue of £2,370,000. He estimated it as equivalent to about 4 per cent. of Imperial expenditure whereas the actual contribution was about 12 per cent. The contribution would, of course, vary as the net Customs revenue rose or fell. On the other hand the Irish Government were to take all the rest of the“true”revenue of Ireland and to defray out of it all local Irish expenditure, including a fixed sum of £1,000,000 towards the cost of the constabulary and Dublin police, which were temporarily to remain Imperial services. Customs and Excise duties were to be regulated and collected by the Imperial authority which was also to fix postal rates; but all other taxes were to be imposed by the Irish Legislature.[pg 136]The interests of existing judges, and existing civil servants, and of her constabulary, which remained under the control of the Viceroy, were secured. The constabulary would be gradually replaced by a force under the control of the Irish authority. Two Exchequer Judges would be appointed to guard observance of the Act, and appeals lay to the Privy Council which would try on the motion of the Viceroy, or of the Secretary of State, any question as to invalidity of an Irish Act. These arrangements might after fifteen years be subject to revision in pursuance of an address to Her Majesty from the House of Commons or the Irish Legislative Assembly.The receipts and expenditure of the Irish Government under this scheme would have stood as follows:Receipts.(1) Excise true revenue exclusive of licences £3,220,000(2) Local taxes:Stamps, Income-tax, Excise licenses £1,495,000(3) Postal revenue £740,000(4) Other non-tax revenue £205,000Total £5,660,000Expenditure.(1) Civil Government charges, except Constabulary £3,210,000(2) Collection of Inland revenue £160,000(3) Postal service £790,000(4) Contribution to Irish Constabulary £1,000,000Total £5,160,000Surplus £500,000The Bill passed the House of Commons, but the financial clauses were greatly recast in Committee. The changes originated in the fact that the Inland revenue had overestimated the“true”revenue of Excise by a very considerable sum, and the error would have reduced to an insignificant sum the free starting balance for the Irish Government provided in the original scheme. Mr. Gladstone decided in consequence not to keep the Customs revenue as Ireland's contribution to Imperial expenditure, but to let that revenue fall into the common stock of Irish revenue and to[pg 137]take out of that common stock one third of the“true”Irish revenue. This third was to cover Ireland's contribution to Imperial expenditure together with one third of the cost of the Irish constabulary and Dublin police. Ireland was to meet all her local charges out of the remaining Irish revenue. The Imperial Government was to retain for six years the imposition and collection of all taxes; the Irish Government having only supplementary powers of taxation. At the end of six years the Irish contribution was to be revised, and Ireland would be empowered to impose taxes other than Customs and Excise, and she would collect taxes, the Customs alone being retained by the Imperial authorities. The“true”revenue derived from the Customs and Excise was to be ascertained by a Joint Committee of the Treasury and the Irish Government. The financial result of these changes is shown in the following figures:[pg 138](1) Customs:Revenue collected in Ireland £2,136,000Addestimated allowance for duties paid in Great Britain on articles consumed in Ireland £266,000Total estimated Irish revenue £2,402,000; Amount Payable to Irish Exchequer Two-Thirds £1,601,000(2) Excise:(a) Spirits. Revenue collected in Ireland £4,112,000Deductduties ascertained to be paid in Ireland on spirits consumed in Great Britain £1,872,000Total £2,240,000(b) Beer. Revenue collected in Ireland £811,000Deductestimated allowance for duties paid in Ireland on beer consumed in Great Britain £187,000Total £624,000(c) Licence duties collected in Ireland £194,000Total estimated £3,058,000; payable to Exchequer £2,039,000(3) Stamp duties collected in Ireland £707,000 estimated, £471,000 payable(4) Income-tax collected in Ireland £552,000 estimated, £368,000 payable(5) Crown Lands amount estimated to be due to £65,000 estimated, £43,000 payableTotal £6,784,000 estimated, £4,522,000 payable(6) Miscellaneous Irish Revenue £138,000 estimated, £138,000 payableTotals £6,922,000 estimated, £4,660,000 payableIrish Expenditure, 1892-3.(1) Civil Government charges (exclusive of Constabulary and salary of Lord-Lieutenant, but inclusive of local charges met out of local taxation account) £3,123,000(2) Constabulary charges (£1,459,000) two-thirds of £973,000(3) Estimated deficit on postal account £52,000Total £4,148,000Surplus £512,000Total £4,660,000[pg 139]The schemes of 1893 again illustrate the difficulties inherent in a severance of the two Exchequers. The revise left more points open for difference between the two Governments, and it had the serious defect of revision after the short interval of six years.The original scheme was far preferable. The retention of the Customs as the Imperial contribution reduced opportunity for conflicts of opinion to a minimum, and the interval of fifteen years before revision left ample time for the new Irish Government to put its house in order. I venture to think it would have been wise to make good the error in estimating the“true”revenue of Ireland (which invalidated the scheme) by an Imperial Grant, at all events for a time. Under the scheme the Imperial Government provided £500,000 for the constabulary. If it had granted £300,000 or £400,000 more, the net Imperial contribution derived from the Customs would have been reduced to say £1,400,000, not a large sacrifice for the end in view—reconciliation with Ireland.The Bill as amended passed the House of Commons but was thrown out in the Lords. This Parliament refused to accept Mr. Gladstone's proposals to give Ireland Home Rule, and nineteen years elapsed before a third Home Rule Bill was submitted to Parliament.In the three schemes of 1886 and 1893 the Imperial contribution was very similar, perhaps somewhat larger in 1893. In all three schemes, also, the net gain to the British Exchequer was reduced by the grant from that Exchequer of £500,000 to the cost of the Irish Constabulary.The difficulty of devising a financial scheme fairly simple and workable, which was experienced in 1886 and 1893, has been disappointing, but not discouraging. It was inevitable but it can be surmounted.[pg 140]The Bill of 1912In 1911, Mr. Asquith pledged the Government to take up again in the ensuing session the question of Home Rule. In 1910 the Conservative Party, at least a considerable part of it, in presence of a probable dissolution on the Parliament Bill, showed, as in 1885, a disposition to coquette with Home Rule, but the movement came to nothing, and the Party settled into determined opposition to the Home Rule policy, submitting themselves to the lead of the Ulster extremists, who preached sedition in no measured terms. In other respects, the prospects of Home Rule are fairly favourable. England, apart from Scotland, Wales, and Ireland, still returns a majority opposed to Home Rule, but public opinion does not show any signs of vigorous or violent opposition as in 1886. The Liberals, the Irish, and the Labour Party are united in its favour. The passing of the Land Acts is rapidly removing the agrarian evil, and the landlords have not the same cause for anxiety as formerly. The grant of Local Government is working well, and in spite of much poverty the condition of the people is improving. Lastly, the passing of the Parliament Act has made it possible, in spite of opposition in the Lords, to pass a Home Rule Act within the limits of the present Parliament.On April 11th, the Prime Minister introduced the Government Bill. He regarded it as the first step in a comprehensive policy of devolution. It retains permanently at Westminster 42 Irish Members, so that Ireland will have a voice, not only on questions in the Imperial Parliament which concern Ireland, but on questions of Imperial interest, such as war and peace. The Bill of 1886 reserved to the Imperial Parliament[pg 141]certain questions. The Bill of 1893 also made necessary reservations, though its tendency was towards more complete autonomy; but in the interval between 1893 and 1912 great changes have taken place, and the Imperial Government finds itself hampered by new liabilities. The Old-Age Pension Act, the Land Purchase Act of 1903, the National Insurance Act, and Labour Exchanges have added very greatly to Irish expenditure. On the other hand, the contribution to Imperial expenditure, unluckily for the British taxpayer, has disappeared. The problem is, therefore, a new one, and the Government solves it, at all events for the present, by keeping in its own hands a large number of Services, as will be seen hereafter.In 1885-6 Ireland contributed a surplus of considerably more than £2,000,000 to Imperial expenditure; in 1895-6, £2,000,000.103The Government estimates the true revenue of Ireland in 1912-13 at £10,839,000; and the expenditure on Irish services at £12,354,000. Therefore the new Irish Government will start with a deficit of £1,515,000. That deficit is now charged on the British taxpayer. It results from British management of Irish finance, for, on the one hand, Irish revenue is limited by the relatively limited means of Irish taxpayers; on the other hand, England has regulated Irish expenditure on the lavish scale of her own expenditure.The Government lays down certain principles on which Home Rule finance will be based:(1) Ireland must manage her own finance and[pg 142]must have powers of taxation consistent with leaving to the Imperial Government a field of taxation sufficiently wide for Imperial needs.(2) The Budgets of the two countries must not hamper each other.(3) Ireland must bear the cost of any increase arising hereafter on Irish services, but she must benefit by economies in those services.(4) She must have power to reduce taxation if her economies permit it.The scheme which will give effect to these principles may be described as follows.In the first place the Imperial Government retains in its own hands the imposition and collection of all Irish taxes, the Post Office duties alone excepted, which will be transferred to the Irish Government.Normalincrease in Irish Revenue will not be applied to Irish services. It will reduce the deficit. The Irish Government, however, will have supplementary powers of taxation.An Irish Exchequer and an Irish Consolidated Fund will be created, and an Irish Auditor-General appointed. Further, a joint Exchequer Board, consisting of Treasury and Irish officers, will adjust the accounts between the two Exchequers, based upon what it declares to be the actual cost of Irish services when the Act comes into operation. If the Irish Government, using its supplementary powers of taxation, increases or reduces taxes, the Exchequer Board will vary accordingly the sum to be paid by the British to the Irish Exchequer on account of Irish expenditure, and it will determine the effect of any other changes taking place in the relations between the two Exchequers. Lastly, if and when normal increase of Irish revenue puts an end, during a period of[pg 143]three years, to the existing deficit, the Exchequer Board will make a report to that effect, and the financial arrangement between the two countries will then be reconsidered in order to secure a fair contribution from Ireland to Imperial expenditure.The Government, as I have stated, estimates the revenue of 1912-13 at £10,839,000. That sum represents the whole“true”revenue of Ireland, viz., taxes and miscellaneous, £9,485,000; Post Office Revenue, £1,354,000. The Imperial Government adds to this revenue of £10,839,000 a free gift of £500,000 at the cost of the British taxpayer, in order to give the Irish Government a fair start. The total Irish income in the year 1912-13 will therefore be £11,339,000.On the other side of the account, the Imperial Government retains in its own hand various Irish Services, termed in the Bill“Reserved Services,”described later. It transfers from the British to the Irish Exchequer the sum allotted to Irish Expenditure (outside the Reserved Services), estimated in 1912-13 at £5,462,000, the cost of the Postal Service £1,600,000,104and £500,000, the free gift mentioned above, making a total transfer of £7,562,000.If in the future the sum of £5,462,000 allotted to Irish Expenditure and the free gift of £500,000 are exceeded, the Irish Legislature must provide the necessary ways and means.The transfer of £7,562,000 from the British to the Irish Exchequer leaves a balance on the British Exchequer on the Irish Account of £3,777,000105free[pg 144]to that extent to meet the charge of the Reserved Services.These Reserved Services are:(1) Old-age Pensions £2,664,000(2) National Insurance Labour Exchange £191,500(3) Land Purchase £761,000(4) Constabulary £1,377,500(5) Collection of Revenue £298,000Total £5,292,000Therefore the excess of Irish Expenditure in 1912-13 over Irish Revenue as provided results in a deficit of £1,515,000 payable by the British taxpayer, and if the free gift of £500,000 by the British taxpayer included in the provided revenue be added, the total charge on the British taxpayer in 1912-13 on account of Irish Expenditure is £2,015,000.This annual gift of £500,000 is after three years to diminish yearly by £50,000, until a minimum of £200,000 is reached, which will eventually represent the gift of Great Britain to Ireland, until prosperity or good management enables Ireland to pay her own way, and at the last to make a contribution to Imperial Expenditure.The Government estimates a normal growth in Irish Revenue of £200,000 a year, which, to the extent it is realised, will reduce the deficit payable by the British taxpayer.The Imperial guarantee on Irish Land Stock is to continue in full force.Effect of Future ModificationIf the Imperial Parliament increases or reduces taxation, the change will not affect the Irish Budget, for the transferred sum will remain unaltered.[pg 145]The Irish Parliament will have power to reduce taxes levied in Ireland. It will also have power to impose taxes. It may add at will to Excise duties, and if so the Customs duties on beer or spirits must vary with the Excise duties. It may levy new duties which do not interfere with the Imperial system of taxation—for instance, a house duty, or establishment licences. It may add to Income-tax or death duties, and also to Customs duties (other than beer and spirits) provided that the addition does not exceed 10 per cent. of their yield. This 10 per cent. resembles the“centimes additionels”which are levied in foreign countries on direct taxes, and are applicable there to local expenditure. But the Irish Parliament must not trench on Imperial taxes. This increase or reduction of Irish duties will not affect the British Exchequer, but it will increase or diminish the“sum transferred”to the Irish Exchequer.The Irish Parliament will not have power to tax articles not subject to Imperial taxes for the time being. If in the exercise of its power it differentiates Customs or Excise duties in the two countries, there will be a differential duty on such goods passing from one to the other.Public Works Loans granted before the passing of the Home Rule Act will remain under the management of the Imperial Government. Future loans will be managed by the Irish Government.The Irish Parliament will have power to raise loans on the security of the“transferred”revenue, sufficient provision being made for interest and sinking fund. If the Irish Government desires it, the Exchequer Board above-mentioned, may issue an Irish Loan, deducting the charge from the sum“transferred”to Ireland.Such are the provisions of the Bill. It cannot be[pg 146]denied that they appear complicated, but they will be found less so in practice. The machinery of financial administration in a great State is necessarily complicated, and a radical change in that machinery involves a multitude of changes in detail for which the reforming Act must provide. Root and branch opponents of Home Rule naturally criticise those provisions, and exaggerate withUlstervehemence the administrative difficulties which attend radical change, but the advocates of great measures, while recognising difficulties can take juster views of their extent, and they know that they can be surmounted.In the first place an expert body (the Exchequer Board) will interpret the financial provisions of the Act. It will consist of two members appointed by the Treasury and two by the Irish Government, and a chairman appointed by the Crown. Their decision is to be final. On these questions there is therefore no power reserved to the Imperial Government, which might cause friction. The Chairman should probably be a man of judicial rank. Possibly a case might arise in which a revision of the Board's decision would be needed. So far this important section of the machinery is not complicated. In the next place the Imperial Government remains responsible and liable for all the“reserved”services. Here again there is no complication.Thirdly, the Customs and Excise Clauses appear complicated, but they are for the most part machinery clauses, common to Revenue Acts.Fourthly, the Free Trade Clause offends of course the Unionist-Protectionist party, but its merits need not be discussed here. I venture to doubt where Ireland is likely to set up a Protectionist policy against Great Britain. Our market is too important to her. If such a policy were established, history tells us that British Protectionists will not[pg 147]consult Irish interests. Lastly a certain, but not a great, inconvenience will attend the taking of an official record of goods passing between the two countries essential to determining the true revenue of Ireland.Thus the apparent complications of the Bill dwindle greatly on examination. The Bill of 1912 is no doubt much less simple than that of 1893 as introduced by Mr. Gladstone, but that Bill was not, however, so simple as it appeared. It was based on the principle of autonomy, but it retained great powers in Imperial hands. In fact it gave autonomy as far as autonomy was practicable. Circumstances have changed much since 1893, and the problem is now in some respects easier. The pivot and crux of Mr. Gladstone's scheme, the Imperial contribution, has, for the time, disappeared.Sir Henry Primrose's Committee adopted unanimously and unhesitatingly the principle of simplicity. They recommend that the power of imposing and levying all taxation in Ireland, subject to reservations on questions of trade and of foreign relations should rest with the Irish Government. They urge that that policy accords with the general policy of Home Rule, as removing causes of friction, as avoiding need for revision of the arrangement (excepting a future question as to an Imperial contribution), it terminates the extravagance inherent in the partnership, and makes the responsibility of the Irish Government for Irish administration complete.The Committee examine the objections to the grant of complete power of taxation, viz., that (1) it would break up the fixed unity of the realm; (2) that it would impair facilities of trade between the two countries; (3) and that it is at variance with the principle of a Customs Union, said to be a feature common to federations.[pg 148]On the first point the Committee reply:(1) That in their view the Irish Government should have power to impose Customs duties only for the purpose of raising revenue, and that the Imperial Government should reserve questions of tariff, and foreign relations. Thus fiscal unity on important points would be maintained. For sixty years from the Union separate machinery existed for the collection of different rates of duty in the two countries. If Union could dispense with fiscal unity,a fortíorícan any less close form of association do so.(2) The Committee do not attach importance to the second objection. The Custom House does not seriously trammel the convenience of traders between this country and the Continent, and it was found endurable when the variance between England and Ireland was more formidable than now.(3) On the third objection the Committee argue that a Customs Union is indispensable, when the boundaries of federated states form a ring fence. It is not indispensable when, in a case like that of England and Ireland, the two countries are separated by sea.These reserves diminish, of course, the severe simplicity of the scheme, and the Committee's answers to objections admit some inconvenience to trade, but a great change like that of Home Rule must have some drawbacks, and in the opinion of Home Rulers, the end to be gained far more than compensates for slight inconveniences which attend its execution. It is certain, moreover, that, whatever may be the measure[pg 149]adopted, it will be necessary to take means for ascertaining the“true”Revenue of Ireland, and to that extent there must be some slight interference with trade.I agree with the Committee in their preference for the simplicity of complete autonomy.Sir Henry Primrose and his colleagues agree to a great extent with a Minority Report of the Financial Relations Committee (1896), signed by Lord Farrer, Mr. Bertram Currie and myself. The advantages of complete autonomy are obvious, and I cannot avoid a regret that it has not been possible to adopt it. I note, however, that the greatest Irish authority on Irish Government, Lord Macdonnell, though in favour of Home Rule, is entirely opposed to the grant of fixed autonomy to Ireland.We must not misunderstand the relations of the Committee to the Government. They were not appointed to draw a Home Rule Bill. They were to ascertain and consider the fiscal relations between Ireland and other parts of the United Kingdom as they exist to-day, paying special regard to the changes which have taken place in revenue and expenditure since 1896, the date of the Report of the Royal Commission; to distinguish between Irish Local Expenditure and Imperial Expenditure in Ireland; and to consider, in the event of Home Rule being established, how the revenue required to meet the necessary expenditure should be provided. The function of the Committee was, therefore, purely financial. They had to collect financial information, a necessary preliminary to a consideration of the Bill, and to advise as to the method of providing the revenue required. They had no mission to examine the political conditions which must be satisfied by a Bill designed to effect a Constitutional Revolution. That[pg 150]was the function of the Cabinet. The Committee, limiting itself to its instructions, recommended the method of raising revenue which they thought wisest, independently of any but financial considerations. The Government consider the question from a wider point of view. Their measure must be founded on policy as well as finance. They do not adopt the Committee's recommendations. They decide to retain for a time, more or less indefinite, a closer relation between the two financial systems. Much as I should like greater simplicity, a study of their measure leads me to the conclusion that its provisions are, in the main, wise. Let us then consider how far the provisions of the actual Bill satisfy the conditions needed to insure the success of Home Rule.In the first instance, and for an uncertain number of years, the Imperial Government keeps a tight hand upon the Irish Government. It reserves large powers enabling it to reject, postpone, or test the validity of Irish Bills. It regulates and levies all taxes, and fixes postal rates. It secures the interests of various classes of public servants, and retains temporarily the police under its own control. It fixes Irish Local Expenditure at a certain sum, and it issues that sum yearly to the Irish Government together with a free gift of £500,000 a year for three years, falling gradually to a permanent gift of £200,000.Normalincrease of Irish Revenue is appropriated to reduce the deficit to be borne by the British Exchequer. If, therefore, the Irish Government increases its own expenditure beyond the fixed sum allotted to it, it must find the revenue required, and for that purpose powers of taxation are given to it.The nursing hand of the mother is, in fact, present at every point of the Bill, but it must be remembered[pg 151]that a hostile step-mother may, at any time, replace the kindly mother.There is no escape from the conclusion that these reservations restrict the autonomous power of the Irish Government. On the other hand, the whole spirit of the Bill marks the greater part of them as temporary. The Bill, in fact, confers autonomy by gradual steps, and holds out prospects that eventually the relations between the two countries will be simple and workable. At the outset, and for some time onward, the Irish Government, freed from liability for the costly“reserved”services which the“partnership”has bestowed or inflicted on Ireland, will occupy itself with the organisation of its own home administration. It starts with no previous experience of administration, and it is clearly desirable that it should proceed by steps, gathering experience as it goes. Its field of work at first should not be too wide, and six years is not too long a period for it to reform and reconstitute its administrative organisation. This is its first duty, and it undertakes it under favourable conditions.In six years the constabulary will be transferred automatically from the charge of the Imperial Government to that of the Irish Government with the sum allotted to its support.106That sum will be increased by any saving which accrues to the British Exchequer from the transfer, and in determining that sum regard is to be had to theprospectof any increase or decrease[pg 152]in the cost of the service, expected to arise from causes not being matters of administration.In the next place, the Irish Parliament may, at any time, on twelve months' notice assume the legislative and executive control of three reserved services, viz., Old-age Pensions, National Insurance, and Labour Exchanges. If they are taken over, the sum transferred with them will be determined on the same principle as in the case of the constabulary. Autonomy, therefore, in regard to these services is granted to the Irish Government, and they will only be retained under the control of the Imperial Government, if, and so long as the Irish Government desires it.The Postmaster-General said in his speech on the introduction of the Bill that the old-age pension charge is now practically at its maximum, gradually diminishing, and the Primrose Committee (paragraph 54), estimate the charge at the time when the Bill becomes law at £3,000,000. The question then arises what will be the amount transferred, if the Irish Government, seeing its way to more economical administration, were to give at once the twelve months' notice and take over the service at the end of a year. It would not, I presume, be £2,664,000 the charge at which the Treasury in its“outline of financial provision”(paper 6154), estimated it in 1912-13, but £3,000,000, modified to some extent by the prospect of reduction.The cost of National Insurance and Labour Exchanges is estimated by the Treasury in 1912-13 at £191,500, increasing by £300,000 in ten or fifteen years. If the Irish Government were in like manner to take them over, the amount transferred would, I presume, be £190,000 with a sum added representing the prospect of increase.In the event then of those services being taken[pg 153]over by the Irish Government, they would considerably exceed their charges as estimated by the Treasury for 1912-13, and the excess would entail a corresponding increase of charge on the British taxpayer, to be counterbalanced gradually by the normal increase of Irish revenue, which the Postmaster-General estimates, with due reserve, at £200,000 a year, and by the gradual reduction (£50,000 a year) of the free gift of the British taxpayer from £500,000 to £200,000.It must be remembered that these increased charges on the British taxpayer are not the result of Home Rule, they are an inheritance from the“partnership.”When these services are transferred from the Imperial to the Irish Government, the Imperial Government will only retain control over the land purchase charges and the regulation and collection of taxes. The former will apparently remain permanently with the Imperial Government, involving an estimated increase of charge on the British taxpayers of £450,000 a year (Treasury Paper 6154). With regard to the latter, it is clearly desirable that at the outset the Imperial Government should be responsible for levying and collecting taxes. If difficulties on that subject should arise in parts of Ireland, the Imperial Government will settle them with an authority which the new Irish Government cannot possess. Clause 26, however, holds out a possibility hereafter of extended autonomy to Ireland. If for three years the revenue of Ireland exceeds the expenditure on Irish services by the Imperial and Irish Governments, the Parliament of the United Kingdom will revise the financial provisions of the Home Rule Act, with a view to securing a proper contribution from Irish revenues to Imperial expenditure, and extending the powers of the Irish Governmentwith respect to the[pg 154]imposition and collection of taxes, and if extension were then granted in a liberal spirit, there would be little left to desire.ConclusionI have thus traced the gradual progress towards autonomy contemplated by the Act. It justifies the conclusion that the Government favours autonomy, but seeks to achieve that end gradually and tentatively. With the path thus marked out, it lies with the nation to pursue steadily and resolvedly the great end of reconciliation with Ireland.It is impossible to consider Home Rule in its financial aspect, without casting a look backward and comparing the result which would have followed the grant of Home Rule in 1886 with the result which has followed its refusal. In the former case Ireland would have been reconciled long ago. She would have been mistress in her own house, and it would have been her interest as well as her policy so to conduct her administration as to insure the success of her autonomy. She would have had full opportunity for reorganising her establishments on a reasonable scale, substituting for an expensive military police an ordinary police, with a saving, as Mr. Gladstone once pointed out, of £900,000 a year. She would have been able to maintain the reasonable contribution to Imperial expenditure which it is her duty as an integral part of the United Kingdom to provide. It would have been worth the while of Great Britain to make a great sacrifice at the outset to attain this solution of the Irish problem, and long before now the solution would have been complete.The Conservative Party refused Home Rule. They have held power during sixteen out of the twenty-five[pg 155]years elapsed in the interval, and they have had full opportunity to try their alternative policy. That policy has not indeed been the twenty years of“resolute Government,”a euphemism for coercion, advocated by Lord Salisbury. They have tried a policy of bribes and doles, with the result that the Imperial contribution of over £2,000,000 made in 1885 has been dissipated, and that Irish local expenditure alone shows now a deficit of £1,500,000 and a steadily increasing deficit. In short, a total burthen of between £3,500,000 and £4,000,000 has been inflicted on the British taxpayer. The Leader of the Conservatives has now announced with splendid audacity that if the“partnership”continues, if the Conservatives are allowed still to mis-rule Ireland, and to maintain the baleful spirit of ascendancy, they will endeavour to develop in every possible way the resources of Ireland. That is to say, the policy of bribes and doles is to continue at the expense of the British taxpayer. Let the British taxpayer note that, and let him note also that the Conservative Party will find the ways and means for these bribes and doles not by taxes on the wealthy, but by taxes on the food of the people. Ireland will accept the doles; but she will not be satisfied. She will still clamour at our gates for Home Rule, as she has clamoured since 1886, and she will get Home Rule, but the burthen on the British taxpayer will be then how much greater than now?[pg 156]AppendixThis Report of the Primrose Committee, the Treasury outline of financial provisions, and the speech of the Postmaster-General on the introduction of the Bill offer some vague estimates, perhaps more properly guesses, of Irish finance, one of which, Old-age Pensions, extends to twenty years. It may be interesting to throw these figures together, not (God forbid) as an estimate, but as illustrating opinion prevalent among the experts engaged in the preparation of the Bill.Income:Estimate for the year 1912-1913 10,839,000Addfree gift of £500,000 to be reduced in nine years to 200,000The Postmaster-General's Estimate of £200,000 normal yearly increase of revenue in twenty years 4,000,000Income in twenty years (round figures) 15,000,000Expenditure:Sum transferred to Ireland 1912-1913 5,462,000Post Office, 1912-1913 1,600,000Old-age pensions (Treasury Paper) 2,800,000Land purchase (£761,000 in 1912-1913 increased by £450,000) 1,211,000Insurance £191,500 in 1912-1913 increased by £300,000 491,500(Say) 11,564,500-11,600,000Balance available for Constabulary, collection of Revenue, Imperial contribution and Irish services.It must be recollected that the Irish Government has to provide for increase of Irish services beyond £5,462,000 by taxation.[pg 157]

