THE ASSAULT ON THE BUDGET.
WE are far from denying that Mr. Gladstone's mere authority as against the Budget, would have carried a greater weight even with trained politicians,—most probably with the present writer,—before the startling revolution in his Irish policy than it does now. No one who knows himself ought to deny that a conviction that a great statesman has erred on one matter of the first public importance, does shake materially the mere authority of that statesman even in rela- tion to topics not necessarily,—indeed, only accidentally,—con- nected with it. We know well how salutary, bow beneficent for the country, Mr. Gladstone's financial career has been. Were it not obvious that to prove Mr. Goschen wrong on the critical point in his Budget, would immensely shake the confidence of the country in the Unionist Government, we should still attach the greatest possible weight to the mere fact that the statesman who has conferred on the country all these benefits, evidently and seriously disapproves Mr. Goschen's most important proposal. But absolutely as we believe in Mr. Gladstone's disinterested- ness when he entreats Mr. Goschen to take back that proposal, we do not think it possible that his judgment has not been involuntarily and unconsciously biassed by his dislike to the general policy of the present Government, and by the political instinct, as distinguished from anything like a conscious or deliberate wish, which impels him to discredit it. And we are quite sure that this is the chief, if not the only secret of a good many of the bitterest assailants of Mr. Goschen. We are quite aware that it is just as difficult for us to defend Mr. Goschen's Budget without being influenced by a correspond-
ing bias on the other side. Indeed, we have very little doubt that more or less we are so influenced. Still, with the full con- sciousness that so it must be, we venture to assert that, after making as much allowance as we think we ought to make for this bias, and giving the fullest weight to all Mr. Glad- stone's very weighty arguments, we do sincerely think that the grounds on which Mr. Goschen advocates a diminution of the Sinking Fund at the present moment, are much stronger than those on which Mr. Gladstone deprecates that diminution ; and we maintain that this view is more or less confirmed by some of Mr. Gladstone's own statements. We will try to put the case as simply as we can before our readers.
Mr. Gladstone's strongest point may be said to be that which he put forward in the following passage :—" We are now invited to say that we cannot bear,—we in this country, with an estimated income of something like £1,000,000,000 a year,—to apply to dealing with our National Debt in the form of provision for annual interest and effectual reduction, a sum nearly so large as NM applied to that same purpose in the year 1860, when the wealth of the country was not, I think, more than two-thirds of what it now is. An income of £900,000,000 or £1,000,000,000 a year refuses to apply to dealing 'with the Debt, and relieving and providing for the future as a prudent man ought to do, more than, I think, between £25,000,000 and £26,000,000, whereas in the year 1860, that provision, unless I am much mistaken, came to £28,000,000. Is that a proposal worthy of support? I say worthy,' but I do not want to use a word that can be used as a term of censure ; is it con- genial to Conservative tradition I" Undoubtedly that looks a very strong case. But let us examine carefully into that case. In the first place, we need not remind our readers that while in the year 1860 the total revenue received was very little over £70,000,000, the present revenue received is over £90,000,000. It is true that the Income-tax was then, for the incomes over £150, as high as 10d., and for lower incomes 7d. ; and that the total amount received through that heavy Income-tax in those days was not much above £8,000,000, whereas it is now nearly double that sum, at 7d., though there is a complete remission of the tax to all whose incomes are under £150 a year, and a partial remission to all whose in- comes are under £400 a year. This fact tells immensely, no doubt, in favour of the increase of national wealth on which Mr. Gladstone insists. At the same time, it is only fair to consider that the high Income-tax of 1860 and 1861 was put on for the special purpose of securing an immense stimulus to the trade of this country in the shape of the French Com- mercial Treaty ; that we were asked to buy a very great stimulus to profitable trade by that very exceptional burden. Now it is just the contrary. The bulb of our trade increases slowly, but its margin of profit decreases, and has decreased for some years back, greatly owing to the heavy lames in agri- culture, and partly, perhaps, to the appreciation of gold. And it is the margin of profit, the excess of returns over expendi- ture, not the absolute amount of wealth, which makes taxation easy to bear. A very rich country making very small profits finds taxation much more burdensome than a much poorer country making very large profits. Again, while in the years 1860 and 1861 the Income-tax was very inadequately collected, and especially inadequately collected from the poorer Income-tax payers, it is now very much more closely collected; and Mr. Goschen has proved to demonstration that the poorer Income-tax payers are really paying a far larger proportion of the Income-tax revenue than they ever paid before. In fact, while the collection of Income-tax, and, indeed, of all other taxes, from the richer classes, is decreasing steadily, the collec- tion of Income-tax from the poorer class of tolerably well-to-do persons is making up, and a little more than making up, for that
decrease in the Income-tax of the rich. It really comes to this, then,—that while those with a very large margin of income
over expenditure were, in fact, paying for the great financial
effort of 1860, it is those with but a small margin of income over expenditure who are paying for the relatively smaller effort of 1887. But, in truth, no one, we think, would be pre-
pared to argue that the year 1860 is a fair-year with which to
compare the year 1887 in relation to matters of this kind. Though £28,000,000 may then have been appropriated to the service of the Debt, it was so appropriated under strict contract.
