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The Framework of Home Rule
by Erskine Childers
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The cost of Irish Primary Education—L1,632,000, as I pointed out in Chapter IX.—is at once too high and too low; too high in the sense that much of it is wasted owing to the lack of popular control, too low in the sense that it is a scandal to spend nearly as much on police as on the education of children, and L800,000 more on Old Age Pensions than on the education of children. If part or even the whole of the additional expense eventually necessary is raised by rates, so much the better. Accurate comparison is difficult with the English and Scottish expenditure on elementary education, because the greater part of the cost in those countries is borne by private endowments and local rates, whereas in Ireland no local rate is raised for elementary education, there are no endowments, and private subscriptions are very small.[128] It is certain, however, that far greater sums, in proportion to population, are spent in England and Scotland than in Ireland. This is little to be wondered at if we consider the painful history of education in Ireland; but we cannot recall the past, and, as I urged in Chapter IX., one of the first duties of a free Ireland will be to improve the education of the children.

The Irish vote for Universities and Colleges, L166,000, has been swelled by the recent establishment of the National University. No item in the whole list represents money better spent.

With regard to other Irish services, I shall make use, with Professor Oldham's consent, of some interesting tables compiled by him, showing the principal variations in Irish expenditure since the year 1891-92.[129]

They include certain expenses which I have already alluded to, and others which I shall have to remark upon further, besides giving a general view of the growth in the cost of Irish government. Neither of lists A or B is exhaustive:

A. INCREASES OF EXPENDITURE.

1910-11. 1891-92. L L 1. Old Age Pensions 2,408,000 — 2. Primary Education 1,632,000 843,755 3. Universities and Colleges 166,000 26,000 4. Payments to Local Taxation Account 1,477,500 399,260

5. Ireland Development Grant 191,500 —

6. Post Office 1,404,500 749,046 7. Cost of collecting Irish Revenue 298,000 223,362 8. Surveys of the United Kingdom 81,000 47,603

9. Land Commission 414,500 91,826 10. Department of Agriculture 415,000 44,630 11. Other items (five[130]) 240,500 172,918 ————- ————- 8,728,500 2,598,400

Nos. 1 to 4 I have already dealt with, but it is interesting to note the contrasting figures of 1893-94.

No. 5. The Ireland Development Grant of L191,500 is interesting as an example of the haphazard methods of Anglo-Irish finance. It is an annual sum voted for various development purposes, and was originally established (at the figure of L185,000) in 1903 as an equivalent for the capitation grants for school attendance in England, given under the Education Act of 1902 in lieu of school fees. In allotting the Irish equivalent, Mr. Goschen's proportion of 80, 11, 9 was for the first time condemned by all parties. What the proportion ought to be was a matter of dispute, but it was fixed in this case on the basis of population. Since the English grant has now risen to L2,500,000, the Irish proportion therefore is now, strictly speaking, inadequate.

Nos. 6, 7, and 8 are examples of charges debited by the Treasury against Ireland which are open to criticism as long as the Union lasts, and which meet with much complaint in Ireland. Obviously, however, the first two at any rate are charges which an Ireland financially independent would have to bear.

No. 9. The Land Commission vote of L414,500 is of course the direct result of an abnormally bad system, necessitating abnormal and costly remedial administration. Ireland herself is not morally responsible for a penny of it, but if she is wise she will shoulder the cost as a corollary of responsible government. Small administrative economies may be made, and the cost will disappear altogether with the completion of Land Purchase, say in fifteen years, but in the immediate future no reduction can be counted on with certainty. The figure given includes the cost of the Land Commission proper, which deals with Judicial Rents and manages finance, as well as the cost of the Estates Commissioners who conduct the machinery of Land Purchase. It also includes losses on the flotation of Land Stock at a discount, and the interest and sinking-fund on the Stock raised to pay the bonus to landlords.

No. 10. The vote of L415,000 for the Department of Agriculture, whose origin and functions I described in Chapter IX., does not accurately show the actual cost of the Department, because it excludes the greater part of an Endowment Income of L166,000 a year, derived partly from the Irish Church Fund, partly from the Irish Local Taxation Account, and partly from the interest on a capital endowment of L200,000, as well as other small miscellaneous grants. But it includes a sum of about L44,000 for some museums, colleges, gardens, etc., whose English counterparts are subsidized under different votes, as well as the sum of L144,000 for the Congested Districts Board.[131] Nor does this latter sum represent the full cost of the Congested Districts Board, which has also an Endowment Income from the Irish Church Fund of L41,250, a subsidy from the Ireland Development Grant, and a fluctuating income from various sources—rents, etc.

Part of the expense of the Department itself must be regarded as abnormal, in view of the extraordinarily backward economic condition of the country when it was founded. Nor, valuable as the Department's work is, can it be safely assumed that the cost is not extravagant. As long as any Department relies on an Imperial vote there can be no certainty that the expenditure will be economical. The whole cost of the Congested Districts Board is abnormal. Its very existence is evidence of the failure of external government in Ireland, and, as I urged in Chapter IX., the whole question of the treatment of the congested districts needs thorough investigation at the hands of a responsible Irish Government.

B. REDUCTIONS IN EXPENDITURE.

1910-11. 1891-92.

L L 1. Relief of Distress 5,000 183,675 2. Pauper Lunatics Grant 111,655 3. Teachers' Pensions Grant 90,000 4. Railways (Ireland) Grant 61,000 341,934 5. Local Government Board 92,500 132,748 6. Chief Secretary's Offices 27,500 39,681 7. Registrar-General's Office 13,000 29,926 8. Justice and Police 2,090,500 2,129,849 ————- ————- 2,289,500 3,059,468

Most of these reductions are deceptive. No. 1 is the saving of an abnormal grant, Nos. 2 and 5 signify mere transfers to Grants in Aid of Local Taxation, No. 7 a transfer of duties to the Department of Agriculture.

The table shows a total reduction of L769,968, while Table A shows a total increase of L6,130,000. Together they account for an increase since 1891-92 of L5,360,032.

Here is a similar table, confined to Justice and Police:

C. EXPENDITURE ON JUSTICE AND POLICE.

1910-11. 1891-92. L L 1. Judicial Salaries ... ... ... 102,000 110,244 2. Dublin Metropolitan Police ... 93,500 91,998 3. Royal Irish Constabulary ... ... 1,371,000 1,362,348 4. Judicial Pensions, etc. ... ... 15,000 18,656 5. Law Charges ... ... ... ... 65,500 71,977 6. Superior Courts Offices ... ... 110,500 116,851 7. County Courts Offices ... ... 109,000 112,895 8. Prisons, etc. ... ... ... ... 112,000 134,429 9. Reformatories, etc. ... ... ... 112,000 110,451

2,090,500 2,129,849

To Nos. 1, 2, and 3 I have already referred. The whole charge of two millions, though it shows a slight decrease in twenty years, is grossly out of proportion to the resources of Ireland. Under heads 6 and 7 are included a number of posts which are notoriously little more than sinecures.

To sum up once more, the cost of the Irish Government as paid out of the common purse in the last completed financial year was L11,344,500, or L2 11s. 9d. per head of the population, as compared with a cost per head of L1 9s. 2d. in England, and in Scotland of L1 13s. 31/2d. But this is not the minimum figure with which we have to reckon in considering the Home Rule scheme; some items show a marked increase in the Estimates of the current year: (1) The increase in Old Age Pensions, not certain yet, will be at least L250,000. (2) The Land Commission is L544,000, as compared with L414,500. (3) Universities and Colleges, L186,256, as compared with L166,000. (4) Department of Agriculture, L426,609, as compared with L415,000. (5) Registrar-General's Office, L29,020, as compared with L13,000. (6) Valuation and Boundary Survey, L44,581, as compared with L30,000. (7) Public Works and Buildings in Ireland, L273,370, as compared with L215,000. Even with allowance for over-estimates, especially in the last of these items,[132] we must anticipate an increase of nearly half a million under the above heads, to which we must add L150,000 recently allocated by the Road Board to Ireland for the year 1911-12, and L34,750 already allocated by the Development Commissioners. If Ireland comes prematurely into the National Insurance scheme, and assumes eventual financial responsibility for her share of the cost, that will be an additional source of expense; but it is to be hoped that her leaders, in common prudence, will henceforth endeavour to stem the rising flood of Irish expenditure, and so facilitate the retrenchments imperatively necessary under Home Rule. As it is, the total outgoings of the current year (1911-12), swelled by the increases shown above, will probably amount to L12,000,000, while this total will in its turn be added to by the office costs of the Irish Legislature and the salaries of Ministers.

The scheme framed cannot assume immediate economies, and a responsible Ireland alone can decide the nature and extent of the drastic economies which must be made in the future. Beyond the brief remarks and hints made in the course of this chapter, I myself venture only to lay down the broad proposition that, to the last farthing, Irish revenue must govern and limit Irish expenditure. For any hardship entailed in achieving that aim Ireland will find superabundant compensation in the moral independence which is the foundation of national welfare. She will be sorely tempted to sell part of her freedom for a price. At whatever cost, she will be wise to resist.

