The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://archive.org/details/cu31924092575996 Date Due CORNELL UNIVERSITY LIBRARY 3 1924 092 575 996 JOfS- PINANCE AND POLITICS. BY THE SAME AUTHOR. A New Edition — the Seventh. Price 7s. Sd. A HANDBOOK TO POLITICAL QUESTIONS. iriTR THE ARGUMENTS ON EITBEB SIDE. Contents : — , Home Rule— Disestablishment : Englisli, Sootoli, and Welsh —Irish Church Disestablishment Results— Education— Free Schools- Reform (Historical) —Proportional Representation— Women's SuBBrage — Ballot — Reform of House of Lords— Exclusion of Bishops— London Municipal Reform— Local Self-Govemment : English and Irish— Local Taxation— Land Laws— Lease- hold Enfranchisement— Allotments Extension— Intoxicating Liquor Laws —Sunday Closing— Incidence of Taxation— Pair Trade— Capital Punishment —Marriage with Deceased Wife's Sister— Sunday Opening of Museums- Cremation, etc. John Murray, Albemarle Street, London. Third Edition. Ninth Thousand. Price 6cZ. A POLITICAL MANUAL. WITE AN INTRODUCTION. The National Press AaEN0T,_13, Whitefriars Street, B.C. IMPERIAL PARLIAMENT SERIES. EDITED BY THE SAME. Price Is. eacft, cloth. 1. IMPERIAL FEDERATION. 2. REPRESENTATION. 3. LOCAL ADMINISTRA- TION. 4. RUSSIA AND ENGLAND IN ASIA. • 5. WOMEN SUFFRAGE. 6. LOCAL OPTION. 7. LEASEHOLD ENFRAN- CHISEMENT. 8. DISESTABLISHMENT. 9. REFORM OF LONDON GOVERNMENT AND OF CITY GUILDS. 10. CHURCH REFORM. In Preparation. 11. REFORM OF HOUSE OF LORDS. 12. FIFTY YEARS OF LEGIS- LATION — INTKODUC- TORY Volume. Swan, Sonnekschein & Co., Paternoster Square. FINANCE AND POLITICS; AN HISTORICAL STUDY. 1783-1885. Bt SYDNEY ' BUXTON, M.P. ADTHOR OF "A HANDBOOK TO POLITICAL QUESTIONS," ETC. IN TWO VOLUMES. VOL. I. LONDON: JOHN MUKEAY, ALBEMAELE STREET, 1888. [All rights reserved.] in ,UNI\/E:^3^TY: y, Li Lj.'4/iH\ LONDON: BRABBPKY, AONEW, h CO., PK1NTERS, WHIlEFiilARS. TO SIR JOHN LUBBOCK, AT WHOSE SUGGESTION THIS WORK WAS BEGUN; AND TO HIS DAUGHTER, MY WIFE, WITHOUT WHOSE HELP AND ENCOURAGEMENT IT WOULD NOT HAVE BEEN ACCOMPLISHED. TO THE EEADEE. My original idea in beginning this book, some six years ago, was to treat strictly of finance, and to take up the subject where it had been left by Sir Stafford Northcote. I was fortified by a kindly letter of encouragement from him, and — determining to put out of my mind the disadvantage under which an inferior writer must labour, who, in any way, invites comparison with such a master of English style — I intended to follow, however haltingly, in his foot- steps. I soon convinced myself, however, that no natural line could be drawn at the year 1860. For the proper understanding of that year, the policy of the previous seven years had to be studied ; and to understand that which was done in 1853, it was essential to master Peel's fiscal reforms. But those of Peel had followed on those of Huskisson, and to show what Huskisson did, it was neces- sary to show on what foundation he worked. This took the story back to the time of the Great War, from which dates so much of our taxation ; and before dealing with Pitt as a War Minister, something had of necessity to be said of Pitt as a Peace Minister also. Then, again, the feeling grew upon me that Politics and Finance, the Constitutional and the Industrial system of the country, cannot be historically dissociated without ■viii TO THE EEADEE. detriment to the proper understanding of each. If we go back to early history this fact stands out clearly enough ; for, in earlier days, the interest felt in financial matters took a more violent form than is its wont at present. It was, to a large extent, a money grievance that prompted the action of the Barons at Eunnymede. Wat Tyler's revolt, of the end of the fourteenth century, was due to a poll-tax ; and it was a strong feeling against extravagance and exorbitant taxation that stirred the followers of Jack Cade, some seventy years later. If it had not been for his arbitrary levies, Charles the First would probably not have lost his head. The robbing of the Exchequer by Charles 11. hastened the decline of the popularity of the Restored Stuarts. The exactions of James II., and the idea that he was supplementing his legitimate revenue by secret supplies from Popish France, had much to do with the revolution of 1688. William III. did something to consolidate his throne by relinquishing, almost as his first act, the obnoxious " hearth-money." It was an attempt to " shear the wolf " which lost us a Colony, and added a hundred millions to our debt. North's weak finance helped to discredit his administration ; Pitt's strong finance strengthened his hold over the country. I shaU hope to show how inextricably finance and politics have been interwoven in English history during this century. Vansittart weakened, Huskisson strengthened, the Liverpool Government. In 1827 the Goderich Ministry was broken up by a squabble over a Finance Committee. The administration of the Duke of Wellington went out on an economical question. It was the cry of " Retrench- TO THE EEADER. ix ment " almost as much as the cry of " Reform " which gave to the Whigs their popularity ; as it was their wretched finance which, later, did much to bring on them reproach. Peel came into ofiice on the question of finance ;, and it was a question of fiscal reform which caused his fall The financial difiiculties of the Eussell Government were chronic. Lord Derby's first Government went out on their Budget. The year 1853 marked an epoch in English history. Palmerston's second Government derived much of its strength from the doings of its Chancellor of the Exchequer. Finance played a prominent part in, and did much to decide, the elections of 1868, 1874, and 1880, In 1885 a Government, for the second time, went out on its Budget, and a financial defeat brought about a great crisis in English history. Finance affects the prosperity of the country and the comfort of the people. Good finance improves trade and lightens burdens, bad finance hampers the one and increases the other. Finance depends on policy, and the policy which affects it the most is that regulating foreign affairs. " Upon the judicious management of our foreign affairs," said Mr. Disraeli in 1868, "depend peace or war, the tranquil pursuits of industry, and the amount of taxation which must be levied in this country. For by a single blunder in the conduct of our foreign affairs, the most provident arrangement of the finances ever planned may in a moment be cancelled and destroyed." Between one nation and another there is, of necessity, sympathetic expendi- ture on the war services. And England is no exception to the rule. True, her insular position has, to a large extent. X TO THE1 EEADEE. enabled her to avoid the enormous and compulsory standing armies of the Continent ; but the weight of her Oriental Empire has tended ever more and more to drag her into the position of an European Power. The close propinquity of Russia in Asia has brought her more than ever face to face with Russia in Europe ; India has brought her into Egypt, and through Egypt she touches every European nation. Thus, in spite of an increasing desire to carry out .a policy of non-intervention, the necessities of her position, and the greater friction and unfriendliness among her European neighbours, have more than once brought about panic, or necessitated hurried preparations for war, though war itself has (except in 1854) been happUy avoided. During the " forty years' peace," though England from time to time had her " little difficulties," they were com- paratively infrequent. But from about the date of the Crimean War — a date which the Devil must have marked with a white stone in his Calendar — began a series of chronic wars and disturbances on her Imperial frontier, or in connection therewith ; and decade by decade, almost year by year, the gradual extension of the Empire has increased the points of contact between English civilization and the " simple and violent " world of barbarism. Thus, time after time the nation has been drawn into wars, usually begun in self-defence, always undertaken on the most humane and philanthropic principles, but almost invariably resulting in annexation. Time after tirae, against their own will, our rulers have multiplied the nation, and, as of old, have not increased the joy. Thus, in every way, and on every hand, politics and TO THE EEADEE. xi I finance mix and are mingled. And hence it has come about, that, instead of an essay on finance alone, I have attempted a study of English politics and finance. My original idea also (in 1882) was to bring the history up to 1880 and there to stop. But the scope of the work was enlarged ; matter accumulated, which I was loth to put aside ; and there came home to me the truth of Sterne's observation, " Let no man say — ' Come, I'll write a duo- decimo.' " Moreover, other literary, together with much political work, and divers distractions and delays occurred ; and though I scorned delights and lived laborious days, year after year passed by, and, leaving 1880 far behind, made it seem advisable to bring the chronicle more nearly up to date. But in dealing with the years from 1881 onwards, I have done no more than take " . . . .a bird's eye view of all the ungracious past," and have ceased from any attempt to criticise in detail the doings of the time. Indeed, the financial historian of the future will find that 1881 marks in many ways a new point of departure. It was the last year of what, by any stretch of imagination, can be considered moderate ex- penditure. And not only so, but in one way and another, the whole system of national accounts has since been, or is in process of being, radically altered. Moreover, I found it almost impossible to write im- partially of a period so recent, a period in which events have been so stirring, in which party passion has run so high. And, personally, my anxious desire throughout has xii TO THE EEADER. been to deal with, my subject without party prejudice or personal predilections ; though I am too well aware, tbat in this I have by no means entirely succeeded. I am not, indeed, conscious of having allowed my party predilections to interfere with my judgment of events : but it is almost impossible to study any period, to live for a time with the personages of history, without forming likes and dislikes, sympathies and antipathies, perhaps unreasonable, certainly personal. Further, I feel I ought to make an apology for offering my criticisms on the proposals and the work of the great Masters of Finance. But the critic of to-day has this advantage at least, that he is writing with knowledge of results, and that it is, comparatively speaking, easy to be wise after the event. I am afraid that the " general reader," should he cast a casual eye upon my book, will find the interest of the various parts unequal ; and the inherent difficulty of dealing with questions of finance without giving figures has, I fear, been too much for me. I have endeavoured in the text, however, to lighten as far as might be, the load of statistics with which a work such as this must neces- sarily be burdened. I have endeavoured alsp to avoid unnecessary detail in the figures given. " Round numbers," said Dr. Johnson, " are always false : " but, with all due respect to such an authority, I believe that round numbers are, in many cases, the most truthful, because they convey the clearest idea to the mind of the reader. " One last remark I wish to make, one last explanation I wish to offer " — there are in this book far too many notes, TO THE EEADBE. xiii and these notes are far too discursive. But I couldn't part "with them. Either they seemed to me to contain solid information which would encumber the text, and yet could not well be omitted ; or they consisted of quotations, and remarks of my own, which it has amused me to jot down in passing, and which the reader is at full liberty to skip. I am most anxious, in conclusion, to express my gratitude for the very valuable and most kindly help which has been given to me by Mr. George Barnes, Sir John Lubbock, Mr. Stephen Spring-Eice, and other friends. S. C. B. 16, Baton Place, April, 1888. CONTENTS. CHAPTER I. PITT AND HtrSKISSON. 1783—1823. Ktt Prime Minister and Chancellor of the Exchequer, 1783 ; Kesignatiou ; Eetum to office ; Last budget, 1 — Pitt as peace minister, 2 — His peace taxation, 2 — His fiscal, financial, and economical reforms, 3 — Consolidated Fund ; Sinking Fund ; Commercial treaty with France, 4 — Comparison of Pitt with Walpole, 5 — War declared with France in 1793, 5 — Pitt's war finance, 6 — Imposition of income tax, 7 — Debt rapidly accumulated, 7^Cost of Great War, 8 — The Debt and expenditure before and after the war, 8 — The restoration of peace, 1815, 8 — The result as affecting Great Britain, 9 — Distress in the country after the peace, 10 — Unpopularity of the Government, 11 — Death of Castlereagh ; Eetirement of Addington and Vansittart ; Accession to office ■ of Canning, Huskisson, and Peel, 12 — Financial affairs between 1815-22, 12 — Repeal of the income tax and other war taxes, 13 — Postponement of fiscal reform, 14 — The Sinking Fund, 14 — Vansittart's finance, 15 — The Bullion Committee, 16 — The Bank Act of 1819, 16 — Resumption of specie payment, 1821, 16 — Financial reform inaugurated by Huskisson, 1823, 17 — Huskisson a free trader, 17 — The deplorable fiscal and financial situation in 1823, 18 — • Multiplicity of taxes, 19 — Sydney Smith's epitome of taxation in 1820, 19 — Trade hampered ; smuggling encouraged, 20 — Husldsson's reductions on the spirits and silk duties, 21 — On manufactures, and on certain raw materials, 21 — Abolition of the system of bounties, 22 — Reduction of duties on articles of general consumption, 22 — Minor fiscal reforms, 22 — Colonial trade, 23 — Restrictions relaxed, 24 — Navigation laws amended, 25 — Corn laws left intact, 25 — Revival of trade in 1826 checked by over-speculation, 25— Crisis of 1826, 26 ... , 1—26 CHAPTER II. THE WHIGS. 1827—41. Death of Liverpool in 1827, 27 — Canning, Goderich, and Wellington rapidly suc- ceed one another in 1827-28, 27— The Wellington Government, 28— Their financial doings, 28 — Repeal of the beer duty, 28 — Their economies, 29 — Defeat and resignation, 30 — The Reform Government, 30 — Their legislative activity between 1830 and 1834, 31— Althorp Chancellor of the Exchequer, 32— His Budget of 1831, 32 — Its failure, 34 — Reduction and repeal of duties between CONTENTS. 1831 and 1834, 34 — The East India Company, 35 — Abolition of its trading monopoly in 1833, 35— The tea duties, 36— Poulett Thomson, 36— Eeform of the Excise department, 36 — Resignation of Grey in 1834 ; Succeeded by Lord Melbourne, 36 — Althorp becomes Lord Spencer, 37 — Melbourne dismissed by the King, 37 ; Succeeded by Peel, 37— The Whigs again in office, 1835, 37— The weakness of their position, 37 — Alliance with the Irish party, 38 — Financial ineptitude, 39 — Penny Post, 39 — Distress in the country, 39 — Yearly deficits, 39 — Baring's levy of 1840-1, 40 — Misfortunes abroad ; disputes with France, United States ; war with Persia, China, and Afghanistan, 40 — Acces- sion of the Queen, 40 — Jamaica and Canada, 41 — Defeat and humiliation, 41 — Declare for a fixed duty on Corn in 1841, 41 — Budget of 1841, 42 — Dissolution and defeat at election, 42 — End of Reform era, 42 ... . 27 — 42 CHAPTER III. PEEL. 1841—46. Peel's accession to office, 43 — ^Alarming state of the country, 43 — Peel's personal position, 49 — Entire confidence of the country in him, 45 — The ideas of the , last centuries respecting trade and taxation, 45 — The " Mercantile System " and the " Balance of Trade," 45 — Prohibitive and protective fiscal system, 46 — Complications of the Customs tariff, 47 — Desire for fiscal reform in 1842, 48 — The Import Duties Committee of 1840, 48 — Peel's financial policy, 51 — His fiscal policy, 51— The income tax, 52— Peel's first Budget, 1842, 53— The state of the finances, accumulated deficiencies, 53 — The only alternative, the revival of the income tax, 54 — The Prime Minister's appeal to the possessors of property, 54 — Imposition of the income tax for three years, 55 — Increase of spirit duty, 55 — Result of imposition of the income tax in '42 and '43, 56 — Renewal of the income tax in 1845 for three more years, 57 — Tariff reforms of 1842, 57 — Peel's account of them, 57 — Abolition of export duties ; reduction of manifold duties on imports ; reduction of timber duties, 58 — The Budgets of 1843 and 1844, 59 — Duties on wool repealed, on sugar reduced, 59 — The Budget of 1845 ; abolition of 520 custom duties and remaining export duties, 60 — Abolition of excise duty on glass, 60 — Repeal of the duties on raw materials used in home industries, 61 — The Free Trade Budget of 1846 ; Protective duties on home manufactures abolished or reduced, 62 — The silk duties, 62 — Abolition or reduction of the remaining duties on articles of food, 63 — The Bank Charter Act of 1844, 63 — Conversion of debt, 1844, 64 — General review of Peel's political and financial policy, 64 — The results of his fiscal and financial reforms, 66 43 — 66 CHAPTER IV. THE CORN LAWS. 1846. The history of the Com Laws from the Conquest, 67— Original object of the Corn Laws, 67 — They gradually become protective, 67 — Corn Law of 1670, 67 Of 1773, 68— Pitt's Corn Law of 1791, 69— EfEect of war on the price of corn ; Agricultural interest demands fresh protection after the peace, 69 Corn CONTENTS. xvii Law of 1815, 70 — Injurious effects of the Corn Laws; sufferings of the agricultural interest, 70— Sliding scale of 1822, 71— Scarcity of 1826, 71— The sliding scale of 1828, 72— Aggravation of the evil, 72 — Peel's revision of the sliding scale in 1843, 73— Change of opinion on the question, 74 — The growth of the manufacturing as compared to the agricultural interest, 7-1 — Increase of population, 75 — The effect of the fiscal reforms on the public mind, 76— Canadian duty, 76 — The League, 77— Effect on Peel, 77 — Failure of the harvest of 18i5, 79 — Suspension of the Corn Laws proposed by Peel to the Cabinet, 79— Their indecision, 80— Russell declares in favour of repeal, 80 — Peel's further proposals to his colleagues, 80 — Cabinet divided, 81 — Eesig- nation and return to office, 81 — The abolition of the Corn Laws, 81 — Peel's defeat and resignation,. 82 -The end of the Protectionist party, 83— Summary of the results of the repeal of the Corn Laws, 83 .... 67 — 83 CHAPTER V. THE WHIGS AGAIN. 1846-52. The Whigs again in office under Eussell, 85 — Peel supports them, 85 — The Govern- ment unfortunate from the start, 85 — The disastrous harvest of 1846, 86 — Irish Famine, 86 — The railway mania of 1844-47, 86 — Collapse, 87 — Suspension of Bank Charter, 88 — Kesult of railway extension, 88 — The unsettled state of Europe, 88 — The climax in 1848, 88 — Physical-force Chartism, Physical-force Repeal, 89 — Distress in England and in the colonies, 89 — Palmerston's meddlesome foreign policy, 1847-51, 89 — State of the finances, deficit of the year 1847, 90 — A year of Budgets, 1848, 90 — Proposed increase of the income tax to a shilling, and renewal for five years, 91 — Withdrawal of the proposal, and renewal of the tax at Td. for three years, 91 — Improved state of the finances, 1849-52, 91 — Economy, 91 — Military and naval expenditure,- 1835-53, 92 — Gross expenditure of the country during the same period, 93 — Proposed renewal of the income tax in 1851 for three years, 93 — Feeling against prolonged renewal, 94 — Defeat of the Government ; renewal for one year, and appointment of a Committee of Enquiry, 94 — The financial weakness of the Government, 95 — Their financial reforms, 95 — Repeal of duty on bricks, on export of coal, 95 — Stamp duties reformed, 95 — Window tax replaced by inhabited house duty, 95 — The principles of free trade extended ; reduction in the timber duties, equalisation of the sugar duties, 96 — The repeal of the Navigation Laws, 97 — History of the Navigation Laws, 97 — Their principle supported by Adam Smith and Huskisson, as being necessary for safety and commerce, 97 — Description of the Navigation Laws, 98 — Difficulties with America after 1782 leads to a system of reciprocity, 98 — Retaliation of other nations, and extension of system of reciprocity in 1822 and 1825, 98 — Abolition of the Navigation Laws in 1849, 99 — The enfeebled state of the Government in 1851, 99— Dismissal of Lord Palmerston, 100— His '-tit for tat," 100— The Militia Bill, 100 — Resignation of the Eussell Government, 101 — Lord Derby takes office in a minority, 101 — Discordant views of the ministers on the subject of Protection, 102 — General election of 1852, 102^Defeat of the Protectionists, 102 — Final acceptation of the principle of " unrestricted com- petition," 102 — Disraeli's " Compensation " Budget of December, 1852, 103 — Defeat and resignation of the Derby Government, 104 . . . 85 — 104 VOL. I, S xyiii CONTENTS. CHAPTER VI. "1853." Coalition Ministry of Whigs and Peelites tinder Aberdeen, 105 — The Peelites, 105 — Expectations of an era of peace not fulfilled, 107— Gladstone Chancellor of the Exchequer, 107— His qualifications for the post, 108— Budget of 1853, 109 —The Budget Speech, 109— The principal features of the Budget, 109— Pro- - posals for the gradual extinction of the income tax, 109— History of the income tax, 109— Poll taxes and taxes on expenditure, 110 — Pitt's income tax of 1799, 111— Repeal in 1802, renewal in 1803, and repeal in 1816, 111— Revival in 1842, Jll^Continued renewals; tax again expiring in 1853, 111— Gladstone's condemnation of the income tax, and assertion that its basis could not be changed, 112 — His two objects : to mark the tax as a temporary tax, and to retain it until the completion of commercial reform, 113 — Renewal of the . income tax for seven years, with gradual reduction in rate, to expire in 1860, / 114— Succession Duty imposed, 114— Professional incomes to be assessed on ' three years' average, 114 — Deduction for life insurance, 115 — Limit of exemption reduced to £100, 115— Tax extended to Ireland, 115 — The arrange- ments under which the tax would expire in 1860, 115 — Increase in the Scotch \ and Irish spirit duties, 117 — History of the Succession Duty, 117 — Pitt's ' attempt to impose a succession duty in 1796, 117 — His second attempt, 1805, 118— The proposal of 1853, 118— Great over-estimate of the yield from the duty, 119 — The causes of its failure to produce a greater revenue, 120 — The fourth revision of the Customs tariff, 120 — Duty on manufactures repealed or reduced, 121 — Disappearance of remaining differential duties on manufactures, 121 — Abolition of many small customs duties, and reduction of others, 122 — Excise duty on soap repealed, 123 — Reform of stamp duties, 124 — Initiation of system of " penny taxation," 124 — Assessed taxes reformed, 124 — Duty on dogs, 124 — Reduction of the tea duty, 124 — Satisfactory results of the reduc- tions and remissions, 125 — Attempt to reduce the interest on the Debt, 125 — History of former conversions, 126 — By 1853 the whole of the Debt in three per cent, stock, 127 — Terms offered to the stock-holders, 127 — The ill success of the scheme ; reasons of failure, 128 — Consolidation of the Customs Laws, 129 — History of previous consolidations, 129 — Pitt's consolidation, and creation of the Consolidated Fund, 130 — Fresh confusion supervenes during the war, 131 — Constant consolidation without improvement, 131 — The great consolidation of 1825, 131— The consolidation and codification of 1853, 132 . , 105—132 CHAPTER VII. FREE TRADE. 1842—53. The broad principle of free trade, 133 — State interference sometimes necessary, though generally an evil, 134 — Taxation should be imposed for revenue pur- poses only; and levied on the smallest number of articles, 134 — Result of the application of these principles, 135 — The repeal of the corn laws only a part ,' of the, general policy of free trade, 136— Great expansion of commerce in the CONTENTS. xix first free trade era, from 1812-1853, 136 — How far due to free trade or to other causes, 137 — An " age of locomotion," . 137 — Railway extension, 137 — Steam Navigation, 139 — Telegraphic communication, 139 — The " Penny Post," 139 — The results of the improved means of communication, 141 — The Colonies, 1-11 — The CaUfornian and Australian gold discoveries, 142 — Financial and commercial results of the twelve years ending 1853, 142 — Comparison with those of the previous twelve years, 144 — Free trade a powerful factor' in the increase of wealth, 144 — Free trade and its advocates, 145 — Peel's opinion, 145 — England still holds to the principle of free trade, 145 . . , 133— 14(j CHAPTER VIII. THE CRIMEAN WAR. 1853—58. Origin and growth of the quarrel leading to the Crimean War, how England became involved, 147 — The story of the war, 148 — Overthrow of the Aberdeen Ministry ; Palmerston becomes Prime Minister, 149 — The financial position of the country satisfactory, 149 — Imposition of taxation instead of addition to the debt, 150 — The Budget of 1854, 150 — Income tax increased by one half, 151 — Second Budget of 1854 ; income tax increased to Hd., and the spirit, malt, and sugar duties raised, 151 — Resignation of the Peelites, 153 — Lewis suc- ceeds Gladstone at the Exchequer, 153 — Budget of 1855 ; estimated deficiency of 23 millions, 153 — Income tax increased to 16d., the duties on sugar and spirits further raised, those on tea and cofEee increased, 153 — Budget of 1856, 154 — Peace already signed, but war expenditure still to be met, 154 — No further taxation imposed, 155 — The cost of the war, and the mode in which it was met, 155 — Further wars and disturbances following on the Crimean War prevent reduction of expenditure, 156 — Budget of 1857, 156 — The income tax to be renewed at Id., the tea and sugar war duties to be reduced, the war duties on malt and cofiee to lapse, 157 — Defeat of Palmerston on the Chinese Question, and dissolution of the House, 158^Palmerston's success at the elec- tion of '57, 158 — His defeat and resignation in 1858 over the Orsini question, 159 — The object of the Budget of 1857, 159 — Lewis proposes to maintain taxation at a higher figure, in order, by redeeming the war debt, to be enabled by 1860 to repeal the income tax, 159 — Opposition of Gladstone and Disraeli, 160 — Superiority of Lewis's proposal over that of his opponents, 161 — Second Budget of 1857, alterations made, 162 — The Indian Mutiny, 163 — The cost not great, 163 — The territory of the East India Company transferred to the Crown, 164 — Monetary panic of 1857,164 — Second suspension of Bank Charter, 165 — Rapid recovery, 165 — Excess of expenditure over revenue, 1857, 165 — Derby succeeds Palmerston in 1858, 165 — Disraeli Chancellor of the Exchequer; his Budget of 1858, 165 — Reduction of the income tax to 5d., 166— Suspension of the war sinking fund, 167 — Discussion of his financial policy, 168 — The feeling of the nation on the subject of the redemption of the debt, -168 — Equalisation of the Irish spirit duties to those of England, 169 — Extension of penny taxation to bankers' cheques, 169 . , . . . . 147 — 169 XX CONTENTS. CHAPTEE IX, PALMEESTOK. 