V.—Financial Relations99By Lord Welby“The Channel forbids Union, the Ocean forbids separation. I demand the continued severance of the Parliament with a view to the continued everlasting unity of the Empire.”Terse words in which a great statesman summed up the relation of Ireland to England. The Home Rule Bill will give the sanction of law to Grattan's aphorism. It bids Ireland manage her own affairs, freeing her in her own house from official bondage to an unsympathetic consort. If the Act of Enfranchisement is drawn in a trustful and large spirit, it will, we may feel assured, end the feud of centuries, and create unity where the Act of Union has created enmity.The policy of Home Rule is wise in itself, and worthy the statesmanship of a nation always bold in the hour of need, and, as experience of its working is gained, it will commend itself more and more to the commonsense of a practical people, but the immediate success of the first Home Rule Act will depend greatly on the skill and wisdom with which the details of a complicated measure are devised, facing fairly the financial[pg 113]evils consequent on Tory obstinacy, and avoiding, in reasonable degree, offence to popular prejudice and existing interests.The provisions which will adjust the financial relations between the two nations are not among the least difficult of those details, and Parliament must solve the puzzling problem without delay. It must begin by temporarily giving local government in Ireland a fair start at the cost of the British tax-payer.Let us, in the first place, clear the ground from some doubtful arguments which, used as premises, will probably lead the unwary to false conclusions. A plea is often put forward that England is a rich country and Ireland a poor country, and it is argued that identical taxation therefore wrongs Ireland. But England is not a rich country, in the broad sense. It is a country in which there is vast accumulation of wealth, but in which, also, there is a great mass of poverty—poverty probably exceeding the poverty of Ireland, and, therefore, identical taxation if it wrongs the poor of Ireland, wrongs still more the poor of England. Critics arguing from this false premise contend that the extension of the Income-tax to Ireland was a wrong, that is to say, the wealthy man living in Ireland, where living is relatively cheap, ought not to contribute to the national expenditure on the same principle as the wealthy man living in England, where living is relatively dear; or, to put the argument in another form, it is sound finance to take Income-tax from a man in England, struggling on a few hundreds a year. It is unsound finance to take Income-tax from, say, the profits earned in Ireland by the Guinness firm. Nationalists, misled by the plea of Ireland's poverty, have relied on this argument, and Conservatives also have used it chiefly to discredit Mr. Gladstone, who extended the Income-tax to[pg 114]Ireland; but the argument is false in itself, and cannot be made the basis of sound financial legislation. As a matter of fact, taxes on articles of general consumption, on the necessaries of life, fall heavily on the poor, and the argument of over-taxation applies in great degree to the poor in the great towns of England, and to the poor in Ireland. If, then, the poor of Ireland are to be relieved, the poor of England must be relieved also, and identical taxation would still be the result. The statesman must find a truer gauge by which to measure the relative capacity of the two countries to bear taxation.Again, during the long discussion on financial relations, much time has been wasted in criticising that provision of the Act of Union, which fixed the respective contributions of Great Britain and Ireland to the common purposes of the Empire at the proportion of fifteen and two. That proportion, in fact, was not exacted, and it may be put aside as theoretical.A summary of recent financial history in Ireland will enable the reader to understand the circumstances in which Parliament takes up the problem of Home Rule. Towards the close of the eighteenth century the condition of Ireland was bad. England, selfish to the last degree in her commercial policy, treated Ireland as little better than a conquered country, and ruined her commercially and industrially by restrictions on her trade. Protestants and Catholics joined in patriotic resistance, and wrung at last freedom of trade in 1779, and an independent Parliament in 1782. Thenceforward for a time the financial administration of Ireland was regulated in accord with Irish interest. The country prospered financially under the new order. Large sums were spent in promoting agriculture and manufactures, and in grants for public works, and the[pg 115]country's finance was restored to order. During the years of peace, 1782 to 1793, Ireland contributed on the average £584,000 to military—that is to the common expenses of the Empire. The military expenditure of Great Britain in the peace years, 1786 to 1792, averaged £5,142,000. Ireland was then a most important factor in the State, for the population was to that of England in the proportion of nearly one to two.Pitt desired to establish reciprocity between the two countries and at the same time to obtain from Ireland a contribution on a fixed principle for the Navy, wise proposals worthy of the Minister; but the two Parliaments could not agree. That of England bowed to the pernicious claims of ascendancy and to the supposed interests of the commercial classes. Pitt was defeated. The French Revolution and a war lasting nearly twenty-two years followed, and in the midst of the war broke out the Rebellion of 1798. If the charge of the Irish debt at the outbreak of the war and the average civil expenditure of Ireland between 1793 and the Union is deducted from the average income of Ireland, the surplus constituted Ireland's real contribution to the common expenditure and it averaged about £900,000 a year. The year 1800 marks a great change of policy. Pitt put an end to the independent Parliament of Ireland and passed the Act of Union, bad in itself, and worse by the means which made it law. It sought to make the two countries one for all purposes of revenue, and that object was kept steadily in view.From 1800 to 1817 the United Parliament imposed taxes on both England and Ireland, but the Irish Treasury collected the Irish Revenue, defrayed the local expenditure of Ireland as sanctioned by the United Parliament and remitted the surplus in aid of the war expenditure. The greater part of the[pg 116]burthen fell upon Great Britain, but Ireland's share drained greatly her resources. Her revenue which had produced £1,837,000 in 1793, reached £7,305,000 in 1817, an increase of 300 per cent., while her contributions during the years of war to the common expenditure calculated on the principle adopted in the preceding paragraph amounted to about £3,000,000. During the same period Great Britain contributed to the war out of revenue about £43,000,000 on the annual average.In 1817 the Irish Treasury was abolished, the exchequers of the two countries were united, the British and Irish Revenues were paid alike into the one exchequer. The Irish local expenditure was defrayed from that exchequer under the check of the English Treasury, and the United Parliament imposed and repealed Irish taxes. From 1817 for many years Ireland fared badly. Her representatives in Parliament served her ill. Tories, Whigs, and independent members failed alike in making England understand Irish needs, and the British Parliament neglected Irish interests. The years between 1817 and 1842 mark the first period of Irish financial history dating from the war. It was a period of stagnation. Both countries required time to recover from the calamity incident to war; but the recovery would have been more rapid, even under heavy taxation, had not progress been retarded by the unwise legislation of protection, which fettered enterprise and restricted commerce. This evil, however, injured Great Britain more than Ireland. In 1824 the separate Customs Departments of the two countries were abolished. The trade between Great Britain and Ireland was treated as coasting, and from that time no official record has been kept of goods exported from and imported into both countries.In 1817 the taxes levied in England were similar to,[pg 117]but not identical with, those levied in Great Britain. Ireland was exempt from many taxes levied here, and in some cases, such as spirits, she paid a lower rate of duty. A period of profound peace enabled the government to remit taxation; but those remissions were chiefly made in deference to British interests, and in making them Irish interests were little considered. The truth of this statement is illustrated by the Revenue Returns. The estimated“true”100Revenue of Great Britain fell from £51,500,000 in 1820 to £46,250,000 in 1840, although population, and with it consumption, had increased. The“true”Revenue of Ireland in the same period rose from £5,250,000 to £5,500,000. But it must be added that many of the taxes remitted were taxesnot levied in Ireland. In respect to them Great Britain had to a certain extent a claim to prior consideration.The second period of financial history extended from 1842 to 1869, a period of rapid recovery and of great prosperity in Great Britain, but not so in Ireland. Famine fell upon her in 1846, and thinned her population, followed by emigration, which showed how poverty pressed upon the poor, while the Fenian movement of 1866 showed how widespread was the spirit of unrest. A highly cultivated Liberal statesman was Lord-Lieutenant during several years of the period. An interesting diary which he kept leaves the impression that the leading statesmen of the day were not reading the signs of the times, or gauging the gravity of a growing movement. This was hardly the period to choose for increasing the taxation of Ireland, nevertheless in 1853 Mr. Gladstone extended the[pg 118]Income-tax to Ireland, counterbalancing it in part by the remission of loans granted to Ireland during the famine—a very insufficient compensation. But the Income-tax did not touch the poor, and as I have pointed out there was no reason why the wealthy and comparatively well-to-do classes in Ireland should not contribute to the public expenditure like their brethren in Great Britain. This plea, however, does not extend to the spirit duties which during 1853 Mr. Gladstone and Mr. Disraeli raised to the level of the spirit duties in Great Britain. That tax undoubtedly was paid in great measure by the poorer classes.In one direction there was improvement. In 1842 Sir Robert Peel acceded to power, and inaugurated at once the policy of liberating trade which has conferred such benefits on Great Britain, and in a minor degree on Ireland. The era of prosperity which followed the adoption of the Free Trade policy increased greatly the consuming power of the people, and enabled Mr. Gladstone to largely reduce duties on the principal articles of food consumed by the poorer classes. For example, he and his successors reduced the tea duties from 2s. 2d. to 6d. and abolished the sugar duties. This was undoubtedly the true method of remedying the evil which underlies the plea that identical taxation wronged Ireland. I have shown that that evil was caused not by identical taxation, but by heavy taxes on food, which oppressed alike the poor of Ireland, and the more numerous poor of Great Britain. The policy adopted met the local grievance, by modifying if not removing the general grievance, and this remedy of the general grievance was only rendered possible by the growing prosperity of Great Britain. The poor of Ireland had therefore their full share of the benefit caused by the prosperity of Great Britain. The historian[pg 119]must give full weight to this consideration when he criticises the increase of the Irish spirit duty. There can be little doubt as to the verdict of history, if the choice lies between cheap whisky and dear food on the one side, and cheap food and dear whisky on the other. Between 1860 and 1900 the Customs and Excise duties which were reduced exceeded the like duties increased by some £22,000,000 a year, and Ireland had her share in the reduction.In 1864 a Committee of the House of Commons inquired into the taxation of Ireland, but it led to no useful result. In other directions the monotony of neglect continued. The Government and Parliament paid little or no attention to Irish needs. Ireland was the Cinderella of the three kingdoms, and fared accordingly.The third period ranged from 1869 to 1896. It might be termed the Home Rule period, for it includes the two Home Rule Bills of Mr. Gladstone, but it includes also other great measures relating to Ireland. Indeed, during the whole period of seventeen years Ireland engrossed, to a great degree, the attention of Parliament. The change was very remarkable. Up to 1869 England was indifferent to, or bored by, Ireland. She was stupid. She did not trouble herself to learn Irish wants, and she could not understand the spirit of Irish nationality. The Devon Commission, a Conservative Commission, appointed by a Conservative Minister, Sir Robert Peel, reported that 2,500,000 people in Ireland were on the verge of starvation, and gave warning of the evils, the perils, inherent in the Irish land system. England took no notice of either warning. The famine answered the first in cruel fashion. The second was pigeon-holed. Wise in her own Home administration, wise of late years in her[pg 120]Colonial administration, she knew no remedy for Ireland but force, and force is no remedy. She accepted, almost as matters of ordinary administration, Coercion Acts which marked with a black stigma most years of the century, unable to see that that fact alone was a disgrace to her statesmen, her Parliament, and her people.Early in the Home Rule days I heard a great English statesman say:“The first duty of a Government is to bring the people into agreement with the law; till it does that it fails in its first duty, and England has hitherto failed to bring Ireland into agreement with the law”—a truth well and forcibly expressed.In 1869 a man of great power and eloquence, wide views, and firm resolve became Prime Minister. He realised the habitual injustice of England to Ireland, and he saw the perils impending. By his strength of will he forced an unwilling country and an indifferent Parliament to devote its serious attention to Irish questions. He disestablished the Church. He was defeated on Irish education, but he laid the foundation of a land settlement by conferring on the tenants, in spite of strenuous opposition from the Tories, the rights of fair rents, fixity of tenure, and free sale, and his measures were marked by an earnest desire to deal liberally with Ireland to the utmost extent consistent with equity to the British tax-payer. Finally, when Ireland sent to Westminster more than four-fifths of her representatives pledged to Home Rule, he accepted this expression of the national will, and became a convert to the principle of Home Rule. I deal later in detail with his two Home Rule Bills of 1886 and 1893, which were defeated, and I need only here deal with finance of the third period, apart from the provision of the Home Rule Bills.[pg 121]Before Mr. Gladstone was converted to Home Rule, Home Rule finance attracted little attention. That eminent statistician, Sir Robert Giffen, made, indeed, in 1885, a singular suggestion to theStatistnewspaper, viz., that the Irish landlords should be bought out at the cost of the Imperial Exchequer, and that the rent charge, which would then be payable by the purchasing tenant, should be given to an Irish authority, in lieu of payments from the Exchequer, for the internal administration of Ireland.Again, Sir Robert wrote an article in theNineteenth Century Review, March, 1886, a few weeks before the introduction of the first Home Rule Bill, to show how unimportant, from a financial point of view, Ireland had become to us, and to suggest the expediency of devising some form of Government under which the special needs and circumstances of that country would receive more and better attention than they did under the existing arrangements. His figures might be, in some instances, doubtful, perhaps even incorrect, but it can hardly be denied that he made good his point. Sir Robert was, we see, greatly in advance, not only of the ordinary Briton, but of financial experts generally, both as regards the land question and also that of the Government of Ireland.Perhaps the most able thinker and writer on economic questions in the second half of the nineteenth century was the late Mr. Bagehot, and, in proof of the general indifference to Irish questions in England, it is notable that his collected works, ranging over a wide field in politics and literature, contain no paper on the government or condition of Ireland. Yet he had witnessed O'Connell, the famine, the depopulation of Ireland, the Committee on Irish Taxation, and the Fenian outbreak in 1866.[pg 122]In 1890 Mr. Goschen, as Chancellor of the Exchequer, in the Conservative Government, moved for a Committee of the House of Commons to consider the financial relations of England, Scotland, and Ireland. The Committee was instructed to inquire into the equity of their financial relations in regard to the resources and population of the three kingdoms. It had hitherto been much discussed whether Ireland could be regarded as a separate financial entity from the rest of the kingdom. The Irish Taxation Committee of 1864, of which Sir Stafford Northcote and Mr. Lowe were prominent members, had refused to admit the principle of such separate entity, and that had been generally the Conservative contention. But, in the reference to the Committee of 1890, the Conservative Government accepted the principle. The Home Rule Bills of 1886 and 1893 were, of course, based upon it. Thus, 1890 marks an important advance in the discussion, and thenceforward, by consent of both parties, the separate“entity”was established.After the rejection of the second Home Rule Bill the Liberal Government appointed a Royal Commission to inquire into the financial relations of the two countries and their relative taxable capacity. The Report of this Commission deserves attention, because it was exhaustive in its inquiries, because the information it laid before the public has since that time been generally used in discussion, and because many of the recommendations made were far-reaching and suggestive. There was, as might be expected, great difference of opinion. The Conservative members and the Nationalist members made their several Reports. Attention, however, may be directed to one of the Reports, because it received the concurrence of the Nationalist members and of three English members—one of whom was a very[pg 123]high, if not the highest, financial authority in the City of London, the two others retired Civil Servants who had been at the head of two great Departments of the State. Their conclusions were as follows:“(1) That Great Britain and Ireland must, for the purpose of this inquiry, be considered as separate entities.“(2) That the Act of Union imposed upon Ireland a burthen which, as events showed, she was unable to bear.“(3) That the increase of taxation laid upon Ireland between 1853 and 1860 was not justified by the then existing circumstances.“(4) That identity of rates of taxation does not necessarily involve equality of burthen.“(5) That whilst the actual tax revenue of Ireland is about one-eleventh of that of Great Britain, the relative taxable capacity of Ireland is very much smaller, and is not estimated by any of us as exceeding one-twentieth.”The three English members above mentioned presented a separate Report, recording at length their views on the questions referred to the Commission. I call attention to it, because reference is frequently made to it in the Report of Sir Henry Primrose's Committee, recently appointed to advise the Government upon the new Home Rule Bill.They pointed out that the whole taxation of Ireland increased from £2,900,000 in 1820, to over £6,600,000 in 1893, and that by far the larger part of this increase was derived from taxes on articles of consumption which fell most heavily on the poor; that the increase resulted only temporarily in an increase in the contribution to common expenditure which rose from £3,691,000 in 1820 to £5,396,000 in 1860, to fall to £1,966,000 in 1893, for the greater part of the increase had been absorbed in increase of Irish civil expenditure. This local expenditure amounted in Ireland to 19s. 7d. per head, while in Great Britain it only amounted to 11s. 9d. If the cost of administering Ireland had been reduced to the like[pg 124]cost in Great Britain, a saving of nearly £2,000,000 would have been realised.They thought that the expenditure in Ireland was conducted on a scale totally unsuitable to that country, that the industrial taxation, borne in Ireland mainly by the consumers of dutiable articles, was heavier than the masses of the Irish people ought to bear, that Irish taxation ought not to exceed one twentieth part of taxation of the United Kingdom, but they doubted whether Great Britain would consent to alter her whole system of taxation to meet the evil to Ireland. They objected totally to seeking a remedy in increased grants and doles, and they suggested that Ireland should levy her own taxes and provide for her own expenditure.Lastly, in answer to the objection that Ireland might impose new Customs duties, they held that to be unlikely, since Ireland rather than Great Britain would suffer by such a policy, because the market of Great Britain is of greater importance to Ireland than that of Ireland to Great Britain.The Royal Commission reported in 1896. The question of the financial relations remained then in practical abeyance till 1907. In that year the Government of Sir H. Campbell-Bannerman proposed to establish an Irish Council under the Lord-Lieutenant entrusted with the control and direction of certain administrative Departments. A sum was to be charged on the Consolidated Fund to enable the Council to meet the expenditure of the transferred Departments. This sum was fixed for the first five years at £4,164,000. This was simply a measure to decentralise administration, and to admit Irishmen to a share in Irish administration. It did not, however, obtain support in Ireland, and in consequence it was not pressed.We come now to the last stages in the story of Irish[pg 125]finance. The Government of Mr. Asquith decided to introduce the Third Home Rule Bill in the session of 1912, and in 1911 they appointed a Departmental Committee under Sir Henry Primrose to advise them. The able report of that Committee has been laid before Parliament, and it brings our information on the financial relations up to the latest date:They state the“true”Irish Revenue in 1895-6 to have been £8,034,000.They estimate“true”Revenue 1910-11 at 10,300,000.Increase £2,266,000.The“true”local expenditure in Ireland, 1895-6, £5,938,000.The“true”local expenditure 1910-11, 11,344,000.£5,406,000.Thus whereas Ireland in 1895-6 made a contribution of £2,066,000 to Imperial Expenditure, in 1910-11, not only did she make no contribution to Imperial Expenditure, but the British taxpayer was called on to contribute more than £1,000,000 towards Irish local expenditure. But Irish local expenditure is increasing under the heads of old-age pensions, land purchase, and expenses of the Government which will be established in Ireland under Home Rule. The Committee in consequence estimate:The Irish local expenditure in 1913-14 at £12,400,000.The Irish Revenue at 10,350,000.Deficit £2,050,000.