FINANCE.
TO THE EDITOR OF THE SPECTATOR.
Camberwell, 361 January 1849.
SIR—It is at all times an easy enough matter to pick holes in a person's gar- ment, but in Mr. Cobden's case it would appear to have been more facile of ac- complishment than ordinarily; for truly it may be said that the "National Bud- get' is already almost in tatters. Nevertheless, it yet remains in a condition sufficiently showy to attract and dupe a large portion of the public, and to create thereby an agitation at once powerful and mischievous, unless, as you suggest, some better scheme be projected, or in the absence of that, the people themselves become so informed by frequent discussion as to be fully cognizant of the empiricism of the one before them. At present the people in regard to questions of political eco- nomy are in general profoundly ignorant, and consequently they often show an "ig- norant impatience of taxation": in order, therefore, to the acquirement of a better understanding of the subject, and for the purpose of promoting investigation, I will, with your permission, state as shortly as possible, what in my opinion appears mamly to be wanting, in not only Mr. Cobden's budget, but in most of the plans aft forth for effecting "financial reform? It is the non-recognition of the prin- t:vies of political economy as they severally relate to each other. We find the questions of free trade and protection, revenue and taxation—direct and indirect—jumbled together,_in &meaner so complex and intricate, that it is
next to impossible to follow our finance reformers with anything approaching either to satisfaction or instruction.
But how does the subject really stand? Until the period of Sir Robert Peel's Tariff reforms and the Income-tax, our revenue was obtained almost entirely from taxation indirectly levied—that is from the Customs and Excise; and this system was so devised that it served a twofold purpose: first, it provided the Government with means necessary for the exigencies of the state; and secondly, it offered am- ple protection to agriculture and commerce against foreign rivalry and competi- tion. This system, however, was in due time thought to operate injuriously to the interests and prosperity of the country, and thereupon the giant agitation Free Trade uprose to overturn it; and so .far succeeded as not only to destroy that which was faulty, but also a part of what was good: not only were the pro- tective duties abolished, but a considerable portion also of those for revenue, so that a direct tax (the Income-tax) had to be levied for meeting the deficiency. The Free-traders, in that instance, blundered in their undiscriminating attack on the revenue: the consequence has been to derange the finances, and to force on the Government a deficiency of income to meet current demands. As political economists, they should have distinguished between duties for protection and those for revenue; and, having ascertained the relative amount that each produced for their several purposes, and finding that the amount for revenue was an large AS mast still interfere with our commercial transactions with foreigners, they were bound in honesty and policy, in calling on the country to demand of the Legis- lature so large a remission of indirect taxation for revenue, at the same time to have proclaimed to the public that their demand could only be granted by a com- pensating tax being substituted. Having failed in this their duty, the result has been Sir Robert Peel's patchwork of fiscal and finance reform, and the present confusion of the question.
The Financial Reformers appear bent on pursuing a similar course in the present day: they look only at one side of the subject, and consequently promise more than they will ever be able to perform. Financial reform is good, just as free trade is good; but it is not so if it can be had only by diminishing the efficiency of the departments of the public service. Let us by all means have due retrenchment and economy, aud let us retain free trade; but at the same time let us provide a revenue sufficient for all the exigencies of the state. To effect this, I would
sug- gest—first, that the doctrine of free trade should be accepted without qualifi cation for the regulation of finance and fiscal legislation; that if, in harming the Customs and Excise duties for revenue only, they be found materially to interfere with the real interests of the country, direct taxation be substituted in their place; secondly, that the revenue should equal the expenditure whatever that may be; and thirdly, by good and sagacious legislation at home and in our colonies, that that (the expenditure) should be reduced to a minimum point.
But quite sure am I, Sir, however much better than the present one our sys- tem of finance might and ought to be, that the whole question is now exhibited to the public in a form calculated to delude and mislead ; for its importance is ex- aggerated, and it cannot from its nature produce all the advantages that are pro- mised. The most that can reasonably be expected from a " reform " is a better, because more effective, administration of finance affairs: the money saving at the best can only be one or two millions, more or less; and I imagine that no per- son will seriously pretend (regarding the question simply one of money) that that sum, either saved or lost, can have any material effect for better or for worse upon any one class of her Majesty's subjects. There was one more question connected with the foregoing that I should have desired to have noticed—whether in fact taxation be the evil that it is almost universally thought to be. But my letter has already exceeded its limits. I will reserve it for another communication; unless, indeed, it should be deemed worthy of your own able pen, which would bestow on it so much greater knowledge and accomplishment than I can dare to claim.
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