1859. Eeform Bill of " fancy franchises," 1859, 170— Defeat of the Tory Govemmeut, 170— General election, 1859, 170— Defeat of the Tories, 170— Palmerston Prime Minister and Gladstone again Chancellor of the Exchequer, 171 — State of trade, 1859, 171— Palmerston's suspicion of Napoleon III., 172— Reasons for English alarm, 172-3 — The Suez Canal, 173 — Napoleon really well disposed towards England, 174 — Mutual suspicion and increased armaments, 174 — Palmerston's memorandum on the state of the national defences, 1846, 175 — The French navy, 1846, 175— The defences of England, 175— Palmerston's foreign policy, 176 — Patriotic ferment of 1859-60, 176 — Volunteer movement, 176 — Great expenditure, 178 — ^England's naval position, 178 — Eeconstruction of the Navy, 178 — Disappearance of England's former naval supremacy through the introduction of steam and iron into naval constmction, 179 — Alarmingly weak state of the Navy in 1858, 179 — Increase of Expenditure on the Navy, 180 — Construction of ships under Pakington, 180 — Further increase of expenditure in 1859, 181 — France takes the lead in the construction of ironclads, 1858, 181 — English Admiralty follow suit, 1859, 181 — Activity in French dockyards, 1861, 181 — Further efforts of English Admiralty, 181 — Great increase in number of sailors and marines, 182 — Ee-establishment of England's superiority at sea, 1865, 182-3 — Number of soldiers in regular Army, 1854-63, 183 — Improvement in pay and comforts ; increased cost of Army and Navy, 183 — Eecurring costly " transition periods " in Navy, 184 — Budget of 1859, 184 — Eevenue and expenditure of 1858, 185 — Prospect for 1859, nearly five millions deficit, 185 — Shortening of the "malt credits," 185 — - Income tax raised from 6d. to 9d., 187 — A new departure in the use of the income tax, treated as a " make-weight " in finance, 187 . , , 170 — 188 CHAPTER X. " 1860." The year 1860 financially important, 189 — The income tax and the "war duties" on tea and sugar legally lapse ; while the " long annuities " fall in, 189 The negociation of the French Commercial Treaty adds to the importance of the year, 189— Budget of 1860, 189 — Eevenue and expenditure for 1859, 190 Unsatisfactory outlook for 1860, 191 — The estimates ; and expected deficiency of 9i millions, 192 — Eeason of the failure of the scheme of 1853 in regard to the income tax, 192 — Eeuewal of the income tax, 193 — Later attempts to abolish it, 194 — Fifth revision of the Customs' tariff, 195 — Summary of the gradual reduction and repeal of customs duties between 1842 and 1860, 196 — Number of duties repealed and reduced in 1860, 196 — Subsequent repeals and reductions of duties, 196 — Existing tariff, 196 — Final abolition in 1860 of duties on manufactures, 197 — The woollen trade, 198 — The silk trade, 199 —Abolition of the duties on fancy articles, 201— Abolition of the remaining duties on articles of food and of prime necessity, 202 — The " colonial system " brought to an end, 202— Freedom of trade brought to completion, 203 Great CONTENTS. xxi diflSculties in the way of any return to the old system of manifold duties on imports, 203 — The opposition to the repeal of the protective duties, 204 — Reduction in the duties on " dried fruits ; " and the reduction and equalisa- tion of the difEerential duty on timber, 205 — Hops, chicory, game certificates, 205 — Proposed abolition of the excise duty on paper, 206 — Imposition of registration charges on exports and imports, 206 — Their repeal in 1863, 207 — Minor changes, 207 — Loss of revenue consequent on the French Treaty, 208 — And on the other tariff reforms, 208 — Deficit of llj millions, 209 — Ee- imposition of the tea and sugar duties, 209 — The income tax at lOd., 209 — Shortening of malt and hop credits, 209 — The paper duty, 211 — Proposal to abolish the paper duty by imposing an extra penny of income tax, 211 — The rejection of the Paper Duty Abolition Bill by the House of Lords, 212 — The justification for their action, 212 — The constitutional question, 212 — Action of the House of Commons, 213 — Gladstone's Budgets of 1853 and 1860 compared, 214 — The reduction of the debt too much neglected, 215 — Eevenue before applied to that purpose used by Gladstone to meet ordinary expenditure, 216 —Increase of debt in 1860 and 1861, 217 189—217 CHAPTER XI. THE COMMERCIAL TREATY. 1860. Pitt's Commercial Treaty with France of 1786, 218— His two objects in view, 218 —Opposition of Fox, 218— The treaty destroyed by the French Revolution, 219 — The French tariff very prohibitive and protective, 220 — Reductions begun under the third Empire, 220— French duties enormous in 1860, 220— Effect on the trade between England and France, 221 — Cobden's share in the Commercial Treaty of 1860, 222— Cobden's views, 223— Those of Napoleon III., 223— Nego- ciations and difliculties, 223 — The result of Palmerston's warlike action, 224 — The Commercial Treaty as affecting the principle of free trade, 225 — The old commer- cial idea, 226 — ^Anew departure in 1860, 226 — Good results springing from the Treaty, 228 — Opposition to the Treaty, 229 — Engagements under the Treaty, 230 — The wine and spirit duties, 230 — History of the wine trade in England, 232 — The Methuen Treaty, 232 — Effects of heavy duties on French wines, 233 — The taste for light wines almost destroyed, 234 — Object of reduction of duty to revive the taste, 235 — Effect of the reduction on the consumption of wine, 235 — The results of the Commercial Treaty, 236 — Denunciation of the Treaty in 1872 by France, 237— Negociations in 1873 and 1878, 237— The negociations of 1880 and 1881, 238 — Failure of the negocilttions, 240 — Present position of affairs, 241 218—241 CHAPTER XII. EXPENDITURE. 1860. Reform Bill of 1860, very short lived, 242 — The interest of the Session lay in finance, 242— The Chinese opium war, 243— The Chinese War of 1856-60, 243 — Its renewal in 1859 involved increased expenditure, 244 — Great under- estimate of the cost, 245— The Supplementary Budget of July, 1860, 246— The xxii CONTENTS. spirit duties increased, 247 — History of the spirit duties, 2i7 — The Gin Act of 1728, 2i8— Changes of duty between 1727-1815, 248— The fiscal principle in regard to the spirit duty, 249 — Gradual increase in the duties from 1825 to 1860,250 — Successive disappointments in the yield from . the increased duty, 250— The warehousing system, 252— Spirits in bond ; anticipatory deliTeries, their evil results, 252 — The same in regard to tea and sugar, 253— Palmerston's fortification scheme of 1860, 253— Recommendation of the Eoyal Commission on National Defences, 253— Estimated cost, 253— Pitt's proposal of 1786, 254 — Uselessness of the fortifications erected during the Great War, 254 — Palmerston's proposal, 255 — Kxpected rapid completion, 256 — The forts still, in 1887, unprovided with guns, 256 — Changes in public opinion on the question, 257 — Cost of armaments and fittings, 257 .... 242 — 258 CHAPTEE XIII. THE PAPEE DUTY. 1861. Disappointing results of the financial year 1860, 259 — Heavy expenditure, ine- lastic revenue, 259 — Failure of the wheat, hop, and barley crops, 260 — Effect on the revenue, 260 — Satisfactory results of the tariflE reforms of 1860, 261 —Budget of 1861, 262— The estimates for 1861, 262— Mode of estimating for the revenue, diiferent from that of 1860, 263 — Proposals of the year ; tea and sugar duties unaffected, 264 — The duty on paper repealed, 264 — Evils of excise duties, 264 — Repeal preferable to reduction, 265 — Repeal of paper duties, coupled with the remission of a penny of income tax, 265 — History of the paper duties, and of the other excise duties imposed in the eighteenth century, 266 — Their reduction and repeal, 266 — Results of the repeal of the duty on paper, 267 259—268 CHAPTER XIV. THE AMERICAN CIVIL WAR. 1861—65. Effect of the American Civil War on English trade and industry, 269 — Cause of the war, 269 — The secession of the South, 1860, 270 — The war; temporary advantage of the South, 270 — The reserve strength of the North, 270 — Lee's surrender to Grant in 1865, 271 — English sympathy for the South, 272 — Reasons for it, 272— Itritatlon dn both sides, 273— The " Trent Affair," 273— England and America within an ace of war, 273 — The case of the piratical cruisers, 274 — The English as neutrals, 274 — The defence of Canada, 275 — Federation, 275 — The " cotton famine " in Lancashire, 275 — The history of the cotton industry, 275 — Its extraordinarily rapid growth, 276 — The imports of raw cotton between 1700 and 1886, 276 — The cotton famine during the years 1861, 1862, and 1863, 277— The ■ Indian supply of cotton, 277— Gradual improvement, 27!) — The distress admirably borne, 279 — Assistance from public and private sources, 279— The Session , of 1862, 280— Death of the Prince Consort, 280^Supplementary Estimates of 1861, 280 — A realized deficiency, 281— Financial position of the country, 282 — The interdependence of the CONTENTS. ' xxiii customs and excise revenue, 283 — Diminution in the consumption of intoxi- • cants, 283 — Only temporary, 284 — Alteratious in the system of stating the public accounts, 284 — System of payment to the Bank of England, 284— The receipts from and expenditure on behalf of the Indian Government on account of the Indian depot, 285 — Constant changes in the mode of keeping these accounts, 285 — Budget of 1862, 286 — Equilibrium between the revenue and the expenditure, 287 — A minute surplus, 287 — So taxation to be imposed, 288 — Further simplification of the wine duties, 289 — Commutation of the hop duty Into a brewer's licence duty, 289 — The hop duty indefensible, 289 — The form of the commutation, 290 — Brewer's licences, 290 — Eenewal of Exchequer Bonds, 291 269—291 CHAPTEK XV. ECONOMY. 1863. The year 1863 the turning-point between expenditure and economy, 292 — Sum- mary of the expenditure between 1859 and 1862, 292 — Increased expenditure on Army and Navy, 293 — Increased taxation and deficits, 294 — Increasing desire for economy, 295 — Gladstone preaches economy, 295 — But is responsible for the expenditure, 296 — Stansfield's resolution, June, 1862, and Palmerston's amend- ment, 296 — Effect of the profuse expenditure on the revenue, 297 — Great financial pressure during the period from 1859-62, 297 — Budget of 1863, 298 — The new epoch of economy, 298 — A large bond fide surplus, 298 — Unsuccess- ful proposal to commute the railway tax, 300 — Unsuccessful proposal to tax charities and corporations, 300— Disposal of the surplus, 301 — Reduction of the income tax by twopence to Td., 302 — Discussion of the question of the reduction of taxation on articles of general consumption, 302 — Preferable to make a considerable reduction on one article than small reductions on several , 302— The conflicting claims to reduction of the tea and sugar duties, 302 — Reduction of the tea duty from Is. 5d. to Is., 305 — History of the tea duties, 305 — Pitt's reduction of the duty in 1784, 306 — The duty again raised by the war, 306— Monopoly of the Bast India Company, 306 — Reduction of 1836, 307 — Increase of duty during Crimean War, 307 — Reductions of 1863 and 1865, 307 — Progressive increase in consumption of tea, 307 — An object- lesson, 308 — Total remissions of taxation in 1863, 308 — Repeal of the " minute taxation" imposed in 1860, 309 — The reduction in the income tax combined with an extension of the limit of exemption, and an increase in the amount of abatement, 309 — The history of the income tax abatements and exemptions, 309 — Pitt's income tax of 1799, 309— Alterations made in 1803 and 1806, 309 . — Peel in 1842 fixes the limit of exemption at £150 without abatement, 309 . — Gladstone in 1853 carries the tax down to incomes of £100, with abatement up to £150, 310— Change made in 1863, 310— Lowe's changes in 1873, 310— Northcote's further changes in 1876, 310 — Discussion as to whether the system of exemption and abatement has not been carried too far, 311 , 292 — 312 xxiT CONTENTS. CHAPTER XVI. FOREIGN AFFAIES. 1863—66. Disturbances on the Continent, 1863-64, 313— Poland, Greece, Mexico, Denmark, 313 — ^The popularity of the Emperor Napoleon on the wane, 313 — His rebuffs, 313 — France proposes a Congress to discuss European complications, 313 — Curt refusal of the English Government, 314 — The Parliamentary Opposition in France growing in numbers, 314: — The Grecian question, 314 — Deposition of Otho in 1862, 314— Prince George of Denmark elected King, 315— The Ionian Islands handed over to Greece by England, 315 — Insurrections in Poland in 1863, 315 — European expostulations with Russia, 316 — Suppression of the insur- rection, 316 — The Schleswig-Holstein question, 316 — Friction between Den- mark and Germany, .316 — Prussia and Austria attack Denmark in 1864, 317 — Palmerston's pledge to assist Denmark, 317- — Public opinion adverse to war, 317 — Palmerston gives way, 317 — ^Vote of censure on Palmerston moved, but not successful, 318 — Conduct of Prussia, 318 — Unpopularity of Prussia, 318 — The Prussian Government and the Chambers, 319 — The war between Prussia and Austria in 1866, 319 — Defeat of Austria, 319 — Far-reaching results of the war, 319 — Advantages gained by Bngland,from theEuropean changes, 320 318 — 320 CHAPTER XVII. REMISSION. 1864—65. Satisfactory financial results of 1863, 321 — Economy and increase of revenue, 321 — Increased demand for articles of general consumption, 322 — Large realised surplus in 1863, 322— Budget of 1864, 322— Large surplus, 322 — Economy continued into 1864, 322 — Reduction in expenditure, 323 — Natural increase of revenue not taken into account, 323 — Reduction of the sugar duties and income tax, 324 — History of the sugar duties, 324' — Differential duties in favour of colonial sugar, 325 — Changes of duty between 1793 and 1840, 325 — The controversy between slave-grown and free-labour sugar, 326 — Peel's action in ,1844, 326 — Reduction of duty on foreign free-labour sugar, 327 The gradual equalisation of the duties on colonial and foreign sugar, whether produced by free labour or slave grown, 327 — Increase of the duties during the Crimean War, 328— Changes in the duties between 1858 and 1864, 328— The further changes between 1864 and 1874, 328 — The question as between classification of duties and an uniform rate, 329 — Proposed reduction of the malt tax instead of the sugar duty, 330 — Reduction of the income tax by a penny to M., 330 — The object of the reduction ; in order to again give an opportunity for the repeal of the tax, 331— Failure of the attempt, 332— Speculation on the subject, 332 — Reduction of the fire insurance duty, 333 — Minor remissions, 333— The Budget of 1865, 334— The seventh and last of the Palmerstonian Parliament, 334— Comparison between the Budgets of 1864 and 1865, 334 — The results of the reductions on the tea and on the sugar duties, 335 — Economy in 1866, the minimum of expenditure reached, 336 — Com- CONTENTS. XXV panson of expenditure with 1862, 336 — Estimated surplus of four millions for 1865, 337 — The surplus devoted to reducing the income tax to id., and a further reduction of the tea duty from Is. to 6d., 338 — -The malt tax pitted against the tea duty, 338 — Minor alterations, 339 — Summary of the remissions of 1865, 339 321— 33» CHAPTER XVIII. GLADSTONE. 1859—66. Gloomy aspect of affairs at home and abroad in 1866, 340 — Budget of 1866, 340— Financial results of 1865, 340 — Increased expenditure for 1866, 341 — Estimates for 1866, 341^Half the surplus to be devoted to furthur annual re- duction of debt, 342 — The other half to the reduction of the wine duties and the abolition of the timber duties, 342 — The Commercial Treaty with Austria, 342 — The timber duties, 343 — Original object of the imposition of these duties, 343 — Reduction of the duties in 1821, 343 — Althorp's unsuccessful proposal of 1831, 344— Peel's reductions, 344— Reduction of 1851, 344— Evil effect of the high differential timber duties, 344 — Abolition of the duty on pepper, 345 — Summary of the financial proposals of 1866, 346 — Gladstone's eight Budgets 1859-1866, 346 — -His financial and fiscal policy, 346 — No class legislation, 347 — The opinions of Cobden and Northcote on his policy, 348 — Gladstone's opinion on the subject of direct and indirect taxation, 348 — The impositions and remissions of direct and indirect taxation between 1859 and 1866, 350 — Gladstone's action in regard to the Debt, 350 — Fortunate in his fixity of tenure and long period in office, 351 — Few changes in the Palmerston Ministry of 1859-65 ; constant changes in the Conservative Ministry of 1866-68, 351 — The expenditure between 1859 and 1866,352 — The revenue between the same dates, 352 — Remissions of taxation, 352 — Increase of trade, 353 — Gladstone's second term of Office at the Exchequer eminently satisfactory and prosperous, 353 340—353 INDEX 355 The following Appendices will be found at the end of Volume II. : — PAGE Appendix A. — Changes in the system of presenting the Public Accounts . . 322 „ B.— Introduction to the Budget Tables 329 „ C— Tables of the Annual Budgets from 1858 to 1885 . . . 334 „ D.—Debt Table from 1857 to 1885 363 E.— (1.) Gross Expenditure from 1857 to 1885 364 (2.) Gross Revenue from 1857 to 1885 365 „ F.— Net Expenditure from 1857 to 1885 366 _^ G.— (1.) Gross Expenditure from 1791 to 1885 . . . .367 (2.) Gross Revenue from 1791 to 1885 368 TOL. I. c xxvi CONTENTS. Appendix H. — Expenditure on Administration from 1801 to 1885 . . . 369 J.— (1.) Tobacco Duty 370 (2.) Land Tax 373 (3.) Licences 374 „ K. — The Income Tax Schedules ; and the rate in the £ between 1799 and 1888 377 „ L. — Direct and Indirect Taxation 380 „ M. — Difference of burden of Death Duties on Personalty and Realty 384 „ N. — List of Prime Ministers and Chancellors of the Exchequer from 1783 to 1887 386 FINANCE AND POLITICS. CHAPTEE I. PITT AND HUSKISSON. 1783—1827. The financial record of Great Britain from 1783 to 1801, is a record of Pitt's eighteen consecutive Budgets ; just as the political record is a record of Pitt's eighteen consecutive years of c«. Premiership. Becoming, when only four-and-twenty, by the arbitrary act of the King, Prime Minister and Chancellor of the Exchequer, the only Commoner in his Cabinet,* he held ofilce without interruption until 1801 ; when, being unable to meet the views of the King on the question of Eoman Catholic Emancipa- tion — " the most Jacobinical thing " His Gracious Majesty " ever heard of" — he resigned. Addington, while Pitt supported him, carried on well enough for a time. But " In peace or war, too weak to govern shown, '' the "Doctor" was, it was soon felt, not equal to the post, and in 1804 Pitt, no longer able to restrain his impatience, resuraed office. t In 1805 he produced his nineteenth and last Budget, a - * " A sight to make surrounding nations stare : A Kingdom trusted to a schoolboy's care." — The Eolliad. Pitt was for a few months Chancellor of the Exchequer in the Shelburne Ministry of 1782-3. After the fall of the Coalition Ministry in December, 1783, Pitt became Prime ilinister, and remained in office until Feb., 1801. His first budget was that of 1784. He presented also that of 1801. ■\ Addington resigned in 1804 on a vote with reference to military defences, though he had on it a majority of 37 — 240 to 203. But his majorities had been dwindling, and Pitt and Fox were now arrayed against him. See Lewis's British Administra- tions, p. 242 ; Life of Sidmouth, i,, chaps, xxii., xxiii. Ih VOL. I. 2 FINANCE AND POLITICS. Chap. 1. Budget involving a great increase of taxation. Then came, ■within a few months of one another, Trafalgar, which cost us Nelson, and Austerlitz, which gave the death-blow to Pitt, — the one victory making England supreme at sea, the other making France supreme on land. Pitt's career was divided into two almost equal epochs — the first of peace, the last of war. Succeeding North, who, with a slight break, had been Chancellor of the Exchequer since 1767, and Prime Minister for twelve j-ears, he found the task of bringing back stabilitj' and method into the finances of the country no light one. North's easy-going obstinacy had been as disastrous in financial as in Colonial and Foreign policy. Lacking origi- nality, he had turned to the Wealth of Nations * for guidance. But he was unable to grasp the whole truth as taught by Adam Smith, and, while accepting the suggestions for increased taxation, he omitted to couple with them that revision and simplification of the tariff and of the taxes which formed the main part of his adopted master's design. Pitt's first task was to bring about an equilibrium, and to put an end to the deficit which was fast becoming chronic. And this he did, on the one hand, by funding a mass of unfunded debt, as well as by reforming and checking expenditure, and, on the other, by the courageous imposition of taxation. The load of taxation, and the multiplicity of taxes imposed by Pitt, are commonly attributed to the strain of war. But, as a matter of fact, in the ten years before war came, the revenue of the country, partly through addi- tional taxation and partly through the improvement of receipts following on fiscal reform, had increased from 13^ to over 18J millions. Somewhat curiously, his first taxes, those imposed in time of peace, proved themselves to be less satisfactory and less durable than many of those subsequently imposed during time of war. With the exception of the licence to kill game, not one of Pitt's peace taxes now survives ; indeed, many of them were relinquished as admitted failures by their author himself. * Published in 1776. Adam Smith is one of the few men who, by their writings alone, changed the whole tone, habits, and opinions of his countrymen. As Bagehot says, in his Economic Studies (p. 97), Adam Smith was "the beginner of a great practical movement," which he brought home to the mass of the people. See ■ Haldane's Adam Smith, 1887. The edition of the Wealth of Nations referred to throughout is McCuUoch's edition of 1872. 1783-93. PITT AND HUSKISSON. 3 The wai' taxes, on the other hand, for the most part still survive, and form a very substantial portion of the revenue of the countr3^* And while not shrinking even in time of peace from the imposi- tion of necessary taxation, Pitt devoted himself assiduously to the improvement of the whole fiscal system, and was able to accom- plish reforms many of which successfully withstood the ravages of war. Anticipating the great guiding principle of Sir Eobert Peel, he strove, and strove successfully, above all to create a surplus. Realizing that "true economy is better than a great revenue," he — whose first speech had been in favour of Burke's " Econo- mical Eeform Bill " — applied himself diligently to the reduction of expenditure, to the abolition of sinecures, to the prevention of waste and corruption, jobbery and favouritism,! and to the im- provement of account and of audit. Appreciating the financial truth, first partially realized by Sir E. Walpole, that industries do not exist merely for purposes of taxation, and that judicious reductions, combined with simpli- fication of levy, will, in the end, by stimulating consumption and by diminishing smuggling, increase the revenue, Pitt improved the system of warehousing, simplified the method and reduced the cost of colleciion, and — when he could find the means, for he would not risk a deficiency — lowered excessive duties, t Applying himself to the simplification of the tariff, he produced comparative order out of chaos, bj'' repealing the then existing system of customs and excise duties, — a mode of collection as barbarous as it was injurious ; under which, not only were the number of articles charged with dutj' innumerable, but most of * The new taxes imposed between 1783 and 1792 were those on hats, gloves, mittens, perfumery (perfumes, tooth powder, pomatum, &c.), on shops and on female servants, all repealed by Pitt himself ; on bricks, repealed in 1850 ; on horses and racehorses, repealed in 1874, (now to be re-imposed) ; and on " sporting," which as a "game licence " still exists. The new war taxes imposed by Pitt were of a more serious description, and- comprised the income tax, the legacy duty, taxes on dogs, on attorneys, armorial bearings, and marine insurance — all of which (the income tax after an interval of extinction) still exist. The taxes on "convoys" (see I. 14Sn.), watches, hair powder, and horses employed in industry, were subsequently repealed. t "It is," as Mr. Lecky remark.s, " a shameful instance of the perverting influence of party spirit that Sheridan, and even Bilrke, . . should have ridiculed the minute economies of Pitt, . . describing his measure for enquiring into fees and perquisites as a ' ratcatching bill, instituted for the purpose of prying into vermin abuses. ' " (History of England in the Eighteenth Century, v. 33.) See Massey's History of Eng- land, vol. iii. J Especially that on tea. See /. ^06. B 2 4 PINANOE AND POLITICS. Chap. I. them were taxed over and over again, under different " subsidies," "imposts," and " duties," granted from time to time, and dating back to many previous reigns. Instead of these complications, one single duty was imposed on each article ; the number of arti- cles charged with duty not being however affected. He grouped together, under the name of "assessed taxes," the "establish- ment," land, and house taxes,* and placed their collection under one Board. In order to diminish fraud and smuggling, he further extended Walpole's system, and transferred the collection of several duties from the Customs to the Excise Department.! Turning his attention to the complicated system of mortgaging each item of revenue to some particular purpose or some par- ticular fund, Pitt created in its place one general " Consolidated Fund," grouping together the permanent national liabilities, and hypothecating to them the permanent revenues of the country. + By means of a sinking fund, established on a " spirited and permanent plan," the country was to be gradually relieved of all its incumbrances. A scheme which did much to improve public credit and to restore financial confidence. A system which, what- ever its faults (and these will be presently discussed || ) was intended by its author to be based on an annual surplus of revenue over expenditure. By his Commercial Treaty with France in 1786, founded on a system of reciprocal benefit, he (for the moment at least) put an end, both to the injurious war of tariffs, which for a centurj' had crippled the trade between England and France, and to the theorj^ of the " unalterable enmity " between the two countries : — a novel state of things which could not, and did not, long outlive the declaration of war.** Pitt was, in his earlier j'ears, so cramped and fettered by the excesses of his predecessors, that it was not until the last year of peace that he was able freely to remit taxation without having to make corresponding additions.! t Thus, though he more than once managed to make the burden of taxation somewhat * See I. Ill and //. S2—93. i See /. 23. % See I. 30. II See Ohap. XXIX. ** See Chap. XL ■fj- In 1792, so flourishing was the state of the tinances, that Pitt was able both to add to the sinking fund and to remit taxation. See Pitt's Speeches, ed. 1808, February l7th, 1792. The foreign trade of the country — exports and imports — had increased from under twenty millions in 1782 to nearly forty in 1790. 1783-93. PITT AND HUSKlSSO>f. 5 less oppressive, much of his fiscal work was but the shifting of a load he could not lessen. And then, just when the finances of the country had been brought into a sound and healthy condi- tion,* when " dejection and gloom . . doubt and uncertainty," had been dispersed, when reform and economy had increased the revenue, diminished the debt, purified the services, improved trade, and would have enabled him to reduce the burdens on the people, the war cloud descended on the country. If Pitt had had the good fortune of Walpole ; if, like Walpole, he had found the finances in a sound condition, and had enjoyed twenty years of uninterrupted tenure of office in an epoch of peace, it is safe to predict that he would have anticipated many or most of the financial and fiscal reforms of Huskisson, perhaps even those of Peel and Gladstone, and that his long administration, if less eventful, would have been more beneficent. f His record was, indeed, more enduring than that of Walpole. Forty years of war and blundering had, when North retired, almost entirely obliterated the handiwork of Sir Robert. Twice that number of years have, in many respects, but con- firmed the fiscal reforms that Pitt carried through while peace yet prevailed, and affirmed the wisdom of his choice in regard to much of the taxation he imposed, under stress of war. It was due mainly to his fostering care that England, in 1793, entered into the Great War more wealthy and prosperous than * The price of Consols was between 56 and 57 when Pitt came into office (Tomline's Memoirs of Pitt, i. 484). In 1792 they rose as high as 97. Tlie lowest jirice they touched during the war was 47^, in August, 1798. (See a curious MS. book by Tan Sommer (1840) of the fluctuations in Consols between 1788 and 1829. The book is in the library of the House of Commons.) Pitt's first loan of 1793 was contracted at 72 for the 3 per cent, stock. The loan of 1798 was contracted at about 50. ■\ Walpole's biogi-apher — Archdeacon Coxe — says of him that "he found our tariff the worst in the world ; he left it the best. " In the year in which he returned to office, 1721, the net expenditure amounted to £5,873,000, and the net income of the country to £5,954,000. In 1739, the last year of peace, the expenditure was but £5,210,000 — an "immense sum," as the Speaker told the king — and the revenue £5,820,000, and during most of that period an annual surplus was realized. These were indeed the halcyon days of finance. Walpole, the father of financial and fiscal reform, reduced excessive taxation, extended the warehousing system, simplified the tariff, and by the reduction of custom duties diminished smuggling and encouraged the import of foreign goods. He shrank, however, from the unpopularity of further attempts to improve the system of warehousing and of excise collection ; he imposed a salt tax in order to reduce the land tax ; and he plundered the sinking fund which he had created. 