[pg 126]for which provision must be made in the forthcoming measure.In order to meet the existing deficit, the Committee suggest that the British Exchequer should take over liability for all old-age pensions which had been actually granted at the date when the Home Rule Bill comes into operation. They estimate that liability at £3,000,000 a year, gradually, of course, diminishing. If necessary, the liability in whole or part of the Irish Constabulary Pensions (£400,000) might also be transferred to the British Exchequer. They advise that the obligation of Ireland to contribute to the Imperial expenditure should be affirmed, but that a settlement of the amount of the contribution should remain in abeyance; and lastly, that the guarantee of the Imperial Exchequer in respect of the Land Stock should remain, but that means should be taken to secure regular payment of the sum due from Ireland to the National Debt Commissioners.I shall contrast later the recommendations of the Committee with the actual provisions of the Home Rule Bill.I will now compare the finance of the three Home Rule Bills which have been submitted to Parliament, those of 1886, 1893 and 1912.The Bill of 1886Mr. Gladstone made it an essential condition of his plan that there should be an equitable distribution of Imperial charges and that Ireland should pay her fair proportion to the common expenses of the Empire. In 1885 that contribution was represented by the surplus of Irish Revenue remaining after deduction of the expenditure in Ireland on Irish services. He calculated in 1886 that the surplus above described[pg 127]provided a contribution by Ireland to Imperial expenditure equivalent to £2 where Great Britain contributed £23. This proportion contrasts with Mr. Pitt's arrangement in 1800 that Ireland should pay £2 where Great Britain paid £15. Mr. Gladstone proposed in future that where Great Britain paid £28, Ireland should pay £2, a concession of moment to Ireland, and he supported it on the following ground: he measured the taxable capacity of the two countries by (1) the Income-tax returns (2) the death duty returns, and (3) the valuation of property. Income-tax gave a proportion of £38 to £2, but he held Income-tax an imperfect test, because it was paid in Ireland on a lower valuation than in Great Britain and because many Irishmen receive dividends on securities which pay Income-tax in England. He thought that £34 to £2 would be nearer the true proportion. He held the death duties to be a better test and they showed a proportion of £26 to £2, while the valuation, lower in Ireland than in Great Britain, gave a proportion of £24 to £2. Arguing from these premises, he held that his proposed contribution of £2 to £28 was an equitable and even a generous arrangement, justified by the necessity of starting the Irish Legislative body with a balance to its credit.A table is given showing how the contribution was appropriated.The amount to be contributed by Ireland to Imperial expenditure being thus ascertained, the more difficult part of the problem remained, viz., how to provide the fund out of which the contribution would be payable and how to secure its payment. The plan which commended itself to him as insuring the fiscal unity of the three kingdoms, and giving absolute security to the British Exchequer, left the imposition and collection[pg 128]of Customs and Excise duties with the Imperial Government, and under Imperial control. This plan was to be carried into effect in the following manner. The Customs and Excise were to be levied under Acts of the Imperial Parliament, and were not to be subject to the control of the Irish Legislature. The Irish Legislature with that exception could impose taxes on Ireland. Under the Land Purchase Bill, which was to be introduced concurrently with the Home Rule Bill, a Receiver-General was to be appointed, into whose hands the Customs and Excise Duties and other taxes were to be paid, including taxes imposed by the Irish Parliament. The Imperial Receiver-General, having thus in hand all Imperial and local taxes levied in Ireland, would in the first instance pay out of them the Imperial charges. Apart from the Imperial charges there were other charges, strictly Irish, such as Judges' salaries, pensions, the salaries of existing civil servants, for the security of which the Bill provided. The Bill bound the Irish Parliament to impose taxes sufficient to meet such charges, and ordered them to be paid by the Receiver-General. The Receiver-General was to keep an Imperial and an Irish account. The Irish charges would of course be paid from the latter account. He was to carry the Customs and Excise Duties in the first instance to the Imperial account, and the local taxes to the Irish account, transferring to the Irish account the surplus of Custom and Excise, after payment of the Imperial contribution. He was subsequently to pay the balance remaining on the Irish account to the Irish Exchequer.An Imperial Court of Exchequer was established in Ireland to watch over the observance of the Act, and all Revenue acts were to be tried and defaults punished in that Court. The Bill further enabled the Irish[pg 129]Parliament to take over the Irish Post Office, if it should so desire, though it was Mr. Gladstone's opinion that it would be for the convenience of both countries if the Post Office were to remain under the control of the Postmaster-General.The Imperial contribution payable by Ireland was not to be increased for thirty years, though it might be reduced if the Imperial charge for Army, Navy and Imperial Civil expenditure for any year should be less than fifteen times the contribution paid by Ireland. In that case one-fifteenth of the diminution could be deducted from the Imperial contribution.Existing Civil Servants were retained in their offices at existing salaries. If the Irish Government were to desire their retirement, they would be retired on pensions. On the other hand, if at the end of two years the officers themselves desired to retire, they could do so, receiving pensions on the usual abolition of office scale.Supposing the Home Rule Bill to have become law the account of Irish finance would have stood thus:Receipts.Imperial taxes:Customs £1,880,000Excise £4,300,000Total £6,180,000Local taxes:Stamps £600,000Income-tax 6d. £550,000Total £1,150,000Non-tax revenue:Post Office £1,020,000Total: £8,350,000Expenditure.Contributions to Imperial expenditure on basis of one-fifteenth of Imperial expenditure:Debt charges £1,466,000Army and Navy £1,666,000Civil charges £110,000Total £3,242,000Sinking Fund on one-fifteenth of capital of debt £360,000Constabulary101£1,000,000Local Irish Civil charges £2,510,000Collection of revenue:Imperial taxes £170,000Local taxes £60,000Non-tax revenue £604,000Total £834,000Surplus £404,000Total £8,350,000[pg 130]When it is said that in 1885-1886 Ireland was paying to Imperial expenditure in the proportion of £2 to £23, that proportion was calculated on the whole gross Imperial expenditure, whereas Mr. Gladstone calculated the proportion of £2 to £28 on a military expenditure materially cut down, for he excluded from it charges which ought strictly to be called war charges, a modification very favourable to Ireland and reducing considerably her true contribution.He made another concession of great importance. He proposed to credit Ireland with the entire receipts levied in Ireland, but that was not a true test of the amount of taxation paid by Ireland. There are goods which pay duty in Great Britain, but which are consumed in Ireland, so conversely there are goods which pay duty in Ireland but are consumed in Great Britain. For instance, spirits, porter, and tobacco are largely exported duty paid from Ireland and are consumed in Great Britain, and Mr. Gladstone calculated that the excess of duties so paid in Ireland on goods consumed in Great Britain amounted to no less a sum than, £1,400,000 a year. That is of course British Revenue, and in striking a true account between the two countries it should be credited to Great Britain, not to Ireland. The Home Rule Bill, however, gave it to Ireland, a direct grant of £1,400,000102from Great Britain to Ireland, and if that amount be subtracted from the contribution of £2 to £28, it leaves the proportion £2 to £52 instead of £2 to £23.If we strike a balance between the contributions to be paid by Ireland to Great Britain under the Home Rule Bill, and the grants to be paid to Ireland, we shall arrive at the following result:[pg 131]Contribution from Ireland to Great Britain £3,602,000Grants from Great Britain to Ireland:Duties paid in Ireland on goods consumed in Great Britain £1,400,000Grant toward the Constabulary £500,000Total: £1,900,000Net contribution from Ireland to Imperial purposes (or nearly in the proportion of 2 to 60) £1,702,000If the Imperial contributionactuallypaid by Ireland in 1885 be equated on like principle, the proportion stated above at 2 to 23 will be similarly reduced.The Bill was defeated in the House of Commons, and therefore its provisions did not undergo the test of scrutiny in Committee.The provisions of this Bill illustrate the difficulties which attend the financial severance of the Irish from the British Government. High authorities thought at the time that Mr. Gladstone, in 1886, should have proceeded in the first instance by way of Resolutions establishing the principles upon which the Bill would be subsequently founded, and there is much to be said for that view. The main principles of the measure would have been established in the first instance after free and full discussion, and the details would have been adapted later to the principles then laid down. Mr. Gladstone himself, in his reply upon the Second Reading (June 7th, 1886,) indicated a course somewhat similar in its result. He said:“If an interval is granted us, and the circumstances of the present session require the withdrawal of the Bill, and it is to be re-introduced[pg 132]with amendment at an early date in the autumn, it is our duty to amend the Bill with every real amendment and improvement, and with whatever is calculated to make it more effective and more acceptable for the attainment of its end.”It must be remembered that there had been no sufficient time for the collection of the data on which an effective measure could be founded, and the collection of those data was a task of great difficulty, for the Departments did not possess them. The Government came into power in February, and the Bill was introduced on April 6th; thus there was no real opportunity for testing the value of the data collected in that short interval, or for gauging beforehand objections both to the principles and details of the scheme adopted, and experience proved that some of the objections were valid, though probably not insurmountable.The scheme was based on two principles which would be especially liable to criticism:(1) For thirty years Ireland was to contribute to Imperial charges as they then existed a fixed annual sum.(2) The Customs and Excise duties ascollectedin Ireland (i.e., not the“true”revenue) were to be credited to the Irish Government.The first of these principles would have been closely scrutinised in Committee, but probably in the main it could have held its ground. In the first place, it reduced considerably the Imperial contribution, consisting hitherto of the balance of revenue after payment of Irish charges. As Mr. Gladstone pointed out, the amount of military expenditure, on which the proportion of 2 to 28 was calculated, was considerably reduced, and Great Britain had to pay the difference, and so far the change was favourable[pg 133]to Ireland. In the second place, Irish expenditure was increasing, and under the existing system the balance of Irish revenue, constituting the Irish Imperial contribution, was, as the sequel lamentably proved, diminishing, and, a result not foreseen at the time, the wasteful and unsound finance which financial partnership entailed upon Ireland ere long extinguished it. The grant of autonomy was an effective check on this continued waste, otherwise the contribution of a fixed quota would soon have reduced the Irish Government to insolvency.The grant to Ireland of thecollectednot thetrueduties of Customs and Excise was open to grave objection. It presented her with the duties levied in Ireland on articles consumed in Great Britain, but if at any time the habits of the people, such as decrease in drinking, reduced this practical gift—estimated at £1,400,000, or if changes in law or practice transferred the payment of these duties from Ireland to Great Britain, the financial equilibrium of the scheme would be destroyed. This was a real danger as under the bonding system the British trader could, if he pleased, pay these duties in Great Britain.The decision that Ireland was not to be represented at Westminster led to a clumsy device for giving Ireland a voice in the Imperial Parliament when Irish interests were involved. This would be the resource if a war contribution had to be obtained.The scheme of 1886 can only, therefore, be regarded as a draft to be tested and modified in discussion and to form the basis of a revised and amended scheme.The Bill of 1893Mr. Gladstone introduced the second Home Rule Bill in February, 1893. In the discussion he pointed out[pg 134]how incredibly wasteful the method of governing Ireland was; the Irish Civil Government grants, which had averaged from 1833 to 1837 £762,000, had risen between 1888 and 1892 to £4,042,000, and the cost of local government in Ireland was twice as much per head as the like cost in England.Under the scheme of 1886 Irish representatives were not to sit in the Imperial Parliament, but the Government found that under existing financial arrangements there must be financial connection, unless Parliament was prepared to face a different system of trade laws between the two countries, and provision must be made for that connection. Mr. Gladstone, therefore, reversed the decision of the Government in 1886. He proposed to retain Irish representatives at Westminster, reduced in number to 80. They were not to vote on purely British questions, but in his opinion it would be difficult to make that distinction as far as the mass of business was concerned. The Irish representatives would not vote on any tax which was not to be levied in Ireland or on any grant of money for other than Imperial purposes as scheduled in the Bill. By this means Ireland would have a voice, if emergency, such as war, rendered fresh taxation necessary.In the interval between 1886 and 1893 knowledge had been gained to some extent as to what constituted the“true”revenue of Ireland, and the Inland Revenue thought it possible to levy in Great Britain the Excise duties collected in Ireland on articles consumed in Great Britain andvice versa. These Excise duties represented the greater part of the sum of £1,400,000, previously described as the difference between duties, so to speak, belonging to Ireland and duties collected in Ireland, a difference estimated in 1893 at £1,800,000. If Ireland retained that difference, as contemplated by the scheme[pg 135]of 1886, it was equivalent to a grant from Great Britain to Ireland. On the other hand the Customs were not able to make the separation thought possible by the Excise.With these facts before him Mr. Gladstone made an entire change in the financial scheme. As in 1886, he held that Ireland must make a proper contribution to Imperial expenditure, but he abandoned the principle, adopted in 1886, of obtaining that contribution by a quota of one-fifteenth of Imperial expenditure, that is a contribution of £2 by Ireland to £28 by Great Britain. He retained instead the whole of the Customs revenue collected in Ireland as the Irish contribution. He proposed that Great Britain should pay any excess of the charge of constabulary over £1,000,000, out of the contribution, the balance representing Ireland's share of Imperial expenditure. He justified the change on the ground that as the management of trade was reserved to the Imperial Government, the management of the Customs so closely connected with trade should be Imperial also. The Customs were expected to produce a net revenue of £2,370,000. He estimated it as equivalent to about 4 per cent. of Imperial expenditure whereas the actual contribution was about 12 per cent. The contribution would, of course, vary as the net Customs revenue rose or fell. On the other hand the Irish Government were to take all the rest of the“true”revenue of Ireland and to defray out of it all local Irish expenditure, including a fixed sum of £1,000,000 towards the cost of the constabulary and Dublin police, which were temporarily to remain Imperial services. Customs and Excise duties were to be regulated and collected by the Imperial authority which was also to fix postal rates; but all other taxes were to be imposed by the Irish Legislature.[pg 136]The interests of existing judges, and existing civil servants, and of her constabulary, which remained under the control of the Viceroy, were secured. The constabulary would be gradually replaced by a force under the control of the Irish authority. Two Exchequer Judges would be appointed to guard observance of the Act, and appeals lay to the Privy Council which would try on the motion of the Viceroy, or of the Secretary of State, any question as to invalidity of an Irish Act. These arrangements might after fifteen years be subject to revision in pursuance of an address to Her Majesty from the House of Commons or the Irish Legislative Assembly.The receipts and expenditure of the Irish Government under this scheme would have stood as follows:Receipts.(1) Excise true revenue exclusive of licences £3,220,000(2) Local taxes:Stamps, Income-tax, Excise licenses £1,495,000(3) Postal revenue £740,000(4) Other non-tax revenue £205,000Total £5,660,000Expenditure.(1) Civil Government charges, except Constabulary £3,210,000(2) Collection of Inland revenue £160,000(3) Postal service £790,000(4) Contribution to Irish Constabulary £1,000,000Total £5,160,000Surplus £500,000The Bill passed the House of Commons, but the financial clauses were greatly recast in Committee. The changes originated in the fact that the Inland revenue had overestimated the“true”revenue of Excise by a very considerable sum, and the error would have reduced to an insignificant sum the free starting balance for the Irish Government provided in the original scheme. Mr. Gladstone decided in consequence not to keep the Customs revenue as Ireland's contribution to Imperial expenditure, but to let that revenue fall into the common stock of Irish revenue and to[pg 137]take out of that common stock one third of the“true”Irish revenue. This third was to cover Ireland's contribution to Imperial expenditure together with one third of the cost of the Irish constabulary and Dublin police. Ireland was to meet all her local charges out of the remaining Irish revenue. The Imperial Government was to retain for six years the imposition and collection of all taxes; the Irish Government having only supplementary powers of taxation. At the end of six years the Irish contribution was to be revised, and Ireland would be empowered to impose taxes other than Customs and Excise, and she would collect taxes, the Customs alone being retained by the Imperial authorities. The“true”revenue derived from the Customs and Excise was to be ascertained by a Joint Committee of the Treasury and the Irish Government. The financial result of these changes is shown in the following figures:[pg 138](1) Customs:Revenue collected in Ireland £2,136,000Addestimated allowance for duties paid in Great Britain on articles consumed in Ireland £266,000Total estimated Irish revenue £2,402,000; Amount Payable to Irish Exchequer Two-Thirds £1,601,000(2) Excise:(a) Spirits. Revenue collected in Ireland £4,112,000Deductduties ascertained to be paid in Ireland on spirits consumed in Great Britain £1,872,000Total £2,240,000(b) Beer. Revenue collected in Ireland £811,000Deductestimated allowance for duties paid in Ireland on beer consumed in Great Britain £187,000Total £624,000(c) Licence duties collected in Ireland £194,000Total estimated £3,058,000; payable to Exchequer £2,039,000(3) Stamp duties collected in Ireland £707,000 estimated, £471,000 payable(4) Income-tax collected in Ireland £552,000 estimated, £368,000 payable(5) Crown Lands amount estimated to be due to £65,000 estimated, £43,000 payableTotal £6,784,000 estimated, £4,522,000 payable(6) Miscellaneous Irish Revenue £138,000 estimated, £138,000 payableTotals £6,922,000 estimated, £4,660,000 payableIrish Expenditure, 1892-3.(1) Civil Government charges (exclusive of Constabulary and salary of Lord-Lieutenant, but inclusive of local charges met out of local taxation account) £3,123,000(2) Constabulary charges (£1,459,000) two-thirds of £973,000(3) Estimated deficit on postal account £52,000Total £4,148,000Surplus £512,000Total £4,660,000[pg 139]The schemes of 1893 again illustrate the difficulties inherent in a severance of the two Exchequers. The revise left more points open for difference between the two Governments, and it had the serious defect of revision after the short interval of six years.The original scheme was far preferable. The retention of the Customs as the Imperial contribution reduced opportunity for conflicts of opinion to a minimum, and the interval of fifteen years before revision left ample time for the new Irish Government to put its house in order. I venture to think it would have been wise to make good the error in estimating the“true”revenue of Ireland (which invalidated the scheme) by an Imperial Grant, at all events for a time. Under the scheme the Imperial Government provided £500,000 for the constabulary. If it had granted £300,000 or £400,000 more, the net Imperial contribution derived from the Customs would have been reduced to say £1,400,000, not a large sacrifice for the end in view—reconciliation with Ireland.The Bill as amended passed the House of Commons but was thrown out in the Lords. This Parliament refused to accept Mr. Gladstone's proposals to give Ireland Home Rule, and nineteen years elapsed before a third Home Rule Bill was submitted to Parliament.In the three schemes of 1886 and 1893 the Imperial contribution was very similar, perhaps somewhat larger in 1893. In all three schemes, also, the net gain to the British Exchequer was reduced by the grant from that Exchequer of £500,000 to the cost of the Irish Constabulary.The difficulty of devising a financial scheme fairly simple and workable, which was experienced in 1886 and 1893, has been disappointing, but not discouraging. It was inevitable but it can be surmounted.[pg 140]The Bill of 1912In 1911, Mr. Asquith pledged the Government to take up again in the ensuing session the question of Home Rule. In 1910 the Conservative Party, at least a considerable part of it, in presence of a probable dissolution on the Parliament Bill, showed, as in 1885, a disposition to coquette with Home Rule, but the movement came to nothing, and the Party settled into determined opposition to the Home Rule policy, submitting themselves to the lead of the Ulster extremists, who preached sedition in no measured terms. In other respects, the prospects of Home Rule are fairly favourable. England, apart from Scotland, Wales, and Ireland, still returns a majority opposed to Home Rule, but public opinion does not show any signs of vigorous or violent opposition as in 1886. The Liberals, the Irish, and the Labour Party are united in its favour. The passing of the Land Acts is rapidly removing the agrarian evil, and the landlords have not the same cause for anxiety as formerly. The grant of Local Government is working well, and in spite of much poverty the condition of the people is improving. Lastly, the passing of the Parliament Act has made it possible, in spite of opposition in the Lords, to pass a Home Rule Act within the limits of the present Parliament.On April 11th, the Prime Minister introduced the Government Bill. He regarded it as the first step in a comprehensive policy of devolution. It retains permanently at Westminster 42 Irish Members, so that Ireland will have a voice, not only on questions in the Imperial Parliament which concern Ireland, but on questions of Imperial interest, such as war and peace. The Bill of 1886 reserved to the Imperial Parliament[pg 141]certain questions. The Bill of 1893 also made necessary reservations, though its tendency was towards more complete autonomy; but in the interval between 1893 and 1912 great changes have taken place, and the Imperial Government finds itself hampered by new liabilities. The Old-Age Pension Act, the Land Purchase Act of 1903, the National Insurance Act, and Labour Exchanges have added very greatly to Irish expenditure. On the other hand, the contribution to Imperial expenditure, unluckily for the British taxpayer, has disappeared. The problem is, therefore, a new one, and the Government solves it, at all events for the present, by keeping in its own hands a large number of Services, as will be seen hereafter.In 1885-6 Ireland contributed a surplus of considerably more than £2,000,000 to Imperial expenditure; in 1895-6, £2,000,000.103The Government estimates the true revenue of Ireland in 1912-13 at £10,839,000; and the expenditure on Irish services at £12,354,000. Therefore the new Irish Government will start with a deficit of £1,515,000. That deficit is now charged on the British taxpayer. It results from British management of Irish finance, for, on the one hand, Irish revenue is limited by the relatively limited means of Irish taxpayers; on the other hand, England has regulated Irish expenditure on the lavish scale of her own expenditure.The Government lays down certain principles on which Home Rule finance will be based:(1) Ireland must manage her own finance and[pg 142]must have powers of taxation consistent with leaving to the Imperial Government a field of taxation sufficiently wide for Imperial needs.