MR. GOSCHEN'S FIRST BUDGET.
IT was an interesting spectacle on Thursday to see Mr. Goschen take to finance like a fish to the water. He revelled in the subject. In it he was like a South-Sea islander in a warm sea,—only distressed at the prospect of having to come out at all. He discussed many great subjects with a force and animation that were positively inspiring. He grieved over his inability to enlarge upon other departments of finance, as a poet would regret the want of time to repeat a favourite ode. He anticipated launching into great investiga- tions on which he had as yet formed no opinion, as Alexander anticipated his Indian conquests. Mr. Goschen seemed, indeed, to have passed into a new world since he had found himself at the head of the British Treasury. The prospect of dealing with local loans is as fascinating to him as was Balboa's first view of the Pacific "lonely upon a peak in Darien." The hope of reforming the coinage is dearer to his vision than a glimpse of any earthly paradise ; the organisation of the Public Debt is a luxury of luxuries ; and the problem as to the proportionate incidence of taxation on different classes is to him a vista of exceeding joy. In discussing the questions on which he actually entered, Mr. Goschen displayed perfect mastery. First he showed that the extraordinary elasticity of revenue which reached its maximum - in 1874, had virtually disappeared altogether. It is not only that the alcoholic revenue is declining, but that no . branch of revenue exhibits any symptom of rising in a way_to compensate, or MOTO than compensate, this decline. From 1877 to 1886, the consumption of wine has fallen off 30 per cent. The consumption of coffee is leas than it was twenty years ago. The consumption of tea, on the other hand, has nearly doubled in the thirty years since 1857; bat though the consumption has doubled, the tea revenue has not doubled. Indian tea is so much stronger, and so much larger a proportion of the tea now imported is Indian than it was formerly, that, reckoned in relation to the increase of population, the tea revenue shows signs of falling off. The good revenue returns on the Stamp-duties are partly due to the falling-in of some heavy legacies, and partly to the better collection of the revenue, and that also accounts in some measure for the increased produce of the Income-tax. The yield of every penny in the Income-tax has fallen off heavily under Schedules A and B, has increased considerably on the rental of houses ; and in relation to the profits of business, it is increasing now extremely slowly, instead of "by leaps and bounds." Whereas between 1869 and 1876 (only seven years), the total amount of the tax increased by £80,000,000; in the gen years from 1876 to 1886 it has only increased by .25,000,000, one-sixteenth of the increase in the previous seven years. In the City of London, where the gross assessment under Schedule D is between E16,000,000 and £17,000,000, the gross assessment on individual profits from trades and professions fell from £7,050,000 in 1876, to £6,150,000 in 1886; but meanwhile, the profit of the public Companies increased from £7,200,000 in 1876, to £10,700,000 in 1886, from which Mr. Goschen argues that while the richer classes in the more profit- able professions are suffering, the well-to-do middleman is prospering. The same resulted from the class of incomes which are improving. In the City, incomes returned at under £1,000 improved about 7 per cent., while incomes returned between £1,000 and £5,000 fell off 10 per cent., and incomes over £5,000 fell off 21 per cent. From all this, Mr. Goschen draws the very certain inference that while there is a considerable improvement in the area of prosperity as regards the well-to-do, the wealthy are suffering very much. Again, he infers, apparently, from the failure of the increased Tobacco-duty to draw, and from the very slow progress of general consumption of dutiable articles, that the working class are not at present prosperous, and are perhaps, on the whole, suffering.
Well, the drift of all these facts is clear enough. There may be a fair prospect of a revival of trade,—Mr. Goschen thinks there is, for trade is certainly better in various directions than during the last few years,—but there is no prospect of any rapid growth in the elasticity of the revenue ; the burden of the taxation on our resources is very serious, and the question arises whether an effort should not be made to diminish that burden ; and if so, in what direction it ought to be made, whether by diminishing expenditure, which Mr. Goschen would prefer, if only Parliament were not the real cause of the growth of expenditure, or by relaxing to some extent Sir Stafford Northcote's heroic effort, commenced at a time of extraordinary prosperity, to repay debt. No figures produced by Mr. Goschen were more striking than those which he gave to show the pressure exerted by Parliament to increase expenditure, even in directions not affecting the two great services. "In 1868-69," says Mr. Goschen, "the Estimates for the Civil Service were £9,173,000. Now they are £17,931,000. You must deduct some items owing to change of account; but a genuine increase remains of £8,079,000, or 88 per cent. The first impression of the Committee may be,—what extravagance has been committed by successive Governments in that respect ? But I would call their most particular attention to the origin of that increase, and to the parties who are really responsible for it. It is not due to the fact that the business of the State has been conducted in a more costly manner, but that new functions are constantly being forced upon the State, and that new services are being demanded of the State by the voice of Parliament. Parliament, acting under the pressure of public opinion, has been constantly imposing new duties upon the State, and compelling it to bear, in whole or in part, the burden of work hitherto falling on local authorities or private individuals, or that has not been performed at all. It is for Parliament in the future to decide to what extent it will continue that policy, but it is my duty as the present guardian of the public purse to call attention to the result of that legislation, so far as expenditure is concerned, and to show that this legislation,—in many respects beneficial legislation,— has added 88 per cent, during the course of years to which I have referred to the cost of the Civil Service. It is a re- markable fact that out of the increase of £8,079,000, no less a sum than £7,605,000 is due to the direct action of Parliament, and only £474,000 is an administrative increase. If a deduction is made for an increase of £629,000 on the coat of Irish Police, there is an absolute saving during the period of more than £150,000 of what may be called the cost proper of the public departments. It is not due to the administrative services, and the saddle should be put upon the right horse. It is no use denouncing the costly system of government from year to year, and in department after department, when fresh duties are constantly being thrust upon the State, frequently in opposi- tion to the views of the existing Government of the day. Of the increase 1 have mentioned, there was due to new services imposed upon the Government by Parliament, £5,057,000, and to the automatic increase in services previously imposed, £2,548,000." Now, everybody knows that to look in this direction for any drastic remedy is not hopeful. The causes which have added so much to the cost of education and of inspection are causes deep in the convictions of the people, will hardly be kept in check, and will certainly not admit of serious compression. So that it comes to this,—With an inelastic revenue and a steady pressure on Parliament to use the public purse still more liberally, ought we to compel the large Spending Departments, the Army and Navy, to contract their expenditure by mere force of the extreme unpopularity of heavy taxation ; or ought we to lighten the burden of taxation partly at the cost of pos- terity, by consenting to diminish the sum allotted (under circumstances of the highest national prosperity) to the repay- ment of debt ?