6 FINANCE AND POLITICS. Chap. I. any other nation, and with commerce abroad and means of com- munication at home extraordinarily extended. A pecuniary posi- tion which earned her the questionable distinction of standing, during a full generation, in the forefront of the fight against France, and of alternately subsidizing * and being embroiled with almost every other nation in Europe. It was then England learnt the lesson that the one faithful friend was the "only ally she did not pay — Providence." A strict economist in peace, Pitt was a very prodigal in war, and the ease with which he managed to raise the enormous number of millions he requu-ed, strikes modern financiers with wonder. War made an end of economy, and of surpluses. The deficit in 1793 (exclusive of the sinking fund) was a million and a half, by '94 it had risen to ten, and by '95 to twenty millions ; after that — the deluge. At first Pitt did not realize the gravity of the situation, or appreciate the nature of the struggle into which he had been forced. France bankrupt, and apparently in a state of disruption, seemed no very formidable foe ; and Pitt, greatly as he disliked the war, looked confidently to a successful struggle and an early peace."f* He fell, therefore, into the fatal error I of making at first no special effort to meet the heavy war expenditure ; and, with the exception of the imposition of taxation sufficient to meet the interest and sinking funds on the new loans, he did httle or nothing to prevent the increase of debt. Indeed it was not for some four or five years after the outbreak of war — when, in France, order had emerged out of chaos ; when, instead of being subdued. * Between 1793 and 1816, England, following out Pitt's Continental policy, by loan or subsidy paid over to her allies, while they were allies, no less a sum than fifty-seven millions, in addition to other payments ; besides providing them with over two millions of small arms and bayonets. The countries to whom subsidies were given numbered and included every nation in Europe, with the exception of Turkey. (See the invaluable Public Income and Expenditure Metum o/ 1869 {P. P. 366, 366, i."), pp. 681-2, &c.) ■|- See Lewis' British Administrations ; Massey, iii. , 470 ; Malmesbury 's Diary, 1801 ; Pellew's lAfe of Lord Sidmouth, i. 157 ; Lecky, v. 55, vi. 134 ; Macaulay's Essaya, " Pitt," p. 394 ; cf. also Burke's Letters on liegicide Peace, 1796. J Mr. Newmarch, in his exhaustive article on Pitt's Loans (Stat. Journal, June and Sept., 1855), argues that the financial state of the country and of the public credit was so deplorable for some time after the outbreak of war, that it was impos- sible for Pitt to have imposed additional taxation at tliat time. Compare Gitlbrd's Political Life of Pitt, vol. iv. See against this, Parnell's Financial Reform (4th ed. 1832), p. 285 ; Gladstone's Speech, Hansard, May 8th, 1854, &q. 1797—1815. PITT AND HUSKISSON. 7 she liad been victorious over our allies and had actually threatened our own shores ; when, at home, financial pressure had necessi- tated the suspension of specie payment, and credit had fallen low indeed — that the gravity of the contest was realized, and a determined effort was made to overtake the ever-increasing liabilities. In the autumn of 1797 Pitt rose to the occasion, and, from that time onwards, he and his successors did not relax their truly heroic efforts to meet a large portion of the current liabiUties from im- mediate taxation, instead of throwing the whole burden on future generations. The resources of indirect taxation being inadequate to meet the emergency, recourse was had to a direct property tax, and the "triple assessment" was imposed. But finding the levy only partially successful, and, though supplemented by the "loyalty loan " and by voluntary contributions, wholly inadequate to the occasion, Pitt did not shrink from imposing, nor his successors from reimposing, a ten per cent, income tax,* while in other ways the reveuue was rapidly increased. But, by this time, it was too late to repair the laxity of earlier days. So rapidly and lavishly had debt been created, that the mere interest on the new capital swallowed up a very large portion of the additional taxation imposed, leaving little available to meet the ever-increasing ex- penditure. Thus, in spite of these later endeavours, the cost of the war was far beyond the immediate means of the country, and millions had to be borrowed by the score. f The nation, numbering some fourteen to fifteen million souls, entered into the Great War burdened by a debt of two hundred and forty millions, and with an expenditure (exclusive of the * Equivalent to 23. in the pound. See /. 111. "t" In the first four years of the war, 1793-7, the taxation imposed only increased the revenue of Great Britain and Ireland by some three and a quarter millions, while a sum of 150 millions was added to the debt. But in the four succeeding years, ending with the peace of Amiens, the revenue of the country was raised by some fourteen millions a year, and the debt increased by only 127 millions. After the renewal of the war, the revenue was again rapidly increased, until, from 39 millions of 1801, it had been raised to 73 millions in 1810, and to 79 in the last year of the war. But tlie expenditure was so profuse, that the debt continued still more rapidly to rise, and by 1810 a further 150 millions had been added, and by 1815 yet another 200 millions. Napoleon's last "hundred days " of power cost England, it is said, 100 millions— a million a day. See National Debt Return, P. P. 443 of 1858, and Budget Tables in vols. i. and ii. of P. I. and E. Return of 1869 ; Newmarch, Stat, Jl., Sept. It must be remembered that in these tables the expenditure and revenue are given "net " previous to 1800, and after that " gross. " In the above they are given throughout as " gross." 8 EINANOE AND POLITICS. Chap. I. sinking fund) of some eighteen to nineteen millions a year^ — of which the Army and Navy absorbed about six, and the Debt charge nine and a half — the revenue amounting to about twenty miUions.* Twenty-two years later they emerged from the War — a war which had seen a generation come and go, and a hostile Republic change into an aggressive Empire — numbering some twenty miUions of persons ; burdened by a debt of nine hundred mil- lions ; with a revenue of nearly eighty, and with an expenditure of a hundred millions, of which the debt now absorbed thirty- two, t and the Army and Navy over fifty-six millions. Every- thing taxed, all industries " protected," and wheat at famine price. But England was triumphant, if almost exhausted; of the sea the undisputed mistress ; hers the only great capital in Europe which had never been occupied by the French. The world, weary of conflict, looked forward to a long speU of peace. The " balance of power " was restored. France, governed by a Bourbon, her strength exhausted, her territories curtailed within their ancient boundaries, was no longer a source of danger. Kings and Emperors, freed from the dominion of the Usurper, cut and carved the map of Europe according to their liking, on the settled principle that the voice of the Ruler was the voice of God.t Europe was prostrated by the war, and peace at any price was eagerly welcomed : and the arrangement of Vienna, though suppressing libertj', though charged with future agitation, and though throwing back civilization over the greater part of the Continent, kept Europe for a space free from fear of war or dread of revolution. The first seven years succeeding the restoration of peace were * The Irish revenue (£1,368,000) and expenditure (£1,395,000), then kept separate, are included in the above figures. See Porter's Progress of Vic Xatlon, ed. 1847, pp. 8, 25, &c. ; Adam Smith, pp. 460, 467 ; P. I. and E. Return, ii., Tables, &c. i The war is estimated to have cost (excluding the interest the nation has had to pay ever since, and the enormous difference in the price of issue and redemption of the stock) some £830,000,000, of which £230,000,000 was immediately met, and some £600,000,000 added to the debt. For a discussion of the question of Pitt's method of raising loans, see //. 202 n. X " Useful and necessary changes in legislation and the administration of States, ought only to emanate from the freewill and the intelligent and well-weighed con- viction of those whom God had rendered responsible for power " — the corner-stone of the " Holy Alliance " of 1815, between the Emperors of Kussia and Austria and the King of Prussia. "Well might the Duke of Wellington, in declining to sign this document, say on behalf of his Government that Parliament would require "some- thing more precise ' ' 1 1815-22. PITT AND HUSKISSON. 9 fimong the darkest in modern English history. The excitement and glory of the war had evaporated. Peace but accentuated its hardships and confirmed its burdens. During the time that war was devastating the Continent, British trade, home and foreign, had flourished. The great woollen industry of the country had expanded, and, side by side with it, had risen up the new cotton trade ; while the coal and iron industries had likewise, from small beginnings, made enormous progress. Thus trade, in spite of heavy duties, protective tariffs, navigation laws, " Berlin Decrees " and " Orders in Council," * had doubled, while foreign capital and shipping had been driven by war to seek the security of English soil and of the English flag. The country had been looking forward to peace as to a time when restraints, and retaliatory restrictions being removed, commerce would still further increase and prosper. But with peace did not come plentj^ Peace allowed trade to resume its normal course, and thus put an end to the commercial and naval monopoly that England had lately enjoyed. War, it was soon found, had impoverished her best customers. It had artificially maintained the price of many of the chief products of British manufacture; and with peace came a great collapse of prices.! Peace deprived of profitable employment much mercantile marine tliat had been used for transport and other purposes during the war ; while the great reduction of the fleet itself threw additional shipping on to an overstocked market. The war had enormously raised the price of all agricultural * The famous "Berlin Decree," issued by Napoleon in 1806, when practically supreme on the continent, declared the whole of the British Isles to be in a state of blockade, and forbad any intercourse with her. In retaliation, a series of "Orders in Ciouncil " were issued, declaring the whole of the coast of France and of her allies also in a state of blockade, and commercial intercourse with them was forbidden. " The Continent," as Peter Plymley said, "was to be reconquered by the want of rhubarb and plums." (Sydney Smith's Works, ed. 1840, iii. 464.) These ' ' Orders " — and especially the high-handed way in which they were carried out — were naturally most irritating to the neutral maritime Powers, whose trade was thereby almost destroj'ed. And one result springing from them was that, in 1812, England, though she had by that time greatly modified her regulations, drifted into war with America — an uneventful war, which closed in 1814. + There was subsequently some recovery, but at first the price of most staple articles fell immediately from 50 to 60 per cent. Lead, for instance, from £34 to £18 ; tin, from £174 to £102 ; co^jper, as high as £200 in 1805, was at £140 in 1815, and fell to £85 in 1816. Some sorts of iron fell from £20 to £8 ; raw cotton, from 2s. 6d. in 1814 to Is. 7d. in 1816, &c. See Tooke's History of Prices, ii., 11 and Appendix. In 1793 wheat had been at 49s. Sd. a quarter; in 1814 it had reached an average price of 126s. 6d. ; in 1816 it was at 78s. 6d. 10 EINANCE AND POLITICS. Chap. I. produce; and, with wheat often at five pounds or more the quarter, thousands of additional acres had been brought under cultivation. Peace lowered these prices thirty to fifty per cent., and a disastrous harvest in 1816 destroyed much agricultural capital. Kents, which had increased four or five fold during the war, threatened to come down with a run ; ?o, to remedy the agricul- tural distress, and to maintain prices, a stringent corn law was imposed, which, while unsuccessful in maintaining the price of corn, further seriously injured the commercial interest, by dimi- nishing the power of other nations to purchase British goods. Gold had been drained abroad to supply our armies and to pay for those of our allies ; bank failures and restriction of note issue had reduced the circulating medium, and great stringency and uneasiness prevailed in the money market.* Thus profits, prices, and trade shrank together, and vast numbers of persons were thrown out of work. Thousands of disbanded soldiers and sailors helped to swell the ranks of the unemployed ; + while the rapid extension of machinery, by increasing the powers of production, and by shifting the centres of industry, for the moment aggravated the distress ; the demand for goods had not yet grown up to the increased supply, labour had not yet accommodated itself to the change of locahty. Thus * " Gone is that gold, tte marvel of mankind, And pirates barter all tliat's left behind. No more the hirelings, purchased near and far, Crowd to the ranks of mercenary war. The idle merchant on the useless quay Droops o'er the bales no bark may bear away ; Or, back returning, sees rejected stores Kot piece-m_eal on his own encumber'd shores ; The starved mechanic breaks his rusting loom, And desperate mans him 'gainst the coining doom." Byron's Curse of Minorca. f Adam Smith speaks of the number of disbanded soldiers and sailors as ' ' more than 100,000— a number equal to what (sic) is employed in the greatest manufac- tures." But the number must have been much larger. In 1813 there were 147,000 sailors and marines in the service ; and (excluding the foreign corps of some 30,000 men, and including the Ordnance and embodied Militia), there were about 850,000 men in the ai-my under arms, making together a total of nearly half a million. But, by 1817, there were only 23,000 men in the navy and about 103,000 in the army, a total of 126,000, a reduction in four years (allowing for casualties) of at least 300,000 men, turned adrift to find employment elsewhere. (See P. I. and E. Return, 1869, pp. 695, 702 ; Eeport Finance Committee, 1817 ; and Parliam-entctry Paper, No. 213 of 1859, Sess. I. Huskisson, on July 9, 1817 (Speeches, ii. 6), spoke of the peace having discharged from the army and navy "from 400, 000 to 500, 000 persons, who had formerly been consumers, but who now became competitors in the market of productive labourers." 1815-2S. PITT AND HUSKISSON. 11 work was scarce, labour abundant, wages low, and distress universal. To make matters worse, the rulers were totally out of sympathy with the ruled. A starving people, sullen and suspicious, took leave to doubt the assertion of a detested ministry that, if things were bad, at least, they derived " inestimable advantages " from the existing system of law and government, " the most perfect that had ever fallen to the lot of any people." * Discontent and Luddite outrage had been rife enough before the close of the war ; and after the peace plots, riots, risings, incen- diarism, machine-breaking, and treason, became the order of the day. The Government attributed the discontent chiefly to the inevitable " agitator," who was " shaking all respect for established authority and ancient institutions ; " and force — " Xew laws to hang tke rogues that roared for bread," — was the onh- remedy in which they believed. The Habeas Corpus Act was suspended. Liberty of person, press, and speech were suppressed ; and the Home Office did not scruple to utilise spies and informers. Suppression but made matters worse. Threaten- ing demands for reform arose, leading to the Peterloo "massacre," to further repressive and oppressive measures, followed by the Cato Street conspiracy', f and ending in general gloom, depression, uneasiness, distrust, and discontent. Castlereagh's own pistol did but execute the people's unwritten decree, and the hardly suppressed " hurrah of triumph " that went up over his dead body, J marked the depth of unpopularity to which the Ministry had fallen. Then, in 1822, came a change. Exit, within a few months of one another, Addington,|| Castlereagh, and Vansittart. Ad- dington, — ' ' Without the aid of wit or parts, Aud not a grain o( statesman's arts," Home Secretary; Castlereagh, "very smooth yet grim," Foreign * Prince Regent's Speech, Jan. 28th, 1817. f The Peterloo Kiots were in 1819. The "Six Acts" were passed in the same year. The Cato Street Conspiracy was in 1820. t He committed suicide in August, 1822. See Torrens' Memoirs of Lord Mel- bourne, i. 167 ; (Jroker's Correspcmdenoe, i. 226, &c. II Addington was now Lord Sidmouth ; Castlereagh was Lord Londonderry at the time of his death ; Vansittart was created Lord Bexley. 12 FINANCE AND POLITICS. Chap. I. Secretary and leader of the House ; Vansittart, Chancellor of the Exchequer, that " devout man of leather," whom Huskisson, with considerable truth, once stigmatised as the " real blot and sin of the Grovernment." * Enter Canning, Huskisson, and Peel. The head of the Grovernment remained, indeed, the same, but the policy of the Grovernment, foreign, home, and financial, was radically changed. Canning, succeeding his life-long rival as Foreign Secretary and leader of the House, inaugurated a new policy abroad, the policy of leaving the nations to settle their own form of govern- ment without foreign intervention. Huskisson, as President of the Board of Trade, in co-operation with Robinson, the Chancellor of the Exchequer, initiated fiscal reform. Peel, at the Home Office, was humane, conscientious, and liberal minded. The nation were fortunate in their new rulers, but the new Government were themselves fortunate in the time at which they acceded to office. The late Government had had to bear the brunt of the distress, distui'bance, dislocation, and disajjpoint- ment caused by the peace. And now the worst of the crisis was over. Consumption had increased, capital was seeking invest- ment, labour was more in demand : a period of depression was to he followed by a period of expansion. A new era was begun ; an era of " reform " was inaugurated. The first few j^ears after the war had been illumined by no ray of financial enlightenment. Economy had indeed prevailed, the economy not of choice but of necessitj^, for the Government were not allowed the wherewithal to be extravagant. The main stay of extravagance then — that which has something to do with extravagance now — the income tax, had, despite the protests of the Government, who vainly struggled to retain at least one half, been forcibly swept away by the House of Commons, on the final return of peace."f The obnoxious tax was " defeated for * ' ' If blocks can from danger delivei', T^oo places are safe from the French : The first is the month of a river, The second the Treamiry Bench." Sjiint of the Public Journals, 1802, p. 206, + By a vote of 238 to 201, the defeat of the Government "was declared amidst the greatest cheering and the loudest exultation ever witnessed within the walls of tho English Senate.' Tayler, Histury of Taxation, p. 71. 1815-22. PITT AND HUSKISSON. 13 ever " ; and the House, giving way to the impulse of the moment, ■u-ent so far as to order that all the books and records relating to it should be destro3'ed.* The extinction of the tax was due partly to a natural desire for economy and reduction of taxation, — " an ignorant impatience for relaxation of taxation," as Castlereagh sneeringly called it, — partly to the fact that the tax had been granted " for and during the con- tinuance of war, and no longer " ; f partly to the hesitation felt by Parliament to trust to a Government smitten with " Imperial ideas," ways and means that might be used to turn England into a military nation, " a nation of slaves." Thus disappeared, at one fell swoop, considerably over fourteen millions of revenue, and for nearly thirty years no Government ventured to propose the re-enactment of the " oppressive and inquisitorial" tax, but had to subsist as best they could, relying almost entirely on indirect taxation. iVlong with the income tax were, moreover, relinquished the war malt tax, and some other minor sources of income, at a loss of another three millions a year. These remissions, combined with a dwindling revenue, reduced the available income by some twenty millions a year — fi-om seventj'-nine millions in 1815, to fifty -nine and a half in 1818 — and, of this income, some thirty to thirty-two miUions were absorbed by the ordinary charges for the debt, and from fifteen to sixteen millions by the military and naval services. But if, on the one hand, the loss of revenue entailed Dy these remissions induced to economy, it had on the other the enormous disadvantage, not only of preventing fiscal reform, but even of aggravating the existing financial chaos. In 1819 — in order still further to increase the sinking fund, and to make good * On the motion of Brougham. Hmwarcl, May 13th, 1816. t In 1815 (^., Feb. 20th) — when peace seemed assured — the Government stated that they did not propose to renew the income tax, but that they would raise some five millions of revenue by other taxation. On April 19th — after the escape of Napoleon from Elba — the income tax was renewed ' ' during the present year and until the 6th day of April next after the ratification of a definite treaty of peace." But the " hundred days" involved enormous expense, and the Government desired to retain the income tax at least for two years, "for the purpose," as the Chancellor of the Exchequer said, "of winding up the expenses of the war" (H., March 12th, 1816). See also debate of Feb. 1st and 27th and March 5th, 1816, and petitions of London Coi-poration and others (Feb. 13th and March 7th), &c. See Yonge's Life of Lord Liverpool, ii. 133, &c. 14 PINANOE AND POLITICS. Chap. I. the loss entailed on the consolidated fund by the amalgamation of the revenues of England and Ireland *— it became necessary to obtain some three millions of additional revenue ; and the taxation imposed took the form of increased burdens on almost every article of general consumption (tea, sugar, coffee, pepper, tobacco, spirits, ■wine, and malt), together with an increase on the export duty on coal, and an enormous addition to the import duty on wool, — taxation which, while it still further harassed trade, produced not a tithe of the revenue expected from it. Some remission of taxation was indeed given three years later, when Castlereagh and Vansittart, having, as they thought, arranged a considerable diminution in their annual expenditure, by "spread- ing" certain liabilities over a considerable number of years, were rejoicing in a supposed surplus. The remission was carried through, but the Debt operation failed, the net result being that the finances were more embarrassed than ever.f Nor was the loss of revenue alone the cause of the postponement of financial reform. Our forefathers of sixty to seventy years ago were laudably desirous of reducing their huge war debt. Ex- hausted as they were by the war, with trade bad, prices enor- mously reduced, distress almost universal, the few wild utterances in favour of the " sponge " met with no response, and the nation, as a whole, were ready not only to keep faith with the public creditor, but voluntarily and cheerfully to maintain and to add to the huge sinking fund, which (as they sincerely imagined) was rapidly reducing the debt. I The sinking fund was indeed based on a delusion, but the i^ublic at large, and their responsible financial advisers, believed it to be a reality. The statesmen of the day had not as yet appreciated the fact that remission and financial reform would in the end do more for the revenue, and for the reduction of debt, than the mere reten- tion of oppressive and vexatious burdens. It seemed to them, * The "net" separate revenue of Ireland in 1816 was four and a lialf millions, the charge for the Irish debt six and a half millions, and the consolidation involved therefore an additional debt-charge on the revenue of the United Kingdom of some two millions. See Resolutions of Chancellor of the Exchequer of June 7th, 1819, H. + The proposal was to convert an annual charge of five millions (the naval and militaiy pension list), terminable within a limited time, into a terminable annuity - of £2,800,000, to run for forty-five years. About £1,800,000 of taxation was to be remitted. (See IT. 23, "Deadweight " Annuity.) + See Cha^}. XXIX., for an account of Pitt's sinking fund. 1815— 2S. PITT AND HUSKISSON. 15 therefore, impossible to grant remission or to carry out fiscal reform, inasmuch as either would involve an immediate loss of revenue, to the detriment of the sinking fund. And thus, between 1815 and 1823, from fourteen to seventeen and a half millions were year after year applied to the maintenance of the sinking fund ; a sum which, though for the most part borrowed, was none the less heavy an incubus on the finances of the country. The first of the preliminary steps taken, when the new era of fiscal and financial reform began, was the reduction of the sinking fund in 1823 from sixteen to five millions a year ; an arrangement which left a surplus of two millions to be devoted to remission of taxation. Even the five millions was found to be too great a strain, and, in 1829, the last relic of Pitt's sinking fund was finally swept away, and in its stead was instituted that form of sinking fund which still exists, and which alone is automatic, whatever he the vicissitudes of the year — the annual appropriation to the reduction of debt of any realised balance of revenue over expenditure. Thus, the repeal of the income tax, and the maintenance of the voracious sinking fund, prevented the Liverpool-Castlereagh Government, even if they had so desired, from indulging in fiscal reform. Later, first the reduction, and then the final abolition of the sinking fund, combined with improved revenue, permitted, indeed, something in the nature of reform and remission to be undertaken between 1823 and 1842. But not until the policy of 1816 had been reversed, and the income tax had been again imposed in 1842, was it found possible thoroughly to reform, simplify, and purify the fiscal system of the country. Not, indeed, that Vansittart would have known what to do with an opportunity even if such had presented itself. Vansittart, a specimen of the class whom Dr. Johnson once savagely charac- terised as men with " minds as narrow as the neck of a vinegar- cruet " ; Vansittart, who, on one occasion, when it was notorious that bank-notes were at a considerable and varying discount, solemnly moved a resolution declaring that " in public estima- tion " they were held as equivalent to gold, " and usually accepted as such ; " * who, on another occasion, when the income tax had * ^.,May 13, 1811. See debate on "Bullion and Bank Notes Committee," Mr. 16 PINANCE AND POLITICS. • Chap. 1. been given up, justified the further relinquishment of the malt war duty on the ground that, as the Government had to borrow, it did not much matter whether they borrowed a few millions more or less ; * Vansittart, who, like Grenville, believed "regulation to be commerce, and taxes to be revenue,"'!' was hardly the Chancellor of the Exchequer to promote fiscal reform. One financial reform of great importance was, however, carried through during this period of darkness, — a reform due chiefly to Peel and Huskisson, and not to Vansittart — the resumption of specie payment. In Februarj^, 1797, the pressure on the Bank of England had been so severe that, acting on the instructions of the Government of Pitt, the directors had suspended the payment of gold for their notes, — a suspension which, at first intended to be of short duration, was afterwards annually renewed with the intention that it should continue until six months after a Treaty of Peace was signed. In 1810, a Committee of enquiry, the " Bullion Committee," had been appointed, which had recom- mended the gradual return to specie payment, on the ground that the mutual convertibiHty of notes and gold was an essential foundation of sound business. In 1811, the Chairman, Mr. Horner, moved resolutions on behalf of the Committee, but, on the motion of Vansittart, they were rejected by the House. Peace did not bring with it the resumption of cash payments ; and, in 1819, another committee, the "Bank Committee," was appointed. Of this committee Peel was chairman, and acting on its report, he, on behalf of the Government, proposed that specie payment should be gradually resumed. J The Bank itself anticipated the Baring's speech. "A guinea at this moment brought 26s. or 27s." — S., Feb. 1st, 1810. "About the year 1813," says Sir Rowiand Hill, "one of my brothers sold a guinea for a one pound note and eight shillings in silver." (Life of Sir Rowland Bill, i. 40.) The discount on notes at one time, m 1813, rose as high as 29 per cent. (Porter, p. 429.) * H., March 20, 1816. -i" Quoted of Grenville by Mr. Do-well in his History of Taxation and Taxes in England (1st ed. 1884), ii. 145 ; a Work of gi-eat value, and to which I am very much indebted. X See his speech, H., May 24th, 1819. See also several of Huskisson's speeches on the subject, both previous and subsequent to the Act (re-published -with Biographical notice, 3 vols., 1831), especially that of May 7th, 1811 ; and his pamphlet of October, 1810, " The Depredation of the Currency," a striking argument iu favour of the resumption of specie payment, and containing most orthodox free trade views (i. 50 of Speeches). 