(2) The Budgets of the two countries must not hamper each other.(3) Ireland must bear the cost of any increase arising hereafter on Irish services, but she must benefit by economies in those services.(4) She must have power to reduce taxation if her economies permit it.The scheme which will give effect to these principles may be described as follows.In the first place the Imperial Government retains in its own hands the imposition and collection of all Irish taxes, the Post Office duties alone excepted, which will be transferred to the Irish Government.Normalincrease in Irish Revenue will not be applied to Irish services. It will reduce the deficit. The Irish Government, however, will have supplementary powers of taxation.An Irish Exchequer and an Irish Consolidated Fund will be created, and an Irish Auditor-General appointed. Further, a joint Exchequer Board, consisting of Treasury and Irish officers, will adjust the accounts between the two Exchequers, based upon what it declares to be the actual cost of Irish services when the Act comes into operation. If the Irish Government, using its supplementary powers of taxation, increases or reduces taxes, the Exchequer Board will vary accordingly the sum to be paid by the British to the Irish Exchequer on account of Irish expenditure, and it will determine the effect of any other changes taking place in the relations between the two Exchequers. Lastly, if and when normal increase of Irish revenue puts an end, during a period of[pg 143]three years, to the existing deficit, the Exchequer Board will make a report to that effect, and the financial arrangement between the two countries will then be reconsidered in order to secure a fair contribution from Ireland to Imperial expenditure.The Government, as I have stated, estimates the revenue of 1912-13 at £10,839,000. That sum represents the whole“true”revenue of Ireland, viz., taxes and miscellaneous, £9,485,000; Post Office Revenue, £1,354,000. The Imperial Government adds to this revenue of £10,839,000 a free gift of £500,000 at the cost of the British taxpayer, in order to give the Irish Government a fair start. The total Irish income in the year 1912-13 will therefore be £11,339,000.On the other side of the account, the Imperial Government retains in its own hand various Irish Services, termed in the Bill“Reserved Services,”described later. It transfers from the British to the Irish Exchequer the sum allotted to Irish Expenditure (outside the Reserved Services), estimated in 1912-13 at £5,462,000, the cost of the Postal Service £1,600,000,104and £500,000, the free gift mentioned above, making a total transfer of £7,562,000.If in the future the sum of £5,462,000 allotted to Irish Expenditure and the free gift of £500,000 are exceeded, the Irish Legislature must provide the necessary ways and means.The transfer of £7,562,000 from the British to the Irish Exchequer leaves a balance on the British Exchequer on the Irish Account of £3,777,000105free[pg 144]to that extent to meet the charge of the Reserved Services.These Reserved Services are:(1) Old-age Pensions £2,664,000(2) National Insurance Labour Exchange £191,500(3) Land Purchase £761,000(4) Constabulary £1,377,500(5) Collection of Revenue £298,000Total £5,292,000Therefore the excess of Irish Expenditure in 1912-13 over Irish Revenue as provided results in a deficit of £1,515,000 payable by the British taxpayer, and if the free gift of £500,000 by the British taxpayer included in the provided revenue be added, the total charge on the British taxpayer in 1912-13 on account of Irish Expenditure is £2,015,000.This annual gift of £500,000 is after three years to diminish yearly by £50,000, until a minimum of £200,000 is reached, which will eventually represent the gift of Great Britain to Ireland, until prosperity or good management enables Ireland to pay her own way, and at the last to make a contribution to Imperial Expenditure.The Government estimates a normal growth in Irish Revenue of £200,000 a year, which, to the extent it is realised, will reduce the deficit payable by the British taxpayer.The Imperial guarantee on Irish Land Stock is to continue in full force.Effect of Future ModificationIf the Imperial Parliament increases or reduces taxation, the change will not affect the Irish Budget, for the transferred sum will remain unaltered.[pg 145]The Irish Parliament will have power to reduce taxes levied in Ireland. It will also have power to impose taxes. It may add at will to Excise duties, and if so the Customs duties on beer or spirits must vary with the Excise duties. It may levy new duties which do not interfere with the Imperial system of taxation—for instance, a house duty, or establishment licences. It may add to Income-tax or death duties, and also to Customs duties (other than beer and spirits) provided that the addition does not exceed 10 per cent. of their yield. This 10 per cent. resembles the“centimes additionels”which are levied in foreign countries on direct taxes, and are applicable there to local expenditure. But the Irish Parliament must not trench on Imperial taxes. This increase or reduction of Irish duties will not affect the British Exchequer, but it will increase or diminish the“sum transferred”to the Irish Exchequer.The Irish Parliament will not have power to tax articles not subject to Imperial taxes for the time being. If in the exercise of its power it differentiates Customs or Excise duties in the two countries, there will be a differential duty on such goods passing from one to the other.Public Works Loans granted before the passing of the Home Rule Act will remain under the management of the Imperial Government. Future loans will be managed by the Irish Government.The Irish Parliament will have power to raise loans on the security of the“transferred”revenue, sufficient provision being made for interest and sinking fund. If the Irish Government desires it, the Exchequer Board above-mentioned, may issue an Irish Loan, deducting the charge from the sum“transferred”to Ireland.Such are the provisions of the Bill. It cannot be[pg 146]denied that they appear complicated, but they will be found less so in practice. The machinery of financial administration in a great State is necessarily complicated, and a radical change in that machinery involves a multitude of changes in detail for which the reforming Act must provide. Root and branch opponents of Home Rule naturally criticise those provisions, and exaggerate withUlstervehemence the administrative difficulties which attend radical change, but the advocates of great measures, while recognising difficulties can take juster views of their extent, and they know that they can be surmounted.In the first place an expert body (the Exchequer Board) will interpret the financial provisions of the Act. It will consist of two members appointed by the Treasury and two by the Irish Government, and a chairman appointed by the Crown. Their decision is to be final. On these questions there is therefore no power reserved to the Imperial Government, which might cause friction. The Chairman should probably be a man of judicial rank. Possibly a case might arise in which a revision of the Board's decision would be needed. So far this important section of the machinery is not complicated. In the next place the Imperial Government remains responsible and liable for all the“reserved”services. Here again there is no complication.Thirdly, the Customs and Excise Clauses appear complicated, but they are for the most part machinery clauses, common to Revenue Acts.Fourthly, the Free Trade Clause offends of course the Unionist-Protectionist party, but its merits need not be discussed here. I venture to doubt where Ireland is likely to set up a Protectionist policy against Great Britain. Our market is too important to her. If such a policy were established, history tells us that British Protectionists will not[pg 147]consult Irish interests. Lastly a certain, but not a great, inconvenience will attend the taking of an official record of goods passing between the two countries essential to determining the true revenue of Ireland.Thus the apparent complications of the Bill dwindle greatly on examination. The Bill of 1912 is no doubt much less simple than that of 1893 as introduced by Mr. Gladstone, but that Bill was not, however, so simple as it appeared. It was based on the principle of autonomy, but it retained great powers in Imperial hands. In fact it gave autonomy as far as autonomy was practicable. Circumstances have changed much since 1893, and the problem is now in some respects easier. The pivot and crux of Mr. Gladstone's scheme, the Imperial contribution, has, for the time, disappeared.Sir Henry Primrose's Committee adopted unanimously and unhesitatingly the principle of simplicity. They recommend that the power of imposing and levying all taxation in Ireland, subject to reservations on questions of trade and of foreign relations should rest with the Irish Government. They urge that that policy accords with the general policy of Home Rule, as removing causes of friction, as avoiding need for revision of the arrangement (excepting a future question as to an Imperial contribution), it terminates the extravagance inherent in the partnership, and makes the responsibility of the Irish Government for Irish administration complete.The Committee examine the objections to the grant of complete power of taxation, viz., that (1) it would break up the fixed unity of the realm; (2) that it would impair facilities of trade between the two countries; (3) and that it is at variance with the principle of a Customs Union, said to be a feature common to federations.[pg 148]On the first point the Committee reply:(1) That in their view the Irish Government should have power to impose Customs duties only for the purpose of raising revenue, and that the Imperial Government should reserve questions of tariff, and foreign relations. Thus fiscal unity on important points would be maintained. For sixty years from the Union separate machinery existed for the collection of different rates of duty in the two countries. If Union could dispense with fiscal unity,a fortíorícan any less close form of association do so.(2) The Committee do not attach importance to the second objection. The Custom House does not seriously trammel the convenience of traders between this country and the Continent, and it was found endurable when the variance between England and Ireland was more formidable than now.(3) On the third objection the Committee argue that a Customs Union is indispensable, when the boundaries of federated states form a ring fence. It is not indispensable when, in a case like that of England and Ireland, the two countries are separated by sea.These reserves diminish, of course, the severe simplicity of the scheme, and the Committee's answers to objections admit some inconvenience to trade, but a great change like that of Home Rule must have some drawbacks, and in the opinion of Home Rulers, the end to be gained far more than compensates for slight inconveniences which attend its execution. It is certain, moreover, that, whatever may be the measure[pg 149]adopted, it will be necessary to take means for ascertaining the“true”Revenue of Ireland, and to that extent there must be some slight interference with trade.I agree with the Committee in their preference for the simplicity of complete autonomy.Sir Henry Primrose and his colleagues agree to a great extent with a Minority Report of the Financial Relations Committee (1896), signed by Lord Farrer, Mr. Bertram Currie and myself. The advantages of complete autonomy are obvious, and I cannot avoid a regret that it has not been possible to adopt it. I note, however, that the greatest Irish authority on Irish Government, Lord Macdonnell, though in favour of Home Rule, is entirely opposed to the grant of fixed autonomy to Ireland.We must not misunderstand the relations of the Committee to the Government. They were not appointed to draw a Home Rule Bill. They were to ascertain and consider the fiscal relations between Ireland and other parts of the United Kingdom as they exist to-day, paying special regard to the changes which have taken place in revenue and expenditure since 1896, the date of the Report of the Royal Commission; to distinguish between Irish Local Expenditure and Imperial Expenditure in Ireland; and to consider, in the event of Home Rule being established, how the revenue required to meet the necessary expenditure should be provided. The function of the Committee was, therefore, purely financial. They had to collect financial information, a necessary preliminary to a consideration of the Bill, and to advise as to the method of providing the revenue required. They had no mission to examine the political conditions which must be satisfied by a Bill designed to effect a Constitutional Revolution. That[pg 150]was the function of the Cabinet. The Committee, limiting itself to its instructions, recommended the method of raising revenue which they thought wisest, independently of any but financial considerations. The Government consider the question from a wider point of view. Their measure must be founded on policy as well as finance. They do not adopt the Committee's recommendations. They decide to retain for a time, more or less indefinite, a closer relation between the two financial systems. Much as I should like greater simplicity, a study of their measure leads me to the conclusion that its provisions are, in the main, wise. Let us then consider how far the provisions of the actual Bill satisfy the conditions needed to insure the success of Home Rule.In the first instance, and for an uncertain number of years, the Imperial Government keeps a tight hand upon the Irish Government. It reserves large powers enabling it to reject, postpone, or test the validity of Irish Bills. It regulates and levies all taxes, and fixes postal rates. It secures the interests of various classes of public servants, and retains temporarily the police under its own control. It fixes Irish Local Expenditure at a certain sum, and it issues that sum yearly to the Irish Government together with a free gift of £500,000 a year for three years, falling gradually to a permanent gift of £200,000.Normalincrease of Irish Revenue is appropriated to reduce the deficit to be borne by the British Exchequer. If, therefore, the Irish Government increases its own expenditure beyond the fixed sum allotted to it, it must find the revenue required, and for that purpose powers of taxation are given to it.The nursing hand of the mother is, in fact, present at every point of the Bill, but it must be remembered[pg 151]that a hostile step-mother may, at any time, replace the kindly mother.There is no escape from the conclusion that these reservations restrict the autonomous power of the Irish Government. On the other hand, the whole spirit of the Bill marks the greater part of them as temporary. The Bill, in fact, confers autonomy by gradual steps, and holds out prospects that eventually the relations between the two countries will be simple and workable. At the outset, and for some time onward, the Irish Government, freed from liability for the costly“reserved”services which the“partnership”has bestowed or inflicted on Ireland, will occupy itself with the organisation of its own home administration. It starts with no previous experience of administration, and it is clearly desirable that it should proceed by steps, gathering experience as it goes. Its field of work at first should not be too wide, and six years is not too long a period for it to reform and reconstitute its administrative organisation. This is its first duty, and it undertakes it under favourable conditions.In six years the constabulary will be transferred automatically from the charge of the Imperial Government to that of the Irish Government with the sum allotted to its support.106That sum will be increased by any saving which accrues to the British Exchequer from the transfer, and in determining that sum regard is to be had to theprospectof any increase or decrease[pg 152]in the cost of the service, expected to arise from causes not being matters of administration.In the next place, the Irish Parliament may, at any time, on twelve months' notice assume the legislative and executive control of three reserved services, viz., Old-age Pensions, National Insurance, and Labour Exchanges. If they are taken over, the sum transferred with them will be determined on the same principle as in the case of the constabulary. Autonomy, therefore, in regard to these services is granted to the Irish Government, and they will only be retained under the control of the Imperial Government, if, and so long as the Irish Government desires it.The Postmaster-General said in his speech on the introduction of the Bill that the old-age pension charge is now practically at its maximum, gradually diminishing, and the Primrose Committee (paragraph 54), estimate the charge at the time when the Bill becomes law at £3,000,000. The question then arises what will be the amount transferred, if the Irish Government, seeing its way to more economical administration, were to give at once the twelve months' notice and take over the service at the end of a year. It would not, I presume, be £2,664,000 the charge at which the Treasury in its“outline of financial provision”(paper 6154), estimated it in 1912-13, but £3,000,000, modified to some extent by the prospect of reduction.The cost of National Insurance and Labour Exchanges is estimated by the Treasury in 1912-13 at £191,500, increasing by £300,000 in ten or fifteen years. If the Irish Government were in like manner to take them over, the amount transferred would, I presume, be £190,000 with a sum added representing the prospect of increase.In the event then of those services being taken[pg 153]over by the Irish Government, they would considerably exceed their charges as estimated by the Treasury for 1912-13, and the excess would entail a corresponding increase of charge on the British taxpayer, to be counterbalanced gradually by the normal increase of Irish revenue, which the Postmaster-General estimates, with due reserve, at £200,000 a year, and by the gradual reduction (£50,000 a year) of the free gift of the British taxpayer from £500,000 to £200,000.It must be remembered that these increased charges on the British taxpayer are not the result of Home Rule, they are an inheritance from the“partnership.”When these services are transferred from the Imperial to the Irish Government, the Imperial Government will only retain control over the land purchase charges and the regulation and collection of taxes. The former will apparently remain permanently with the Imperial Government, involving an estimated increase of charge on the British taxpayers of £450,000 a year (Treasury Paper 6154). With regard to the latter, it is clearly desirable that at the outset the Imperial Government should be responsible for levying and collecting taxes. If difficulties on that subject should arise in parts of Ireland, the Imperial Government will settle them with an authority which the new Irish Government cannot possess. Clause 26, however, holds out a possibility hereafter of extended autonomy to Ireland. If for three years the revenue of Ireland exceeds the expenditure on Irish services by the Imperial and Irish Governments, the Parliament of the United Kingdom will revise the financial provisions of the Home Rule Act, with a view to securing a proper contribution from Irish revenues to Imperial expenditure, and extending the powers of the Irish Governmentwith respect to the[pg 154]imposition and collection of taxes, and if extension were then granted in a liberal spirit, there would be little left to desire.ConclusionI have thus traced the gradual progress towards autonomy contemplated by the Act. It justifies the conclusion that the Government favours autonomy, but seeks to achieve that end gradually and tentatively. With the path thus marked out, it lies with the nation to pursue steadily and resolvedly the great end of reconciliation with Ireland.It is impossible to consider Home Rule in its financial aspect, without casting a look backward and comparing the result which would have followed the grant of Home Rule in 1886 with the result which has followed its refusal. In the former case Ireland would have been reconciled long ago. She would have been mistress in her own house, and it would have been her interest as well as her policy so to conduct her administration as to insure the success of her autonomy. She would have had full opportunity for reorganising her establishments on a reasonable scale, substituting for an expensive military police an ordinary police, with a saving, as Mr. Gladstone once pointed out, of £900,000 a year. She would have been able to maintain the reasonable contribution to Imperial expenditure which it is her duty as an integral part of the United Kingdom to provide. It would have been worth the while of Great Britain to make a great sacrifice at the outset to attain this solution of the Irish problem, and long before now the solution would have been complete.The Conservative Party refused Home Rule. They have held power during sixteen out of the twenty-five[pg 155]years elapsed in the interval, and they have had full opportunity to try their alternative policy. That policy has not indeed been the twenty years of“resolute Government,”a euphemism for coercion, advocated by Lord Salisbury. They have tried a policy of bribes and doles, with the result that the Imperial contribution of over £2,000,000 made in 1885 has been dissipated, and that Irish local expenditure alone shows now a deficit of £1,500,000 and a steadily increasing deficit. In short, a total burthen of between £3,500,000 and £4,000,000 has been inflicted on the British taxpayer. The Leader of the Conservatives has now announced with splendid audacity that if the“partnership”continues, if the Conservatives are allowed still to mis-rule Ireland, and to maintain the baleful spirit of ascendancy, they will endeavour to develop in every possible way the resources of Ireland. That is to say, the policy of bribes and doles is to continue at the expense of the British taxpayer. Let the British taxpayer note that, and let him note also that the Conservative Party will find the ways and means for these bribes and doles not by taxes on the wealthy, but by taxes on the food of the people. Ireland will accept the doles; but she will not be satisfied. She will still clamour at our gates for Home Rule, as she has clamoured since 1886, and she will get Home Rule, but the burthen on the British taxpayer will be then how much greater than now?[pg 156]AppendixThis Report of the Primrose Committee, the Treasury outline of financial provisions, and the speech of the Postmaster-General on the introduction of the Bill offer some vague estimates, perhaps more properly guesses, of Irish finance, one of which, Old-age Pensions, extends to twenty years. It may be interesting to throw these figures together, not (God forbid) as an estimate, but as illustrating opinion prevalent among the experts engaged in the preparation of the Bill.Income:Estimate for the year 1912-1913 10,839,000Addfree gift of £500,000 to be reduced in nine years to 200,000The Postmaster-General's Estimate of £200,000 normal yearly increase of revenue in twenty years 4,000,000Income in twenty years (round figures) 15,000,000Expenditure:Sum transferred to Ireland 1912-1913 5,462,000Post Office, 1912-1913 1,600,000Old-age pensions (Treasury Paper) 2,800,000Land purchase (£761,000 in 1912-1913 increased by £450,000) 1,211,000Insurance £191,500 in 1912-1913 increased by £300,000 491,500(Say) 11,564,500-11,600,000Balance available for Constabulary, collection of Revenue, Imperial contribution and Irish services.It must be recollected that the Irish Government has to provide for increase of Irish services beyond £5,462,000 by taxation.