If Irish revenue is to be the measure of Irish expenditure, it follows that it must be wholly, or at any rate predominately, under Irish control. Let us look a little more closely, therefore, into its amount and composition.

III.

IRISH REVENUE.

As I have already pointed out, in order to arrive at the present revenue of Ireland, our best course is to take the mean tax revenue of the two years 1909-10 and 1910-11, and to add to it the non-tax revenue of 1910-11, which was, of course, unaffected by the delay in passing the Budget of 1909. For clearness, however, I first set out separately the Irish figures of these two years, distinguishing between tax revenue and non-tax revenue, and giving the "collected" revenue and the "true" revenue in different columns:

1909-10. 1910-11.

Revenue as Revenue as Collected. "True." Collected. "True"

TAX REVENUE. L L L L Customs 2,742,000 2,755,000 3,103,000 2,977,000 Excise 4,487,000 2,898,000 5,826,000 3,734,000 Estate, etc., Duties 684,000 684,000 1,144,000 1,144,000 Stamps 293,000 315,000 326,000 351,000 Income Tax 388,000 451,000 1,825,000 2,164,000 Land Value Duties — — 1,000 1,000

Total Irish Revenue from Taxes 8,594,000 7,103,000 12,225,000 10,371,000

NON-TAX REVENUE. Postal Service 900,000 900,000 935,000 935,000 Telegraph Service 180,000 180,000 185,500 185,500 Telephone Service 30,000 30,000 35,000 35,000 Crown Lands 26,000 26,000 24,500 24,500 Miscellaneous 116,000 116,000 114,500 114,500

Total Irish Non-Tax Revenue 1,252,000 1,252,000 1,294,500 1,294,500

Aggregate Irish 9,846,000 8,355,000 13,519,500 11,665,500 Revenue

Percentage of the Aggregate Revenue of the United Kingdom 7.52 6.38 6.57 5.67

On p. 276 are the details of the mean tax revenue, "collected" and "true," of the two years 1909-10, 1910-11, with the non-tax revenue of the latest year, 1910-11, added to them.

PRESENT IRISH REVENUE (MEAN OF THE LAST TWO YEARS).

Details of Revenue. Mean Collected Mean "True" or Tax "Contributed" Tax Revenue of the Revenue of the Years 1909-10, Years 1909-10, 1910-11. 1910-11.

TAX REVENUE. L L Indirect{Customs 2,922,500 2,866,000 Taxation{Excise 5,156,500 3,316,000 (incl. licences L284,500)

Total Indirect Taxation 8,079,000 6,182,000

{Estate Duties 914,000 914,000 Direct Taxation{Stamps 309,500 333,000 {Income Tax 1,106,500 1,307,500 {Land Value Duties 1,000 1,000

Total Direct Taxation 2,331,000 2,555,500

Total Tax Revenue 10,410,000 8,737,500

NON TAX REVENUE (1910 11). Postal Service 935,000 935,000 Telegraph Service 185,500 185,500 Telephone Service 35,000 35,000 Crown Lands 24,000 24,500 Miscellaneous 114,500 114,500

Total Non Tax Revenue (1910 11) 1,294,500 1,294,500

Collected "True" or Revenue "Contributed" at the Revenue at the Present Day. Present Day,

Aggregates 11,704,500 10,032,000

The two aggregate figures at the bottom, L11,704,500 and L10,032,000, approximately represent the Treasury estimate of the "collected" and the "true" revenue of Ireland, respectively, at the present day. They are confirmed by the figures of previous years; for the average revenue of the five years, 1904-09, was as follows: "collected," L11,320,000; "true" or "contributed," L9,612,400, the new taxation of 1909-10 having added L500,000 to the "true" revenue. I must again remind the reader, however, that the figures are open to the criticism that the adjustment between the "collected" tax revenue and the "true" revenue is inaccurate owing to the methods employed by the Treasury. It will be observed that the resulting net deduction from the "collected" tax revenue of to-day, a deduction attributable, on the balance of the various figures, almost exclusively to Excise,[133] and mainly to the Excise duty on spirits, amounts to L1,672,500, and makes all the difference between the solvency and insolvency of Ireland regarded as an independent financial unit. Her expenditure, it will be remembered, was L11,344,500, her "collected" revenue L11,704,500, leaving a surplus of L360,000, which becomes a deficit of L1,312,500 if we reckon only the "true" or "contributed" revenue of L10,032,000. On the other hand, the principle, as distinguished from the methods of adjustment, is perfectly sound if we wish to arrive at a correct idea of the financial position of Ireland. The L1,672,500 virtually represents the duties on goods exported from Ireland, and consumed in Great Britain, or rather the excess of these duties over those levied on goods exported from Great Britain and consumed in Ireland. The consumer pays the tax on dutiable commodities, and a financially independent Ireland could not raise revenue twice over from the same commodity. She would, for example, have to give a drawback from the Excise duty on spirits exported to England, since a Customs duty would be levied on its import into England. On the other hand, she would be entitled to every penny of revenue derived from the tea and sugar imported into and consumed within her borders, and to the full income tax on property held by Irishmen.

Now, for two reasons, I do not propose to make any exhaustive inquiry into the accuracy of Treasury adjustments for "true" revenue. My first reason is, that full material for calculation cannot be obtained by any private individual, and could not be obtained and worked up even by the Treasury without an enormous expenditure of time and trouble. The most careful inquiry I have seen is embodied in an exceedingly able pamphlet by "an Irishman," entitled "The Financial Relations of Ireland with the Imperial Exchequer," and I mention below a few of the criticisms made by the writer. His and other investigations seem to prove that Irish revenue is considerably underestimated, perhaps by half a million.[134] My second reason is that errors of adjustment in either direction cannot affect in any substantial way the kind of financial scheme we are to adopt in the Home Rule Bill.

Let us fix our attention, then, on the second of the two columns in the table on p. 276, showing the aggregate "true" revenue of Ireland at the present day. Disregard the non-tax revenue from the various postal services (which represents payment for services rendered, and is swallowed up by an excess on the expenditure side of L249,000), and examine the heads of tax revenue shown in the upper half of the column. It will be seen that 70-75 per cent. of Irish "true" revenue is derived from Customs and Excise duties, which, with the exception perhaps of licence duties, may be classed as indirect taxation. The deduction for "true" revenue, it will be observed, has considerably modified the proportion, which for "collected" revenue works out at 77.61 per cent., or nearly four-fifths.

As the reader is aware, this is not a new feature in Irish finance. It formed the basis of the Report of the Financial Relations Commission with regard to the over-taxation of Ireland. Much the greater part of Irish revenue, even since the abolition of protective duties and the substitution of direct taxation, has always been derived from taxes on articles of common consumption, the simple reason being that Ireland is a country where there is little accumulated wealth from which to extract direct taxation. In Great Britain, whose circumstances dictate the finance of the United Kingdom, no less than 54.79 per cent. of the tax revenue is derived from direct taxation, only 45.21 per cent. from Customs and Excise.[135]

The Irish figures show that to retain in the hands of the Imperial Parliament the control of Irish Customs and Excise will be to retain almost paramount control over Irish revenue; to deny Ireland the main lever she needs for co-ordinating her expenditure and her revenue, and for making her taxation suitable to her economic conditions. It will be to preserve the framework of a fiscal system which the highest financial authorities have pronounced to be unfair to Ireland, and which incontrovertible facts show to be uneconomical both for Ireland and Great Britain.

Meanwhile that system has at length produced a deficit, with which I shall deal in the next chapter. Its amount, probably exaggerated, must necessarily remain uncertain under the present fiscal Union. One thing alone is certain, that it will grow as long as that Union lasts.

FOOTNOTES:

[115] I.e., on the generally accepted basis of (1) assessment to death duties, (2) assessment to income-tax. With regard to (1), in the last report of the Inland Revenue Commissioners, the figure for the United Kingdom was L371,808,534; for Ireland, L15,872,302, or 1/234. With regard to (2), the figure for the United Kingdom was 1009.9 millions; for Ireland, 39.7 millions, or 1/254. Deduct a small allowance for the difference between resources and taxable capacity, and the result approximately is one-twenty-fifth.

[116]

Total revenue (including non-tax revenue) of United Kingdom (mean of two years. 1909-10, 1910-11) L165,147,500 One-twenty-fifth L6,605,900 Actual "true" revenue contributed by Ireland (mean of two years, 1909-10, 1910-11) L10,032,000 —————- "Over-taxation" L3,426,100

If only the tax-revenue be taken, the over-taxation amounts to L3,109,800 (total revenue for United Kingdom, L140,680,000; one-twenty-fifth=L5,627,200; actual Irish revenue, L8,737,000). Some members of the Royal Commission made certain allowances for education grants, etc., which it would be useless to parallel now.

[117] See pp. 248-249.

[118] See p. 259, footnote.

[119] Treasury Return, No. 220, 1911.