1823-37. PITT AND HUSKISSON. 17 time fixed by the Act, and, in 1821, the payment of gold for notes was practically resumed. This question, almost more than any other financial question, for years agitated the public mind. To some, it meant the mone- tary salvation of the country ; to others, it was the cause of every pecuniary disaster, every discomforting fall, or every objectionable rise of price that took place. But for nearly seventy years the system has worked successfully, and no one is now found to ques- tion the great advantage that the resumption of specie payment has been to the country. After Pitt— the Pitt of 1783 to 1793— Huskisson and Eobinson were the pioneers of fiscal reform, and it was to their enlightened action that Peel, nearly twenty years later, largely owed the power of carrjing through his more thorough and far-reaching reforms. Huskisson — for Huskisson was the prime mover, the good-natured but feeble Eobinson being little more than a cipher * — while doing much for freedom of commerce and fiscal reform, did not indeed establish free trade or anything approach- ing fi-ee trade. It is far easier to continue a restrictive system than to recede from it, and Huskisson, though himself a free- trader,! was supremely anxious not to weaken his influence for good by proposing changes for which public opinion was not j^et ripe ; and in carrying out this wisely opportunist policy, he had to strike a balance between the Prohibitionists, the Protectionists, and the Free- Traders. I But his movements, though necessarily * "Everybody knows that Huskisson is the real author of the finance measures of Goveniment, and there can be no greater anomaly than that of a Chancellor of the Exchequer who is obliged to propose and defend measures of which another minister is the real though not the apparent author." Charles Greville, Memoirs, 1st S., i. 81. Huskisson's masterly, lucid, and enlightened expositions of the fiscal and com- mercial policy of the country are sufficient in themselves to show who was the real author of the reforms. Canning spoke of him as " the best practical man of business in England" (Biog. Sketch, p. 40). He had been one of the Secretaries to the Treasury, under Pitt, in 1804^5. + In his pamjihlet of 1810 (republished by him in 1819) on the "Depreciation of tlw Currencxj," Huskisson laid down the proposition that the commercial interest of a country "is most effectually consulted by leaving to every part of the world to raise those productions for which the soil and climate are best adapted." See also many of his speeches. { See Parnell's Treatise on Financial Reform, p. 72, &c. ; Huskisson's own speeches ; Herries' speech on Budget in 1841 ; and Herries' Memoirs, ii. 185. As it was, Huskisson did not escape abuse from the Prohibitionists. On one occasion in the House, during a debate in 1826, he was, by implication, denounced by a member interested in the silk trade as an "insensible and hard-hearted meta- physician, exceeding the Devil in point of malignity. " VOL. I. c ^ 18 FINANCE AND POLITICS. Chap. I. slow and cautious, were sure, and his few years of office at the Board of Trade, between 1823 and 1827, made a lasting mark upon the fiscal system of the country. He found it strictly pro- tective and largely prohibitive ; he left it still protective, but far less so than before, and with prohibition, except as to articles of food, practically swept away. He managed, moreover, to interest people in financial reform as they had never been interested before ; and his tragic and premature death was felt as a distinct loss by the whole country. He had sown the good seed, and he was, after an interval, followed by those who were capable of reaping the harvest. Nor were the reforms initiated by Huskisson in any way pre- mature. The fiscal and financial situation was indeed deplorable. Taxation, though a necessity of war, is an art of peace ; the time of battle is not a time for remission or reform. Small blame to Pitt and his successors, therefore, if, in the throes of a life-and- death struggle, their impositions of, and additions to, existing taxation were not always judicious. Taxation had been pretty universal before the war ; * but every expedient hitherto left untried had then been called into requisition, and no conceivable method of raising revenue had been neglected. Necessity had known no * Evon before the war, successive Chancellors of the Exchequer had been fertile in inventing sources of taxation. Mr. Dowell (ii. 187) aptly quotes some lines written in 1784 :— " Should foreigners, staring at English taxation, Ask why we still reckon ourselves a free nation. We'll tell them we pay for the light of the sun ; For a horse with a saddle, to trot or to run ; For writing our names ; for the flash of a gun ; For the flame of a candle to cheer the dark night ; For the hole in the house, if it let in the light ; For births, weddings, and deaths ; for our selling and buying— Though some think 'tis hard to pay threepence for dying ; And some poor folks cry out. These are Pharaoh-like tricks, To take such unmerciful tale of our bricks. How great in financing our statesmen have been. From our ribbons, our shoes, and our hats maj' bo seen. On this side and that, in the air, on the ground. By Act upon Act now so iirndy we're hound, One would think there's not room one new impost to put, From the crown of the head to the sole of the foot ; Like Job, thus John Bidl his condition deplores. Very patient, indeed, and all covered with sores." Burke, two years previously, had said that "we were already taxed if we rode or if we walked ; if we kept at home or went abroad ; if we were masters or if we were servants ; if we drank wine or if we drank beer ; and, in short, we were taxed in every way possible. " 1823—27. PITT AND HUSKISSON. 19 law, and the conflict had left its baneful mark on the taxation and trade of the countrj-. Almost every article that could minister to the wants of man, physical, mental, or moral, was taxed and re-taxed. The duties were complicated and diiferential to the last degree, the same article being often, with perverse ingenuity, taxed in different ways and under different heads. It seemed to be of little account whether a duty was profitable or whether it was merely vexatious, whether it produced a threepenny-bit,* or whether it produced a million sterling. It might be neither profitable nor protective, and yet be retained. The raw materials of industry were heavily taxed. Imports of food were practically forbidden, and the price of home produce was artificially maintained. Most foreign manufactures were prohibited ; all home industries were protected ; Colonial pro- ducts were differentially favoured. At one and the same time bounties were given to encourage a trade, and harassing excise duties which injured its growth were imposed. Taxation for revenue purposes was levied irrespective of the burden, incidence, or injurious nature of the duty. Navigation laws hampered com- merce ; complicated customs laws throttled trade. Duties were excessive, collection costly, smugghng rampant, fraud universal. " "We can inform Jonathan," wrote Sydney Smith in the Edin- burgh Review, 1820, " what are the inevitable consequences of being too fond of glory ; — taxes upon every article which enters into the mouth, or covers the back, or is placed under the foot ; taxes upon everything which is i^leasant to see, hear, feel, smell, or taste ; taxes upon warmth, light, and locomotion ; taxes on everything on the earth, and the waters under the earth, on everything that comes from abroad or is grown at home ; taxes on the raw material ; taxes on every fresh value that is added to it \)j the industry of man ; taxes on the sauce which pampers man's appetite, and the drug that restores him to health ; on the ermine which decorates the judge, and the rope which hangs the criminal ; on the poor man's salt, and the rich man's spice ; on the brass nails of the coffin, and the ribands of the bride ; at bed or board ; couchant or levant, we must pay. The schoolboy whips his taxed top ; the beardless youth manages * The permanent import duties on saltpetre produced two-pence a year, the war duty a penny. 2 20 FINANCE AND POLITICS. Chap. I. his taxed horse, with a taxed bridle, on a taxed road ; — and the dying Englishman, pouring his medicine, which has paid 7 per cent., into a spoon that has paid 15 per cent., flings himself back upon his chintz bed, which has paid 22 per cent., and expires in the anns of an apothecary who has paid a licence of a hundred pounds for the privilege of putting him to death. His whole pro- perty is then immediately taxed from 2 to 10 per cent. Besides the probate, large fees are demanded for burjdng him in the chancel ; his virtues are handed down to posterity on taxed marble ; and he is then gathered to his fathers to be taxed no more." * It seems scarcely credible to us, now-a-days, that this description was no mere quip on the part of that most witty of divines, but was literally a statement of things as they were — less than seventy j'ears ago ! Trade shackled, ham25ered, injured, had unsuccessfully struggled against manifold obstacles. And it ajipears — for the imperfect records of these earlier days do not permit of accurate estimate t ■ — that, while in 1814, the total foreign trade of the country amounted to about ninety-seven millions, that sum had, by 1822, dwindled to seventy-seven millions, a clear proof that something was radically wrong. Prohibition and excessive duties had borne their natural fruit, had injured legitimate trade, and fostered that which was illegitimate. Smugglers drove a roaring trade, illicit profits were enormous. Nay more ; everyone sj^mpathised with " Smuggler Bill," and hoped he would escape from "Exciseman Gill." "I like a smuggler;" wrote Lamb, "he is the only honest thief. He robs nothing but the revenue — an abstraction I never greatly cared about." I Smuggled articles were openly worn; smuggled goods were openly consumed. [] Silk and spirits were the main- stay of the smuggler ; and, to meet the evil, the prohibitive duties on silk were changed by Huskisson into a duty of 30 per cent, on the value, while the duties on spirits were enormously reduced. The first experiment was made with the Scotch and Irish spirit * WorJcs, i. 372. ■I- See /. 143, n. t " The Old Margate Hoy," written in 1833 II See /. i7, SOO, 249, n. 1823—87. PITT AND HUSKISSON. 21 duties ; and in 1823 they were diminished by considerably over one-half, while the distillers were freed from many trammels on their trade. So successful did the reduction prove — the amount of duty-paying spirits being at once doubled — that the policy of reduction was extended to British spirits, and with equally satis- factory results.* The change made in the silk duties, on the other hand, was not nearly thorough enough to be satisfactory. The duty of 30 per cent, still left the smuggler a good margin of profit ; and, though the reduction of the duty in 1846 to 15 per cent, checked the smuggling, the illicit trade continued until the final repeal of the duty in 1860. t Nevertheless, the upshot of the reforms and reductions initiated bj"^ Huskisson, and continued, as they were, by his successors, was gradually, by reducing illicit profits, and by enabling the consumer to satisfy his wants at a more reasonable rate, to take away the occupation of the smuggler, and to bring the " exciseman" within the pale of humanity, t Nor was reduction confined to spirits and silk. All the pro- tective, in some cases prohibitive, import duties on foreign manu- factures, varying between 40 and 180 per cent., or even more, of the value, were reduced to 30, 15, and even 10 per cent. Certain cotton and glass manufactures were admitted at the lowest rate ; certain woollen and earthenware goods at 15 per cent. ; wrought iron and steel at 20, some descriptions of linen at 25, others at 40 per cent. ; silks, at 30 per cent. The British manufacturer, while stimulated by the introduc- tion of limited foreign competition, was to be placed in a better position to meet it, by a considerable reduction in the import duties on the raw materials of manufacture. The duties on flax, hemp, and other articles were greatly reduced, and that on raw silk from 5s. 7hd., first to 3d. and then to Id. per lb. The import * See I. 247-252. t See/. 198-200. McCuUoch, Com. Did., "Silk," estimates that tlie smuggler could cover his risks by a charge of from twelve to fifteen per cent, on the value. He points out that the high duty of thirty per cent., instead of excluding, acted as a bounty on the clandestine importation of foreign silks. See Porter's evidence before the Import Committee of 1840 {P. P. 601 of 1840, p. 188). J See Dr. Johnson's well-known definition : "Excise — a hateful tax, levied upon commodities, and adjudged, not by the common judges of property, but by wretches hired by those to whom excise is paid." Johnson's Dictioimry, ed. 1755. Many of the articles now under the supervision of the Customs department were formerly under that of the Excise, for the greater security of levy. 22 FINANCE AND POLITICS. Chap. I. duty on foreign wool, imposed in 1802, enormously raised by Vansittart in the " black year," 1819, was reduced to Id. a pound. At the same time, in lieu of the prohibition on the export of home-grown wools that had been in existence for 180 years, a low export duty was imposed. Both import and export duty were later abolished by Peel. The remaining duty on salt (of 15s. a bushel), which had been gradually diminishing, was further reduced to 2s., and then repealed ; that on leather was reduced by one- half, and finally repealed by Goulburn in 1830. The excise duties on stone, and on printed silks, were repealed. But Huskisson, as did Peel after him, devoted his attention more to the Customs than to the Excise ; and, as did Peel in his earlier budgets, pre- ferred reduction to abolition. The system of bounties, instituted for the encouragement of particular trades, was gradually brought to an end. Those given on the exportation of silk stuffs were immediately, and those on linen ultimately, abolished. Those given as an encouragement to the prosecution of the herring and whale fishery — bounties which, as Adam Smith said, caused " vessels to be fitted out for the sole purpose of catching, not the fish, but the bounty" — practically disappeared.* The duties on rum, coal, wine, tobacco, t coffee, and other articles of consumption were lowered. The window tax and the house duty, at a cost of a million and a quarter, were reduced by one-half, and their burden in other ways lightened. The " estabhshment " duties were reduced by a moiety, and those affecting Ireland altogether repealed. Jealousy of the commercial progress of other nations had been so great, that up to 1825 it had been a high crime and misde- meanour for any artisan to transfer himself and his knowledge to a foreign country, and the export of machinery had been totally * Adam Smith estimated that, about the j-ear 1780, every harrel of cured herrings consumed in England, the value of which was only some 21s., cost the Government 23s. lOd. (p. 231). The bounty Mas in the form of so much a ton for the vessel, and so much a barrel of herrings. Though now very greatly reduced, it was not finally abolished until 1830. See the interesting reports of the Commissioners for 1821 and 1822 {P. P. 25 of 1821, and 425 and 574 of 1823) for the mode in which the bounty operated, for the number of fish caught and the bounty paid. + Through an error in drafting in 1825, the tobacco duty was reduced by Is., or one-fourth of its amount. This involuntary reduction proved so satisfactory, that the duty was not again raised. 1823-27. PITT AND HUSKISSON. 23 prohibited. The former barbarous enactment was now repealed, together with the prohibition on the export of the more common articles of machinery ; and the remaining prohibitions disappeared in 1843.- The " Union Duties," which still existed between England and Ireland, to the great obstruction of trade, were abolished. The excise licence laws were consolidated. The multitudinous Cus- toms Acts were repealed, simplified, and consolidated — a very great undertaking.* The system of collection was simplified. The three separate Customs Boards, as well as the three separate Boards of Excise, for England, Scotland, and Ireland, were respec- tively consolidated into one Board for the whole of the Customs, and one for the whole of the Excise. The system of joint custom and excise supervision and collec- tion applied to many imported articles of general consumption — ■ originally adopted by Walpole as the best security against smug- gling, and further extended by his successors t — was brought to an end, and the duties on all articles of import (wines, spirits, tobacco, glass, coffee, pepper, &c.) +, wholly or in part collected by the Excise Department, were re-transferred to the Customs Department. In 1822, and again in 1825, something was done to relax the re- strictive commercial laws under which the trade with the Colonies was carried on. The " Plantations " were originally encouraged as valuable marts for British wares, " for the sole purpose," as * Tooke said that the consolidation introduced into the "Custom House Code" a degree of simplicity hardly credible to those who had witnessed the infinite oppres- sion and complexities of former periods (v. 444). See /. 129-132. -(■ Walpole, who had already successfully made tea and coffee subject to excise duties and supervision, desired, in 173-3, further to extend the system to wine and tobacco. But the very name " excise " was still odious to Englishmen ; great popular excitement arose in opposition to the scheme, and Walpole, declaring that "he wonld never be the Minister to enforce taxes at the expense of blood," withdrew the obnoxious proposals. Pitt later substantially carried out, and with but little opposition, Walpole's scheme. See, for Walpole's "Excise," yiahon's, History of England, ii., chap. xvi. ; Coxe's W'al2}oU, i. 372; iii. 129, &c. ; ItfcCarthy's Four Georges, i., chap, xx.; Dowell, ii. 97-100; iv. 167, 243, &c. ; Lecky, i., chap. iii. ; Porter, p. 469 ; Ency. Brit., &c. It is told of Walpole in connection with the debate, that "on March 1st, 1733, Walpole's excise scheme was brought forward. An opponent of the measure asserted that its object was to revive the worst practices of Empson and Dudley. The Prime Minister was so grossly ignorant of history that he had to ask his neighbour ' who Empson and Dudley were ? ' " {Anecdotal Mistory of Parliament, p. 102.) J See Report of Commission of 1824, P. P. 141 of 1824. Tea alone was excepted, and was not re-transferred from the Excise to the Customs Department until 1834. 24 FINANCE AND POLITICS. Chap. I. Adam Smith put it, " of raising up a people of customers." In very early days, their commerce, then comparatively unimportant, had been more or less free. But, by the middle of the seventeenth century, the " monopoly system " was founded, and the whole of the trade of the Colonies was strictly confined to England, and could not be carried on except in British ships ; while those Colonial manufactures thought likely to compete with home industries, were forbidden or discouraged.* Under Hus- kisson the Colonies were allowed to trade directly with any part of Europe, and to import or to export goods so long as they were in British ships, or in ships of the country to which the goods were sent or from which they were received. The trade between the Mother Country and the Colonies was, however, still to be confined strictly to "British ships," and the customs tariff of the Colonies was still framed with a view of favourmg the home trader. The duties on certain Colonial products were reduced : Canadian corn was admitted at a fixed duty irrespective of price. Thus, as Huskisson said,t would best be "perpetuated, a solid and useful connection " between the Mother Country and the Colonies. A further considerable reform was effected in the Colonial tariffs bj' Labouchere in 1841,1 when the prohibitions on the import of certain foreign goods into the Colonies were abolished, and the general duties reduced to moderate dimensions. With self-government came complete fiscal freedom — a liberty which has, alas ! in every case but one, been devoted to protective purposes. But if the Colonies had suffered under the old commercial system, England had suffered too. For while excluding the Colonies from foreign markets, she in return gave them a practical monopoly of the EngUsh market for their produce, by imposing, at the cost of the British consumer and tax-payer, || enormous differential duties in favour of the Colonial against the foreign importer. And the worst of it was that, while the Colonies little by little obtained freedom of commerce, England had become so * See note, /. ISS, "hats." A specimen of many other "Colonial" acts. + See Huskisson's great speech on Colonial policy, March 21, 1825 {Speeches, ii. p. 304), and, as an exposition of his general financial policy, his weighty speech on the " Commercial Policy of the Country " of March 25 (ii. p. 327). J See Levi, History of Commerce, part iii , chaps, ii. and x. II See note, /. 46. 1823-27. PITT AND HUSKISSON. 25 entangled in the network of differential duties, that, though gradu- a% reduced, the burden of the one-sided monopoly of the English market for the Colonial producer, was for another thirty years maintained with considerable rigour ; and it was not indeed until 1860 that the last remaining differentially prohibitive duties — on such articles as wine, spirits, timber, butter, cheese and a few other things — were abolished. And, while dealing with the Colonial question, the restrictive Navigation Laws (under certain provisions of which special duties were charged, and lesser bounties and drawbacks given on goods imported into or exported from England in ships other than British ships) were amended, first by Wallace in 1822 and then by Huskisson in 1825, and placed on a reciprocity basis. In 1815, a reciprocity treaty had been negotiated with the United States. Its j)ro visions were now extended to other foreign nations, and Commercial Treaties were negotiated with France, Prussia, Den- mark, and many other countries. Yet the most obnoxious pro- visions, and those which did most to hamper trade, were not repealed until some five-and-twenty years later.* While the duties on very many articles were reduced, that on the " noblest grain " + was still fully maintained. Yet, as in the case of Peel, so in the case of Huskisson, the fiscal reforms initiated by him logically and ultimately led to an amendment of the ' sacred ' Corn Laws also, and to the substitution of a real sliding scale for the prohibitive duties then in force. | The natural revival of trade consequent on all these fiscal and financial reforms, from 1822 to 1826, was coincident with much financial and constructive activity. Bridges, canals, and docks were built ; incipient railway companies were formed ; banks, gas corporations and joint stock companies of all sorts were every- where established. But this activity, though founded on a real basis of increased prosperity, too soon turned into feverish- ness, and into a vast and ill-directed speculation in all branches of trade — especially in foreign mines and loans. Undue inflation ended in the inevitable collapse, with destruction of credit and * See /. 97, for Mstoiy of the Navigation Laws. + Burke, Thoughts on {Scarcity. + See C/uq}. IV., for history of the Corn Laws. 26 FINANCE AND POLITICS. Chap. I. depreciation of property.* The fiscal reforms had not been sufficiently thorough, and trade, which had been showing signs of revival, was again prostrated by the crisis of 1826, and did not, for some years, renew its former vitality, t * In addition to the speculation in banks (of which 77 subsequently stopped pay- ment), and in other joint stock companies, there was a mania for inyestment of capital in South American loans, and in North and South American mines. Between 1821 — 5 nearly fifty millions sterling were thus lent, chiefly to insolvent States, while millions were invested in mines, the shares of many of which rose at one time ten or twenty-fold. See Levi, p. 178 ; Francis, History of Bamk of England, i. 351, &c. The midsummer madness of the time is well described by Miss Marti- neau. " It is positively declared, " she says, " that warming-pans from Birmingham were among the articles exposed (at Rio Janeiro) under the burning sun of that sky ; and that skates from Sheflfield were ofl'ered for sale to a people who had never heard of ice." (History, ed. 1849, i. 357.) Among the bubble companies started in 1720 (at the time of the previous mania, a hundred years before), and looked upon directly afterwards as absurd and on a par with the company for " making of oil from sunflower seeds," "for importing a number of jackasses from Spain," or "for a wheel for a perpetual motion," was one "for making of iron with pit-coal." See Mahon's History, ii. 17. Greville says of the panic of 1826 : " The state of the city, and the terror of all the bankers and merchants, as well as of all owners of property, is not to be conceived but by those who witnessed it." (1st S., i. 77.) f The revenue in 1822 amounted to 58J millions, in 1826 to just over 54i ; in the interval, on balance, lOf millions of taxation were remitted, a recovery of revenue of over seven millions. See Porter, p. 493. CHAPTER 11. THE ■\VHIGS. 1827— 1S41. LiVEEPOOL, -who for ten years had been the chief of a Govern- ment of repression and retrogression, had, adapting himself to circumstances, for five years presided with equal placidity over its antithesis.