“The Channel forbids Union, the Ocean forbids separation. I demand the continued severance of the Parliament with a view to the continued everlasting unity of the Empire.”

Terse words in which a great statesman summed up the relation of Ireland to England. The Home Rule Bill will give the sanction of law to Grattan's aphorism. It bids Ireland manage her own affairs, freeing her in her own house from official bondage to an unsympathetic consort. If the Act of Enfranchisement is drawn in a trustful and large spirit, it will, we may feel assured, end the feud of centuries, and create unity where the Act of Union has created enmity.

The policy of Home Rule is wise in itself, and worthy the statesmanship of a nation always bold in the hour of need, and, as experience of its working is gained, it will commend itself more and more to the commonsense of a practical people, but the immediate success of the first Home Rule Act will depend greatly on the skill and wisdom with which the details of a complicated measure are devised, facing fairly the financial[pg 113]evils consequent on Tory obstinacy, and avoiding, in reasonable degree, offence to popular prejudice and existing interests.

The provisions which will adjust the financial relations between the two nations are not among the least difficult of those details, and Parliament must solve the puzzling problem without delay. It must begin by temporarily giving local government in Ireland a fair start at the cost of the British tax-payer.

Let us, in the first place, clear the ground from some doubtful arguments which, used as premises, will probably lead the unwary to false conclusions. A plea is often put forward that England is a rich country and Ireland a poor country, and it is argued that identical taxation therefore wrongs Ireland. But England is not a rich country, in the broad sense. It is a country in which there is vast accumulation of wealth, but in which, also, there is a great mass of poverty—poverty probably exceeding the poverty of Ireland, and, therefore, identical taxation if it wrongs the poor of Ireland, wrongs still more the poor of England. Critics arguing from this false premise contend that the extension of the Income-tax to Ireland was a wrong, that is to say, the wealthy man living in Ireland, where living is relatively cheap, ought not to contribute to the national expenditure on the same principle as the wealthy man living in England, where living is relatively dear; or, to put the argument in another form, it is sound finance to take Income-tax from a man in England, struggling on a few hundreds a year. It is unsound finance to take Income-tax from, say, the profits earned in Ireland by the Guinness firm. Nationalists, misled by the plea of Ireland's poverty, have relied on this argument, and Conservatives also have used it chiefly to discredit Mr. Gladstone, who extended the Income-tax to[pg 114]Ireland; but the argument is false in itself, and cannot be made the basis of sound financial legislation. As a matter of fact, taxes on articles of general consumption, on the necessaries of life, fall heavily on the poor, and the argument of over-taxation applies in great degree to the poor in the great towns of England, and to the poor in Ireland. If, then, the poor of Ireland are to be relieved, the poor of England must be relieved also, and identical taxation would still be the result. The statesman must find a truer gauge by which to measure the relative capacity of the two countries to bear taxation.

Again, during the long discussion on financial relations, much time has been wasted in criticising that provision of the Act of Union, which fixed the respective contributions of Great Britain and Ireland to the common purposes of the Empire at the proportion of fifteen and two. That proportion, in fact, was not exacted, and it may be put aside as theoretical.

A summary of recent financial history in Ireland will enable the reader to understand the circumstances in which Parliament takes up the problem of Home Rule. Towards the close of the eighteenth century the condition of Ireland was bad. England, selfish to the last degree in her commercial policy, treated Ireland as little better than a conquered country, and ruined her commercially and industrially by restrictions on her trade. Protestants and Catholics joined in patriotic resistance, and wrung at last freedom of trade in 1779, and an independent Parliament in 1782. Thenceforward for a time the financial administration of Ireland was regulated in accord with Irish interest. The country prospered financially under the new order. Large sums were spent in promoting agriculture and manufactures, and in grants for public works, and the[pg 115]country's finance was restored to order. During the years of peace, 1782 to 1793, Ireland contributed on the average £584,000 to military—that is to the common expenses of the Empire. The military expenditure of Great Britain in the peace years, 1786 to 1792, averaged £5,142,000. Ireland was then a most important factor in the State, for the population was to that of England in the proportion of nearly one to two.

Pitt desired to establish reciprocity between the two countries and at the same time to obtain from Ireland a contribution on a fixed principle for the Navy, wise proposals worthy of the Minister; but the two Parliaments could not agree. That of England bowed to the pernicious claims of ascendancy and to the supposed interests of the commercial classes. Pitt was defeated. The French Revolution and a war lasting nearly twenty-two years followed, and in the midst of the war broke out the Rebellion of 1798. If the charge of the Irish debt at the outbreak of the war and the average civil expenditure of Ireland between 1793 and the Union is deducted from the average income of Ireland, the surplus constituted Ireland's real contribution to the common expenditure and it averaged about £900,000 a year. The year 1800 marks a great change of policy. Pitt put an end to the independent Parliament of Ireland and passed the Act of Union, bad in itself, and worse by the means which made it law. It sought to make the two countries one for all purposes of revenue, and that object was kept steadily in view.

From 1800 to 1817 the United Parliament imposed taxes on both England and Ireland, but the Irish Treasury collected the Irish Revenue, defrayed the local expenditure of Ireland as sanctioned by the United Parliament and remitted the surplus in aid of the war expenditure. The greater part of the[pg 116]burthen fell upon Great Britain, but Ireland's share drained greatly her resources. Her revenue which had produced £1,837,000 in 1793, reached £7,305,000 in 1817, an increase of 300 per cent., while her contributions during the years of war to the common expenditure calculated on the principle adopted in the preceding paragraph amounted to about £3,000,000. During the same period Great Britain contributed to the war out of revenue about £43,000,000 on the annual average.

In 1817 the Irish Treasury was abolished, the exchequers of the two countries were united, the British and Irish Revenues were paid alike into the one exchequer. The Irish local expenditure was defrayed from that exchequer under the check of the English Treasury, and the United Parliament imposed and repealed Irish taxes. From 1817 for many years Ireland fared badly. Her representatives in Parliament served her ill. Tories, Whigs, and independent members failed alike in making England understand Irish needs, and the British Parliament neglected Irish interests. The years between 1817 and 1842 mark the first period of Irish financial history dating from the war. It was a period of stagnation. Both countries required time to recover from the calamity incident to war; but the recovery would have been more rapid, even under heavy taxation, had not progress been retarded by the unwise legislation of protection, which fettered enterprise and restricted commerce. This evil, however, injured Great Britain more than Ireland. In 1824 the separate Customs Departments of the two countries were abolished. The trade between Great Britain and Ireland was treated as coasting, and from that time no official record has been kept of goods exported from and imported into both countries.

In 1817 the taxes levied in England were similar to,[pg 117]but not identical with, those levied in Great Britain. Ireland was exempt from many taxes levied here, and in some cases, such as spirits, she paid a lower rate of duty. A period of profound peace enabled the government to remit taxation; but those remissions were chiefly made in deference to British interests, and in making them Irish interests were little considered. The truth of this statement is illustrated by the Revenue Returns. The estimated“true”100Revenue of Great Britain fell from £51,500,000 in 1820 to £46,250,000 in 1840, although population, and with it consumption, had increased. The“true”Revenue of Ireland in the same period rose from £5,250,000 to £5,500,000. But it must be added that many of the taxes remitted were taxesnot levied in Ireland. In respect to them Great Britain had to a certain extent a claim to prior consideration.

The second period of financial history extended from 1842 to 1869, a period of rapid recovery and of great prosperity in Great Britain, but not so in Ireland. Famine fell upon her in 1846, and thinned her population, followed by emigration, which showed how poverty pressed upon the poor, while the Fenian movement of 1866 showed how widespread was the spirit of unrest. A highly cultivated Liberal statesman was Lord-Lieutenant during several years of the period. An interesting diary which he kept leaves the impression that the leading statesmen of the day were not reading the signs of the times, or gauging the gravity of a growing movement. This was hardly the period to choose for increasing the taxation of Ireland, nevertheless in 1853 Mr. Gladstone extended the[pg 118]Income-tax to Ireland, counterbalancing it in part by the remission of loans granted to Ireland during the famine—a very insufficient compensation. But the Income-tax did not touch the poor, and as I have pointed out there was no reason why the wealthy and comparatively well-to-do classes in Ireland should not contribute to the public expenditure like their brethren in Great Britain. This plea, however, does not extend to the spirit duties which during 1853 Mr. Gladstone and Mr. Disraeli raised to the level of the spirit duties in Great Britain. That tax undoubtedly was paid in great measure by the poorer classes.