[120] A list is given at p. 10 of Return 220 (1911), and an admirable exposition of the whole subject from the Irish standpoint will be found in Professor Oldham's seventh published lecture on the "Public Finances of Ireland" (1911).

[121] The "Whisky Money" was so treated under the Finance Act of 1910.

[122] See p. 238.

[123] Between 1896 and 1898 the equivalent grants to Scotland and Ireland were based on the Goschen proportion, 80, 11, 9, the English grant being taken as standard. Scotch grants are now determined by special legislation.

[124] See Chapter XIV.

[125] Only part of the Dublin Metropolitan Police is paid out of State Funds, the rest by the City of Dublin.

[126] The relative figures were: Ireland, L2,408,000; Scotland, L1,064,000; England, L6,325,500. The recent removal of the disqualification for Poor Law Relief adds considerably to these amounts.

[127] In the poorest parts of Ireland they range as low as 9s.

[128] See pp. 174-176. In 1908, England and Wales spent L21,987,004 on elementary education, and raised L10,467,804 for it in rates. Of the rest, L11,104,305 came from Parliamentary grants. Fees and endowment incomes of voluntary schools are not included (Statistical Abstract of United Kingdom, 1910).

The actual Parliamentary Votes, as they appear in the accounts for 1910-11, are: England (Class IV.), "Board of Education," L14,166,500; Scotland, "Public Education," L2,250,000; Ireland, "Public Education," L1,632,000. But the English Votes include sums devoted to technical education, museums, etc., whose counterparts in Ireland come under other departments.

[129] Two years earlier than the date I have chiefly used for the purposes of comparison, but the difference is not material. In point of fact, the expenditure was L300,000 less in the later than in the earlier year.

[130] (1) Rates on Government Buildings; (2) Superannuation; (3) Government Printing; (4) Board of Works; (5) Home Office.

[131] Department of Agriculture, Endowment Fund:

{ (1) Local Taxation Account L78,000 Income from —{ (2) Irish Church Fund L70,000 (3) Interest on Capital sum of L200,000.

Also (in 1909-10): From Ireland Development Fund L7,000 Under an Act of 1902 L5,000



[132] The amount voted for Public Works in 1910-11 was L259,848 [see "Civil Service Estimates" for 1911-12 (No. 63—1911)]; the amount spent, according to Return No. 220, L215,000.

[133] Under the heads of Excise, the principal deduction is in Spirits (L1,793,000 in 1910-11) and Beer (L309,000 in 1910-11).

The items of Irish tax revenue in which the Treasury make no adjustment are: Excise Licenses (L356,000 in 1910-11); Club Duty (L2,000 in 1910-11); "other items" (L10,000 in 1910-11); Cards and Patent Medicines (L10,000 in 1910-11); "Estate, etc., Duties" (L1,144,000 in 1910-11); Income Tax (Schedules A and B) (L694,000 in 1910-11—abnormally large figure owing to non-collection in previous year); Land Value Duties (L1,000 in 1910-11).

All the heads of Customs revenue are subject to adjustment, though the total result is only a small deduction from Ireland (L126,000 in 1910-11). In all but two the adjustment is in favour of Ireland. The two exceptions are "Foreign Spirits," where a deduction of L25,000 is made in 1910-11, and Tobacco, where a deduction of L620,000 is made in 1910-11.

[134] Income Tax, Schedules C and D (dividends from Government Stocks, public companies, foreign dividends, etc.). The Treasury estimate (as stated in a side-note to the Return) is based on statistics of Estate Duty for the five years ending 1908. But what light can Estate Duty throw on (for example) the dividends collected at the source from British or foreign securities held by Irish banks? Schedule C deals with "Government Stocks, etc.," Schedule D with "Public Companies, Foreign Dividends, etc.," but in the adjustment for "true" revenue no distinction is made between them. Now the Banking Statistics (Ireland) of 1910 show that dividends were payable at the Bank of Ireland on L38,732,000 of Government securities, and that, in addition, a debt bearing interest was due to the Bank from the Government of 21/2 millions. Income Tax on these items alone would be L65,000, less rebates; but the whole of Schedule C, which includes Foreign and Colonial Government Stocks, is given in 1909-10 as only L30,000.

No attempt is made to credit Ireland with a share of the profits made by English and Scottish companies through business done in Ireland.

The only reliable items in Income Tax are those of A and B (Land, Houses, and Occupation of Land), where in 1908-09 Ireland contributed about 6 per cent. of the total; under other heads, according to the Treasury, only 3.5 per cent. The writer estimates the true contribution as several hundred thousand pounds more.

Post Office.—The Treasury give no clue as to how they calculate the profit and loss on Postal Services. Figures of letters, telegrams, parcels, etc., delivered in Ireland are known from the Postmaster-General's report, but the report does not distinguish Irish from English postal orders, of which 1211/2 millions were issued in the United Kingdom in 1909-10. There is good reason to believe that a part of the postal profit now wholly credited to England should in reality be credited to Ireland.

Stamps.—Far too little allowance is made by the Treasury for stamps on transfers executed through English and Scottish exchanges for shares bought or sold by Irishmen, and for bonds, deeds, insurances, issues of capital, etc.

Tea and Sugar.—The Treasury base their calculation "on quantities inter-changed between Great Britain and Ireland in 1903-04," and I learn from the Inland Revenue Department that by this means the consumption per head of the population was arrived at, and that the present official figures are based on the assumption that the relation of consumption per head in Ireland to consumption per head in the United Kingdom as a whole has not altered since 1903-04. The unreliability of this assumption is manifest. It is probable that the heavy additional duty on spirits has raised the consumption of tea in Ireland more than in Great Britain, and the figures of Imports compiled by the Department of Agriculture seem to confirm this view.

[135] On the basis of the mean revenue of 1909-10 and 1910-11.



CHAPTER XIII

FINANCIAL INDEPENDENCE

I.

THE ESSENCE OF HOME RULE.

Let us now sum up this financial question, and give its place in the general problem of Home Rule. In Chapter X. I argued that, on broad grounds of political policy, Ireland, in her own interest, and in the general interest of the United Kingdom, should have "Colonial" Home Rule without representation in the Imperial Parliament. Leaving finance temporarily aside, while observing that any substantial Imperial control over Irish finance would defeat the "colonial" solution of the problem, I endeavoured to show that there were no tenable grounds of a non-financial character for retaining Irish Members at Westminster, nor any dangers to be feared from excluding them. I have now reviewed the history of Anglo-Irish finance up to the present day, and I hope in so doing to have proved that, so far from presenting an obstacle to "Colonial" Home Rule, the financial conditions demand such a solution. Finance and policy are inseparably one. All the considerations which render Home Rule desirable lead irresistibly to the financial independence of Ireland, with complete control assigned to her over all branches of taxation. Without financial independence it is impossible to realize the objects of Home Rule. It would be a miracle were the case otherwise. Ireland would, indeed, be abnormal if, after her history, she could reach prosperity and stability without passing through a phase of financial independence. No parallel, even in the most distant degree, could be found for any such metamorphosis in the whole of the British Empire.

If we study Ireland's interest, we shall promote Imperial interests. The main object of Home Rule is to make Ireland self-reliant. Lord Welby and his colleagues were right in 1896 when they declared that ideal to be impracticable without giving Ireland entire responsibility both for her revenue and her expenditure. This declaration is as true as ever. The situation has changed only in one respect: that financial independence will now mean a financial sacrifice to Ireland, whereas in 1896 it would have meant a financial gain to Ireland—that is, if Lord Welby's recommendation in favour of remitting the Irish contribution to Imperial services had been carried out. At that time Ireland contributed two millions. Now Great Britain contributes over a million to Ireland. Sooner or later that subsidy must stop, and the sooner it stops the better.

But it is of vital importance that Ireland should understand the situation. The present position is dangerous, because the Irish people at large are ignorant of the facts, and their leaders are taking no steps to enlighten them. The reasons are intelligible, but they are not sound reasons. Paced with the facts and the choice, Ireland would not hesitate, but she must know the facts and understand the nature of the choice.

II.

THE DEFICIT.

Let us deal at once with the question of the deficit. It is inconceivable surely that the existence of a deficit should be used as an argument against financial independence, much less as an argument against Home Rule in general. Will anyone be found to say that an island with a fertile soil, several nourishing industries, and a clever population of four and a half millions, is to be regarded, whatever its past history, as incapable of supporting a Government of its own out of its own resources? Let nobody be tempted by the fallacy that, given time, Ireland will regain financial stability under the fiscal Union, and at a later stage, perhaps, be more fitted to bear the burden of fiscal independence. The supposition is chimerical. The present system, besides being radically vicious in a purely scientific sense, undermines the moral power of Ireland to secure her own regeneration.