Except as regards the provision made for the terminable annuities previously in existence, nothing was devoted in the Budget of that year to the repayment of debt. The whole effort of the Chancellor of the Exchequer was to find means for enlarging our trade with France and other countries, even at the risk of deficits which were actually incurred. The Budget of 1860-61
was not a fortunate Budget even as it was, and Mr. Gladstone would no more have thought of proposing in that year to devote -£7,000,000 to the repayment of debt, than he would have thought of proposing a protective tariff. It is one thing to endure a very heavy burden for the sake of sustaining the public credit and stimulating public industry, and quite another thing to endure the same burden when you are aware that it is quite unnecessary for the sake of sustaining the public credit, and positively prejudicial to the stimulus of public industry. That is, as we believe, what Mr. Goschen has fairly made out. He goes back not to 1860, but to 1874, when Sir Stafford Northcote first proposed to establish this Sinking Fund, and asks with what view Sir Stafford Northcote avowedly estab- lished it. Sir Stafford Northcote did not conceal from the House that when he proposed to devote £28,000,000 to the payment of interest and principal of the Debt, however con- siderable the margin for the repayment of principal might be, he relied on the elasticity of the revenue for enabling him to carry out that proposal. In 1874, the revenue was at its maximum of elasticity, and Sir Stafford Northcote had no power of foreseeing that that elasticity was to dwindle from that very time, till now when it cannot be called elastic at all. We believe that he would have been the first to admit that, under the circumstances which Mr. Goschen explained to the Com- mittee last week, the right and proper course, on the very same principles on which Sir Stafford himself had acted in 1874, would be to diminish the burden to be impose& for the repayment of debt. Why, Mr. Gladstone him- self, in one of the most remarkable sections of his speech, seems to us to make an almost equivalent admission. "We opposed," he says, "Sir Stafford Northcote's Sinking Fund entirely upon the ground that it was not desirable to hold out to the country promises and assurances of the redemption of debt which experience proved could not become a permanent reality. We were entirely at that time, as much as now, in favour of the annual redemption of the Debt. I believe I may say, as I was Chancellor of the Exchequer, without any personal vanity, that the Government from 1868 to 1874 reduced a greater amount of the National Debt by means of its surpluses and annuities than ever was reduced within the same period of years." No doubt ; and why ? Because the revenue was at that time in a very elastic state, and every year showed a considerable surplus of revenue both over the estimate and over the expenditure ; and it was on a continuance of that condition of things that Sir Stafford Northcote counted when he proposed his new Sinking Fund. But that condition of things has not continued. On the contrary, as Mr. Goschen proved, it has altogether died away. The revenue may now be said to be elastic only under one head, Income-tax ; and even under that head, its elasticity now is to its elasticity a few years ago as the elasticity of wood to the elasticity of india-rubber. Customs and Excise, in a much increased population, now produce absolutely less than they did in 1874-75. Stamps produce almost exactly the same as they produced twelve years ago, though the population is so much larger. It is the Income-tax payers' and they alone, who are really reducing the National Debt by their increased payments, and the burden and strain of that national service falls not on the nation, but- on the poorer class of Income-tax payers. It seems to us that Mr. Goschen is unanswerable when he says of hie assailants :—" While they take this heroic view of our duty to pay off the National Debt, they would confine- their efforts in that direction to putting a tax on one particular class of the Community; and I ask the Committee whether it is not an intolerable hardship upon the Income-tax payers that this heavy burden on them should be maintained, and that this tax should be kept up at this high rate in time- of peace. This is a question which the country ought to con- sider. If we intend to keep up the sum to be allocated to- the National Debt at £28,000,000, we ought to have some general revision of taxation." We confess we see no answer to that argument, and we cannot conceive that an adequate answer can be given. Doubtless the country is much richer than it was in 1874; but it is not gaining riches at any- thing like the same rate. And, again, it is not the whole country which is bearing the burden of this redemption • the strain- is imposed most unjustly on a very small class. The industrial classes especially, who have probably gained more in income than any other since 1874, hardly bear any reasonable proportion of this burden, while a very great weight is borne by the class which is most affected by the depression of trade, and most in need of a little impulse for its commercial efforts. Mr. Goschen's proposal will tend to remove that depression, and to
stimulate those efforts, and so will secure the country against any reaction such as might easily result if the Sinking Fund were kept too large under the present depressed conditions of agriculture and trade.
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