That was the problem before Mr. Goschen, and the answer he arrived at was that under the verydifferent circumstances of 1887 and 1874, when Sir Stafford Northeote first made the amount of the Sinking Fund a fixed quantity, it would be better to lighten the burden then placed upon us, so as to stimulate to some extent the failing elasticity of the revenue, than to insist on paying off debt at the same rats, in order that the Army and Navy Departments might be driven to large reductions by the immense unpopularity of the whole burden. We have always striven to quicken the public sense of obligation as to the repayment of debt during time of peace, nor do we in the least recede from that position. But when the question becomes a quantitative one, and an alternative between squeezing the Military and Naval Estimates simply for the sake of compelling reductions, and partially diminishing the rate at which we are repaying debt in nnprosperous though peaceful times, as compared with the rate at which we were willing to repay it in times both peaceful and prosperous, we must say that we agree with Mr. Goschen in declaring for a partial relaxation of these efforts. Mr. Goschen still proposes to pay off debt at the rate of £5,000,000 a year ; and all that he contends for is that it is better rather to relax the effort to repay it, than either to squeeze the military and naval sponges, only because they have to be squeezed, or to leave the pro- ducing classes under a leaden pressure such as that which has for some years back been oppressing them. If we adopt the former policy, to which Sir W. Harcourt and Lord Randolph Churchill incline,—the policy of declaring that the Army and Navy must be cut down to suit the exigencies of the taxpayer, what we really do is this,—we ensure ill-advised reductions which are quite certain to lead to further panic. Such was the Navy panic of 1884. And, in truth, it is not reasonable that the naval and military policy of this country should be pro- vided for only out of the Chancellor of the Exchequer's leavings, after he has provided for everything else. There must be some regard paid to the Continental navies and armies, and especially to the Continental navies and armies of those nations with which we are liable to have differences. We are no alarmists, and have never stimulated the naval panics of the day, but rather shown their unwiedom. Still, we believe that those panics have largely arisen from the habit of knocking down the Army and Navy Estimates inconsiderately whenever the House of Commons fell into a cold fit, only in order to add extravagantly to them again directly the House of Commons passed into a hot fit. What is desirable is that our policy as regards the Army and Navy should be carefully considered in relation to our European and Asiatic needs, and should not be recklessly revolutionised, either to meet a sudden disgust of taxation, or to meet a sudden sense of panic. Mr. Goschen is just the man both to get efficiency out of these two services, and to get efficiency out of them at the least possible cost. He does not depreciate the importance of England's position in the world, and he means to maintain it. Therefore he will be trusted by the Departments. He does not choose to pay for what he does not obtain, and there-
fore he will be obeyed when he insists on the services being economically conducted. We regret profoundly the necessity for some relaxation of our efforts to repay debt. But we believe that, on the whole, Mr. Goschen has decided for the best, in concluding that in the present state of our revenue we shall be more likely to cancel steadily an appreciable amount of debt if we do not overdo the effort ; and that we shall be more likely to get an economical Army and Navy if we criticise the military and naval expenditure minutely from the point of view of those services themselves, than we shall if we adopt the bad principle of cutting a coat which ought to cover us, so as to suit an amount of cloth quite inadequate to the purpose.
We cannot leave the subject of Mr. Goschen's first Budget without expressing our deep satisfaction at his determination to put the local loans on a new basis, with a separate Budget of their own ; to write off what has been lost,—no less than • eleven millions,—seven millions of which, lost in the Irish famine, he does not propose to restore by any sinking fund ; and to provide a sinking fund for replacing the other four millions lost by negligence. This is one of the great reforms which has been long needed, and is, as we hope, only one of the many which Mr. Goschen's financial genius is destined to. achieve.
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