It is now 1911. The deficit, once a large surplus, came into being only two years ago. It was the direct and inevitable result of a fiscal Union against which Ireland has for generations unceasingly protested, and it was a result actually foretold in 1896 by Lord Welby and his two colleagues. It could have been averted, as they pointed out, only by a form of Home Rule giving financial independence to Ireland. But the warning was older than the Report of the Financial Relations Commission. Mr. Gladstone told the House of Commons in 1886, when introducing his Home Rule Bill, that no limit could be set to Irish expenditure under the Union; he and Sir William Harcourt repeated the warning in 1893, and if the reader will study the debates on the financial clauses of the Bill of 1893,[136] he will find pages of bitter diatribe founded on the small net contribution from Ireland to Imperial services for which the revised financial scheme provided. Ireland, said the Opposition, was to make money out of Great Britain, and escape her fair proportion of Imperial charges. Mr. Chamberlain showed that, with allowance for payment from the Imperial purse of part of the cost of Irish police, the net initial contribution was about one-fortieth, and asked: "Is Irish patriotism a plant of such sickly growth that it has to be watered with British gold?" The taunt was as pointless as it was cruel, for although the Union had kept Ireland poor, Irish leaders, in spite of that poverty, had asked for a financial independence which Mr. Gladstone in neither of his Bills felt disposed to give her. Mr. Chamberlain had his way; the Union was maintained, and as a result Ireland's actual contribution of two millions at that date has been replaced by a subsidy from Great Britain. Are we to be told now by Unionists that the Union must be maintained in order to maintain this subsidy? or by Home Rulers that the Irish deficit is an argument for the perpetuation of the financial dependence which caused it, and an insuperable bar to the financial independence which alone can extinguish it?

No; let us look the facts in the face. Here is a deficit officially given as L1,312,000. It is probably less, owing to an underestimate of Irish revenue. But it may grow to be more, even with allowance for an automatic growth of revenue, owing to the increased votes of the present year, and the expenses peculiar to the establishment of the new Irish Legislature and Government. What her really healthy and normal revenue should be only Ireland herself can discover in the future. What her right expenditure should be she alone can determine. We can only work upon the data we have before us. Economy cannot be instantaneous, either in Ireland or anywhere else. Assume, then, an initial deficit in the Irish balance-sheet on the basis of present taxation. Its exact size cannot affect the manner of dealing with it. How are we to deal with it?

Let us dismiss at once the theory of "restitution" with the earnest hope that we shall hear nothing of it in the coming controversy. No Irishman will argue that a subsidy to the extent of, or exceeding the deficit, is a good thing in itself, and should be large and lasting because it will represent compensation for money unfairly exacted in the past. It is, indeed, true that the Union impoverished Ireland, but the most grievous wrong was moral, and for that wrong alone is reparation possible. Home Rule is not worth fighting for if it has not as its end and aim a self-reliant and self-supporting Ireland. Nor does it improve the argument in the least to represent the subsidy as productive expenditure for the purpose of raising Ireland's taxable capacity and improving her economic position. No money raised outside of Ireland will have that effect. Once admit the principle of restitution, and where are you to stop? What rational or scientific limit can be set to it? More pertinent question still, what are the conditions which will inevitably be imposed in exchange? Ireland cannot have it both ways. She must either hold out for financial independence or, for every financial boon, submit to a corresponding deduction from her political liberty.

If there were no alternative between financial independence without a farthing of temporary aid, and permanent financial dependence with a permanent loss of liberty, it would pay Ireland a thousandfold in the future to choose the former scheme, remodel taxation promptly to meet the initial deficit, and with equal promptitude set on foot such a drastic reduction of expenditure as would ensure the rapid attainment of a proper financial equilibrium. When once the Irish realized the issue, they would accept the responsibility with all its attendant sacrifices, which would no doubt be severe.

But there is an alternative, and that is to make good the initial deficit, whatever the financial authorities finally pronounce it to be, with an initial subsidy of equal size, or perhaps of somewhat greater size so as to admit of a small initial surplus, but destined to diminish by stated amounts, and within a few years to terminate. To such assistance, given unconditionally, Ireland has an unanswerable claim, and to such assistance she ought, in my opinion, to limit her claim. Until two years ago she contributed uninterruptedly, and sometimes excessively, to the support of the Empire. With men and money she has made efforts for the common weal which no self-governing Colony has made, though she has been treated, politically and financially, as not even a Crown Colony has been treated. Just at the point where the self-governing Colonies, thanks to the liberty allowed them, are beginning to contribute indirectly to the defence of the Empire, Ireland, as the ultimate result of a century of coercive government, ceases to contribute. She can claim honourably, if she wills, to be placed, by temporary financial aid from the authority which is responsible for her undoing, in the financial position of a self-governing Colony.

From the British point of view it is difficult to see any valid objection to the course suggested. There will be no stinginess in the settlement. Even if there were any disposition in that direction, it would be idle to grudge the initial subsidy, because an equivalent sum is already being paid. The Union will infallibly continue to accentuate the deficit and increase the resulting burden on the taxpayers of Great Britain. The plan proposed would eventually remove that burden. But, obviously, its success hinges on the concession of full financial powers to an Ireland unrepresented at Westminster. In their own interests, if not for very shame, Englishmen should decline to make use of the old adage, that "he who pays the piper should call the tune." For more than a century Ireland paid the piper and England called the tune—and what a tune, and with what results! Representation has nothing to do with the case. Precedents are needless, but there are, as a fact, many. Crown Colonies have frequently received free grants for the relief of distress—Jamaica and other West Indian islands, for example. The Transvaal and Orange River Colony received several millions after the war to enable the ruined farmers to start business on a footing of solvency. During the whole period of their adolescence, and, indeed, until quite a recent date, all the self-governing Colonies were virtually subsidized by the allocation of British forces for local defence, maintained at the Imperial charge. And Ireland paid her share of this charge. Similar garrisons were, are, and will be, maintained in Ireland. Yes, but Ireland contributed to their cost, and in course of time will, it is to be hoped, resume her contributions with a gladder heart and a freer conscience than ever before.

Canada was economically stagnant under coercion. If, in her case, we had carried coercion as far as we carried it in Ireland, it would have been necessary to give her a temporary subsidy in order to enable her to assume the position of a self-governing Colony. Ireland's proximity does not alter economic laws. "Facts are stubborn things," and these are the Irish facts. Duty apart, no more profitable investment could possibly be made by the British tax-payer than a subsidy designed to enable Ireland to stand on her legs again. The present tribute to her is a dead loss.

The subsidy, if given, ought, I submit, on no account to be earmarked, on the bad precedent set by the Bills of 1886 and 1893,[137] for any particular head of expenditure in Ireland, as for Police, Pensions, Land Commission, or Education. As I have shown previously, nothing is easier than to pick out items of excessive expenditure, or of under-expenditure, for which Ireland is not herself responsible. But to allocate a grant specially to any of these purposes would be superfluous unless the intention were to maintain Imperial control over the service in question. As I urged in Chapter X., none of the services mentioned above ought to be retained under Imperial control. Extravagance in the first three will not be properly checked, save by a responsible Ireland. Nor will extra money on Education be properly spent until it is raised and spent by Ireland. There are no other services, with the possible exception of Posts, to which a subsidy could possibly be applicable. Even in that case an earmarked subsidy would be out of place. But Posts are outside the point we are discussing. If for mutual convenience they were to be kept under Imperial control—a step which would not render imperative Irish representation at Westminster—their finance would remain, as at present, common to the whole United Kingdom. There is officially held, on bad evidence, to be a loss on Irish Posts of L249,000, and this loss is debited against Ireland, and goes to swell the deficit we have been considering. With the Posts under Imperial control, the initial deficit to be made good by subsidy would be reduced by the amount of the loss. Should it, however, be decided that Ireland is fairly entitled to a share of the large general profit earned by the Postal Services of the United Kingdom, the annual profit so attributable to Ireland would be set off against the annual subsidy as long as the subsidy lasted, and after it was at an end would be a clear item of revenue to Ireland. My own opinion, as I stated in Chapter X., is that the Irish postal system, whether standing by itself it shows a profit or a loss, ought to be under Irish control.

III.

FUTURE CONTRIBUTION TO IMPERIAL SERVICES.

This must be left a voluntary matter for Ireland, as it is for the self-governing Colonies. There is no contribution from Ireland at present, and to fix a future date at which a fixed contribution, like that from the Isle of Man, should begin, is a course hardly practicable even if it were desirable.

IV.

IRELAND'S SHARE OF THE NATIONAL DEBT.

Until two years ago Ireland, of course, contributed, inter alia, to the annual interest and sinking fund, amounting in 1910-11 to L24,554,000, on the National Debt of the United Kingdom. It is impossible to estimate her share of the capital of the Debt, and I scarcely think that anyone would seriously propose to encumber the new Ireland with an old Debt, based on some arbitrary estimate. For the great bulk of Debt created in the past she has little moral responsibility—no more, at any rate, than the self-governing Colonies. In this respect she must begin, like them, with a clean sheet.

V.

IRELAND'S SHARE OF IMPERIAL MISCELLANEOUS REVENUE.

On the other hand, Ireland, in consideration of the remissions mentioned, must renounce the share to which she is technically entitled of the Imperial Miscellaneous Revenue, derived mainly from Suez Canal shares and the Mint, and amounting altogether in 1910-11 to L2,769,500.[138]

VI.