* Of this Government he had acted as the "cement" t which kept together the incongruous materials of the anti- Catholic and the more liberal Tories ; and, with his death, in 1827, the two sections fell apart. Then came Canning's hundred days. Canning the brilliant, witty, eloquent, if somewhat erratic, statesman ; the "adventm'er," the actress' son ; who, in spite of every obstacle, by the force of his own genius, rose to the proudest position an Englishman can hold. A diplomatist " who never took his tea without a strata- gem," but who made the watchword " England and Liberty " ring throughout the world. Canning was succeeded by " Goody Goderich," — who, as " Pro- sperity Robinson," had done some valuable service. But Goderich, embarrassed alike by his failure to keep the peace between Herries and Huskisson, in their contention over the chairmanship of a Finance Committee, and by the victory of Navarino, resigned his commission before the meeting of Par- liament, and retired from the Royal Presence mopping away his futile tears with the Royal pocket-handkerchief. + His place * Between 1812 and 1822, and between 1822 and 1827. + Hill's Canning. Liverpool, if we may judge from his Life and from many of his speeches, held somewhat liberal views on the question of the Corn Laws and fiscal reform, even before he found himself associated with sympathetic colleagues ; and he gave Huskisson and Robinson every support in their work. See Yoiige's Life of Liverpool, especially vol. iii. J The name "Prosperity Robinson" was given him by Cobbett. See Sir H. 28 FINANCE AND POLITICS. Chap. II. was taken in 1828 by the anti-Catholic Tories, under the Duke of Wellington and Sir E. Peel. Huskisson— Canning's right-hand man— took office with the Tories, to his own discom- fort and to the injury of his political reputation. But the Duke soon managed to rid himself of a colleague whom he had always disliked, and with Huskisson went the other Canningites.* Between the death of Liverpool in 1827, and the accession of the Whigs in 1830, Httle was done to carry on the policy initiated in 1823. The W^ellington Government — with Goulburn as Chan- cellor of the Exchequer— took, indeed, one excellent step in their repeal of the tax on leather, the first to disappear of those pernicious excise duties on articles of home manufacture, that had been so lavishly imposed about the beginning of the eighteenth century ; t and they had the sense finally to abolish the old fallacious sinking fund. They reduced still further the duty on sugar and on certain silk manufactures. They made, however, one serious mistake in the repeal of the beer duty in 1830. | The incidence of this tax was unquestionably unfair, and pressed much more heavily on the poorer classes than on the richer; for, inasmuch as the latter usually brewed at home, they were able practically altogether to evade it. These were good reasons for the commutation of the tax into another form, and for im- provement in levy, but not for repeal. The absolute repeal involved the relinquishment of some three millions of taxation, which, instead of merely going to cheapen beer and to encom'age drunkenness, might weU have been applied to the promotion of fiscal reforms. Lytton Bulwer's Historical CJiaracters (p. 354). Lord Goderioh appeared once more in history. lu 1815, as Mr. Robinson, he had, when President of the Board of Trade, submitted the Corn Laws of that jear to the House. In 1846, as Lord Ripon, he, when again President of the Board of Trade, had charge of the Corn Law Eepeal Bill in the House of Lords. * Palmerston (Bulwer's Life, i. 278) estimated that the Canningites in 1828 consisted of only 11 peers and 27 commoners, but nearly all men of weight. Lord Dudley said of Canning's party, in 1813, that they "dined fourteen and voted twelve." + The tax on leather was imposed in 1710. It was distinctly a tax on a ' ' necessary, " and on an article that entered into many processes of manufacture. In 1815 the duty was at the rate of 3rf. a pound on common leather, and produced about £700,000. Reduced by one-half in 1822, it was now producing some £360,000 a year. t See II. 27G. 1828—30. THE WHIGS. 29 But if the government could not boast of doing much for fiscal reform, at least they deserved credit for economy. Economy was indeed still the rule, and the years between 1825 and 1840 were the halcj'on days of economy in finance — a period to which IVIr. Gladstone has more than once adverted in fond reminiscence, to point a moral against more modern extravagance, as the time when Tory and Whig alike strove, and strove successfully, to reduce the public expenditure, and to maintain a balance on the right side. In 1830, the distress in the country, the late report of the Finance Committee of 1828, and the pressure of public opinion, induced the Torj' government to make still further efforts to reduce the expenditure, and, in that year alone, they economised to the extent of over a million. So successful indeed were their efforts, that the Whig Government, who had come into office as the party of Retrenchment as well as of Reform (and their election cry had been more for retrenchment and reduction of taxation than for reform) were not in a position to effect an immediate reduction of more than another million — to their own vexation, and to the bitter disappointment of their supporters.* But nevertheless, during their first few years of office, the Whig Government continued to practise economj'^, and, by 1835, the total expenditure of the country (exclusive of the " slave loan ") was reduced to under 48 J millions, the lowest point it had touched since 1796. Thus the annual expenditm-e, which amounted to * " "We have reaped the harvest of reduction," said a member of the Wellington Government, "and left only the gleanings to our successors." — Le Marchant's Memoirs of Earl Spencer, ii. 460. The ostensible cause of the resignation of the Wellington Ministry was a defeat (233 to 204) on a motion moved by Sir H. Parnell, and supported by the whole strength of the Opposition, to inquire into the Civil List, with a view to reduction : the question having arisen on the accession of "William I"V. A committee was appointed, on whose recommendation the Civil List was nominally reduced from about a million to £510,000 a year. The Civil List was in future to include only those expenses which affected "the dignity and state of the Crown and the comfort of their Majesties," the other items formerly included — for justice, diplomatic services, Treasury salaries, and miscel- laneous—being charged separately on the Consolidated Fund, and being thus brought under the cognizance of Parliament. But — much as in the case of Burke's " Econo- mical Reform '' — while the change in the system of accounts was satisfactory, a prospective saving in " pensions " was practically the only economy effected. There was much truth in Croker's criticism that the only difference was that the new Government ' ' of our ten classes call the first five Civil List, and the other five Consolidated Fund." Correspondence, i. 106. See also Life of Sir J. Graham, i. 310 ; "Walpole's History of England, ii. 631, &c. ; Memoirs of Earl Spencer, p. 270, ice. 30 FINANCE AND POLITICS. Chap. II. 58| millions in 1817, was reduced to 55^ by 1824, and in the next ten years was still further reduced to 48|^ millions, a reduction which was, however, partly due to the diminishing charge for the debt, both through redemption of capital, and by diminution in the average rate of interest.* From thence forward there was a slow though steady increase in the expenditure, until the time of the Crimean War, when it stood (in gross) at between 55 and 56 millions. War at once multiplied expenditure all round, and when peace again came, it was found impossible to return to anything approaching the old scale. In the autumn of 1830, the Wellington Government, while revolution raged abroad, and reform was loudly demanded at home, had, by the mouth of the Prime Minister, declared that the existing system of representation was as perfect as the wit of man could devise. t The Tories were akeady offended by the concession of the Roman Catholic claims, the Canningites by the dismissal of Huskisson ; and this gratuitous declaration making all coalition with the Whigs impossible, the Government were speedily defeated on a side issue, and forced to resign. The Whig party, to whom " office " meant but the memory of a short lived dream, who but three j^ears before were thought to be "united," only because comprised in the person of the " stiff and stately " Grey, " the solitary and powerless relic of an extinct party," now, much to their own surprise, found themselves in office,! a powerful party, and before long to be backed by an overwhelming majority. The Whig reign, extending over eleven years, divides itself into * The total outstanding funded and unfunded debt in 1817 amounted to 840 millions, in 1824 it was 820 millions, and by 1835 it was reduced to 790 millions, against which, however, the terminable annuities had risen from two miUious to four (see //. SOS). In 1822, 153 millions of 5 per cent, stock had been converted into 4 per cent. Two years later, half that sum of 4 per cents, were converted into 34 per cent, stock ; and in 1830 another 153 millions of 4 per cents, were converted into 34 per cent, (see /. 126). The debt charge (exclusive always of the sinking fund) which in 1817 had amounted to 3H millions, had by 1824 fallen to 30i and in 1835 was but 28i millions. (P. P. 443 of 1858, and 366 I. of 1869.) ' + This declaration of the Duke's, combined with the postponement of the Kino-'s visit to the Guildhall, caused a sudilen fall in the Funds from 84 to 77J,, a fall which was, however, soon recovered. Tliis is probably the only speecli of a Minister, on a purely domestic subject, which has ever seriously affected the price of the public securities. J In the " Eeform Cabinet" of 1830 there were four Canningites (Melbourne Pal- merston, Goderich, and Grant). 1830-34. THE WHIGS. 31 two parts. The earlier and glorious portion, the period of practical activitj-, from their accession to office in 1830 until the autumn of 1834, when they were turned out " neck and crop " by the King ; and the later and inglorious portion, dating from their return to office in 1835 until their final fall in 1841, a period of stagnation, humiliation, and incompetence. The earlier period was one of zeal for social and political reforms, of bounding hopes and high aspirations. Parliamentary Reform (leading later to the almost equally important Municipal Reform), Reform of the Poor Law,* Irish Church Reform (accompanied of course by a Coercion Act), were carried through. The Factory Acts were improved and extended.! National education was for the first time recognised and encouraged by the State, t The ferocious criminal law was mitigated.il Lastly, the final abolition * The old Poor Law system was a vicious one — a system of out-door relief to able- bodied men, doles from the rates in aid of wages, children, legitimate or otherwise, forming the standard of income. Self-respect and self-denial were at a discount. Corruption and maladministration pervaded the social system. The new Poor Law abolished out-door relief for able-bodied men, mitigated the law of "settlement," consolidated parishes, re-organised the system of rating, and created a Government department armed with a general authority of re-arrangement, supervision, and cor- rection. The poor rate, which in 1750 was but £730,009 a year (in England and ■\Vales), had risen to over six millions in 1814, and to seven millions in 1832 ; and was now witliin ten years reduced to five, in spite of an increase in population of some two millions. Much immediate hardship, no doubt, resulted from the drastic change that was made, and from the severity with which the new law was put into force. But gradually the new Poor Law outlived its unpopularity, and though by no means perfect, proved itself to be on the whole satisfactory. + The first Factory Acts were passed in 1802 and 1819, owing to the exertions of the first Sir Robert Peel. By them, no child under 9 was to be allowed to work in a cotton factory, and no young person under 16 to work more than twelve hours a day, exclusive of meals. In 1833 the Government, after defeating Lord Ashley's Bill, passed one of their own (not, however, to come into full operation till 1836), by which it was provided that no child under 13 should be allowed to be employed (in any except a silk-mill) more than nine hours a day, and by which was "esta- blished, for the first time, the great principle that labour and education should be combined." Hodder, Life of Lord Shaftesbury, i. 141, 142, 166. These acts were from time to time still further extended. See Bevan, The Industrial Classes. t In 1832, a pittance of £20,000 a year was voted for public education. In 1839, the fund was increased to £30,000, and the Committee of Council was formed. In 1862 came the "Revised Code," and in 1870 the "Education Act." By 1886, the amount voted was four and three-quarter millions a year. 11 In 1808, capital punishment had been abolished for picking pockets to the value of 5s. ; and in 1811, further exemptions had been made. But little more was done until 1820, when a further great advance took place. Between 1832-35, capital punishment was abolished for horse, sheep, and cattle stealing, for larceny in dwelling-houses, for forgery — except in the case of wills, for housebreaking, for returning from transportation, for sacrilege and letter stealing ! Capital puuisliment was practically abolished, for every crime save treason and murder, in 1837, though not finally by law until 1861. In 1820, 1,236 persons were sentenced to death, of whom 107 were executed, and of this number only ten were executed for murder, and the other 97 for lesser crimes, chiefly for horse and sheep stealing. In 1833, 32 FINANCE AND POLITICS. Chap. II. of slavery was carried to completion.* Such were the measures by carrying which the Grey ministry served their country. In financial pohcy they were less successful than in domestic matters. Lord Althorp, though trusted by men of all parties for his straightforward and transparent honesty, in a way that seldom falls to the lot of a party leader, was — as no one allowed more freely than himself — not much of a financier, t Brought up in the school of economy and fiscal reform, an avowed follower of Parnell, the great financial authority of the day, I assisted at the Board of Trade by another notable financier, Poulett Thomson, he attempted considerable things, but accomplished, considering the power at his back, woefully little. Althorp began too ambitiously, and in his first attempt at finance in 1831 produced a Budget,]] which, though in many ways 931 persons were condemned to death, of whom 33 were executed, and only six of these were murderers. 1837 was the first year in which the executions, eight in all (there were 438 capital convictions), were solely for murder. See Porter, Sec. vii.. Chap. ii. Walpole, iii. 55 ; Lord Eussell's English Gov. and Constitution, p. 247. * The total amount paid as compensation to the slave owners — the ' ' West Indian interest " — was twenty millions sterling. The number of slaves freed was about 750,000. The average rate of compensation paid varied between £12 14s. id. a head in the Bahamas, and £53 6s. Sd. a head in Honduras. The total compensation amounted to about 45 per cent, of the former sale value of the slaves ; but, on the other hand, the planters were now relieved of the liability to provide for them during sickness, infirmity, or old age. See Porter, p. 805, &c. f "Jack," wrote bis fond mother at the time of his appointment — and herein the maternal verdict differed, as it is apt to do, from that of general obseiTers — "was always skilful at figures, and Ms work is so much to his taste, that I am sure he wiU do himself credit. " {Memoirs, p. 272.) Althorp's own opinion of his financial ability was very different (p. 268, &c.). It may be noted that out of the 570 pages in his " Life," only about 20 are devoted to his labours as Chancellor of the Exchequer, though that office was one of the most important he ever undertook. t Sir Henry Parnell, in the early part of 1830, published his treatise on Financial Reform, which had a considerable influence on imblic opinion. He advocated the repeal of the taxes on raw materials, as well as the excise duties on home manu- factures, and the reduction of the import duties on foreign manufactures. He strongly opposed the whole system of protection, whether of coi'u or of any other commodity. He desired the reduction of taxes which, otherwise commendable, were excessive in amount, namely, the duties on such "luxuries " as tea, sugar, aud dried fruits, as well as on tobacco, wine, and spirits. He was strongly in favour of retrenchment, especially in the naval and military services. But realizing that no practicable economy could reduce the expenditure sufficiently to allow of his proposed abolitions and reductions of taxation, he did not shrink from advocating the re-imposition of an income tax at the rate of IJ to 2 per cent, (from Z\d. to hd. in the &). In short, he laid before the country the financial and fiscal policy that Peel and Gladstone afterwards carried through. See Financial Reform., 1st ed., 1830 ; 4th ed., 1832. It was on his motion for the appointment of a committee to enquire into the Civil List, that the Government of the Duke was beaten. Sii- H. Parnell afterwards became Lord Congleton. II H., Feb. 11th aud March 18, 1831. 1831. THE WHIGS. 33 most commendable, was too comprehensive and advanced to be acceptable. The aim of the Budget was threefold. First, to reduce certain duties — those on tobacco, newspapers, and news- paper advertisements — which " bj' narrowing the consumption contract the revenue." Secondly, to repeal certain duties — such as those on sea-borne coals and slates — -which pressed more heavily on one class of the community than on others. Thirdly, to repeal certain duties — those on candles, glass, printed calicoes and cottons — which " besides interfering with commerce took more out of the pockets of the people than was furnished to the revenue." * These remissions and reductions, after allowing for recovery of revenue, would cost rather over three millions. The deficit was to be filled up by various fiscal changes. The differential duty in favour of colonial timber was to be reduced by lowering that on foreign, and raising that on colonial woods ; t the duty on wine, differential in favour of Peninsular as against French wines, was to be equalised I — both excellent proposals, and both to the benefit of the revenue. At the same time — and this was the blot on the Budget — an additional duty was to be imposed on the import of foreign raw cotton, as well as on the export of coal. In order to provide the balance of revenue required, together with a surplus of some half million, a direct tax of a half per cent, was to be imposed on the transfer of landed and funded property, to produce a million and a quarter. The Budget was vehemently opposed, especially the last pro- posal, which Peel denounced as " not a question of policy or prudence, but a question of morality," on the ground that by an express provision in all the Loans Acts, funded property was especially exempted from any tax whatever. The old income tax had been extended to fundholders, because it was imposed on all * So wasteful was thesystem of excise toxation on " printed goods," that while the gross amount of taxation levied from " this, most impolitic impost," was ahout two millions, no less than two-thirds of this sum was repaid in the form of reductions or drawbacks on export, the net receipt bv the Exchequer being only half a million, and this sum cost £200, 000 to collect. The duty was also gi-ossly partial, representing a burden of 100 to 150 per cent, on the inferior and only 10 to 15 per cent, on the finer kinds of cotton goods. See Poulett Thomson's (Lord Sydenham) great speech on the revision of taxes, K., March 25. 1830 ; Althorp's Budget Speech, K., Feb. 11, 1831 ; Report of Finance Committee, 1818 ; Dowell, ii. 281, and Porter, p. 205, &c., &c. t See /. 98, 343. t I. 232-235. 34 FINANCE AND POLITICS. Chat. II. possessors of property alike, while this proposal would chiefly affect the holders of Government Stock. The transfer tax was dropped, together with the proposed remissions on glass and tobacco. The proposal in regard to timber was first modified, and finally defeated. Some portions of the Budget, however, remained; and Althorp succeeded in carrying his proposals for the repeal of the excise duties on candles,* printed calicoes and cottons, on sea-borne coal and slate, and in equalising the duty on wine. He was also — and here unfortu- nately — successful in imposing his additional duty on raw cotton, an extra impost that he himself repealed a couple of years later. If the "amateur grazier" who presided at the Exchequer had thus, in his first Budget, shown a lack of appreciation of public opinion ; on the other hand, in 1884, he somewhat feebly yielded to public clamour, and hardly showed that "calm if clumsy" courage for which Jeffrey once gave him credit. He had a surplus, and with it he wished to repeal the window duty — one of the worst of taxes — but, in deference to popular clamour, he changed his policy and gave up instead the house tax — one of the best of taxes — though not so fairlj^ assessed in those days as now. In addition to the taxes already mentioned, Althorp was able to repeal the excise duties on starch, on tiles, on stone bottles, on the export of coal in British ships, or in ships of countries under reciprocity treaties, while reducing that on " coals other- wise exported," a tax subsequently abolished by Peel. The customs duties on currants and raisins, cocoa, oil, and marine in- surance, were considerably reduced ; half the excise dut_y on soaj) was remitted, and the stamp duty on advertisements was reduced from 3s. 6cZ. to Is. Qcl. The tax on the raw material hemp was lowered from 4s. 8d. to a penny the cwt. A passenger duty on railways was imposed, and the existing taxes on locomotion were simplified, some being reduced and others increased. The Bank Charter was renewed, and the Government debt to the bank diminished by one-fourth. The interest on a small amount of 4 per cent, stocks was reduced to 3J per cent. * The tax on candles, imposed in 1709, was the first of the many excise duties imposed during the eigliteenth century on articles of home manufacture. (See /. S66. ) This tax, in spite of the animadversions of Adam Smith, and all, other politico-fiscal economists, had remained in existence for nearly a century and a half. Its repeal entailed a sacrifice of nearly half a million of revenue. 1831—34. THE WHIGS. 33 Further, one matter vitally affecting trade was carried through. The commercial career of the East India Company, covering a period of two centuries and a quarter, was brought to an end. The East India Company had been incorporated in 1600, and had been granted the exclusive privilege of trading in all those parts of the world that lay between the Cape of Good Hope and eastward to the Straits of Magellan.* From commerce the Company had turned to conquest, a trading concern became the ruler of a vast empire ; and, by 1783, so great had the power of the Company grown, that it had become necessary legislatively to recognise and to define it. Fox's India BUI and Pitt's India Bills, the King's intrigues and the King's victories, which fill so large a space in the history of the last quarter of the eighteenth century, do not concern us here. The conclusion of the whole matter had been that a " Board of Control," with its Ministerial representative, had been invested with the supreme power over the civil and military administration of the Company. In 1793 the Charter, already more than once renewed, was again renewed for twenty years, the commercial monopoly of the Company being practically left untouched. In 1813, the Charter had again required renewal, and so obvious had become the injury to trade caused by the monopoly, that when the Government proposed to renew the Charter and the existing rights for another twenty years, the House, while accept- ing the term and the monopoly in regard to China had rejected that part of the BiU which related to India, and had thrown open the trade to all British subjects. In 1833, the Charter again lapsed, and the Government, backed by public opmion, decided that while the Company should retain its territorial possessions for another twenty years, it should at once and for ever cease to be a trading company. Its political powers, temporarily renewed with some modifications in 1853, were finally swept away when, after the Mutiny, the possessions of the East India Company were definitely transferred to the Home Government.! * " The Company may for fifteen years freely and solely trade by such ways and passages as are already found out, or which shall hereafter be discovered, into the Countries and Parts of Asia and Africa, and into and from all the Islands, Ports, Towns, and Places of Asia, Africa, and America, or any of them beyond the Cape of Bona Esperanza to the Streights of Magellan." Charter, East India Company, Dec. 31, 1660. Collection of Clmrters, 1817. t See I. m. D 2 36 FINANCE AND POLITICS. Chap. II. The China monopoly, combined with the ludicrously heavy duties, had greatly restricted the tea trade, unduly kept up the price, and much encouraged smuggling.* And, in 1833, Althorp took advantage of the cessation of the China monopoly to alter the duty, and to transfer its collection from the excise to the customs. The duties imposed still remained, however, far too heavy, and the system introduced of a discriminating duty did not prove satisfactory ; hence, in 1836, they were changed into an uniform duty of 2s. Id. a pound on aU sorts of tea. + Poulett Thomson, during his term of ofBce at the Board of Trade — before he went to Canada, in 1839 — did a good deal to sim]3lify and liberalise the tariff. Lastly, the Exchequer itself was thoroughly overhauled and reformed, and the system of keeping the public accounts greatly improved.! Previously to 1834, the Inland Eevenue had been under the management of three separate Boards of Commissioners, those of " Excise," " Stamps," and " Taxes." In that year the Boards of Stamps and Taxes were amalgamated, at a considerable saving of working expenses ; and in 1848, the two Boards remaining, of Excise and of Stamps and Taxes, were also amalgamated, and the "Board of Inland Revenue" created. The total reductions of taxation between 1830 and 1834 were considerable ; and, if the financial proceedings of the Government were neither brilliant nor methodical, at least expenditure was reduced and surpluses maintained, while the creditable conduct of the Ministry in legislative matters gave to their proceedings a general character of efficiency. In the summer of 1834, Grey resigned. He was an old man. His work was done. He never cared for place, and the constant bickering and disloyalty of his colleagues did not tend to make it more attractive. Lord Melbourne succeeded him with the same Ministry as before — a Government which a few months previously had lost the services of Stanley and Graham. To both these statesmen Peel offered office a few months later; and though * The duty-paying imports of tea- into England in 1800 were some twenty-four millions of pounds, which, by 1830, had only risen to about thirty millions. + See /. 306. t Between 1826-41 some 230 articles were removed from the Customs list and many duties lowered ; while forms were simplified, and red-tape curtailed. See Eeport Comm. Customs, 1857, p. 21 ; Scrope's- ii/e o/ Lord St/denham, p. 66 ; Porter, p. 358, &c. 1834-35. THE WHIGS. 87 thej' then refused it, they gradually gravitated towards him, and ultimately joined him in 1841 — Stanley to leave him on the question of the Corn Laws, Graham to become and to remain the leading " Peelite." In the autumn of 1834, Althorp, by the death of his father Lord Spencer, was called to the Upper House. Melbourne fully intended to carry on the Government as before, with Lord John Russell as Leader in the Commons. But the King, who disliked the "Whigs, thought otherwise, and exercising, for the last time in English history, his constitutional right, himself dismissed the Ministry, on the ground that the transference of one of their number from the Lower to the Upper House had so weakened the Government that they were incapable of continuing to hold the reins of power. Melbourne, though he had at his back an enormous majority, not wishing to continue the disagreeable task of " carrying on the King's Government with the King in oppo- sition," accepted his dismissal, and, good-naturedly plaj'ing the part of "mute at his own funeral," took away in his pocket the King's commands for the Duke.