In one direction there was improvement. In 1842 Sir Robert Peel acceded to power, and inaugurated at once the policy of liberating trade which has conferred such benefits on Great Britain, and in a minor degree on Ireland. The era of prosperity which followed the adoption of the Free Trade policy increased greatly the consuming power of the people, and enabled Mr. Gladstone to largely reduce duties on the principal articles of food consumed by the poorer classes. For example, he and his successors reduced the tea duties from 2s. 2d. to 6d. and abolished the sugar duties. This was undoubtedly the true method of remedying the evil which underlies the plea that identical taxation wronged Ireland. I have shown that that evil was caused not by identical taxation, but by heavy taxes on food, which oppressed alike the poor of Ireland, and the more numerous poor of Great Britain. The policy adopted met the local grievance, by modifying if not removing the general grievance, and this remedy of the general grievance was only rendered possible by the growing prosperity of Great Britain. The poor of Ireland had therefore their full share of the benefit caused by the prosperity of Great Britain. The historian[pg 119]must give full weight to this consideration when he criticises the increase of the Irish spirit duty. There can be little doubt as to the verdict of history, if the choice lies between cheap whisky and dear food on the one side, and cheap food and dear whisky on the other. Between 1860 and 1900 the Customs and Excise duties which were reduced exceeded the like duties increased by some £22,000,000 a year, and Ireland had her share in the reduction.

In 1864 a Committee of the House of Commons inquired into the taxation of Ireland, but it led to no useful result. In other directions the monotony of neglect continued. The Government and Parliament paid little or no attention to Irish needs. Ireland was the Cinderella of the three kingdoms, and fared accordingly.

The third period ranged from 1869 to 1896. It might be termed the Home Rule period, for it includes the two Home Rule Bills of Mr. Gladstone, but it includes also other great measures relating to Ireland. Indeed, during the whole period of seventeen years Ireland engrossed, to a great degree, the attention of Parliament. The change was very remarkable. Up to 1869 England was indifferent to, or bored by, Ireland. She was stupid. She did not trouble herself to learn Irish wants, and she could not understand the spirit of Irish nationality. The Devon Commission, a Conservative Commission, appointed by a Conservative Minister, Sir Robert Peel, reported that 2,500,000 people in Ireland were on the verge of starvation, and gave warning of the evils, the perils, inherent in the Irish land system. England took no notice of either warning. The famine answered the first in cruel fashion. The second was pigeon-holed. Wise in her own Home administration, wise of late years in her[pg 120]Colonial administration, she knew no remedy for Ireland but force, and force is no remedy. She accepted, almost as matters of ordinary administration, Coercion Acts which marked with a black stigma most years of the century, unable to see that that fact alone was a disgrace to her statesmen, her Parliament, and her people.

Early in the Home Rule days I heard a great English statesman say:“The first duty of a Government is to bring the people into agreement with the law; till it does that it fails in its first duty, and England has hitherto failed to bring Ireland into agreement with the law”—a truth well and forcibly expressed.

In 1869 a man of great power and eloquence, wide views, and firm resolve became Prime Minister. He realised the habitual injustice of England to Ireland, and he saw the perils impending. By his strength of will he forced an unwilling country and an indifferent Parliament to devote its serious attention to Irish questions. He disestablished the Church. He was defeated on Irish education, but he laid the foundation of a land settlement by conferring on the tenants, in spite of strenuous opposition from the Tories, the rights of fair rents, fixity of tenure, and free sale, and his measures were marked by an earnest desire to deal liberally with Ireland to the utmost extent consistent with equity to the British tax-payer. Finally, when Ireland sent to Westminster more than four-fifths of her representatives pledged to Home Rule, he accepted this expression of the national will, and became a convert to the principle of Home Rule. I deal later in detail with his two Home Rule Bills of 1886 and 1893, which were defeated, and I need only here deal with finance of the third period, apart from the provision of the Home Rule Bills.

Before Mr. Gladstone was converted to Home Rule, Home Rule finance attracted little attention. That eminent statistician, Sir Robert Giffen, made, indeed, in 1885, a singular suggestion to theStatistnewspaper, viz., that the Irish landlords should be bought out at the cost of the Imperial Exchequer, and that the rent charge, which would then be payable by the purchasing tenant, should be given to an Irish authority, in lieu of payments from the Exchequer, for the internal administration of Ireland.

Again, Sir Robert wrote an article in theNineteenth Century Review, March, 1886, a few weeks before the introduction of the first Home Rule Bill, to show how unimportant, from a financial point of view, Ireland had become to us, and to suggest the expediency of devising some form of Government under which the special needs and circumstances of that country would receive more and better attention than they did under the existing arrangements. His figures might be, in some instances, doubtful, perhaps even incorrect, but it can hardly be denied that he made good his point. Sir Robert was, we see, greatly in advance, not only of the ordinary Briton, but of financial experts generally, both as regards the land question and also that of the Government of Ireland.

Perhaps the most able thinker and writer on economic questions in the second half of the nineteenth century was the late Mr. Bagehot, and, in proof of the general indifference to Irish questions in England, it is notable that his collected works, ranging over a wide field in politics and literature, contain no paper on the government or condition of Ireland. Yet he had witnessed O'Connell, the famine, the depopulation of Ireland, the Committee on Irish Taxation, and the Fenian outbreak in 1866.

In 1890 Mr. Goschen, as Chancellor of the Exchequer, in the Conservative Government, moved for a Committee of the House of Commons to consider the financial relations of England, Scotland, and Ireland. The Committee was instructed to inquire into the equity of their financial relations in regard to the resources and population of the three kingdoms. It had hitherto been much discussed whether Ireland could be regarded as a separate financial entity from the rest of the kingdom. The Irish Taxation Committee of 1864, of which Sir Stafford Northcote and Mr. Lowe were prominent members, had refused to admit the principle of such separate entity, and that had been generally the Conservative contention. But, in the reference to the Committee of 1890, the Conservative Government accepted the principle. The Home Rule Bills of 1886 and 1893 were, of course, based upon it. Thus, 1890 marks an important advance in the discussion, and thenceforward, by consent of both parties, the separate“entity”was established.

After the rejection of the second Home Rule Bill the Liberal Government appointed a Royal Commission to inquire into the financial relations of the two countries and their relative taxable capacity. The Report of this Commission deserves attention, because it was exhaustive in its inquiries, because the information it laid before the public has since that time been generally used in discussion, and because many of the recommendations made were far-reaching and suggestive. There was, as might be expected, great difference of opinion. The Conservative members and the Nationalist members made their several Reports. Attention, however, may be directed to one of the Reports, because it received the concurrence of the Nationalist members and of three English members—one of whom was a very[pg 123]high, if not the highest, financial authority in the City of London, the two others retired Civil Servants who had been at the head of two great Departments of the State. Their conclusions were as follows:

“(1) That Great Britain and Ireland must, for the purpose of this inquiry, be considered as separate entities.“(2) That the Act of Union imposed upon Ireland a burthen which, as events showed, she was unable to bear.“(3) That the increase of taxation laid upon Ireland between 1853 and 1860 was not justified by the then existing circumstances.“(4) That identity of rates of taxation does not necessarily involve equality of burthen.“(5) That whilst the actual tax revenue of Ireland is about one-eleventh of that of Great Britain, the relative taxable capacity of Ireland is very much smaller, and is not estimated by any of us as exceeding one-twentieth.”

“(1) That Great Britain and Ireland must, for the purpose of this inquiry, be considered as separate entities.

“(2) That the Act of Union imposed upon Ireland a burthen which, as events showed, she was unable to bear.

“(3) That the increase of taxation laid upon Ireland between 1853 and 1860 was not justified by the then existing circumstances.

“(4) That identity of rates of taxation does not necessarily involve equality of burthen.

“(5) That whilst the actual tax revenue of Ireland is about one-eleventh of that of Great Britain, the relative taxable capacity of Ireland is very much smaller, and is not estimated by any of us as exceeding one-twentieth.”

The three English members above mentioned presented a separate Report, recording at length their views on the questions referred to the Commission. I call attention to it, because reference is frequently made to it in the Report of Sir Henry Primrose's Committee, recently appointed to advise the Government upon the new Home Rule Bill.

They pointed out that the whole taxation of Ireland increased from £2,900,000 in 1820, to over £6,600,000 in 1893, and that by far the larger part of this increase was derived from taxes on articles of consumption which fell most heavily on the poor; that the increase resulted only temporarily in an increase in the contribution to common expenditure which rose from £3,691,000 in 1820 to £5,396,000 in 1860, to fall to £1,966,000 in 1893, for the greater part of the increase had been absorbed in increase of Irish civil expenditure. This local expenditure amounted in Ireland to 19s. 7d. per head, while in Great Britain it only amounted to 11s. 9d. If the cost of administering Ireland had been reduced to the like[pg 124]cost in Great Britain, a saving of nearly £2,000,000 would have been realised.

They thought that the expenditure in Ireland was conducted on a scale totally unsuitable to that country, that the industrial taxation, borne in Ireland mainly by the consumers of dutiable articles, was heavier than the masses of the Irish people ought to bear, that Irish taxation ought not to exceed one twentieth part of taxation of the United Kingdom, but they doubted whether Great Britain would consent to alter her whole system of taxation to meet the evil to Ireland. They objected totally to seeking a remedy in increased grants and doles, and they suggested that Ireland should levy her own taxes and provide for her own expenditure.

Lastly, in answer to the objection that Ireland might impose new Customs duties, they held that to be unlikely, since Ireland rather than Great Britain would suffer by such a policy, because the market of Great Britain is of greater importance to Ireland than that of Ireland to Great Britain.

The Royal Commission reported in 1896. The question of the financial relations remained then in practical abeyance till 1907. In that year the Government of Sir H. Campbell-Bannerman proposed to establish an Irish Council under the Lord-Lieutenant entrusted with the control and direction of certain administrative Departments. A sum was to be charged on the Consolidated Fund to enable the Council to meet the expenditure of the transferred Departments. This sum was fixed for the first five years at £4,164,000. This was simply a measure to decentralise administration, and to admit Irishmen to a share in Irish administration. It did not, however, obtain support in Ireland, and in consequence it was not pressed.

We come now to the last stages in the story of Irish[pg 125]finance. The Government of Mr. Asquith decided to introduce the Third Home Rule Bill in the session of 1912, and in 1911 they appointed a Departmental Committee under Sir Henry Primrose to advise them. The able report of that Committee has been laid before Parliament, and it brings our information on the financial relations up to the latest date:

They state the“true”Irish Revenue in 1895-6 to have been £8,034,000.

They estimate“true”Revenue 1910-11 at 10,300,000.

Increase £2,266,000.

The“true”local expenditure in Ireland, 1895-6, £5,938,000.

The“true”local expenditure 1910-11, 11,344,000.

£5,406,000.

Thus whereas Ireland in 1895-6 made a contribution of £2,066,000 to Imperial Expenditure, in 1910-11, not only did she make no contribution to Imperial Expenditure, but the British taxpayer was called on to contribute more than £1,000,000 towards Irish local expenditure. But Irish local expenditure is increasing under the heads of old-age pensions, land purchase, and expenses of the Government which will be established in Ireland under Home Rule. The Committee in consequence estimate:

The Irish local expenditure in 1913-14 at £12,400,000.

The Irish Revenue at 10,350,000.

Deficit £2,050,000.

for which provision must be made in the forthcoming measure.

In order to meet the existing deficit, the Committee suggest that the British Exchequer should take over liability for all old-age pensions which had been actually granted at the date when the Home Rule Bill comes into operation. They estimate that liability at £3,000,000 a year, gradually, of course, diminishing. If necessary, the liability in whole or part of the Irish Constabulary Pensions (£400,000) might also be transferred to the British Exchequer. They advise that the obligation of Ireland to contribute to the Imperial expenditure should be affirmed, but that a settlement of the amount of the contribution should remain in abeyance; and lastly, that the guarantee of the Imperial Exchequer in respect of the Land Stock should remain, but that means should be taken to secure regular payment of the sum due from Ireland to the National Debt Commissioners.

I shall contrast later the recommendations of the Committee with the actual provisions of the Home Rule Bill.

I will now compare the finance of the three Home Rule Bills which have been submitted to Parliament, those of 1886, 1893 and 1912.

The Bill of 1886

Mr. Gladstone made it an essential condition of his plan that there should be an equitable distribution of Imperial charges and that Ireland should pay her fair proportion to the common expenses of the Empire. In 1885 that contribution was represented by the surplus of Irish Revenue remaining after deduction of the expenditure in Ireland on Irish services. He calculated in 1886 that the surplus above described[pg 127]provided a contribution by Ireland to Imperial expenditure equivalent to £2 where Great Britain contributed £23. This proportion contrasts with Mr. Pitt's arrangement in 1800 that Ireland should pay £2 where Great Britain paid £15. Mr. Gladstone proposed in future that where Great Britain paid £28, Ireland should pay £2, a concession of moment to Ireland, and he supported it on the following ground: he measured the taxable capacity of the two countries by (1) the Income-tax returns (2) the death duty returns, and (3) the valuation of property. Income-tax gave a proportion of £38 to £2, but he held Income-tax an imperfect test, because it was paid in Ireland on a lower valuation than in Great Britain and because many Irishmen receive dividends on securities which pay Income-tax in England. He thought that £34 to £2 would be nearer the true proportion. He held the death duties to be a better test and they showed a proportion of £26 to £2, while the valuation, lower in Ireland than in Great Britain, gave a proportion of £24 to £2. Arguing from these premises, he held that his proposed contribution of £2 to £28 was an equitable and even a generous arrangement, justified by the necessity of starting the Irish Legislative body with a balance to its credit.

A table is given showing how the contribution was appropriated.

The amount to be contributed by Ireland to Imperial expenditure being thus ascertained, the more difficult part of the problem remained, viz., how to provide the fund out of which the contribution would be payable and how to secure its payment. The plan which commended itself to him as insuring the fiscal unity of the three kingdoms, and giving absolute security to the British Exchequer, left the imposition and collection[pg 128]of Customs and Excise duties with the Imperial Government, and under Imperial control. This plan was to be carried into effect in the following manner. The Customs and Excise were to be levied under Acts of the Imperial Parliament, and were not to be subject to the control of the Irish Legislature. The Irish Legislature with that exception could impose taxes on Ireland. Under the Land Purchase Bill, which was to be introduced concurrently with the Home Rule Bill, a Receiver-General was to be appointed, into whose hands the Customs and Excise Duties and other taxes were to be paid, including taxes imposed by the Irish Parliament. The Imperial Receiver-General, having thus in hand all Imperial and local taxes levied in Ireland, would in the first instance pay out of them the Imperial charges. Apart from the Imperial charges there were other charges, strictly Irish, such as Judges' salaries, pensions, the salaries of existing civil servants, for the security of which the Bill provided. The Bill bound the Irish Parliament to impose taxes sufficient to meet such charges, and ordered them to be paid by the Receiver-General. The Receiver-General was to keep an Imperial and an Irish account. The Irish charges would of course be paid from the latter account. He was to carry the Customs and Excise Duties in the first instance to the Imperial account, and the local taxes to the Irish account, transferring to the Irish account the surplus of Custom and Excise, after payment of the Imperial contribution. He was subsequently to pay the balance remaining on the Irish account to the Irish Exchequer.

An Imperial Court of Exchequer was established in Ireland to watch over the observance of the Act, and all Revenue acts were to be tried and defaults punished in that Court. The Bill further enabled the Irish[pg 129]Parliament to take over the Irish Post Office, if it should so desire, though it was Mr. Gladstone's opinion that it would be for the convenience of both countries if the Post Office were to remain under the control of the Postmaster-General.

The Imperial contribution payable by Ireland was not to be increased for thirty years, though it might be reduced if the Imperial charge for Army, Navy and Imperial Civil expenditure for any year should be less than fifteen times the contribution paid by Ireland. In that case one-fifteenth of the diminution could be deducted from the Imperial contribution.

Existing Civil Servants were retained in their offices at existing salaries. If the Irish Government were to desire their retirement, they would be retired on pensions. On the other hand, if at the end of two years the officers themselves desired to retire, they could do so, receiving pensions on the usual abolition of office scale.

Supposing the Home Rule Bill to have become law the account of Irish finance would have stood thus:

Receipts.Imperial taxes:Customs £1,880,000Excise £4,300,000Total £6,180,000Local taxes:Stamps £600,000Income-tax 6d. £550,000Total £1,150,000Non-tax revenue:Post Office £1,020,000Total: £8,350,000Expenditure.Contributions to Imperial expenditure on basis of one-fifteenth of Imperial expenditure:Debt charges £1,466,000Army and Navy £1,666,000Civil charges £110,000Total £3,242,000Sinking Fund on one-fifteenth of capital of debt £360,000Constabulary101£1,000,000Local Irish Civil charges £2,510,000Collection of revenue:Imperial taxes £170,000Local taxes £60,000Non-tax revenue £604,000Total £834,000Surplus £404,000Total £8,350,000

Receipts.Imperial taxes:Customs £1,880,000Excise £4,300,000Total £6,180,000Local taxes:Stamps £600,000Income-tax 6d. £550,000Total £1,150,000Non-tax revenue:Post Office £1,020,000Total: £8,350,000

Expenditure.Contributions to Imperial expenditure on basis of one-fifteenth of Imperial expenditure:Debt charges £1,466,000Army and Navy £1,666,000Civil charges £110,000Total £3,242,000Sinking Fund on one-fifteenth of capital of debt £360,000Constabulary101£1,000,000Local Irish Civil charges £2,510,000Collection of revenue:Imperial taxes £170,000Local taxes £60,000Non-tax revenue £604,000Total £834,000Surplus £404,000Total £8,350,000

When it is said that in 1885-1886 Ireland was paying to Imperial expenditure in the proportion of £2 to £23, that proportion was calculated on the whole gross Imperial expenditure, whereas Mr. Gladstone calculated the proportion of £2 to £28 on a military expenditure materially cut down, for he excluded from it charges which ought strictly to be called war charges, a modification very favourable to Ireland and reducing considerably her true contribution.

He made another concession of great importance. He proposed to credit Ireland with the entire receipts levied in Ireland, but that was not a true test of the amount of taxation paid by Ireland. There are goods which pay duty in Great Britain, but which are consumed in Ireland, so conversely there are goods which pay duty in Ireland but are consumed in Great Britain. For instance, spirits, porter, and tobacco are largely exported duty paid from Ireland and are consumed in Great Britain, and Mr. Gladstone calculated that the excess of duties so paid in Ireland on goods consumed in Great Britain amounted to no less a sum than, £1,400,000 a year. That is of course British Revenue, and in striking a true account between the two countries it should be credited to Great Britain, not to Ireland. The Home Rule Bill, however, gave it to Ireland, a direct grant of £1,400,000102from Great Britain to Ireland, and if that amount be subtracted from the contribution of £2 to £28, it leaves the proportion £2 to £52 instead of £2 to £23.