IRISH CONTROL OF CUSTOMS AND EXCISE.

Let us now come to close quarters with this important issue. The grand argument on the affirmative side is that the products of these duties represent nearly four-fifths of the tax revenue collected in Ireland. What are the objections?

We need scarcely consider the general objection, sometimes made ostensibly in the interests of Ireland, that her public men have little financial experience. The fact is true, and it is not their fault. But the financial scheme cannot reasonably be based on a recognition of a temporary lack of experience.

I place Customs and Excise together because I believe there is no serious question of making a distinction between the two, and of allowing Ireland to levy and collect her own Excise duties, while denying her authority over Customs. It is true that until 1860 such a distinction was made, and a lower Excise duty levied upon Irish than upon British spirits;[139] but the tendency in all modern States is to make the authority over Customs the same as that over Excise, and any departure from that principle, in the case of modern Ireland, is likely to cause considerable inconvenience. License Duties, which are included under the head of Excise, may, no doubt, without much inconvenience, be differentiated from the rest, but their Irish proceeds (L284,000) are too small to influence the question.

Excise, then, follows Customs. What are the objections to giving Ireland, like the Isle of Man and the Channel Islands, control over her own Customs? Without doubt, the establishment of a new Customs barrier between Ireland and Great Britain is in itself a drawback. The Custom-house machinery exists, of course, at present, because Ireland is an island; nor would the additional function of checking British as well as foreign imports into Ireland cause any great increase of expense; but since the great bulk of Irish external trade is with Great Britain, there will unquestionably be a certain amount of inconvenience and expense both to Ireland and Great Britain in submitting merchandise on both sides of the Irish Channel to the passage of a Customs barrier.

That seems to be the limit to which criticism can justly go in the case of Ireland and Great Britain. That is as far as it goes in the analogous case of New Zealand and the Australian Commonwealth, where a small island State has a separate Customs system from that of a large, wealthy, and populous neighbour of the same race, and with many identical interests. That is as far as it goes in the parallel case of little Newfoundland and the great Dominion of Canada. Neither the Dominion nor the Commonwealth claim that proximity, power, and racial identity give them the right to control the trade and taxation of their small independent neighbours, nor does the smallest friction result from the mutual independence. On the contrary, both the Dominions and the Commonwealth were founded on that vital principle of a pre-existent State independence surrendered voluntarily for larger ends. The whole Empire depends on the principle of local autonomy, and, above all, on the principle of local financial autonomy. Endeavours in America to sustain the opposite theory led to disaster. We have for generations regarded it as perfectly natural that the self-governing Colonies should have Customs systems of their own, even when they are used for the purpose of imposing heavy duties on goods coming from the Mother Country, and we know that that liberty has borne fruit a hundredfold in affection and loyalty to the Imperial Government. Until the Union of Great Britain and Ireland it was regarded as equally natural that Ireland should have control of her own Customs, along with all other branches of revenue. Even after the Union, although there was no Irish control over anything Irish, it was recognized, until the fiscal unification of the two countries in 1817, that Irish conditions required a separate Customs system, which, in fact, existed until 1826.[140] How fiscal unification and the subsequent abolition of separate Customs was brought about I have told in Chapter XI. It is not a pleasant story. To say the least, the conditions, moral and material, were not such as to warrant the inference that there is any inherent necessity for joint Customs between Ireland and Great Britain. The presumption raised by all subsequent events is in the opposite direction.

But the tradition of unified Customs, now nearly a century old, has immense potency, and unless it is fearlessly scrutinized and challenged, may be able, reinforced by the passions excited by the great controversy over Free Trade and Protection, to defy the warnings writ large upon the page of history. The tradition must be so challenged. Say what we will about the proximity of Ireland and Great Britain, descant as we will in law-books, pamphlets, leading articles, debates, on what ought theoretically to be the fiscal relations of the two countries, we cannot escape from the fact that, in this as in so many other respects, both the human and economic problem before us is fundamentally a colonial problem, and that its being so is not the fault of Ireland, but of Great Britain.

Belief in Home Rule seems to me necessarily to involve a willingness to give Ireland her Customs. Great Britain has no moral right to lay it down that her views about trade shall govern the course of Irish policy; and if Great Britain believes sincerely in Home Rule, she should be willing to trust Ireland, regardless of the economic consequences, and regardless of the effect upon the great Tariff controversy.

The effect upon that controversy I shall not discuss. It seems to me to possess only a tactical and electioneering interest, and that side of the Home Rule problem I have rigidly avoided, while expressing in general terms my belief that sound policy and sound tactics in reality coincide. The Home Rule Bill is far more likely to be wrecked by timidity than by boldness, by precautions and compromises than by a fearless accommodation of British policy to Irish facts and needs.

As to the danger to Great Britain of separate Irish Customs, it seems to me to be greatly exaggerated. Ireland's own interests will primarily dictate her action. What she will decide her interest to be, nobody can foretell with certainty beyond a limited point, because Irish public opinion is not formed. Ireland has taken little or no part in the fiscal controversy, for the simple reason that she has been absorbed in the task of getting Home Rule, and until she gets it she is precluded from formulating a trustworthy national opinion on most of the great subjects which agitate modern societies. There is, however, no tradition in favour of high Protection, even from Grattan's commercially free Parliament. The question of a low protective or purely revenue tariff on imports has not received any serious investigation. Let us frankly admit at the outset that no country in the world, economically situated as Ireland is, dispenses with a general tariff of some sort, and undoubtedly there are to-day a good many Irishmen outside political life who advocate the encouragement of infant Irish manufacturing industries by sufficient protective duties directed against Great Britain as well as against the outside world. It would be strange if there were not, in view of the distressing past history of Ireland's throttled industries, and in view of the strenuous efforts now being made by the Development Associations to push the manufacture and sale of Irish goods in all parts of the world. There are many avowed Free Traders also; nor are the Development Associations themselves officially protectionist. The opinion is sometimes expressed that Ireland, which could easily be self-supporting in the matter of food, occupies an unhealthy position in exporting a large proportion of her own agricultural produce, butter, bacon, meat, etc., and in importing for her own consumption inferior British and foreign qualities of some of the principal foodstuffs; but, so far as it is possible to ascertain it, the predominant opinion seems to be that an agricultural tariff would not be a good remedy for this weakness, if it be one, and that Ireland's future development, like that of Denmark, lies in the increasingly scientific organization of her agricultural industries, and in the better cultivation of her own soil. "Better farming, better business, better living," to use the admirable motto invented by Sir Horace Plunkett for the I.A.O.S. In the absence of an Irish Legislature, no special importance can be attached to individual expressions of opinion. Yet a measure of prophecy is permissible. The Irish Legislature will have to study the national interest, and it is possible to say with certainty at least this—that Ireland's interest lies in maintaining close and friendly trade relations with Great Britain. Unfortunately, we have no means of accurately ascertaining the amount of trade done by Ireland with Great Britain and with foreign and colonial countries respectively. Irish commerce takes, of course, three forms: (a) Direct trade with countries outside Great Britain; (b) indirect trade with these countries via Great Britain; (c) direct local trade with Great Britain. The statisticians of the Irish Department of Agriculture make only an imperfect attempt to distinguish between these classes, but their figures, so far as they go, prove beyond question that the great bulk of Irish external commerce belongs to Class (c)—local trade with Great Britain. The total value of Irish trade in 1909 is estimated at L125,675,847, of which L63,947,155 was for imports, L61,728,692 for exports. Probably 80 per cent., at least, of this trade was strictly local. Certainly Great Britain is the market for very nearly the whole of Irish agricultural produce, and for most of her exports of linen, ships, tobacco, liquor, etc. Any aggressive action likely to provoke a tariff war would be ruinous to Ireland, while it would hurt Great Britain far less in proportion. But, in fact, both countries would suffer, Great Britain from the loss of an easily accessible food-supply of extraordinary value, not only for economic, but for strategical reasons; Ireland from the loss of an excellent and indispensable customer.

On the other hand, whatever Ireland's trade policy may be, she certainly needs the power of fixing her own duties upon commodities like tea and sugar, which are of foreign origin, and are now merely transported to her through British ports. Taxation of this sort is a matter of the deepest concern to a country where agricultural wages average only eleven shillings a week, and which cannot reduce its exorbitant Old Age Pensions Bill without giving some compensatory relief to the classes concerned. Tobacco, of which in its manufactured forms Ireland is a considerable producer as well as a large consumer, belongs to the same category. Liquor is an important article of production in Ireland, as well as of consumption, and the Irish Legislature ought to be able to form and carry out its own liquor policy. Ireland is just as able and willing to promote temperance as Great Britain, and just as competent to reconcile a temperance policy with due regard to producing and distributing interests.

The Customs tariff is an Irish question, not an Ulster question. The interests of the Protestant farmers of North-East Ulster are identical with those of the rest of Ireland, and obviously it will be a matter of the profoundest importance for Ireland as a whole to safeguard the interests of the shipbuilding and linen industries in the North in whatever way may seem best. The Industrial Development Associations, which are affiliated in a national organization, and are far above petty sectarian jealousies, may be trusted to see that Ireland steers a safe financial course in her trade policy.