* The fom" months' Premiership of Peel greatly altered the political situation. Peel himself enormously increased his reputation by the admirable and courageous way in which he carried on the business of the country, and he placed his party in a position to take advantage of the waning popularity of his opponents. The Whigs, on their part, though still in a large majority, came back very considerably weakened from the polls. t The impetus their cause had derived from the King's high-handed action was exhausted. When they again took of&ce in 1835, some of the best men of the party stood aloof, with Grey and Spencer ; or else, with Stanley and Graham, were actually in opposition, or playing the still more damaging part of candid friend. The Government themselves, as judged by a shrewd contemporary, * See Memoirs of Lord MeWourm, ii. 41 ; Memoirs of Earl Speiwer, p. 254 ; Croker, ii. 244 ; Hill's Canning, pp. 101, &c. + Parliament was dissolved by Peel in December, 1834. The Tories are estimated to have won no less than 120 seats, bringing the regular Opposition up to about 270. Acland & Ransome's English Political History. In 1837 the numbers were thus estimated. Government 332— Whigs 152, Liberals 100, Radicals 80 ; Opposition 319 — Tories 139, Ultra-Tories 100, Conservatives 80. Courts and Cabinets of Will. IV. a-nd Vict. ii. 253. 38 FINANCE AND POLITICS. Chap. II. was the "most second-rate one the country ever saw." * Mel- bourne and Eussell neither carried the weight, nor did they receive the ungrudging support accorded to their predecessors, while the rest of the Cabinet were as mute as fishes ; and when reinforced in 1839 by Clarendon and Macaulay, it was too late for the Government to retrieve their position. The millenium seemed no nearer than before. The over extravagant expectations of pre-Eeform days had been doomed to disappointment, and had produced their natural reaction.! The ultra-radicals frightened jieople with their wild notions of Ballot, extension of the Suffrage, and reform of the House of Lords ! The moderate reformers met with but scant encouragement from a Government of which the Leader of the House of Commons was nicknamed " Finality John," | and the Prime Minister only asked them " why can't you leave it alone ? " In fact, their policy was : — ■ " To promise, pause, prepare, postpone, And end by letting things alone. In short, to earn the jieople's pay. By doing nothing every day."|| Anxious indeed to do good to Ireland, and to govern her according to Irish ideas, they allied themselves to the Irish Party, a proceeding which (in those days at least) was sufficient to discredit any Government with the countr3\** But the House of Lords threw out or emasculated their Irish Bills as regularly as they were presented, tt and Ireland, her hopes unfulfilled, again became a prey to Bibbon plots and Orange conspiracies. * Gh-ccillc, 2nd S. i. 178. + As Gnizot, in his Metiwir of Peel, well says, "During the long years of opposition the Whigs had promised, or allowed people to hope, that they would under- tafee far more of reform and of progress than they could possibly accomplish; and now they were in power, the people expected of them lar more than they had promised." + See Lord John RusseU's speech of July 3, 1849, in which he denied ever having used the word "finality." The nickname was founded on a phrase of a speech of his of June 23, 1837, in which he spoke of the Refornr Bill as a " final measure." II Praed, as quoted by Trevelyan in his Life and Letters of Lord Macaulay, ii. 60, 61. ** The "Lichfield House Compact" — a sort of " Kilmainham Treaty," a name without a deed — was continually cast in their teeth. ■j-j- The aim of the House of Lords in 1835-41 was appai-ently to illustrate to the nation a sentiment of "William III., that the "worst government was that which could not caiTy its own measures," and they were eminently successful in their object. See Lord Campbell's Life, ii. 85. 1835-41. THE WHIGS. 39 During all this time in financial matters the Melbourne Government had gone from bad to worse. In 1835, in their first year, they were indeed able to reduce and to equalise the tax on paper, and gi'eatly to lighten the newspaper duty — both excellent measures, but a mere flash in the pan. Their foreign and Colonial policy, with its disasters and uncertainties, soon involved increased expenditure ; while the revenue, depleted by the enormous remissions of the im- mediatety preceding years,* was insufficient for their wants. The introduction of the Penny Postage, in 1839 — in itself a great reform, but which, being given without grace, was received without gratitude — still further injured the financial position by causing the immediate loss of a million of revenue. + Deficit followed deficit, each one greater than its predecessor. The agricultural interest, prosperous during the four fat years from 1832-5, was stationary during the two succeeding years, and suffered disastrous loss in the four lean years from 1838-41.]; It was indeed the consequent distress which chieflj'- gave to Chartism [1 such power as it possessed; and it was then also that the eyes of the people, and more slowty those of their " Leaders," began to be opened to the evil results of the Corn Laws. * Between 1830 and ]834, inclusive, between eight and nine millions of taxation were on balance remitted. Between 1815 and 1841, some £45,000,000 of duties were reniitterl, and £8,000,000 imposed, a net reroission of thirty-seven milUons. (Porter, pp. 493-4.) -|- The financial result of the introduction of the "Penny Post" in 1839 was most disappointing. The gross revenue, which had only risen from £2,200,000 in 1815, to £2,383,000 in 1839, fell at once to £1,324,000 in 1840; while the expenditure, which from £500,000 in 1815, had risen to £741,000 in 1839, rose to £864,000 in 1840, and soon reached a million. Each subsequent year showed, however, a recovery of revenue; but it was not until 1851 that the gross revenue equalled that of 1839, and by this time the gross expenditure was nearly double that of twelve years before. Since 1853 the increase of revenue has been rapid and continuous, and the Post Office has been a source of very considerable profit. , The gross expenditure in 1886 was £5,440,000 and the gross revenue £8,450,000. Hill himself believed that the loss caused by the reduction of the postage would almost immediately be made up by the increased number of letters. See Life of Sir B. Hill, by G. B. HiU, i. 347, 537, &c. The cost of the Packet Service, it should be observed, was included in the Post Office Estimates up to 1837, when it was transferred to the Navy Estimates. In 1860 it was re-transferred to the Post Office, but appears as a separate item in the accounts. In 1837 the cost of the Packet Service amounted to about £350,000, in 1860 to £1,000,000. See P. I. & E., ii. 667, 696. t See Tooke, iii. 3-20. II The dreaded six points of the Charter were ballot, and abolition of property qualification for members ; manhood suffrage and equal electoral districts ; annual parliaments and payment of members. The anti-Corn Law League (the rival and foe of Chartism) was started in 1838. 40 FINANCE AND POLITICS. Chap. II. Content at first to sit down under successive and increasing deficits, finally, for very shame, the Government were compelled to impose some taxation. But, resorting to the old exploded system of a general levy on the custom and excise duties,* together with a rise in the assessed taxes and an increased duty on spirits, their taxation was of such a form that the revenue could not respond. Indeed, they only succeeded in proving that, as Swift once said, in the arithmetic of the Customs two and two, instead of making four, often only make one — and they were landed in another deficit, even greater than before. Unlucky at home, they were equally unfortunate abroad. They came to loggerheads with France over Egyptian and Turkish affairs ; they became involved in a serious boundary dispute with the United States, subsequently aggravated by a quarrel over the right to search American ships for slaves. Probably, if they had stayed in office, they would have got into war with one or both of these Powers. They did drift into war with Persia. They began a war — the precursor of many wars — with China. Under them Afghanistan was invaded. Invasion, easy conquest, the establishment of a puppet Amir, followed rapidly one on the other. Then came insurrection, treachery, and massacre ; re- conquest, and final evacuation.! History repeats itself — repeats itself, that is, when rulers will not learn by experience — and forty years later, a repetition of the same miserable policj' pro- duced almost identically the same tragic results. Temporarily resuscitated by the accession of the Queen, by Mel- bourne's touching affection and fidelity to his new Sovereign, and by the foolish party attacks made on her by the Tories, they scrambled along from hand to mouth with " nothing," as Lord Holland said in 1839, "to rel}' on, but the Queen and * This imposition of taxation, which goes by the "name of "Baring's levy," of 1840 — Mr. (afterwards Sir Francis) Baring had sncceedfid Mr. Spring Rice at tlie Excliequer in 1839 — was in imitation of the old "subsidy " of earlier days, a iive per cent, rise of duty on almost every article in the custom and excise list. Baring's levy did much to spoil the symmetry of the tariff figures, by adding to each some niggling little fraction. For instance, the duty on colonial sugar was raised by it from 24s. to 25s. 2Jrf., that on foreign from 32s. to 33s. T^d., that on coffee from 6rf. to 6§jd., etc. + " After four years of unparalleled trial and disaster, everything was restored to the condition in which we found it ; except that there were so many brave English- men sleeping in bloody graves." Lord Shaftesbury, Life, i. p. 440. The war was begun in 1838, the " massacre " took place in November, 1841; Cabul was finally evacuated in January, 1842. 1835-41. THE WHIGS. 41 O'Connell." Attempting, in 1839, in contravention of the political principles, to suspend the Constitution of Jamaica, they were so feebly supported, that they resigned ; but the " Bedchamber Plot," while strengthening Peel's position, brought them back to office, ill-sheltered from the storm of ridicule "behind a woman's petticoat." First refusing, they at last grudgingly and of necessity, granted Canada a Constitution* — the keynote of the subsequent colonial policy of this country — and at the same time managed, by their ungenerous behaviour to Lord Durham, to give an impression of meanness, and of disloj'alty to a colleague which Englishmen never forgive. A government of retrenchment — they had increased the ex- penditure and imposed taxation. A government of reform — the Statute Book, as far as they were concerned, was almost a blank. A government of peace — they had been continually quarrelling or fighting. Beset by difficulties at home and abroad, discredited, ridi- culed, bearing humiliation with an easy fortitude which would have done credit to a better cause, and preferring to meet defeats with resignation of spirit rather than with resignation of office,! the Whigs, in 1841, cast about, in their desperation, for any means of retrieving their position. A year or two previously, the Prime Minister had emphatically declared that those who proposed the abolition of the Corn Laws were fit only for a lunatic asylum; and many of his colleagues had been equally emphatic! But now an agitation in favour of substituting a fixed duty for the sliding scale — with the certainty that abolition must ultimately follow — gave them hopes of salvation, and they * In 1840. + Mr. Hayward, in one of Ms Bsso.ys (Third Series, i. 266), an interesting sketch of Melbourne, states that the Prime Minister once declared, when a question of resignation liad arisen, ' ' I counted up more than two hundred of my intimate acquaintances, or their families, who would have heen half-ruined or heart-broken bjf my going out ; " — and he stayed in. + The matter of the Com Laws had, it is, however, but fair to say, been left an open question in the Government. For instance, in 1834, the First Lord of the Admiralty — Graham — defended them, though in a lukewarm way (indeed Graham had some years before himself demonstrated their futility, in his pamphlet, Oom and Currency), while the Vice-president of the Board of Trade — Poulett Thomson — attacked them and answered Graham. See Ton-ens' Life of Graham, i. 177, 185, 477, cfcc. Lord J. Kussell himself declared for a fixed duty in 1839 (letter to constituents, January 21, 1839). 42 EINANCE AND POLITICS. Chap. II. feverishly declared for that mode of dealing with the Com Laws. In 1840, the GoTernment had endeavoured to meet their deficit by a general increase of custom and excise duties. In 1841, with an equally large deficit, they proposed to meet it hy acting exactly on the opposite principle. Not only were the Com Laws to be radically altered, but the protective and differential duties on two most important articles of consumption — sugar and timber — were to be greatly reduced.* But the end was come. Though defeat only made them cling more firmly to office, a direct vote of want of confidence — out of which, as Sir James Graham thanked God, they "could not wriggle " — at length forced them to resign or dissolve, whereupon they appealed to the country, t And the country was weary of them ; was perhaps not ripe for Free Trade — certainly was not willing to receive it from their hands. Their appeal was rejected, and the Tory party was returned to power with an overwhelming maj oritj'. Thus disappeared a great party. Not annihilated, as the Tory Party had been annihilated at the time of the Reform Bill, before an outburst of Liberalism. Not broken up as, in 1846, the Tory Partj^were broken up, in the accomplishment of one great measure; or as the Liberal Party were broken up, forty years later, during a change of front. Not used up, as the Liberal Party were used up between 1868-74, by preternatural activity on the part of their leaders. Not routed, as the Conservative Party Avere routed in 1880, through definite dislike to their foreign policy. None of these things had happened. The great Whig Party had been simply muddled away. So ended the Eeform Era ; opening so hopefully, closing so pitifully. * See Poulett Thomson's letters (from Canada) to Lord John Russell of Marcli 21, 1841, advising the Government not "to patch," but to introduce a sort of "Com- mercial Refonn Bill." f The dissolution took place in June, 1S41. CHAPTER III. PEEL. 1841—46, The state of the country and the financial position, when Peel again acceded to office, was not very encouraging for fiscal refonn. Five years' accumulated deficiencies, amounting to seven or eight millions sterhng; increased, and increasing, military and naval expenditure ; costly war legacies to be met in China, in Persia, and in Afghanistan ; an inelastic and sinking revenue, not responding to increased taxation ; trade stagnant ; the total value of the exports dwindling year by year,* these two signs together giving rise to great alarm, lest the wealth of the country were becoming exhausted ; harvests deficient, employment scarce, articles of general consumption at a high price, crime and pauperism at their maximum.! The Corn Laws assailed by the League; the Union threatened by the Eepealers ; the existing form of Govern- ment assailed by the Chartists. Abroad, France offended and sulky ; America initated and threatening ; Em'ope generally in an uneasy condition. The outlook was indeed gloomy ; but Peel had one enormous advantage in his favour. He succeeded a discredited govern- ment, a Government whose extravagance and financial ineptitude had been only equalled by their indifference to reform at home and their mismanagement of affairs abroad. Peel's personal position was already a great one. As chairman of the Bank Committee of 1819, and as the author of the .Bank Act of * Amounting in 1842 to a lesser sum than in the last year of the great war. -|- " Both pauperism and crime attained not their relative but their actual maximum in 1842, tiU at last one person in evei^ eleven was a pauper ; and one person in every 500 was committed for trial." (Walpole, v. 503.) 44 FINANCE AND POLITICS. Chap. III. the same year, he had made himself a financial name. His repu- tation had survived his tenure of the Irish Office. Twice at the Home Office he had shown that he possessed enlightened and humane views. His conduct of affairs during his short Premier- ship of eight years before, had proved him to be a statesman. The temper and judgment he had shown, as leader of the Oppo- sition, had proved him to be a man of power and resource. From what seemed their final annihilation in 1832, the Tory party had gradually, under his generalship, regained its old position, so that, in the Parliament of 1837, it came to number a half of the whole House, and now, in a Parliament summoned by the Whigs themselves, it was in a majority of nearly one hundred votes.* Thus steadilj^ and uniformly Peel had been growing in public estimation. If his views were felt by some of the less enlightened of his own party to be somewhat too advanced and progressive, his acceptance of the Reform Bill as a settlement not to be re-opened, and his liberal, if moderate programme, commended him to reasonable men of all parties ; t while his change of front on the question of Roman Catholic emancipation had been, if not for- given, for the time forgotten. Admirable in debate, unsurpassed in his knowledge and manage- ment of the House of Commons, but awkward and taciturn in social intercourse ; t his very manner, in itself frigid and repellent, gave confidence at this time of distress and doubt. Peel, alone, it was clear, was capable of carrying on the Queen's Government with satisfaction to the country, and of bringing it out of the slough of despond into which Melbourne and his colleagues had plunged it. The position was somewhat like that of a hundred and twenty years before. Then, after the collapse of the bubbles — South Sea and others — when the nation seemed at the point of bankruptcy, all eyes were turned to another Sir Robert as the one man able to * The Tory party in the Reformed Parliament of January, 1833, only numhered 149, the lowest in point of numbers that either of the two great parties have ever touched. In the new Parliament of 1841 they numbered 367. See note, supra, p. ST. f It was about this time that the change of name from "Toi-y"to "Conserva- tive " took place. The name " Conservative " had first been used by Mr. Croker in an article in the Quarterly, in 1831. J " I have no small talk, and Peel has no manners," said the Duke once when expressing a doubt as to Conservative acceptability at the Coui-t of a female Sovereign. 1841. PEEL. 45 save Society : Walpole undertook the charge, stayed the plague, and stood between the living and the dead. Now Peel, placed at the hehn by popular acclamation, was successful in dealing with a state of affairs which, if less acute than that of 1721, was fundamentally more critical. Friend and foe alike felt that at last the country was to be governed by a strong man, and a man of business ; and it was this popular support which endowed Peel with courage and energy to face and to meet the enormous difficulties of the financial situation. It was, indeed, the perfect confidence felt in the man, more than any liking for his measures, which enabled him, in a House of Protectionists, to enter on a course of fiscal reform which could but lead to free trade ; in a House mainly repre- senting wealth, to impose a direct tax on property in order to relieve industry. In old days, the idea of taxation had simply been to obtain the necessary revenue, without much regard to the incidence of the tax or to the interests of producer, consumer, or trader. The end alone was considered, not the means, and as each trade or industry made headway, it was looked upon as fair game for taxation.* Gradually the idea sprang up that taxation, as far as it could, should serve a commercial purpose, as well as produce the necesr sary revenue. In the sixteenth, seventeenth, and eighteenth centuries, and even as late as the first quarter of the nineteenth century (at first in its full rigour, and gradually modified by ex- perience and increasing intelligence), the commercial policy of the country was conducted on the theory of the so-called "mercantile system," based on what Bagehot sanguinely called the " extinct superstition . . that wealth consisted of money." Along with it prevailed also the co-ordinate superstition, which is still far from extinct, that the greater the exports and the smaller the im- ports the better the " balance of trade " and the more prosperous * Green writes of Henry VII.: — "A dilemma of his favourite minister, which received the name of ' Morton's fork, ' extorted gifts to the exchequer from men who lived handsomely on the ground that their wealth was manifest, and from those who lived plainly on the plea that economy had made them wealthy. " — A Short History of the English People, p. 296. See Hallam's Coinstitutional History, ed. 1872, i. 14, for the same. 46 FINANCE AND POLITICS. Chap. III. the country. Most people then, as some do still, shared the opinion expressed in Mark Twain's definition, that " the imports of a country are the things that are paid for ; the exports are the things that are 'not." In order, therefore, to maintain a good " balance of trade," exports were to be encouraged and imports discouraged : the foreigner was to be induced to buy British goods ; foreign goods were to be as far as possible eschewed. Hence, naturally arose the fiscal system, under which were levied heavy import duties on foreign food, raw materials and manufactures, while the exports of home manufactures and food products were, with some exceptions, encouraged by a sj'^stem of bounties ; the result of the whole being, that while we indeed bought but little, we sold pro- portionately less, and trade was restricted in both directions.* Thus were introduced prohibitive or protective taxation for the benefit of the manufacturer ; corn laws and the prohibition of the import of food products, for the benefit of the agricultural interest ; differential duties in favour, and for the encouragement of the Colonial against the foreign producer ; t navigation laws, for the encouragement of shipping. A few of the imposts com- bined the advantage of being remunerative and at the same time protective ; others were neither the one nor the other. Some of them, originally imposed merely for revenue purposes, had, by addition after addition to the duty, become both protective and unremunerative. Little of the indirect taxation was maintained solely for revenue purposes, and that which was so maintained was, both in method and in amount, injurious. The heavy excise duties on home manufactures injured the growth and stunted the improvement of many industries. The excessive and often com- * Adam Smith (p. 187, &c.) very clearly describes the old " Mercantile System." See also McCuUoch's Introduction (p. 20, &c. ), Cunningham's G-rowlh of Mivglish Industry {-p. 364, &c.), Hnskisson's JDepreciation of Ciirrcncy, 1810, &c. f These differential duties were very costly to the British consumer and taxpayer. The price of colonial produce was artificially raised to the price at which the foreign articles could be imported ; while coming in, as it did, at the lower rate of duty, it produced but little revenue. Thus the consumer practically paid a large subsidy to the Colonies, while the Exchequer lost the receipts which it would have gained by the imposition of an equal and moderate duty on foreign and colonial goods alike. It has been estimated that on the two principal articles'of colonial pro- duction alone — sugar and timber— the home consumer was, till 1842, paying in the price a bounty to the Colonies of nearly six millions a year — on timber one and a half, and on sugar over four millions. McCuUoch's Com. Xlirt., "Colony," "Timber-" cf. Porter, 657 ; Walpole, iv. 132, &c. 1841. PEEL. 47 plicated custom and excise duties on imported articles, such as spirits, wine, tea, and tobacco, led to the natural results. Exces- sive duties, whether intended for protective or for revenue pur- poses, were largely tempered by the dexterity and the devices of the smuggler. "Cheap goods," as McCulloch says, "never fail of making their way through every obstacle ; " and thus, to a very large extent, the producer lost his protection, and the Ex- chequer lost its legitimate revenue, while the consumer had to compensate the smuggler for the risk involved in his trade.* The extraordinarily cumbrous complications of the customs tariff, drawn up on no definite or intelligent principle, t with its innumerable conflicting, differential, protective,} prohibitive, un- remunerative duties, will become evident as we proceed to trace the different steps that were taken with a view to simplify it. The effect on trade and commerce of this combination of taxa- tion and protection was clearly pointed out by Deacon Hume and Porter in their evidence before the "Import Duties Com- mittee " of 1840.11 The system of tariff was most harassing and costly to the trader, involving endless and unnecessary ware- housing, packing and unpacking, disputes and complications. It * Peel pointed out, in 1842, that higli duties, intended to be protectiTe duties, were often a " mere delusion, " which do " not constitute a protection to the British manu- facturer, . . for the check to their operations is the smuggler. It is a mere delusion to tell the home manufacturer that you levy a duty of 35 to 40 per cent, on the importation of foreign manufactured articles, if he is robbed of that apparent protec- tion by the importation of the same articles in an illicit way. " In support of this view he produced a letter from an " extensive smuggler," offering his correspondent goods at a charge far below the revenue duty. {H., May 10, 1842.) " Even thirty years ago a Dorsetshire labourer never worked after three o'clock in the da)% and why ? Because the whole of that part of England was demoralized by smuggling. jSTo one worked after three o'clock in the day, for a very good reason — because he had to work at night. No farmer allowed his team to be employed after three o'clock, because he reserved his horses to take his illicit cargo at night, and carry it rapidlj' into the interior." — Disraeli at Manchester, April 3rd, 1872. f " The plan has been to name, as nearly as possible, every article which the mind of man almost could conceive, with a particular duty attached to it ; and then, with a view to obtain a duty upon any article which may not have been so named, the table winds up with two general charges, which are known by the name of the ' unenumcrated duties.'" Deacon Hume before the Committee on Import Duties {f. P. 601 of 1840, p. 87). X Deacon Hume laid before the Import Committee of 1840 a list of 130 home or colonial articles (heads, exclusive of sub-heads) which were actually "protected" by import duties. Porter stated to the same committee (p. 196) that there were 82 differential duties in favour of Colonial against Foreign imports. II Their evidence is well worth studj', as an exposure by contemporary observers who had peculiarly good means of observation — Hume had been for 49 years at the- Customs and Board of Trade, and Porter was head of the Statistical Depart- ment of the Board of Trade — of the evils of a system of innumerable and mostly protective customs duties. 48 FINANCE AND POLITICS. Chap. III. discouraged and destroj'ed enterprise, competition, invention and improvement.