If we strike a balance between the contributions to be paid by Ireland to Great Britain under the Home Rule Bill, and the grants to be paid to Ireland, we shall arrive at the following result:

Contribution from Ireland to Great Britain £3,602,000Grants from Great Britain to Ireland:Duties paid in Ireland on goods consumed in Great Britain £1,400,000Grant toward the Constabulary £500,000Total: £1,900,000

Contribution from Ireland to Great Britain £3,602,000

Grants from Great Britain to Ireland:

Duties paid in Ireland on goods consumed in Great Britain £1,400,000

Grant toward the Constabulary £500,000

Total: £1,900,000

Net contribution from Ireland to Imperial purposes (or nearly in the proportion of 2 to 60) £1,702,000

If the Imperial contributionactuallypaid by Ireland in 1885 be equated on like principle, the proportion stated above at 2 to 23 will be similarly reduced.

The Bill was defeated in the House of Commons, and therefore its provisions did not undergo the test of scrutiny in Committee.

The provisions of this Bill illustrate the difficulties which attend the financial severance of the Irish from the British Government. High authorities thought at the time that Mr. Gladstone, in 1886, should have proceeded in the first instance by way of Resolutions establishing the principles upon which the Bill would be subsequently founded, and there is much to be said for that view. The main principles of the measure would have been established in the first instance after free and full discussion, and the details would have been adapted later to the principles then laid down. Mr. Gladstone himself, in his reply upon the Second Reading (June 7th, 1886,) indicated a course somewhat similar in its result. He said:

“If an interval is granted us, and the circumstances of the present session require the withdrawal of the Bill, and it is to be re-introduced[pg 132]with amendment at an early date in the autumn, it is our duty to amend the Bill with every real amendment and improvement, and with whatever is calculated to make it more effective and more acceptable for the attainment of its end.”

“If an interval is granted us, and the circumstances of the present session require the withdrawal of the Bill, and it is to be re-introduced[pg 132]with amendment at an early date in the autumn, it is our duty to amend the Bill with every real amendment and improvement, and with whatever is calculated to make it more effective and more acceptable for the attainment of its end.”

It must be remembered that there had been no sufficient time for the collection of the data on which an effective measure could be founded, and the collection of those data was a task of great difficulty, for the Departments did not possess them. The Government came into power in February, and the Bill was introduced on April 6th; thus there was no real opportunity for testing the value of the data collected in that short interval, or for gauging beforehand objections both to the principles and details of the scheme adopted, and experience proved that some of the objections were valid, though probably not insurmountable.

The scheme was based on two principles which would be especially liable to criticism:

(1) For thirty years Ireland was to contribute to Imperial charges as they then existed a fixed annual sum.

(2) The Customs and Excise duties ascollectedin Ireland (i.e., not the“true”revenue) were to be credited to the Irish Government.

The first of these principles would have been closely scrutinised in Committee, but probably in the main it could have held its ground. In the first place, it reduced considerably the Imperial contribution, consisting hitherto of the balance of revenue after payment of Irish charges. As Mr. Gladstone pointed out, the amount of military expenditure, on which the proportion of 2 to 28 was calculated, was considerably reduced, and Great Britain had to pay the difference, and so far the change was favourable[pg 133]to Ireland. In the second place, Irish expenditure was increasing, and under the existing system the balance of Irish revenue, constituting the Irish Imperial contribution, was, as the sequel lamentably proved, diminishing, and, a result not foreseen at the time, the wasteful and unsound finance which financial partnership entailed upon Ireland ere long extinguished it. The grant of autonomy was an effective check on this continued waste, otherwise the contribution of a fixed quota would soon have reduced the Irish Government to insolvency.

The grant to Ireland of thecollectednot thetrueduties of Customs and Excise was open to grave objection. It presented her with the duties levied in Ireland on articles consumed in Great Britain, but if at any time the habits of the people, such as decrease in drinking, reduced this practical gift—estimated at £1,400,000, or if changes in law or practice transferred the payment of these duties from Ireland to Great Britain, the financial equilibrium of the scheme would be destroyed. This was a real danger as under the bonding system the British trader could, if he pleased, pay these duties in Great Britain.

The decision that Ireland was not to be represented at Westminster led to a clumsy device for giving Ireland a voice in the Imperial Parliament when Irish interests were involved. This would be the resource if a war contribution had to be obtained.

The scheme of 1886 can only, therefore, be regarded as a draft to be tested and modified in discussion and to form the basis of a revised and amended scheme.

The Bill of 1893

Mr. Gladstone introduced the second Home Rule Bill in February, 1893. In the discussion he pointed out[pg 134]how incredibly wasteful the method of governing Ireland was; the Irish Civil Government grants, which had averaged from 1833 to 1837 £762,000, had risen between 1888 and 1892 to £4,042,000, and the cost of local government in Ireland was twice as much per head as the like cost in England.

Under the scheme of 1886 Irish representatives were not to sit in the Imperial Parliament, but the Government found that under existing financial arrangements there must be financial connection, unless Parliament was prepared to face a different system of trade laws between the two countries, and provision must be made for that connection. Mr. Gladstone, therefore, reversed the decision of the Government in 1886. He proposed to retain Irish representatives at Westminster, reduced in number to 80. They were not to vote on purely British questions, but in his opinion it would be difficult to make that distinction as far as the mass of business was concerned. The Irish representatives would not vote on any tax which was not to be levied in Ireland or on any grant of money for other than Imperial purposes as scheduled in the Bill. By this means Ireland would have a voice, if emergency, such as war, rendered fresh taxation necessary.

In the interval between 1886 and 1893 knowledge had been gained to some extent as to what constituted the“true”revenue of Ireland, and the Inland Revenue thought it possible to levy in Great Britain the Excise duties collected in Ireland on articles consumed in Great Britain andvice versa. These Excise duties represented the greater part of the sum of £1,400,000, previously described as the difference between duties, so to speak, belonging to Ireland and duties collected in Ireland, a difference estimated in 1893 at £1,800,000. If Ireland retained that difference, as contemplated by the scheme[pg 135]of 1886, it was equivalent to a grant from Great Britain to Ireland. On the other hand the Customs were not able to make the separation thought possible by the Excise.

With these facts before him Mr. Gladstone made an entire change in the financial scheme. As in 1886, he held that Ireland must make a proper contribution to Imperial expenditure, but he abandoned the principle, adopted in 1886, of obtaining that contribution by a quota of one-fifteenth of Imperial expenditure, that is a contribution of £2 by Ireland to £28 by Great Britain. He retained instead the whole of the Customs revenue collected in Ireland as the Irish contribution. He proposed that Great Britain should pay any excess of the charge of constabulary over £1,000,000, out of the contribution, the balance representing Ireland's share of Imperial expenditure. He justified the change on the ground that as the management of trade was reserved to the Imperial Government, the management of the Customs so closely connected with trade should be Imperial also. The Customs were expected to produce a net revenue of £2,370,000. He estimated it as equivalent to about 4 per cent. of Imperial expenditure whereas the actual contribution was about 12 per cent. The contribution would, of course, vary as the net Customs revenue rose or fell. On the other hand the Irish Government were to take all the rest of the“true”revenue of Ireland and to defray out of it all local Irish expenditure, including a fixed sum of £1,000,000 towards the cost of the constabulary and Dublin police, which were temporarily to remain Imperial services. Customs and Excise duties were to be regulated and collected by the Imperial authority which was also to fix postal rates; but all other taxes were to be imposed by the Irish Legislature.

The interests of existing judges, and existing civil servants, and of her constabulary, which remained under the control of the Viceroy, were secured. The constabulary would be gradually replaced by a force under the control of the Irish authority. Two Exchequer Judges would be appointed to guard observance of the Act, and appeals lay to the Privy Council which would try on the motion of the Viceroy, or of the Secretary of State, any question as to invalidity of an Irish Act. These arrangements might after fifteen years be subject to revision in pursuance of an address to Her Majesty from the House of Commons or the Irish Legislative Assembly.

The receipts and expenditure of the Irish Government under this scheme would have stood as follows:

Receipts.(1) Excise true revenue exclusive of licences £3,220,000(2) Local taxes:Stamps, Income-tax, Excise licenses £1,495,000(3) Postal revenue £740,000(4) Other non-tax revenue £205,000Total £5,660,000

Receipts.

(1) Excise true revenue exclusive of licences £3,220,000

(2) Local taxes:

Stamps, Income-tax, Excise licenses £1,495,000

(3) Postal revenue £740,000

(4) Other non-tax revenue £205,000

Total £5,660,000

Expenditure.(1) Civil Government charges, except Constabulary £3,210,000(2) Collection of Inland revenue £160,000(3) Postal service £790,000(4) Contribution to Irish Constabulary £1,000,000Total £5,160,000Surplus £500,000

Expenditure.

(1) Civil Government charges, except Constabulary £3,210,000

(2) Collection of Inland revenue £160,000

(3) Postal service £790,000

(4) Contribution to Irish Constabulary £1,000,000

Total £5,160,000

Surplus £500,000

The Bill passed the House of Commons, but the financial clauses were greatly recast in Committee. The changes originated in the fact that the Inland revenue had overestimated the“true”revenue of Excise by a very considerable sum, and the error would have reduced to an insignificant sum the free starting balance for the Irish Government provided in the original scheme. Mr. Gladstone decided in consequence not to keep the Customs revenue as Ireland's contribution to Imperial expenditure, but to let that revenue fall into the common stock of Irish revenue and to[pg 137]take out of that common stock one third of the“true”Irish revenue. This third was to cover Ireland's contribution to Imperial expenditure together with one third of the cost of the Irish constabulary and Dublin police. Ireland was to meet all her local charges out of the remaining Irish revenue. The Imperial Government was to retain for six years the imposition and collection of all taxes; the Irish Government having only supplementary powers of taxation. At the end of six years the Irish contribution was to be revised, and Ireland would be empowered to impose taxes other than Customs and Excise, and she would collect taxes, the Customs alone being retained by the Imperial authorities. The“true”revenue derived from the Customs and Excise was to be ascertained by a Joint Committee of the Treasury and the Irish Government. The financial result of these changes is shown in the following figures:

(1) Customs:Revenue collected in Ireland £2,136,000Addestimated allowance for duties paid in Great Britain on articles consumed in Ireland £266,000Total estimated Irish revenue £2,402,000; Amount Payable to Irish Exchequer Two-Thirds £1,601,000(2) Excise:(a) Spirits. Revenue collected in Ireland £4,112,000Deductduties ascertained to be paid in Ireland on spirits consumed in Great Britain £1,872,000Total £2,240,000(b) Beer. Revenue collected in Ireland £811,000Deductestimated allowance for duties paid in Ireland on beer consumed in Great Britain £187,000Total £624,000(c) Licence duties collected in Ireland £194,000Total estimated £3,058,000; payable to Exchequer £2,039,000(3) Stamp duties collected in Ireland £707,000 estimated, £471,000 payable(4) Income-tax collected in Ireland £552,000 estimated, £368,000 payable(5) Crown Lands amount estimated to be due to £65,000 estimated, £43,000 payableTotal £6,784,000 estimated, £4,522,000 payable(6) Miscellaneous Irish Revenue £138,000 estimated, £138,000 payableTotals £6,922,000 estimated, £4,660,000 payable

(1) Customs:

Revenue collected in Ireland £2,136,000

Addestimated allowance for duties paid in Great Britain on articles consumed in Ireland £266,000

Total estimated Irish revenue £2,402,000; Amount Payable to Irish Exchequer Two-Thirds £1,601,000

(2) Excise:

(a) Spirits. Revenue collected in Ireland £4,112,000

Deductduties ascertained to be paid in Ireland on spirits consumed in Great Britain £1,872,000

Total £2,240,000

(b) Beer. Revenue collected in Ireland £811,000

Deductestimated allowance for duties paid in Ireland on beer consumed in Great Britain £187,000

Total £624,000

(c) Licence duties collected in Ireland £194,000

Total estimated £3,058,000; payable to Exchequer £2,039,000

(3) Stamp duties collected in Ireland £707,000 estimated, £471,000 payable

(4) Income-tax collected in Ireland £552,000 estimated, £368,000 payable

(5) Crown Lands amount estimated to be due to £65,000 estimated, £43,000 payable

Total £6,784,000 estimated, £4,522,000 payable

(6) Miscellaneous Irish Revenue £138,000 estimated, £138,000 payable

Totals £6,922,000 estimated, £4,660,000 payable

Irish Expenditure, 1892-3.(1) Civil Government charges (exclusive of Constabulary and salary of Lord-Lieutenant, but inclusive of local charges met out of local taxation account) £3,123,000(2) Constabulary charges (£1,459,000) two-thirds of £973,000(3) Estimated deficit on postal account £52,000Total £4,148,000Surplus £512,000Total £4,660,000

Irish Expenditure, 1892-3.

(1) Civil Government charges (exclusive of Constabulary and salary of Lord-Lieutenant, but inclusive of local charges met out of local taxation account) £3,123,000

(2) Constabulary charges (£1,459,000) two-thirds of £973,000

(3) Estimated deficit on postal account £52,000

Total £4,148,000

Surplus £512,000

Total £4,660,000

The schemes of 1893 again illustrate the difficulties inherent in a severance of the two Exchequers. The revise left more points open for difference between the two Governments, and it had the serious defect of revision after the short interval of six years.

The original scheme was far preferable. The retention of the Customs as the Imperial contribution reduced opportunity for conflicts of opinion to a minimum, and the interval of fifteen years before revision left ample time for the new Irish Government to put its house in order. I venture to think it would have been wise to make good the error in estimating the“true”revenue of Ireland (which invalidated the scheme) by an Imperial Grant, at all events for a time. Under the scheme the Imperial Government provided £500,000 for the constabulary. If it had granted £300,000 or £400,000 more, the net Imperial contribution derived from the Customs would have been reduced to say £1,400,000, not a large sacrifice for the end in view—reconciliation with Ireland.

The Bill as amended passed the House of Commons but was thrown out in the Lords. This Parliament refused to accept Mr. Gladstone's proposals to give Ireland Home Rule, and nineteen years elapsed before a third Home Rule Bill was submitted to Parliament.

In the three schemes of 1886 and 1893 the Imperial contribution was very similar, perhaps somewhat larger in 1893. In all three schemes, also, the net gain to the British Exchequer was reduced by the grant from that Exchequer of £500,000 to the cost of the Irish Constabulary.

The difficulty of devising a financial scheme fairly simple and workable, which was experienced in 1886 and 1893, has been disappointing, but not discouraging. It was inevitable but it can be surmounted.

The Bill of 1912

In 1911, Mr. Asquith pledged the Government to take up again in the ensuing session the question of Home Rule. In 1910 the Conservative Party, at least a considerable part of it, in presence of a probable dissolution on the Parliament Bill, showed, as in 1885, a disposition to coquette with Home Rule, but the movement came to nothing, and the Party settled into determined opposition to the Home Rule policy, submitting themselves to the lead of the Ulster extremists, who preached sedition in no measured terms. In other respects, the prospects of Home Rule are fairly favourable. England, apart from Scotland, Wales, and Ireland, still returns a majority opposed to Home Rule, but public opinion does not show any signs of vigorous or violent opposition as in 1886. The Liberals, the Irish, and the Labour Party are united in its favour. The passing of the Land Acts is rapidly removing the agrarian evil, and the landlords have not the same cause for anxiety as formerly. The grant of Local Government is working well, and in spite of much poverty the condition of the people is improving. Lastly, the passing of the Parliament Act has made it possible, in spite of opposition in the Lords, to pass a Home Rule Act within the limits of the present Parliament.

On April 11th, the Prime Minister introduced the Government Bill. He regarded it as the first step in a comprehensive policy of devolution. It retains permanently at Westminster 42 Irish Members, so that Ireland will have a voice, not only on questions in the Imperial Parliament which concern Ireland, but on questions of Imperial interest, such as war and peace. The Bill of 1886 reserved to the Imperial Parliament[pg 141]certain questions. The Bill of 1893 also made necessary reservations, though its tendency was towards more complete autonomy; but in the interval between 1893 and 1912 great changes have taken place, and the Imperial Government finds itself hampered by new liabilities. The Old-Age Pension Act, the Land Purchase Act of 1903, the National Insurance Act, and Labour Exchanges have added very greatly to Irish expenditure. On the other hand, the contribution to Imperial expenditure, unluckily for the British taxpayer, has disappeared. The problem is, therefore, a new one, and the Government solves it, at all events for the present, by keeping in its own hands a large number of Services, as will be seen hereafter.

In 1885-6 Ireland contributed a surplus of considerably more than £2,000,000 to Imperial expenditure; in 1895-6, £2,000,000.103The Government estimates the true revenue of Ireland in 1912-13 at £10,839,000; and the expenditure on Irish services at £12,354,000. Therefore the new Irish Government will start with a deficit of £1,515,000. That deficit is now charged on the British taxpayer. It results from British management of Irish finance, for, on the one hand, Irish revenue is limited by the relatively limited means of Irish taxpayers; on the other hand, England has regulated Irish expenditure on the lavish scale of her own expenditure.

The Government lays down certain principles on which Home Rule finance will be based:

(1) Ireland must manage her own finance and[pg 142]must have powers of taxation consistent with leaving to the Imperial Government a field of taxation sufficiently wide for Imperial needs.(2) The Budgets of the two countries must not hamper each other.(3) Ireland must bear the cost of any increase arising hereafter on Irish services, but she must benefit by economies in those services.(4) She must have power to reduce taxation if her economies permit it.

(1) Ireland must manage her own finance and[pg 142]must have powers of taxation consistent with leaving to the Imperial Government a field of taxation sufficiently wide for Imperial needs.

(2) The Budgets of the two countries must not hamper each other.

(3) Ireland must bear the cost of any increase arising hereafter on Irish services, but she must benefit by economies in those services.

(4) She must have power to reduce taxation if her economies permit it.

The scheme which will give effect to these principles may be described as follows.

In the first place the Imperial Government retains in its own hands the imposition and collection of all Irish taxes, the Post Office duties alone excepted, which will be transferred to the Irish Government.Normalincrease in Irish Revenue will not be applied to Irish services. It will reduce the deficit. The Irish Government, however, will have supplementary powers of taxation.

An Irish Exchequer and an Irish Consolidated Fund will be created, and an Irish Auditor-General appointed. Further, a joint Exchequer Board, consisting of Treasury and Irish officers, will adjust the accounts between the two Exchequers, based upon what it declares to be the actual cost of Irish services when the Act comes into operation. If the Irish Government, using its supplementary powers of taxation, increases or reduces taxes, the Exchequer Board will vary accordingly the sum to be paid by the British to the Irish Exchequer on account of Irish expenditure, and it will determine the effect of any other changes taking place in the relations between the two Exchequers. Lastly, if and when normal increase of Irish revenue puts an end, during a period of[pg 143]three years, to the existing deficit, the Exchequer Board will make a report to that effect, and the financial arrangement between the two countries will then be reconsidered in order to secure a fair contribution from Ireland to Imperial expenditure.