If there is little or no danger that a Home-Ruled Ireland will commit tariff follies of her own, she has unquestionably a right to escape from further entanglement in the tariff policy of Great Britain. What may be the issue of Great Britain's great fiscal controversy nobody can foretell. But as long as a protective tariff remains the cardinal point in the constructive policy of one of the British parties, there is a strong likelihood of such a tariff, which would be uniform for the whole United Kingdom, being carried into law. Free Traders, like myself, may deplore the possibility, but we cannot shut our eyes to it. That tariff, if and when it is framed, will, like the Free Trade tariff of the past, be framed without regard to Irish interests, which are predominantly agricultural, and with exclusive regard to British interests, which are mainly industrial. Whatever may have been the original ideal of the Conservative Protectionists, however highly they may once have valued the protection of agriculture, irresistible political forces have driven them in the direction of a tariff framed mainly to secure the adhesion of the great manufacturing towns. The electoral power of these towns, the growing resentment of the working classes in most parts of the world at the increasing cost of living, the fact that Great Britain cannot under any conceivable circumstances feed her own population, have been reflected in the definite abandonment by the party leaders of the proposed small duty against colonial imports, and in the admission by Mr. Bonar Law at Manchester, during the last General Election, that the proposed tariff would not benefit the farmers. Nor will the failure of the Reciprocity Agreement between Canada and the United States appreciably diminish the obstacles to food-taxes in the United Kingdom. Any practicable protective tariff, therefore, on the ground of its injustice to Ireland, would cause strong and legitimate resentment in that country, which is subjected to the most formidable competition from foreign and colonial foodstuffs, but whose great competition in manufactured goods is Great Britain herself. The one Irish industry which might favour it is the linen industry of the North. It would have no attraction for the shipbuilding industry, which in no part of the British Isles has anything to gain by Protection, as I believe all parties to the controversy agree. Other small manufacturing industries would complain that they gained nothing; while the agricultural population would complain that, as consumers, they would be damaged by higher prices for clothing and other manufactured articles, while as producers they were ignored.

The difficulty is only one further proof of the dissimilarity of economic conditions between Great Britain and Ireland, and of the artificial and unnatural character of the present fiscal union. Justice to Ireland demands its dissolution. The dangers are imaginary. Liberals, however firm their belief in Free Trade, should hold, with Lord Welby and his Home Rule colleagues on the Financial Relations Commission, that "even if Ireland initiates a protective policy, in this case, as in that of the Colonies, freedom is a greater good than Free Trade." As for the Protectionists, I have never seen an argument from that source, and I do not see how any consistent or plausible argument could possibly be framed, to show that a uniform tariff for the United Kingdom could be fair to Ireland. Professor Hewins, the leading Tariff Reform economist, virtually acknowledges the impossibility in his Introduction to Miss Murray's "Commercial Relations between England and Ireland." There were two sound lines of policy, he points out, which might have been adopted towards Ireland in the period prior to the Union: (1)To have placed her on a level of equality with the Colonies, applying the mercantile system indiscriminately and impartially to the Colonies and to her; or (2) to have aimed from the first at the financial and commercial unity of the British Isles. Neither of these courses was taken. Ireland, while kept financially and commercially separate, "was in a less favourable position than that of a Colony." With regard to the present, "Most of the difficulties of an economic character," says the Professor, "in the financial relations between England and Ireland, arise from the differences of economic structure and organization between the two countries. If Ireland were a highly organized, populous, manufacturing country, the present fiscal system would probably work out no worse than it does in the urban districts of Great Britain. But whatever be the virtues or demerits of that system, it was certainly not framed with any reference to the economic conditions which prevail in Ireland." We wait for the seemingly unavoidable political inference, but in vain. Professor Hewins is a Unionist. "A 'national' policy for Ireland ... is never likely to be possible." Well, that is plain speaking, and the more plainly these things are said the better. Let Unionists, if they will, tell Ireland frankly that she must eternally suffer for the Union, but let them not pretend, as they do pretend, that Ireland profits by the Union.

VII.

FEDERAL FINANCE.

Directly we leave the simple path of financial independence, and endeavour to construct schemes which on the one hand disguise the financial difficulties of Ireland, and on the other provide for Imperial control of Irish Customs and Excise, we involve ourselves in a tangle of difficulties. A brief examination of these schemes will throw into still stronger relief the merits of the simpler solution.

First of all, let us dispose finally of the Federal analogy. In Chapter X. I showed that the framework of Home Rule cannot be Federal, because the conditions of Federation do not exist in the United Kingdom. One of the invariable features of a Federation is the Federal control of Customs and Excise, but I pointed out that an equally invariable condition precedent to Federation was the willingness on the part of a self-supporting State, previously possessing complete financial independence, to abandon its individual control over this realm of taxation to a Federal Government of its own choosing,[141] and that no such condition existed in the case of Ireland. But some features of Federal finance undoubtedly may be made to show a superficial analogy to Anglo-Irish conditions, and may therefore have an attraction for those who shrink from giving Ireland financial independence. In the first place, it is possible to find Federal precedents for the payment out of the common purse of certain large items of Irish expenditure. There is no precedent for the payment of Police, but Old Age Pensions, for example, are paid in Australia by the Commonwealth, not by the States. The chief point of interest, however, is the mechanism of Federal finance. The Australian and Canadian Federations are the only two which suggest even a remote parallel. There the subordinate States are actually "subsidized" by regular annual payments out of Federal revenues, mainly derived from Customs and Excise, and in the case of Australia, as I observed at p. 245, the process at present entails an elaborate system of bookkeeping to distinguish between the "collected" and "true" revenue of the several States, similar in kind to the calculations now made by the Treasury for ascertaining the "collected" and "true" revenue derived from Ireland, Scotland, and England.[142]

In Australia this system of bookkeeping is discredited, although the recent attempt by a Commonwealth Referendum to abolish both it and the financial system of which it forms a part just failed. It is to be hoped that, whatever financial scheme is adopted for Ireland, this bad colonial precedent, together with the precedent of the Home Rule Bill of 1893, will not be made pretexts for perpetuating a system whose defects are so glaring, and which is a source of continual dissatisfaction to Ireland. If Irish Customs and Excise are to be outside Irish control, while their proceeds are to be credited to Ireland, let her whole collected revenue from those sources be credited to her, in spite of the excessive allocation that step would involve.

Apart from this point of similarity in mechanism, the Australian and Canadian subsidies to the States and Provinces respectively are of no value as models for a Home Rule Bill. Let us examine the case of Australia. There the Commonwealth, besides having exclusive control of Customs and Excise, has general powers of taxation concurrently with the States, though in practice Commonwealth taxation is almost entirely confined to Customs and Excise. All surplus Commonwealth revenue is, by the present law, returnable to the States, and the total annual amount so returned must not be less than three-fourths of the total proceeds of Customs and Excise; so large are these proceeds, and so small, relatively, the expenses of the Commonwealth Government.[143] Here at the outset is a feature which places Australian Federal Finance in an altogether different category to that of the United Kingdom, where only 47.6 per cent, of the revenue is from Customs and Excise. Nor are the distributions of surplus revenue to the States really "subsidies," even in the case of the poorest States, but repayments, on a method laid down in the Constitution, of that part of the State contribution to Federal services which the Federal Government does not want. Here the system of bookkeeping is of some service to us, because it reveals, approximately, at any rate, both the contribution and the actual repayment, which is based on a calculation of the amount saved to the State by the transference of certain departments to the Federal Government, set off by a per capita charge for new Federal expenditure, as, for example, for Old Age Pensions (see Table on p. 297).

The great bulk of the tax revenue shown comes, as I have said, from Customs and Excise, and it is unnecessary to set out the respective figures of revenue derived from these duties.[144] It will be seen, after deducting repayments from contributions, that even the poorest States make a substantial net contribution to Federal purposes. On the other hand, the relative proportion of revenue contributed by Western Australia and Tasmania is diminishing. In Western Australia it was 12-49 per cent. of the whole in 1905, 8-13 per cent. of the whole in 1909. In the same period, not only relatively, but actually, the gross contribution of Western Australia has diminished from L1,431,624 in 1905 to L1,166,126 in 1909, while the repayment to her has also diminished from L1,031,223 in 1905 to L627,933. Tasmania's repayment is also diminishing, though her gross contribution has increased. These circumstances suggest a slight resemblance to the growing disproportion between the resources of Ireland and Great Britain, but they do not assist us towards a solution of the Irish problem. Each Australian State, while contributing the whole of its Customs and Excise to the Federal Government, receives back at least half, and in some cases two-thirds,[146] and adds that sum to its own independent revenue for the maintenance of the State Government. The sum refunded amounts on the average to a little below a quarter of the total State revenue—to be accurate, 23.01 per cent. Of the remaining 76.99 per cent., only 10 per cent, on the average is derived from direct taxation; 10.10 per cent from public lands, 4.15 per cent, from miscellaneous services, and no less than 52.55 per cent, from Public Works—railways, tramways, harbours, etc.