* It misdirected capital and labour, encouraging some trades at the expense of others. It caused great fluctuations in employment and profits. It was costly of levy. By injming the revenue it burdened the taxpayer ; by unduly raising the price of all articles of consumption it involved a most serious cost to the consumer. Such was the barbarous system — combining every fiscal dis- advantage, and running counter to every fiscal axiom — in force at the close, and for a considerable time after the close, of the Great War. Huskisson and Robinson, Althorp and Poulett Thomson, had done something to reverse the old policy ; but many per- nicious excise duties still remained, and over a thousand articles were still charged with customs duty. The frmge of a great sub- ject had alone been touched. Just before Peel came into office, public attention had been forcibly directed to the subject of fiscal reform ; a feehng in favour of action had been springing up, and the distress of the country had emphasised the necessity, while adding to the diffi- culty, of the task. The chief motive power had been the Report of the celebrated Import Duties Committee of 1840 — a com- mittee, appointed on the motion of the well-known economist Joseph Hume,f to enquke into the Customs Duties, with a view of seeing how far they were levied for protective, and how far for revenue, purposes. The deliberations and the report of this com- mittee marked a new point of departure, by bringing clearly before the public mind the eminently uneconomical and hurtful character of the existing system under which customs duties were levied. | The committee showed that of the overladed tariff, with its * See Hume's evidence, Q. 1137, 1146, &c. Porter (Q. 2563) said that protection " had the effect of setting people asleep." t Joseph Hume began his economical career in 1820, when Vansittart was Chan- cellor of the Exchequer. They were respectively dubbed " penny wise " and "pound foolish." J The enlightened views taken by the committee had such an effect on the financial policy of the country that their remarks and recommendations, in them- selves of very great interest, must be quoted at some length. The committee expressed their "strong conviction that important changes were urgently required iu our Custom-house legislation. The existing tariff," said they "presents neither congruity nor unity of purpose." "The tariff," the report con- tinues, "often aims at incompatible ends; the duties are sometimes meant to be both productive of revenue and for protective objects . . . they do not make the receipt of revenue the main consideration, but allow that primary object of fiscal 1841. PEEL. 49 thousand different duties, ten-eleventlis of the whole customs receipts— £20,800,000 out of i'22,120,000— were produced by regulations to te thwarted by an attempt to protect a great variety of particular interests, at the expense of the revenue and of the commercial intercourse with other countries ; " Colonial interests advantage also "at the expense of the Mothe. Country. " The committee "cannot refrain from impressing strongly on the attention of the House, that the effect of prohibitory duties, while they are of course wholly unpro- ductive to the revenue, is to impose an indirect tax on the consumer, often equal to tlie whole difference of price between the British article and the foreign article, which the prohibition excludes." "On articles of food alone," add they, "it is averred that the amount taken from the consumer exceeds the amount of all the other taxes which are levied by the Government." And the loss was not only loss of revenue, but is " accompanied by injurious effects upon wages and capital, and greatly diminishes the productive powers of the country and limits our active trading relations." On the same grounds the committee condemned also high and protective duties, which check importation and are unproductive to the revenue. "Experience shows," said they, "that the profit to the trader, the benefit to the consumer, and the fiscal interests of the country are all sacrificed when heavj' import duties impede the interchange of commodities with other nations." They found, moreover, a growing conviction "that the protective system is not, on the whole, beneficial to the protected manufacturers themselves. The most pros- perous fabrics abroad," they have reason to believe, "are those which flourish without the aid of special favours." They combated the theory — a theory which liad great weight, especially with Peel — that protection kept up the rate of wages. They believe.l, on the contrary, that "the best service that could be rendered to the industrious classes of the community would be to extend the field of labour, and of demand for labour, by an extension of our commerce. " The committee divided the 872 articles (heads, exclusive of sub-heads) on which duties were charged in 1838 into eight schedules, "which they submit " (as well they may) " to the serious consideration of the House : "- Sch. I. lie OCl 349 articles. producing less than £100 each, and in ) £ 8,050 the aggregate . II. 132 articles. producing from £100 to £500 each 31,630 III. 45 ,, 500 to 1,000 ,, 32,060 IV. 107 ,, 1,000 to 5,000 „ 244,730 V. 63 5,000 to 100,000 ,. 1,397,320 VI. 10 ,, 100,000 to 500,000 ,, 1,838,630 ni. 9 ,, 500, 000 each and upwards 18,575,070 715 22,127,490 „VIII. On 147 articles no duty was received, but on them there"! 5 g^g was an excess of drawback amounting to . . / ' Total 862 producing £22,122,112 Or as put by Jlr. Porter, in another way for 1840 : — 17 articles produced 94| per cent £21,700,000 29 „ „ 3i „ or 899,000 144 „ ,, I'll „ or 363,000 531 80,000 23,042,000 147 ,, loss, deduct 5,000 868 £23,037,000 (P. P. 601 of 1840. The Keport is dated August, 1840.) 50 FINANCE AND POLITICS. Chap. Hi; eighty-two articles; and over six-sevenths— £18,600,000— from only nine articles. With such a state of things existing, they, not unnaturally, expressed " their strong conviction of the necessity of an immediate change in the impurt duties of the kingdom," and that imposts should he levied on a small numher of the most productive articles, which would " facilitate the transactions of commerce, benefit the revenue, diminish the cost of collection, and remove multitudinous sources of complaint and vexation." Such an impression did this report make on the public mind, that the WJiig Government, in their last abortive Budget of 1841, completely reversed their financial policy of the previous year, and made a feeble and half-hearted attempt in the case of timber and sugar to carry out the principle of reduction of differential duties, in order, by stimulating consumption, to increase the revenue, and "to obtain," as the Chancellor of the Exchequer said, " the required supplies without adding to the burdens of the people." And, again, in their Queen's Speech, after the general election of 1841, they declared against the Corn Laws, for the abolition of "unproductive" and "vexatious" import duties, and against " the principle of protection." But it was not for the Whig Government to carry out a policy that required power and resource. With the hour came the man. It was left to Peel, with his enlightened and liberal views, with his courage and common sense, to foster and to guide public opinion, and to bring about great reform. Peel has often been denounced, not only by the author of the phrase, but also (though perhaps in less pungent language) by more unprejudiced speakers and writers, as a " trader on the ideas and intelligence of others." * But there are times when reforms are in the air, and no single mind can claim the credit of originat- ing them. Then is it that the man who, bj^ his force of character and abilities, has placed himself in a position to carrj- out the wishes of the nation ; the man who can discriminate between the good and the bad ; the man who can translate words into actions, rather than he who merely translates ideas into words, * " For between thirty and forty years the right hon. gentleman has traded on the ideas and the intelligenee of others. His life lias been one great appropriation clause : he is a burglar of others' intellect. There is no statesman who has committed petty larceny on so great a scale." — Disraeli (H., May 15th, 18-16;. 184S. PEEL. 51 receives, as he should receive, the lion's share of the credit of legislative reforms.* Peel no doubt did not originate, but adopted, the recommenda- tions of the Import Duties Committee ; he did not originate, but adopted, the recommendations of those who declared that deficits should no longer be tolerated ; he did not originate, but adopted, the recommendations of those who proposed to rehabilitate the revenue by means of direct taxation.! Where he showed the master-mind was in combining together all these various recom- mendations, and at one and the same time, creating a surplus and reforming the tariff, by means of a tax odious to many, long since disused, and which his predecessors had shrunk from re-imposing. The financial policy thus inaugurated, and continually develop- ing through five years of ofiice, was as bold as it was wise. The first object in view was a purely financial one. LUie Pitt, Peel was convinced that the only way of rehabilitating the finances, and of placing them on a sound and satisfactory basis, was to put an end to the discreditable and dangerous system of borrowing to cover annual deficiencies, by making and maintaining each year an equilibrium between revenue and expenditure ; and, further, that something should each year be done towards the reduction of the debt, and for this purpose an annual surplus should be retained and reahzed. The second object was fiscal. Peel clearly saw that the best way of developing the national wealth, of improving commerce, and of promoting employment, was to leave trade more to its own initiative, and to bind it less bj^ Acts of Parliament. Thus the remaining export duties were abolished. Thus were the raw materials of industry set free from dutj% Thus were the import duties on manufactures and on food, * "The idea matters little, the execution is all in all. In art, in writing, iu speaking, in war, in statesmanship, what mainly tells is not the mind's head, biit her hand — not her thoughts, but their working out." Notes of Thought, by Charles Buxton, p. 17. t Althorp, Parnell, Huskisson, and Poulett Thomson, had ere this declared that they entertained no serious objection to an income tax. In 1830 Althorp {R. March 25th) had announced that he " had no hesitation in saying that to grant relief to the productive population, by a reduction of taxes, and to impose a property tax to meet the deficiency thus occasioned, would be a very good measure." It was believed that in 1831 he had desired to propose the imposition of a low income tax, instead of the tax ou the transfer of property, but had been over-ruled by the majority of the cabinet. E 2 52 riNANCE AND POLITICS. Chap. IIL which had been imposed for the protection of home or colonial products, abolished or reduced. Thus was the cumbrous and costly customs tariif cleared of many of the innumerable petty, vexatious, and unproductive duties which injured trade without benefiting the revenue. Again, Peel appreciated the fact that high duties for revenue piu'poses defeat their own object ; that the best way to suppress the smuggler is not to pile penalty on penalty, but to take away the profits of his trade, by a reduc- tion of taxation that will encourage legitimate and discourage illegitimate consumption. In order to supply the immediate void caused by the remission and reduction of taxation, and in order to obtain and to maintain the necessary svu'plus, the income-tax on property was to be re- imposed. Re-imposed, not because Peel looked upon it as a good tax in itself, but for much the same reason that Pitt, though with a different purpose, had originally imposed it — namely, that revenue was essential and dire necessity compelled. Peel's mind was a cautious mind : he did not jump to conclusions, but took some time to convince himself of their truth. Once convinced, however, he went straight forward, swerving neither to the right hand nor to the left, affected neither by party nor b]' personal considerations. He began cautiously, and it was only as the logic of events, as the proofs he every day received brought conviction to his mind, that he adopted that free-trade programme which marked the fiscal legislation of 1846. At first he did no more than continue the policy inaugurated by Huskisson : reduction, not abolition, of taxes ; the substitution of protective for prohibitive duties. But soon abolition took the place of reduction. The duty on raw materials of manu- facture disappeared ; the excise duty on glass was repealed ; innumerable uneconomical and vexatious customs duties were abolished. Finally, the principle of unrestricted competition was, for the first time, applied to some branches of industry, by the abolition of the import duties on certain of the commoner sorts of manufactures, and the further reduction of the duties on many of the higher class goo^s. The surviving export duties were abolished. Along with the duty on corn, disappeared the duties on many other articles of food, while those still left were con- siderably reduced. Indeed, the revision of 1846 was professedly 1842. PEEL. 53 a revision on " free-trade " lines ; the remaining protective duties were avowedly intended to be but temporarily maintained, and to be gradually reduced, until finally every article should feel what Poulett Thomson once called the " healthy breeze of un- restricted competition." In March, 1842,* the Prime Minister introduced his first Budget — an epoch-making Budget — in a weighty and lucid speech. Xotliing was concealed, nothing kept back ; the full financial position, in all its uglj- nakedness, was laid bare. The closing year would end in another deficit of some two millions and a quarter, following on a series of deficits, amounting for tlie pre- vious four years to over five millions. The coming j'ear too, on the basis of the revenue of the previous year, would end in a further deficit of two and a half millions for the " general service of the year." In addition, the Chinese war would cost some hundreds of thousands ; and there was a probability that England would be called upon to give pecuniary aid to India on account of the renewal of the Afghan war. The deficiency was no casual one ; deficits had become chronic. To reduce the expenditure was out of the question. An increase of revenue could hardly be expected. Convinced though he was, that a wise reduction of duties would eventually produce a larger revenue. Peel would not, as his predecessors had done, calculate on an immediate recovery without providing for a possible defi- ciency. "For," said he, after passing in review different reductions of duty which had been made in former j^ears, " with the exception of coffee,! which realised the full amount of duty in the third year, and rum, there is not a single article the duty on which has recovered itself within a period of five or six years after a considerable reduction." The experience of the late Govern- ment who, two years before, had imposed a general five per cent, levy on the customs and excise, and instead of receiving nearly two millions additional revenue, had received but a tenth of that sum,t had made it clear that "the limits of taxation * H., March 11, 1842. •)- Eeduced in 1826. The experience derived from snbsequent reductions on the coffee duty has been very different. t The late Chancellor of the Exchequer (Baring) subsequently argued, however,. 54 FINANCE AND POLITICS. Chav. Ill- on articles of consumption " had been reached ; and it was not therefore possible for him to "consent to any proposal for increasing taxation on the great articles of consumption by the labouring classes." What then should he do? He could not have recourse to "the wretched expedient of continued loans." How then was he to make both ends meet, and to provide the surplus on which his financial policy was based ? What taxation could be imposed ? Indirect taxation was out of the question ; one alternative alone remained — a direct tax on property. And then, turning to them, the Prime ]\Iinister made " an earnest appeal to the possessors of property" to allow him to re-impose the income tax in order " to repair this mighty evil "—financial decrepitude. Property, he declared, would in the end gain, and not lose. Commerce would be re- vived, the manufacturing interests would be fostered, the cost of living would be reduced,* while a great public danger would be averted. In a fine peroration, he appealed to the House, and to the nation, not to be unworthy of their ancestors. " If," said he, " you do permit this evil to continue, you must expect the severe but just judgment of a reflecting and retrospective posterity. Your conduct will be contrasted with the conduct of your fathers, under difficulties infinitely less pressing than theirs. Your conduct will be contrasted with that of your fathers, who, with a mutiny at the Nore, a rebellion in Ireland, and disaster abroad, yet submitted with buoyant vigour and universal applause (with the funds as low as 52) to a property tax of ten per cent. I believe that you will not subject yourselves to an injurious or an unworthy contrast."! that (excluding corn, the receipts from which depended on extraneous circumstances) not £200,000 hut a million additional revenue had been actually received. * Peel asserted confidently that the man who pays £2 18s. id. (sevenpence in —I ^ the £) per cent, on his income might make that saving in his expenditure in con- sequence of the reform of the tarifi'. Budget Speech, IT., March 11, 1842, see also his letter to Cxdkei,xCorres2Jondeiice, ii. 383. Cf. Disraeli's ^'j/i!7 (published 1845) for the other side of the question (p. 402). Mr. Jennings' admirably edited OroJcey's Correspondence and Diaries, (1884) has had the success which it deserves in very much rehabilitating the reputation of Croker, who for thirty or forty years had been almost unknown, except as the object of Macaulay's laboured sarcasm and of Disraeli's savage caricature. The three volumes abound in most interesting and valuable letters of Peel and the Duke of "Wellington. + Perorations are perhaps not made to be analysed. But, as a matter of fact, this sentence is founded on a series of anachronisms. The "triple assessment," not the income tax, was imposed in November, 1797. The mutiny at the Nore had been 1842. PEEL. 55 The House was not slow to respond to the appeal. In spite of, perhaps partly because of, the factious opposition on the part of some of the "Whigs, who had not yet recovered " from their surprise that their promises of cheap bread and cheap sugar had not proved more attractive," * the third reading of the bill was passed by an overwhelming majority; and the income tax, originally called into existence as a weapon of war, was now to be used as an engine of peace. The repeal of the income tax in 1816 had delayed for many years commercial and financial reforms, its re-imposition in 1842 gave them a great impetus.! The tax was to be imposed for three years certain, and for a further two, if, by chance, the state of the finances requked it. It was to be levied on all incomes above £150 a year ; and not at the old ten per cent, rate, or 2s. in the pound, but at Id. only, or not quite three per cent.t For the present Ireland was to be exempt. No arrangements for the collection of the tax existed there, and in the then " state of society " in that country, it would be difficult, said the Prime Minister, to devise or to work satisfactory machinery. [| As a set-off, the Irish spirit duty was to be raised to the level of the Scotch, and the stamp duty was to be equalised with that of England, — additions which were estimated to produce together some £400,000 a year.** The deficit to be met in the year, including the relinquishment of about a million and a quarter of revenue, which was to be devoted to the purposes of fiscal reform, amounted to about three millions and three quarters. The income tax would, it was estimated, produce in the year £3,770,000, the Irish duties £400,000, and a tax on the export of coal, with a few other suppressed in the June of that year : the French and Spani.sh fleets had been com- pletely defeated in the early spriag, and the Dutch ileet in Octobei'. The income tax itself, instituted the following year in consequence of the failure of the triple assessment, was not proposed until December, 1798, long after the Irish rebellion had been snuffed out on Vinegar Hill ; and after Napoleon had relinquished his threatened invasion of England in favour of an equally abortive scheme of Eastern conquest. * Greville, 1st Series, ii. 21. f On the announcement of the intended imposition of the income ta,"c the funds rose from 89 to 93. Cf. Martin's Life of Friiice Consort, i. 134, and "H. B.'s" Cartoon on the subject. + For the history of the income tax, and the alterations made in the tax at different periods, see I. 109 and 309. II The income tax w-as extended to Ireland in 1853. ■ ** The increase of Is. on the Irish spirit duty, instead of producing £250,000 in the year, only produced about £50,000, and the duty was in the following year lowered to the old figiire of 2s. M. 66 PINANOE AND POLITICS. Chap. III. charges, about £200,000 more. Thus, after setting aside half a million for China, a small surplus would be left, and the Prime Minister was sanguine that the revenue would show considerable elasticit3^ Sanguine expectations, which were doomed to disap- pointment ; and, indeed. Peel was always more successful in his financial policy than in his applied arithmetic. The cancer of financial disease had eaten too deeply into the trade of the country to be at once eradicated, and the produce of the customs and excise fell by two milhons short of the estimate. Not only so, but while, by an extraordinary mistake, the whole of the income tax had been reckoned on, only half could actually be collected in the current year. Against this, however — unlike Pitt, who esti- mated for a produce of seven millions and a half and received but five — Peel had estimated for a revenue of but three and three quarters, and had received it at the rate of five millions a year, a rate increased in the following year to over five and a half. Thus, in spite of the blunder, the actual receipts from the income tax in 1842 were but a million and a quarter short of the estimate. Nevertheless, there was on the year's accounts a deficit of £2,400,000, instead of the estimated surplus of £630,000,— Spring-Piice or Baring could apparently have done as well ! But the seed had been sown on good ground, and it was not long before it sprung up and began to bear fruit an hundredfold. The deficit of 1842, was the first and last of Peel's Premiership ; and the verjr next year ended ^vith a surplus revenue of four millions ■ over the ordinary expenditure. Indeed, taking the two years 1842 and 1843 together, — as, in order to show the results of the policy of 1842, they should be taken, — we find that the whole of the million and a half of indirect taxation remitted in the former year was recovered, and half a million to boot ; wliile. nearly eight millions of revenue were derived from the income tax. By 1845, when the income tax was to expire unless renewed, so well had the revenue responded to judicious taxation combined with fiscal reform, that it would have been possible to have dispensed with its aid, even before the end of the five years originally contemplated. The realized surplus of 1844* amounted * The Budget of 1845 was introduced before tlie close of the fluancial year, and the 1842. PEEL. 57 to six millions ; and it was estimated that, for the coming year, even if the income-tax were not re-imposed, there would be (including the ^2,600,000 of arrears of income-tax yet uncollected) a surplus of £1,400,000, with, however, some risk of a deficiency in 1846. But Sir Robert Peel,* encom-aged by the success which had already attended his financial policy, and emboldened by increased familiarity with the income tax and with fiscal operations generally, had the courage to demand, and the House of Commons had the patriotism to agree to, the re-imposition of the tax for another three j'ears; and thus, guaranteed against all risk of a deficiency, the Prime Minister was enabled to make a " bold experiment," /' and still further, and in a more comprehensive way than before, to reduce, simplify, and reform indirect taxation. This second imposition of the income-tax was essentially different from that of any previous period. In 1798 1 and in 1803, the tax had been imposed and re-imposed under war necessity, and in 1842 revived under financial pressure. But now, in 1845, when it might have been allowed to lapse, it was deliberately', and with full knowledge, re-imposed, with a specific purpose in view — a purpose which, indeed, it was hoped might, but which on the other hand might not, so revive the revenue, as to enable the tax to be sooner or later dispensed with. The fiscal proposals of Peel's first Budget of 1842 are best de- scribed in his own words. " We have proceeded," said he, in his Budget speech, "on these principles. First, we desire to remove all / prohibition, and the relaxation of duties of a prohibitory character ; next, we wish to reduce the duties on raw materials for manu- factures, to a considerable extent — in some cases the duty we propose being merely nominal, for the purpose more of statistical than revenue objects, in no case, or scarcel}' any, exceeding in actual realized surplus for 1844 exceeded, by about a million, the estimate — five millions — as given in the Budget speech. * Goulburn, the Chancellor of the Exchenuer, was only, as it were, Peel's "chief clerk." It was Peel himself, and not his Chancellor of the Exchequer, who, in 1842, in 1845, and practically again in 184G, laid before the House the financial proposals of the Gopernment. Lord J. Russell, in 1848, tried to play the same part to his Chancellor of the Exchequer, but his interference as Prime Minister served only to make the ill-success of the Budget of that year the more significant. f The Income Tax Act was not actually passed until January, 1799. , 58 FINANCE AND POLITICS. Chap. III. the case of the raw materials -5 per cent. Then we propose that the duties on articles partly manufactured shall be materially reduced, never exceeding 12 per cent. ; while as to duties on articles whollj^ manufactured, we propose that they shall never exceed 20 per cent." Again, sjjeaking later in debate, he thus summed up what he had done : — "We have sought," said he, "to remove all prohibitions — all absolute prohibitions — upon the import of foreign articles, and we have endeavoured to reduce duties which are so high as to be prohibitorj% to such a scale as may admit of fair competition with domestic produce. In cases where that principle has been departed from, and the prohibitory duties maintained, we justify our departure from the rule by the special circumstances of the case. But the general rule has been to abolish prohibitions and to reduce prohibitory duties within the range of fair competition. With respect to raw materials which constitute the elements of our manufactures, our object, speaking generally, has been to reduce the duties on them to almost a nominal amount. In half- manufactured articles, which enter almost as much as the raw material into our domestic manufactures, we have reduced the duty to a moderate amount. And with regard to completely- manufactured articles, our design has been to remove prohibition, and to reduce prohibitory duties, so that the manufactures of foreign countries may enter into a fair competition with our own." * The actual effect of the Budget of 1842, was to abolish, at a cost of £100,000, the remaining export duties on home manu- factures, leaving only the raw materials coal, wool, and clay, still subject to such duties ; and to reduce, at a cost of but £270,000, the import duties on no less than 750 articles in the customs tariff, none of which were producing over £10,000 a year. The duties on two articles of general consumption — timber at a loss of £600,000, and coffee at a loss of £200,000— were considerably reduced, the duties still, however, remaining greatly differential in favour of colonial produce.! A few articles, such as brandy, wines, dried fruits, &c., were specifically reserved for future reduc- tion, " as instruments of negotiation, with a view of effecting a * if., MavlO, 1842. + See /. is, 98, 343. 1843-45. PEEL. 59 reduction of duties imposed by other countries on the produce of our own country." And brandy and wine were the chief means wherebj', twenty years later, Cobden and Gladstone were able to negotiate the Commercial Treaty with France. The duties on the other 450 articles in the tariff were to remain unaltered, it not as yet appearing to Peel " necessarj' in the interests of commerce or of consumers to make any reductions." In 1843 there was a pause. The duty on " garancine," what- ever that may be, was altered, and the prohibition, into which Huskisson had run a wedge, on the export of tools, utensils, machinery, and similar articles, was repealed, while the duties on foreign timber were somewhat further reduced. In 1844 the surplus was utilised chiefly for the purpose of improving the credit of the country, both by strengthen- ing the balances — dangerously depleted by the late Government — and by assuring the success of the operation involved in reducing the interest on a large portion of the debt.