The Government, as I have stated, estimates the revenue of 1912-13 at £10,839,000. That sum represents the whole“true”revenue of Ireland, viz., taxes and miscellaneous, £9,485,000; Post Office Revenue, £1,354,000. The Imperial Government adds to this revenue of £10,839,000 a free gift of £500,000 at the cost of the British taxpayer, in order to give the Irish Government a fair start. The total Irish income in the year 1912-13 will therefore be £11,339,000.

On the other side of the account, the Imperial Government retains in its own hand various Irish Services, termed in the Bill“Reserved Services,”described later. It transfers from the British to the Irish Exchequer the sum allotted to Irish Expenditure (outside the Reserved Services), estimated in 1912-13 at £5,462,000, the cost of the Postal Service £1,600,000,104and £500,000, the free gift mentioned above, making a total transfer of £7,562,000.

If in the future the sum of £5,462,000 allotted to Irish Expenditure and the free gift of £500,000 are exceeded, the Irish Legislature must provide the necessary ways and means.

The transfer of £7,562,000 from the British to the Irish Exchequer leaves a balance on the British Exchequer on the Irish Account of £3,777,000105free[pg 144]to that extent to meet the charge of the Reserved Services.

These Reserved Services are:

(1) Old-age Pensions £2,664,000(2) National Insurance Labour Exchange £191,500(3) Land Purchase £761,000(4) Constabulary £1,377,500(5) Collection of Revenue £298,000Total £5,292,000

(1) Old-age Pensions £2,664,000

(2) National Insurance Labour Exchange £191,500

(3) Land Purchase £761,000

(4) Constabulary £1,377,500

(5) Collection of Revenue £298,000

Total £5,292,000

Therefore the excess of Irish Expenditure in 1912-13 over Irish Revenue as provided results in a deficit of £1,515,000 payable by the British taxpayer, and if the free gift of £500,000 by the British taxpayer included in the provided revenue be added, the total charge on the British taxpayer in 1912-13 on account of Irish Expenditure is £2,015,000.

This annual gift of £500,000 is after three years to diminish yearly by £50,000, until a minimum of £200,000 is reached, which will eventually represent the gift of Great Britain to Ireland, until prosperity or good management enables Ireland to pay her own way, and at the last to make a contribution to Imperial Expenditure.

The Government estimates a normal growth in Irish Revenue of £200,000 a year, which, to the extent it is realised, will reduce the deficit payable by the British taxpayer.

The Imperial guarantee on Irish Land Stock is to continue in full force.

Effect of Future Modification

If the Imperial Parliament increases or reduces taxation, the change will not affect the Irish Budget, for the transferred sum will remain unaltered.

The Irish Parliament will have power to reduce taxes levied in Ireland. It will also have power to impose taxes. It may add at will to Excise duties, and if so the Customs duties on beer or spirits must vary with the Excise duties. It may levy new duties which do not interfere with the Imperial system of taxation—for instance, a house duty, or establishment licences. It may add to Income-tax or death duties, and also to Customs duties (other than beer and spirits) provided that the addition does not exceed 10 per cent. of their yield. This 10 per cent. resembles the“centimes additionels”which are levied in foreign countries on direct taxes, and are applicable there to local expenditure. But the Irish Parliament must not trench on Imperial taxes. This increase or reduction of Irish duties will not affect the British Exchequer, but it will increase or diminish the“sum transferred”to the Irish Exchequer.

The Irish Parliament will not have power to tax articles not subject to Imperial taxes for the time being. If in the exercise of its power it differentiates Customs or Excise duties in the two countries, there will be a differential duty on such goods passing from one to the other.

Public Works Loans granted before the passing of the Home Rule Act will remain under the management of the Imperial Government. Future loans will be managed by the Irish Government.

The Irish Parliament will have power to raise loans on the security of the“transferred”revenue, sufficient provision being made for interest and sinking fund. If the Irish Government desires it, the Exchequer Board above-mentioned, may issue an Irish Loan, deducting the charge from the sum“transferred”to Ireland.

Such are the provisions of the Bill. It cannot be[pg 146]denied that they appear complicated, but they will be found less so in practice. The machinery of financial administration in a great State is necessarily complicated, and a radical change in that machinery involves a multitude of changes in detail for which the reforming Act must provide. Root and branch opponents of Home Rule naturally criticise those provisions, and exaggerate withUlstervehemence the administrative difficulties which attend radical change, but the advocates of great measures, while recognising difficulties can take juster views of their extent, and they know that they can be surmounted.

In the first place an expert body (the Exchequer Board) will interpret the financial provisions of the Act. It will consist of two members appointed by the Treasury and two by the Irish Government, and a chairman appointed by the Crown. Their decision is to be final. On these questions there is therefore no power reserved to the Imperial Government, which might cause friction. The Chairman should probably be a man of judicial rank. Possibly a case might arise in which a revision of the Board's decision would be needed. So far this important section of the machinery is not complicated. In the next place the Imperial Government remains responsible and liable for all the“reserved”services. Here again there is no complication.Thirdly, the Customs and Excise Clauses appear complicated, but they are for the most part machinery clauses, common to Revenue Acts.Fourthly, the Free Trade Clause offends of course the Unionist-Protectionist party, but its merits need not be discussed here. I venture to doubt where Ireland is likely to set up a Protectionist policy against Great Britain. Our market is too important to her. If such a policy were established, history tells us that British Protectionists will not[pg 147]consult Irish interests. Lastly a certain, but not a great, inconvenience will attend the taking of an official record of goods passing between the two countries essential to determining the true revenue of Ireland.

Thus the apparent complications of the Bill dwindle greatly on examination. The Bill of 1912 is no doubt much less simple than that of 1893 as introduced by Mr. Gladstone, but that Bill was not, however, so simple as it appeared. It was based on the principle of autonomy, but it retained great powers in Imperial hands. In fact it gave autonomy as far as autonomy was practicable. Circumstances have changed much since 1893, and the problem is now in some respects easier. The pivot and crux of Mr. Gladstone's scheme, the Imperial contribution, has, for the time, disappeared.

Sir Henry Primrose's Committee adopted unanimously and unhesitatingly the principle of simplicity. They recommend that the power of imposing and levying all taxation in Ireland, subject to reservations on questions of trade and of foreign relations should rest with the Irish Government. They urge that that policy accords with the general policy of Home Rule, as removing causes of friction, as avoiding need for revision of the arrangement (excepting a future question as to an Imperial contribution), it terminates the extravagance inherent in the partnership, and makes the responsibility of the Irish Government for Irish administration complete.

The Committee examine the objections to the grant of complete power of taxation, viz., that (1) it would break up the fixed unity of the realm; (2) that it would impair facilities of trade between the two countries; (3) and that it is at variance with the principle of a Customs Union, said to be a feature common to federations.

On the first point the Committee reply:

(1) That in their view the Irish Government should have power to impose Customs duties only for the purpose of raising revenue, and that the Imperial Government should reserve questions of tariff, and foreign relations. Thus fiscal unity on important points would be maintained. For sixty years from the Union separate machinery existed for the collection of different rates of duty in the two countries. If Union could dispense with fiscal unity,a fortíorícan any less close form of association do so.(2) The Committee do not attach importance to the second objection. The Custom House does not seriously trammel the convenience of traders between this country and the Continent, and it was found endurable when the variance between England and Ireland was more formidable than now.(3) On the third objection the Committee argue that a Customs Union is indispensable, when the boundaries of federated states form a ring fence. It is not indispensable when, in a case like that of England and Ireland, the two countries are separated by sea.

(1) That in their view the Irish Government should have power to impose Customs duties only for the purpose of raising revenue, and that the Imperial Government should reserve questions of tariff, and foreign relations. Thus fiscal unity on important points would be maintained. For sixty years from the Union separate machinery existed for the collection of different rates of duty in the two countries. If Union could dispense with fiscal unity,a fortíorícan any less close form of association do so.

(2) The Committee do not attach importance to the second objection. The Custom House does not seriously trammel the convenience of traders between this country and the Continent, and it was found endurable when the variance between England and Ireland was more formidable than now.

(3) On the third objection the Committee argue that a Customs Union is indispensable, when the boundaries of federated states form a ring fence. It is not indispensable when, in a case like that of England and Ireland, the two countries are separated by sea.

These reserves diminish, of course, the severe simplicity of the scheme, and the Committee's answers to objections admit some inconvenience to trade, but a great change like that of Home Rule must have some drawbacks, and in the opinion of Home Rulers, the end to be gained far more than compensates for slight inconveniences which attend its execution. It is certain, moreover, that, whatever may be the measure[pg 149]adopted, it will be necessary to take means for ascertaining the“true”Revenue of Ireland, and to that extent there must be some slight interference with trade.

I agree with the Committee in their preference for the simplicity of complete autonomy.

Sir Henry Primrose and his colleagues agree to a great extent with a Minority Report of the Financial Relations Committee (1896), signed by Lord Farrer, Mr. Bertram Currie and myself. The advantages of complete autonomy are obvious, and I cannot avoid a regret that it has not been possible to adopt it. I note, however, that the greatest Irish authority on Irish Government, Lord Macdonnell, though in favour of Home Rule, is entirely opposed to the grant of fixed autonomy to Ireland.

We must not misunderstand the relations of the Committee to the Government. They were not appointed to draw a Home Rule Bill. They were to ascertain and consider the fiscal relations between Ireland and other parts of the United Kingdom as they exist to-day, paying special regard to the changes which have taken place in revenue and expenditure since 1896, the date of the Report of the Royal Commission; to distinguish between Irish Local Expenditure and Imperial Expenditure in Ireland; and to consider, in the event of Home Rule being established, how the revenue required to meet the necessary expenditure should be provided. The function of the Committee was, therefore, purely financial. They had to collect financial information, a necessary preliminary to a consideration of the Bill, and to advise as to the method of providing the revenue required. They had no mission to examine the political conditions which must be satisfied by a Bill designed to effect a Constitutional Revolution. That[pg 150]was the function of the Cabinet. The Committee, limiting itself to its instructions, recommended the method of raising revenue which they thought wisest, independently of any but financial considerations. The Government consider the question from a wider point of view. Their measure must be founded on policy as well as finance. They do not adopt the Committee's recommendations. They decide to retain for a time, more or less indefinite, a closer relation between the two financial systems. Much as I should like greater simplicity, a study of their measure leads me to the conclusion that its provisions are, in the main, wise. Let us then consider how far the provisions of the actual Bill satisfy the conditions needed to insure the success of Home Rule.

In the first instance, and for an uncertain number of years, the Imperial Government keeps a tight hand upon the Irish Government. It reserves large powers enabling it to reject, postpone, or test the validity of Irish Bills. It regulates and levies all taxes, and fixes postal rates. It secures the interests of various classes of public servants, and retains temporarily the police under its own control. It fixes Irish Local Expenditure at a certain sum, and it issues that sum yearly to the Irish Government together with a free gift of £500,000 a year for three years, falling gradually to a permanent gift of £200,000.Normalincrease of Irish Revenue is appropriated to reduce the deficit to be borne by the British Exchequer. If, therefore, the Irish Government increases its own expenditure beyond the fixed sum allotted to it, it must find the revenue required, and for that purpose powers of taxation are given to it.

The nursing hand of the mother is, in fact, present at every point of the Bill, but it must be remembered[pg 151]that a hostile step-mother may, at any time, replace the kindly mother.

There is no escape from the conclusion that these reservations restrict the autonomous power of the Irish Government. On the other hand, the whole spirit of the Bill marks the greater part of them as temporary. The Bill, in fact, confers autonomy by gradual steps, and holds out prospects that eventually the relations between the two countries will be simple and workable. At the outset, and for some time onward, the Irish Government, freed from liability for the costly“reserved”services which the“partnership”has bestowed or inflicted on Ireland, will occupy itself with the organisation of its own home administration. It starts with no previous experience of administration, and it is clearly desirable that it should proceed by steps, gathering experience as it goes. Its field of work at first should not be too wide, and six years is not too long a period for it to reform and reconstitute its administrative organisation. This is its first duty, and it undertakes it under favourable conditions.

In six years the constabulary will be transferred automatically from the charge of the Imperial Government to that of the Irish Government with the sum allotted to its support.106That sum will be increased by any saving which accrues to the British Exchequer from the transfer, and in determining that sum regard is to be had to theprospectof any increase or decrease[pg 152]in the cost of the service, expected to arise from causes not being matters of administration.

In the next place, the Irish Parliament may, at any time, on twelve months' notice assume the legislative and executive control of three reserved services, viz., Old-age Pensions, National Insurance, and Labour Exchanges. If they are taken over, the sum transferred with them will be determined on the same principle as in the case of the constabulary. Autonomy, therefore, in regard to these services is granted to the Irish Government, and they will only be retained under the control of the Imperial Government, if, and so long as the Irish Government desires it.

The Postmaster-General said in his speech on the introduction of the Bill that the old-age pension charge is now practically at its maximum, gradually diminishing, and the Primrose Committee (paragraph 54), estimate the charge at the time when the Bill becomes law at £3,000,000. The question then arises what will be the amount transferred, if the Irish Government, seeing its way to more economical administration, were to give at once the twelve months' notice and take over the service at the end of a year. It would not, I presume, be £2,664,000 the charge at which the Treasury in its“outline of financial provision”(paper 6154), estimated it in 1912-13, but £3,000,000, modified to some extent by the prospect of reduction.

The cost of National Insurance and Labour Exchanges is estimated by the Treasury in 1912-13 at £191,500, increasing by £300,000 in ten or fifteen years. If the Irish Government were in like manner to take them over, the amount transferred would, I presume, be £190,000 with a sum added representing the prospect of increase.

In the event then of those services being taken[pg 153]over by the Irish Government, they would considerably exceed their charges as estimated by the Treasury for 1912-13, and the excess would entail a corresponding increase of charge on the British taxpayer, to be counterbalanced gradually by the normal increase of Irish revenue, which the Postmaster-General estimates, with due reserve, at £200,000 a year, and by the gradual reduction (£50,000 a year) of the free gift of the British taxpayer from £500,000 to £200,000.

It must be remembered that these increased charges on the British taxpayer are not the result of Home Rule, they are an inheritance from the“partnership.”

When these services are transferred from the Imperial to the Irish Government, the Imperial Government will only retain control over the land purchase charges and the regulation and collection of taxes. The former will apparently remain permanently with the Imperial Government, involving an estimated increase of charge on the British taxpayers of £450,000 a year (Treasury Paper 6154). With regard to the latter, it is clearly desirable that at the outset the Imperial Government should be responsible for levying and collecting taxes. If difficulties on that subject should arise in parts of Ireland, the Imperial Government will settle them with an authority which the new Irish Government cannot possess. Clause 26, however, holds out a possibility hereafter of extended autonomy to Ireland. If for three years the revenue of Ireland exceeds the expenditure on Irish services by the Imperial and Irish Governments, the Parliament of the United Kingdom will revise the financial provisions of the Home Rule Act, with a view to securing a proper contribution from Irish revenues to Imperial expenditure, and extending the powers of the Irish Governmentwith respect to the[pg 154]imposition and collection of taxes, and if extension were then granted in a liberal spirit, there would be little left to desire.

Conclusion

I have thus traced the gradual progress towards autonomy contemplated by the Act. It justifies the conclusion that the Government favours autonomy, but seeks to achieve that end gradually and tentatively. With the path thus marked out, it lies with the nation to pursue steadily and resolvedly the great end of reconciliation with Ireland.

It is impossible to consider Home Rule in its financial aspect, without casting a look backward and comparing the result which would have followed the grant of Home Rule in 1886 with the result which has followed its refusal. In the former case Ireland would have been reconciled long ago. She would have been mistress in her own house, and it would have been her interest as well as her policy so to conduct her administration as to insure the success of her autonomy. She would have had full opportunity for reorganising her establishments on a reasonable scale, substituting for an expensive military police an ordinary police, with a saving, as Mr. Gladstone once pointed out, of £900,000 a year. She would have been able to maintain the reasonable contribution to Imperial expenditure which it is her duty as an integral part of the United Kingdom to provide. It would have been worth the while of Great Britain to make a great sacrifice at the outset to attain this solution of the Irish problem, and long before now the solution would have been complete.

The Conservative Party refused Home Rule. They have held power during sixteen out of the twenty-five[pg 155]years elapsed in the interval, and they have had full opportunity to try their alternative policy. That policy has not indeed been the twenty years of“resolute Government,”a euphemism for coercion, advocated by Lord Salisbury. They have tried a policy of bribes and doles, with the result that the Imperial contribution of over £2,000,000 made in 1885 has been dissipated, and that Irish local expenditure alone shows now a deficit of £1,500,000 and a steadily increasing deficit. In short, a total burthen of between £3,500,000 and £4,000,000 has been inflicted on the British taxpayer. The Leader of the Conservatives has now announced with splendid audacity that if the“partnership”continues, if the Conservatives are allowed still to mis-rule Ireland, and to maintain the baleful spirit of ascendancy, they will endeavour to develop in every possible way the resources of Ireland. That is to say, the policy of bribes and doles is to continue at the expense of the British taxpayer. Let the British taxpayer note that, and let him note also that the Conservative Party will find the ways and means for these bribes and doles not by taxes on the wealthy, but by taxes on the food of the people. Ireland will accept the doles; but she will not be satisfied. She will still clamour at our gates for Home Rule, as she has clamoured since 1886, and she will get Home Rule, but the burthen on the British taxpayer will be then how much greater than now?

Appendix

This Report of the Primrose Committee, the Treasury outline of financial provisions, and the speech of the Postmaster-General on the introduction of the Bill offer some vague estimates, perhaps more properly guesses, of Irish finance, one of which, Old-age Pensions, extends to twenty years. It may be interesting to throw these figures together, not (God forbid) as an estimate, but as illustrating opinion prevalent among the experts engaged in the preparation of the Bill.

Income:Estimate for the year 1912-1913 10,839,000Addfree gift of £500,000 to be reduced in nine years to 200,000The Postmaster-General's Estimate of £200,000 normal yearly increase of revenue in twenty years 4,000,000Income in twenty years (round figures) 15,000,000

Income:

Estimate for the year 1912-1913 10,839,000

Addfree gift of £500,000 to be reduced in nine years to 200,000

The Postmaster-General's Estimate of £200,000 normal yearly increase of revenue in twenty years 4,000,000

Income in twenty years (round figures) 15,000,000

Expenditure:Sum transferred to Ireland 1912-1913 5,462,000Post Office, 1912-1913 1,600,000Old-age pensions (Treasury Paper) 2,800,000Land purchase (£761,000 in 1912-1913 increased by £450,000) 1,211,000Insurance £191,500 in 1912-1913 increased by £300,000 491,500(Say) 11,564,500-11,600,000

Expenditure:

Sum transferred to Ireland 1912-1913 5,462,000

Post Office, 1912-1913 1,600,000

Old-age pensions (Treasury Paper) 2,800,000

Land purchase (£761,000 in 1912-1913 increased by £450,000) 1,211,000

Insurance £191,500 in 1912-1913 increased by £300,000 491,500

(Say) 11,564,500-11,600,000

Balance available for Constabulary, collection of Revenue, Imperial contribution and Irish services.

It must be recollected that the Irish Government has to provide for increase of Irish services beyond £5,462,000 by taxation.

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