CONTRIBUTIONS OF, AND REPAYMENTS TO, THE STATES OF THE AUSTRALIAN COMMONWEALTH, 1908-09.[145]

—————————————————————————————- Contributions to Repayments from Revenue. Commonwealth. —————————————————————————————- L L New South Wales 5,621,958 3,326,276 Victoria 3,750,161 1,987,435 Queensland 1,989,540 1,027,047 South Australia 1,307,621 716,957 Western Australia 1,166,126 627,938 Tasmania 515,387 244,747 ———————————————- Total Common- Total wealth Revenue. Repayments. ———————————————— 14,350,793 7,930,395 —————————————————————————————-

Here are the details of revenue for 1908-1909 in the richest and the poorest State, respectively:

Particulars. New South Wales. Tasmania. L L Refunded by the Commonwealth 3,377,213 232,342 Taxation (direct) 907,249 250,835 Public Works and Services 7,309,062 329,192 Land 1,778,002 96,519 Miscellaneous 274,600 25,017

Totals 13,646,126 934,405

Now, Ireland raises no public revenues at all from Public Works, only L24,500 out of a total of ten millions from public lands; while 29.25 per cent, of her "true" tax revenue comes from direct taxation and 70.75 per cent, from Customs and Excise. To take away even a third of her receipts from Customs and Excise would be to leave her with a deficit of three millions and a half, which would have to be made up by additions to a direct taxation, which is already vastly higher than in any part of Australia. She needs every penny of her revenue from whatever source derived, and there is no possibility of extracting from her a contribution to Imperial services, unless it be an illusory contribution based on faked figures.

The real moral to be derived from the Australian comparison is that both Australia and Ireland are countries where accumulated wealth is comparatively small, and where the importance of indirect taxation is very great. All the more reason for giving Ireland control of her own indirect taxation. Canada, and, indeed, all the self-governing Colonies, suggest the same moral. In Canada the Federal or Dominion Parliament has an unlimited power of taxation, the Provinces being vested only with the concurrent right of direct taxation within their respective borders (B.N. America Act, Clauses 91 and 92). In practice, nearly the whole Federal tax revenue is derived from Customs and Excise. We have no materials for a comparison of gross and net provincial contributions, because no records are compiled. Under an Act of 1907, revising the former arrangements, two small subsidies, forming a fixed charge on the gross Federal revenue, and bearing no specific proportion to the income from Customs and Excise, are given to each Province.

1. A subsidy (from L20,000 to L40,000) based on the total provincial population.

2. A payment of 80 cents per head of the provincial population.

Both together are very small by comparison with the Australian payments. Neither is really a subsidy, though it is given that name, but the return of a surplus indirectly contributed. It is, indeed, conceivable that a new and poor Province might actually contribute less than she received back. One Province, British Columbia, having long complained that she contributed far more than her share, and received back too little, obtained an exceptional grant of L20,000 under the Act of 1907.[147] The sums raised independently in each Province for the support of the provincial administration are, as in Australia, derived to a very slight extent from direct taxation, and to a very large extent from public property; not, as in Australia, from railways, tramways, etc., but mainly from vast tracts of public land. In this respect the Provinces resemble the Dominion, which derives a large revenue from the same source.

In three vital points, then, Anglo-Irish finance differs from that of the Colonial Federations. Ireland's whole net income comes from taxes; she needs it all; and her economic conditions are totally different from those of Great Britain. So far from borrowing anything from Federal finance, we should deduce from it the moral of financial independence for Ireland. With all the powerful centripetal forces, moral and material, which originally united, and now hold together, the federated States of Australia and Canada, there is continual controversy, and sometimes considerable friction, over finance, generally in connection with the position of the poorer Provinces or States. Some problems are still unsolved. Good authorities, among them Sir Arthur Bourinot, think that the Canadian subsidies are unsound. Australia is dissatisfied with her system. The American States, while giving up Customs and Excise, are self-supporting entities; but that system has its drawback, in Federal extravagance. We must remember, too, that even if these examples were of any use to us, the weak States or Provinces in a Federation have a greater control over Federal financial policy than Ireland could have under any scheme which reserved Customs and Excise to the Imperial Parliament; because the Federal principle, partially infringed only in the case of Canada, is to give them disproportionately high representation in the Upper Federal chamber, which can reject money Bills.[148]

On all counts, Ireland's position is that of a country which imperatively needs fiscal isolation similar to that enjoyed by States prior to Federation, before it can dream of embarking on the perilous sea of quasi-Federal finance. Trouble enough comes from the present joint system. We should make a clean sweep of it, permit Ireland, with a minimum of temporary assistance, to find her own financial equilibrium, and so lay the foundation, perhaps, for a genuine Federation in the future.

VIII.

ALTERNATIVE SCHEMES OF HOME RULE FINANCE[149]

Historically, these fall into two classes; though, as I shall show, they are for all intents and purposes merged in one to-day.

The two classes are—(1) The Gladstonian; (2) the "Contract."

1. Mr. Gladstone's Schemes.—It is unnecessary to examine these in close detail, though, if the reader cares to do so, he will find details set forth in the Appendix. Four outstanding features were common to the schemes both of 1886 and 1893: (a) Permanent Imperial control over the imposition of Customs and Excise; (b) Irish control over all other taxation; (c) an annual Irish contribution to Imperial expenditure; (d) Imperial payment of part cost of the Irish Police.

With regard to (a), the most important point of difference in the two Bills was that under the first Ireland was credited with her whole "collected" revenue from Customs and Excise, under the second (as amended) with only her "true" revenue, which was less than the former by L1,700,000. Another point in which the two Bills differed was the permission to Ireland, under the Bill of 1893, after six years, to collect her own Excise. Both imposition and collection were wholly reserved under the Bill of 1886. I have already given grounds for the impolicy of retaining control over Customs and Excise. Let me only ask the reader, in conclusion, to figure the situation. How could Ireland frame a financial policy? Three-quarters of the revenue, as at present levied, of a country profoundly dissimilar economically from Great Britain, and in need of drastic reforms of expenditure and marked changes in taxation, would be permanently outside the reach of an Irish Chancellor of the Exchequer, and, in spite of the representation at Westminster which Imperial control would entail, would in the long-run fluctuate according to British needs and notions. In the long-run, I repeat; but incidentally there would be sharp and damaging conflicts. Occasions might occur like that of 1909, when the majority of Irishmen, rightly or wrongly, resented the form of new taxation, and would have secured the rejection of the Budget had not that step been hurtful to the prospects of Home Rule. It will be useless to blame either Ireland or Great Britain. Every country is bound to study its own circumstances. A similar crisis would have imperilled even the strongest Federation. We are not in the least concerned at the moment with the goodness or badness of that famous Budget. We are concerned with the effect on the relations of the two countries, and with the indefeasible right of Ireland and Great Britain to do what they consider best for their own interests.

With regard to (b), the Bill of 1893 differed from that of 1886 in the provision of a suspensory period of six years, during which all existing taxation in Ireland was to be under Imperial control, though Ireland could impose additional taxes of her own. After six years—and, under the Bill of 1886, from the outset—Ireland was to have control over all taxation other than Customs and Excise. Where is the wisdom in selecting direct taxation as peculiarly suitable to Irish control? It is already higher in Ireland than in any country economically situated as Ireland is. Yet Ireland's power to reduce it will be very small and very difficult to use, if she is rigidly excluded from changes in the indirect taxation which presses mainly on the poor. Would she naturally be inclined to increase direct taxation? Land Value Duties produce next to nothing in Ireland, and their extension would be unpopular. The existing rates of Income-Tax and Estate Duties cannot be raised, though their incidence might be extended to cover poorer elements of the population, as, for example, the small farmers. That is a kind of measure which the farmers would, if necessary, willingly agree to, in order to balance the accounts of a financially independent Ireland, but it is not the kind of measure they would care about when their national finance was dictated by Great Britain. If one cared to make a dialectical point, one could add that a common argument against Home Rule is a fear of oppressive taxation of the rich or oppressive taxation of North-East Ulster, at the hands of an Irish Parliament, through high direct imposts. The fear is one of those which scarcely need serious discussion. If Irish statesmen were as black as their most industrious traducers paint them, they could not by any ingenuity invent any new direct tax which would not hit all the provinces equally, saving perhaps a tax on pasture ranches, which would hit North-East Ulster least; while super-taxes on the exceptionally rich, if they were worth the trouble of collecting, would drive wealth out of a poor country at the very moment when it was most urgently necessary to gain the confidence of investors and the few wealthy residents.

With regard to (c), Mr. Gladstone's various devices for obtaining from Ireland a contribution to Imperial services possess now only a melancholy and academical interest, because, without an elaborate manipulation of the accounts, so as to disguise their true significance, no such contribution can possibly be obtained. In 1886 Mr. Gladstone provided for an annual payment from Ireland, fixed in amount for thirty years; in 1893 for the contribution of a quota—namely, one-third—of her "true" annual revenue from Imperial taxes, to run for six years, and then to be revised. His calculations were conditioned to some extent by (d), the part payment from the Imperial purse of the cost of Irish Police, coupled, of course, with continued Imperial control of that Police, pending its replacement by a new civil force. It is easy enough in ways like this to show a balance in Ireland's favour, and, at the same time, to cripple the responsibility of the Irish Legislature by transferring selected services from the Irish to the Imperial side of the account. We can extend the process to Old Age Pensions, the Land Commission, and what not. As I have repeatedly urged, this course is radically unsound. As for the Police, there can be no responsible government without control of the agents of law and order.

By crediting Ireland with her whole "collected" revenue, we can give her at once a balance of half a million. By freeing her from the payment of Old Age Pensions, we can make the balance three millions. With the elimination of the Land Commission and the Police, we can make it five millions. Then we can postulate an imaginary taxable capacity, an ideal contribution to Imperial services, and a hypothetical share of the National Debt, and so arrive at a Budget which will look well on paper, but which will deceive nobody, and be open to crushing criticism.

2. "Contract" Finance.—It will be seen that both Mr. Gladstone's schemes set up in Ireland—though under the Bill of 1893 only after six years—a dual system of taxation, Imperial and Irish, after the Federal model. The revenue, "collected" or "true," derived from Imperial taxes levied in Ireland, was to be paid, after the deduction of sums due to the Imperial Government on various accounts, into the Irish Exchequer. And into the same Exchequer went the proceeds of taxes levied by Ireland herself. The distinguishing feature of "Contract" finance is that it maintains the fiscal unity of the British Isles. All taxation in Ireland would be permanently levied and collected, as before, by the Imperial Parliament, Ireland being allowed only the barren and illusory privilege of levying new additional taxes of her own. Out of the Imperial Exchequer a lump sum of fixed amount, or a sum equivalent to the revenue collected in Ireland, would be handed over to Ireland, by contract, as it were, for the maintenance of the Administration.

The simplicity of this scheme seems to me to be its only merit. It disposes of all complicated bookkeeping, all heart-burnings over "true" and "collected" revenue, and all controversies, for a long time at any rate, over an Irish contribution to the Empire; while it involves and immensely facilitates a subsidy based on the reservation of selected Irish services for Imperial management and payment. On the other hand, it is not Home Rule. It annihilates the responsibility of Ireland for her own fortunes, and is, indeed, altogether incompatible with what we know as responsible government. Its germ appeared in the Irish Council Bill of 1907—a Bill which did not pretend to set up anything approaching responsible government, and to which the scheme was therefore in a sense appropriate, though it must, I think, have produced mischievous results if it had been carried into law.[150]

I wish to speak with the utmost respect of Lord MacDonnell and the other patriotic Irishmen who have advocated this kind of financial solution. There was a time when it might have been good policy for Ireland to obtain any—even the smallest—financial powers of her own as a lever, though a very bad lever, for the attainment of more. But we ought now to make a sound and final settlement, and I do earnestly urge upon all those who have Irish interests at heart to reject schemes which merely evade, if they do not actually aggravate, some of the pressing difficulties of the Irish problem of to-day. The fact that Contract finance works well in India is prima facie a reason why it should not work well in Ireland. It does not exist, and it could not be made to show good results, in any community of white men. If anyone is disposed to trace a faint analogy—which in any case would be a false analogy—with the lesser of the two small subsidies given by the Dominion of Canada in aid of the Provincial administrations,[151] let him imagine what the moral and practical consequences would be if, instead of constituting a small fraction of the provincial income, this subsidy were increased to a lump sum calculated by the Dominion Government as correct and sufficient for the whole internal government of the Province. And the pernicious results in a Canadian Province would be trivial beside the pernicious results in Ireland, where the whole system of expenditure and revenue needs to be recast; where large economies are needed, together with additional outlay on education; and where above all, the sense of national responsibility, deliberately stifled for centuries, needs to be evoked. Nothing could be more cruel to Ireland than to give her a fictitious financial freedom, and then to complain that she did not use it well. No nation could use freedom well under the Contract system of finance, whether based on a fixed grant or on revenue derived from Ireland. It is not in human nature to reduce expenditure unless the reduction is reflected in reduced taxation. Every official threatened with retrenchment, even in the services under Irish control and, a fortiori, in the services outside Irish control, would have a grievance in which the public would sympathize, while resentment at an unequal fiscal union would be unabated. Irish statesmen, like any other men in the same position, would be exposed unfairly to the continual temptation of preserving institutions and payments as they were, of making changes only of personnel, and of annually appealing to Great Britain for more money for new expenditure. These appeals could not possibly be refused. If Great Britain chooses to place Ireland in a position of financial dependence, she must take the consequences and pay the bill, as in the past, even if the bill exceeds the revenue derived from Ireland. But, indeed, under Contract finance, attempts to make Irish expenditure conform to Irish revenue would necessarily be abandoned.

Bad as the results must be, we are inexorably driven to some form of Contract finance directly we relinquish its anti-type, financial independence. There is very little practical difference between the Gladstonian and later plans. We may be drawn along the downward path either by considerations of revenue, or considerations of expenditure, or by both combined. To retain Imperial control of Customs and Excise, while crediting the Irish proceeds to Ireland, is in itself equivalent to making three-quarters of Irish tax revenue take the form of an annual money grant fixed by Great Britain. If Englishmen also want to retain control over Irish Police, and Irishmen are short-sighted enough to desire Imperial control, as a corollary of Imperial payment, of Old Age Pensions, National Insurance, or Land Purchase, there at once are four millions, or more than a third of present Irish expenditure, withheld from Irish authority. To cover the remaining seven millions by a Contract allowance, instead of going through the pretence of allotting items of revenue and of deducting a contribution to Imperial services, is a step which is only too likely to commend itself to harassed statesmen. But it would not be Home Rule.

This is not a matter of speculation, but of experience. As long ago as 1818, in the case of Canada, we discarded as vicious the old doctrine that a dependency ought not to be allowed to provide for the whole cost of government out of its own taxes, for fear that its Legislature would control policy. If we are going to remove features which make Ireland resemble a Crown Colony now, do not let us import others which recall the ancient fallacies of a century ago.

There remains to be considered the important question of loans, and to that I shall devote a separate chapter.

FOOTNOTES:

[136] Hansard, July 21 and 25, 1893.

[137] Both Bills provided for part payment of the cost of Irish Police from Imperial funds.

[138] Return No. 220.

[139] See p. 234.

[140] See p. 234.

[141] I need scarcely point out that the newly-created Provinces of the Dominion of Canada are exceptions to this rule. But there is no analogy with Ireland. Such Provinces are carved out of newly settled public territory and given local government.

[142] See pp. 244-245, and 277-278.

[143] Until two years ago even the remaining one-fourth, added to other small items of Commonwealth revenue, was too large for the expenditure, and a part of it was returned annually to the States.

[144] The other principal source of revenue is from Posts, but that is almost exactly balanced by expenditure, so that it barely affects the amount of the repayment to the States.

[145] These figures are taken from the Official Year-Book of the Commonwealth of Australia, No. 3, 1901-1909.

[146] It must be understood that the law requiring three-quarters of the Commonwealth revenue from Customs and Excise to be returned to the States does not imply that each State should have three-quarters of its contribution returned, but that the total amount returned should be at least three-quarters.

[147] See p. 244.

[148] Except perhaps in the case of Canada.

[149] The Author is indebted, here and elsewhere, to papers by Messrs. C.R. Buxton, P. MacDermot, and R.C. Phillimore, in "Home Rule Problems."

[150] By Clause 5 the following sums were allocated to the Irish Council for five years: (1) L3,750,000 for the maintenance of eight Government Departments; (2) L300,000 for public works; (3) L114,000 supplemental.

[151] See p. 299. Under the Act of 1867, No. 2 was earmarked for this purpose.



CHAPTER XIV

LAND PURCHASE FINANCE[152]

I. LAND PURCHASE LOANS.

The data of the land problem are as follows:

The superficial area of Ireland is 20,350,725 acres, and in 1909 it was utilized as follows:[153]

Acres. Percentage.

Area under tillage, hay and fruit 4,582,697 22.5 Area under pasture 9,997,445 61.6 Grazed mountain land 2,548,569 Woods, etc. 301,444 1.5

Bog, barren mountain, water, roads, townlands, etc. 2,925,570 14.4

Total 20,350,725 100.0

The agricultural area, calculated by the exclusion of the last item in the above column, works out at 17,425,155 acres, but since bog forms part of a large number of farms, we may, for the purposes of Land Purchase, place the agricultural area of Ireland at 18,739,644 acres, the figure given in the Census of 1901, and its annual value for rating purposes, as given in the same census, at L10,061,667.

This area is divided into 603,827 agricultural holdings, which are in the hands of 554,060 occupiers, and vary in size from vast pasture ranches to the tiny plots of miserable rock-sown soil, which abound in the congested districts of the west.

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