* The fiscal operations of the year consisted of the abolition of the still exist- ing export and import duties on wool,t the reduction of those on glass, both import and excise, as well as those on currants, coffee, plums, and a few minor articles. Another important measure, was the reduction, by one half, of the duty, up to then practically prohibitory, on foreign " free labour " sugar, the duties remaining however greatly differential in favour of colonial sugar. The following j'ear the duty on both colonial and foreign "free labour" sugar was reduced, the prohibitory duty on foreign " slave-grown " sugar being still, however, left untouched. + In 1842, Peel had contented himself with a mere reduction of duties ; in 1845 he was pecuniarily and politically in a position to take more summary measures. At one blow he swept away as many as 520 customs duties, most of them unremunerative, all of them vexatious and costly of collection — an abolition which would, said Peel, " give a new scope to commercial enterprise, and occasion an increased demand for labour. "|j At a cost of * See /. 64, 127. f Both imposed by Huskisson, in lieu of the existing prohibitory duties. See /. 198. t See /. 96, 325. ^ II Among the articles on which duties were previously levied and now repealed. 60 FINANCE AND POLITICS. Chap. III. £680,000, the import clutj^ on cotton-wool — greatly differential in favour of Colonial cotton — was repealed. The remaining export duties, including the 2s. duty on the export of coal imposed by himself in 1842, together with the duty still existing on coal exported in foreign ships under Reciprocity Treaties, were abolished, at a cost of £118,000.* At a further cost of nearly £600,000, the excise duty on glass — one of the four remaining excise duties on great articles of home manufacture — was abolished. A "tax on light," a duty excessive in amount, and restrictive on improvement or expansion of trade, t The duty on ■were bulruslies, singing-birds, chestnuts, Iceland lichen moss, specimens of minerals, fossils and ores, and manna ( !). The list of the duties repealed will be found in full in the table to the 8th & 9th Yict. c. xii. Some of these duties were producing but a few pounds or even but a few shillings. * Coal had been subjected at one time to two forms of taxation : there was a duty, occasionally prohibitive, on the export of coal, and there was a duty on sea-borne coal carried from one part of England to another. Ko tax on coal caiTied inhmd was ever imposed, though Pitt had once attempted to tax it at the collieries. The tax on sea-borne coal was imposed in 1695, and in 1815 the duty was yielding some £900,000. P.educed in 1824, the tax, described by Parnell in his Treatise, as forming a pernicious obstruction to the productive power of the country, was repealed by Althorpe in 1831. At the time that the duty on sea-borne coal was imposed, the tax on the export of coal was greatly reduced. In 1823 the duty, which then stood at 7s. 9rf. for coal exported in British ships, was reduced to 6s. ^d. a ton. In 1831 this duty, and that carried in foreign ships of countries under reciprocity treaties, was reduced to 3s. Ad. and repealed in 1834. That on coal exported in other foreign ships was reduced from 10s. Qd. to 6s. M. a ton, and in 1834 to 4-5. a ton. lu 1842 Peel had revived the tax by the imposition of a 2s. duty, but was forced to repeal it three years later ; and, in 1850, the duty on foreign ships not under reciprocity treaties was also repealed. t The manufacture of glass first took its rise in the reign of Elizabeth, but, as well as that of iron, was discouraged on account of the great consumption of wood which it entailed. The naval and mercantile marine were looked upon as of far more importance than any branch of trade, and it was feared that the destruction of wood might injuriously affect ship-building. In 1590 (as quoted by Dowell, iv. 302), Harrison, in his Dcsa-iption of England, wrote, "Iron and glass spoil much wood, and after all may be imported from abroad better and cheaper than we can make them at home." The first tax on glass manufactures was imposed in 1695, but was repealed a few years later. The tax was re-imposed in 1746, together with an increase in the import duties, at the rate for white glass of 9s. id. a cwt. It was gradually and enormously raised, the import of manufactured glass being meanwhile practicaDy prohibited, till, in 1815, when yielding some £430,000 a year, it amounted to as much as 98s. on plate glass. After the war the tax was gradually reduced, and in 1835 that on plate glass stood at about 18s. M. a cwt., while on some sorts of glass the duty was still as much as 200 to 250 per cent, on the cost price. The impediments thrown in the way of trade by the duty were very great. "The free progress of invention and improvement was," says Porter, "by this means prevented, not only in the manufacture of glass, but also in many other aits and sciences to which glass is subsidiary. A manufacturer who by his skilful com- binations had succeeded a few years since in making great improvements in the quality of bottle glass, was stopped in his operations by the excise ofiicers, on the plea that the articles which he produced were so good iu quality as not to be readily distinguished from flint glass, to which description a higher rate of duty was attached ; the danger to the revenue being, that articles made of the less CDstlv and 1845. PEEI^. 61 property sold by auction, — a duty which led to much fraudulent evasion, — was also repealed at a cost of some ^£250,000 to ±'300,000.* But the most important feature of this second revision of the tariff was the repeal of nearly all the duties — first reduced by Hus- kisson, and again reduced in 1842 — on the raw materials, whether animal, vegetable, or mineral, of the great home industries : on ironf (cast, ore, pig, unwrought, bar, etc.), steel (unwrought), wool, silk, cotton, flax, and raw linen yarns, luidressed hides and skins, hemp, rags, indigo, etc., as well as on some woods. These duties were of the worst possible description, and tended not onlj' to hamper trade, but, by raising the cost of production and reducing the powers of competition, to restrict manufacture. The only exceptions left were the duties on timber, repealed in 1866, and those on tallow, repealed in 1860. The total amount of remissions and reductions of taxation in 1845 amounted to ^3,340,000. The abolition of the Corn Laws, of which we shall sfieak later, was not the only financial operation of the year 1846. The less highly taxed ingredients, would be used instead of flint glass." And he adds, that the sti-ict excise regulations practically prevented the English manufacturers from making glass suitable for optical instruments (p. 259, &e. ) So great was the hindrance to trade and consumption caused by the heavy tax, that while in 1800 300,000 cwt. of glass had been consumed, in 1842 the amount only stood at 350,000 cwt., though the consumption had been considerably gi-eater iu some intermediate years. The tax on glnss was a tax on light and air ; for the poorer classes, though exempt from the window tax, could not afford to glaze tlieir windows, and so were obliged to block them up. The repeal of the duties was followed by an immediate expansion of the trade, and probably rendered possible the construction in glass of the " Groat Exhibition" of 1851, the now "Crystal Palace." The customs duties were mostly repealed in 1853, and the last in 1860. See I'oulett Thomson's Speech, H., March"26, 1830 ; Porter, p. 255, &c. ; Dowell, vol. iv. book iv., chap. i. : ilcCulloch, C'ljiii. Did. ; Tooke ; Parnell ; Peto's Taxation, p. 125 ; Eeport of Commissioners of Excise, 1835, p. 66, &c., &c. * First imposed in 1777 at between threepence and sixpence in the pound on the price of the articles sold, raised subsequently to sevenpence and a shilling. The grounds on which the abolition of the tax was proposed, were that, the duty being a tax on one form of transfer of property only, was invidious, and that it was so levied as to lead to great evasion, properties being only nominally put up for sale, in order to ascertain their value, and then bought in, to be disposed of privately at the ascer- tained price. It was calculated by Sir Eobert Peel that in 1840 only eight millions out of the forty millions of property sold in that year had paid the duty. See Dowell, iii.ip. 158 ; Peto, p. 127 ; Korthcote, p. 67, &c. f The history of iron is a curious one. In the time of Elizabeth, before coal was used as fuel, the manufacture both of iron and glass was, as we have seen, discouraged, in consequence of the destruction of wood they entailed. The iron industry was greatly restricted, the wants of the country being for the most part snpiplieil by the import of foreign iron. Indeed, the English iron manufacture made no real progi'ess until the latter end of the eighteenth century, when continual 62 FINANCE AND POLITICS. Chap. III. Budget of that year — the first professedly Free Trade Budget, though but the logical sequence to those which had gone before — contained most important proposals. The earlier Budgets had repealed prohibitive, and relaxed protective duties on foreign manufactures, first reduced and then abolished those which were A'exatious and unremunerative, as well as those on the import of raw materials of manufacture. These last having been now repealed, there was no longer the same reason for maintaining the protective duties on home manufactures. Those, therefore, on certain of the inferior descriptions of woollens, linens, and cotton goods, and on dressed hides, were abolished ; while those on the better sorts of linen and cotton goods were reduced by one-half; and those on manufactured metals, such as steel, brass, copper, tin, etc., by a third. The general duty on fuUj^ manufactured articles being reduced to a uniform ten per cent, on foreign, and to half that rate on Colonial, goods,* a differential advantage in favour of " British possessions," though proportionately reduced, was still maintained. The silk trade alone — that tenderly cared for, yet never flourishing child of commerce — was yet to enjoy a protection of fifteen per cent., the thirty per cent, duty, imposed in lieu of the prohibitive dutj', in 1826, being reduced by a moiety. + The agricultural interest had, in additon to the practically pro- hibitive tax on corn, been also protected against the invasion of any other foreign products. Hence the import of all animals. warfare diminished, and ultimately brought to an end, the foreign supply, and stimu- lated the home industry. Iron was never subjected to an excise duty. Petty did indeed, in 1806, in his quest for a new source of revenue, oast a longing eye on the iron industry, which he thought could be made to produce at least half a million a year, but the proposal to tax it was successfully resisted. The duty on imported raw or semi-manufactured iron, always differential in favour of the colonies, was enormously reduced by Hus- kisson. Further considerably reduced in 1842, it was now repealed. The import duty on manufactured iron was finally repealed in 1860. * The duties on manufactures that were repealed were those existing on certain woollen goods, at the rate of, on foreign, fifteen, and on colonial, five per cent. ; on certain cottons ten and five per cent, respectively ; on certain linens fifteen per cent.; on hides, ten and five respectively, &c. The duties retained were those on certain woollens, which from twenty per cent, on foreign and ten on colonial were reduced to ten and five respectively. On some cotton goods the same. On some linen goods the duty (there was no diff'erential duty) was reduced from fifteen to ten per cent; on manufactures of hair from fifteen and seven and a half per cent, to ten and five' ' on skins (dressed) from twenty and ten, to ten and five ; on lace to ten per cent' See /. 121, 197. t See /. 19S. 1846. PEEL. 63 alive or dead, fresh or salted, of their bristles, their hides, and their hair, of all vegetables, fruits, and seeds — tares as well as wheat — had been either prohibited or subjected to enormous duties. As an enlightened Peer told the House of Lords in 1841,* while hundreds of thousands of their countrymen were starving around them, "every animal that walked the earth, nay, even every fish that swam, and every bird that was fit for food, must be taxed lest it should come in cheap for our starving population." All actual prohibitions on articles of food had been removed in 1842, and the duties on food products (except corn) had been very considerably reduced. And now, in 1846, along with the free import of corn, there was to be free import of other articles of food. The duties on live animals t (cattle, sheep, pigs, as well as horses, asses, mules, and goats), and on animal food (beef, bacon, meat salted or fresh, with the exception of hams and tongues), were abolished. The duties on butter, cheese, cured fish, hams, tongues, and hops, were halved, t The duties on certain seeds and vegetables had been abolished in 1845 ; those remaining were now reduced, to be finally repealed in 1853. 'I The duty on tallow was greatly reduced, and provision made for a further reduction of that on timber. The duty on soap was reduced by a third ; that on candles and starch by one-half; that on certain sorts of paper from a shilling to twopence. Finally, the duties on brandy and foreign spirits were also largely reduced. In all, some six millions of revenue was relinquished.. Two other important financial matters were about this time accomplished. In 1844 was passed the Bank Charter Act, one of Peel's chief financial doings, with which we will deal later.** * Lord Eadnor, H., May 2fi, 1841. The import of fish, fresh or salted, was prohibited for the sake of the British fisliing industry. + The duty on cows was at the rate of 15s. each ; on sheep, 3s. ; on pigs, 5s., and sucking-pigs, 2s. ; on horses, £1 ; and asses, 2s. %d. : half these rates for animals coming from British possessions. X The duties on hams, tongues, and cured fish were abolished in 1853 ; those on butter and cheese in 1860. Before Peel removed the prohibition, butter, while it could not be imported for " food, " might be imported for other purposes, if " spoilt " by the insertion into the barrel of a tarred stick. II In 1845 the import duty on acorns, beans, lettuce-seeds, parsley, tares, rape, &c. were abolished. In 1853 clover, carrot, grass, onion, mustard, trefoil, and "all other sorts" of seeds followed. Previous to 1842 the duty on "clover" (for instance) was 20s. the cwt. It was then reduced to 10s. and in 1846 to 5s., colonial clover being charged Is. 6d, ** See //. 14. 61 FINANCE AND POLITICS. Ciiap. III. In the same year the largest conversion of stock yet attempted was successfully carried through. On £250,000,000 of stock the interest was reduced immediately from 3J to 85^ per cent., which in ten years was to fall to 3 per cent. By the conversion an immediate annual saving of £622,000 was effected, and in 1854 a further saving to a like amount would accrue.* The general record of the Peel Government was a very satis- factorj' one. At home there was social and pohtical, as well as fiscal and financial, progress.! Abroad, two boundary disputes with the United States were successfully brought to a close. Friendly and cordial relations were maintained with France, in spite of the momentary difficultv which arose over her attempt to extend her " protectorate " over the island of Tahiti, complicated as the question became by the " Pritchard " incident. Tact, and a conciliatory spirit on the part of Aberdeen and Guizot, brought to a satisfactory conclusion an incident that might else have involved a war. In India, Scinde was annexed ; elsewhere peace prevailed. The financial record was one of which anv Government misht well be proud. The ordinary expenditure, indeed, had on the whole somewhat increased, from 53f millions in 1842, to an estimated amount of about 54f millions for 1846.1 But, on the other hand — to quote the interesting summarj^ given by JMr. Goulburn in his last financial statement | — between January, 1842, and January, 1846, the debt had been reduced by £7,100,000, the out- standing " deficiency bills " by £4,100,000, while the Exchequer balances ** had been increased by £4,800,000 ; the whole repre- senting a practical reduction of debt of some fourteen millions. This redemption, and the reduction of interest, that had been * See /. i,:7. t Kspecially the employment of women and eliiklren in mines and collieries was regulated ; the hours of labour of children in factories was further limited. J This is the " gross " expenditure. In 1842 there had been in addilion to tlie above an extraordinary expenditure of £1,350,000 on Canadian Expedition and Chinese "War. II The other figures given by Jlr. Ooulburn {H., May 29, 1846) in regard to taxes remitted and imposed, and details of tariff reform, were not complete, so I have in their place given the official figures from later returns. ** The Exchequer Balances had under the late Government more than once stood at below a million sterling. On January, 1846, they stood at nearly 8i millions. lS42-4e; PEEL. 60 effected on a lai-ge portion of the deist, liad reduced tlie charge from ^29,600,000 to £28,130,000, or by. nearly IJ millions a year. The extent to which the Customs tariff had been revised and simplified is best shown by the simple figures of reduction and repeal in the five years, 1842 to 1846. In 1841 there were 1046 articles and subdivisions of articles subject to import duties,* and in that year the duties on four were reduced. In 1842 duties were reduced on 769 articles ; in 1843 on nine ; and, in 1844, on a further seven, while those on four were repealed. But in 1842, in consequence of an alteration made, under which certain ad valorem duties were changed into specific duties, the number of subdivisions was increased, and hy 1844 the articles subject to duty had increased to 1098. Then came simplification by means of abolition. In 1845, while 31 duties were reduced, no less than 522 were repealed ; inl846 a further 216 duties were reduced and 79 repealed. To sum up, Peel found the tariff with over a thousand articles subject to duties, and left it with but half the number; the total number of duties reduced by him was 1,035, the total number entirely repealed 605 — duties for the most part on articles which concerned the food, the clothing, and the comfort of the people, or which, as levied on the raw material of manufacture, affected employment. The total amount of taxes imposed in the five years amounted to £5,660,000 a year, the total amount repealed or reduced to £8,150,000 (of which 6} millions were customs duties), a balance of remission of just under 2 J millions a year.t The burden of * In 1660 the customs list consisted of 1,630 articles ; in 1787 of 1,425 ; reduced bj' 1826 to 1,280 ; and by 1840 to 1,046. See, for the above figures, the very interesting table given in the Report of the Commissioners of Customs, 1870 (C. 148, out of print), as well as their Report for 1867, and subsequent Annual Reports. f These figures, of imposition and remission are taken from oflicial returns (Report of Com. Customs, 1857 ; Report Com. Inland Revenue, 1857; P. P. 511 of 1858, &c.). It should be noted that the reduction of the prohibitory duties on foreign slave grown sugar (accomplished by the Whig Government after Peel's resignation) increased the revenue by £416,000, and this sum ought to be deducted from the £8,150,000 in order to show the net reduction of taxation. The remissions and reductions each year, including that on sugar, were as follows (in round numbers) :— In 1842 imposed £5,640,000, reduced £1,590,000. In 1843, imposed a few thousands, reduced £410,000. In 1844, imposed nil, reduced £460,000. In 1845, imposed, £24,000, reduced £4,540,000. In 1846, imposed nil, reduced £1,160,000, VOL. I. F 66 FINANCE AND POLITICS. Ghap. Ill, taxation had befen rendered more equal by the increased imposi- tion of direct taxation. Peel's object had been, as he said in 1842, to " revive com- merce and effect such an improvement in the manufacturing interests as would re-act on every other interest in the country," and his object had certainly been attained. Trade, reviving, had met him more than half way, and the tax revenue had risen from a gross sum of just over 50| millions in 1841 to 55 millions in 1846, an increase of over 4-^- millions ; which, allowing for the remissions of taxation, meant a recovery of over 7 millions sterling in five years. Peel had come into office to find the finances burdened with the weight of accumulated deficiencies, and with the depressing expectation of a further large deficiency in the coming year. He left office with the accumulations considerably more than paid ofl", and with the finances in such good order that in the year a surplus of 2| millions was realized. Credit had revived. Commercial and financial confidence had been restored. The Funds, which in 1841 had been as low as 89, rose in the autumn of '44 to above par, and in the summer of '46, stood very nearly at par. Thus in every waj^ the commercial and financial policy of the time had worked to the advantage of the trade, credit, commerce, and financial stability of the country. CHAPTER IV. THE CORN LAWS. 1846. The very earliest Corn Laws — those dating from just after the Conquest, and lasting for some 400 years — were imposed with views exactly the opposite to those which actuated the sup- porters of later corn laws. The object was not then to keep up, but to keep down the price of corn, in order to prevent dearth ; and, with this view, exportation alone was i^rohibited,* while importation was substantially free. These views were held at a time when the " rent " was paid in kind. But, as the custom began to prevail of paying the rent in money, the income of the landowner came more and more to depend on the price of corn, and gradually the views of the ruling classes altered, and the law was changed. About the middle of the fifteenth century, import was allowed only when corn was above a certain price, while export was allowed when it was below a certain price. By about the middle of the seventeenth ?entury, and especially after the Corn Law of 1670, which practically prohibited the import of corn,+ the old theory of the corn laws was entirely reversed, and the system of protec- tion of the agricultural interest that prevailed for the two suc- ceeding centuries came into play. Thenceforward, the corn laws "were imposed for political and social, not for fiscal purposes ; not * " In 1197, it is recorded that there was a great famine and mortality in England. The King found some ships at St. Valeri, full of com, exported from England ; he ordered all the people belonging to the vessels to be hanged, and sent the corn back." Fiimndal Reform Tract, No. 28, 1880. t The import duty was 16.s. under 53s. id. (below that price corn was prohibited), between that price and 80s. the duty was 8s. ; above 80s. importation was free. When corn was below 53s. id. exportation was permitted on payment of a duty of Is, F 2 68 FINANCE AND POLITICS. Chap. IV. with a view to the revenue, but with a view to the maintenance of the price of corn. It was not unnatural, perhaps, that landlords— the representa- tives of that interest which was in those da3'S the main prop of English industry — who then ruled the roost, should beheve that high rents meant national prosperity, and that it was to the benefit of the nation in general, as it was clearly to that of them- selves in particular, that the growth of corn should be encouraged. And, indeed, their motives were not entirely selfish. The theory of the " Balance of Trade " (of which we have already spoken) still maintained its sway ; and it was thought to be to the commercial interests of the country that the import of corn — which would have to be purchased with gold ! — should be dis- couraged, and the export — which would in return bring the precious metal into the countrj- — should be encom-aged. Again, a belief was firmly held (Peel himself was much influenced by it) that it was essential, in order to guard against the contingencies of war, that the produce of the country itself should be sufficient for its wants, and that, for the necessary of life, it should be in no way dependent on foreign nations for its supplies. After the accession of William III. the export duty was re- pealed, and a bounty on export was given instead,* and for a time the export of corn was considerable ; indeed, it was not until 1788 that the imports permanently exceeded the exports. In 1773, the restrictions on import were verj' much relaxed, t But this law was not thought to be stringent enough, and in * Between 1740 and 1751 a million and a half sterling was paid in the forni of au export bounty. In 1791, and in some few subsequent years, so deficient were the home harvests that a bounty on import was given. In 1795, so great was the scarcity of wheat — it reached in that and the following year the unprecedented average price of 75s. to 785. — that "many persons entered into a voluntary agreement to diminish by one third the consumption of wheat in their families ; " and a law was passed that no bread should be sold until it had been out of the oven for at least twenty- four hours. See Ashworth's Oobden mid the League, 2 ; Pellew's Life of Lord Sidmauih, i. 156. t The scale previous to 1773 provided for a duty of 21s. 9rf., at or below au average price of 53s. id. ; between that and 80s. the duty was 8s. ; above 80s. it was Is. id. By the scale of 1773 there was prohibition below 48s., and above that the duty was 6d. a quarter only. The bounty given on exportation was 5s. up to 44s., after which exp6rtation was forbidden. The bounty was finally abolished in 1814. The total average bounty paid between 1740-50 was £150,000 a year. See for these figures and others given, Adam Smith, pp. 232, 509, &c. ; McCiilloch, Com. Diet., "Corn" ; Tooke, JSncy. Brit., "Corn" ; Porter, 139-54 ; Statistical Ahstracis, &c. Throughoat the figures given refer to wheat ; the duties on other descriptions of grain were pro- portionately less. 1791—1815. . THE COEN LKWS, '; ^9 1791, Pitt introduced a fresli corii law, which was intended to prohibit the importation of foreign corn when the ayerage price was below fifty shillings. Considerable discretionarj^ power of permitting importation was, however, vested in the Crown, and freely used. A few j'ears later, war and unproductive harvests combined, forced up the price of corn to a vei'y high level,* with the result that thousands of acres of inferior land were brought under cultivation, while on all land the rent was enormously raised.! Even before peace came, the landowners and the farmers were clamouring for an improved corn law which should raise still further the minimum price at which corn might be imported. In 1804, a considerable "improvement" in the law was made, I but when, in 1814, a further agitation was attempted, popular opinion was adverse. With final peace came the fear of a great and sudden fall in the price of corn, and so in rents. Tlie farmers were afraid lest, through a fall in prices, they should find themselves unable to meet their engagements. The " country gentlemen " declared that the inferior lands could jiot be culti- vated unless the price of corn were kept up to ninetj', a hundred, or even a hundred and twenty shillings a quarter. They were, in the words of Byron's savage satire : ' ' The last to liid the cry of warfare cease, The first to make a malady of peace. For what were all these country pfitriots horn ? To hunt, and vote, and raise the price of coi-n ? * * * * The peace has made one general malcontent Of these high-market patriots ; war was rent ! " Ultimatelj' Parhament, for the protection of vested interests, made an attempt to maintain the price at a war level. And, * In 1796 the price of corn fluctuated between 122s. and 56s., the average price ■faeing 78s. In January, 1801, the price rose to 139s., and before the autumn it rose to 180s. "The quartern loaf was for four weeks as high as Is. lO^d." See Porter, p. 452. In 1810 the average price was 106s. ; in 1812, 126s. 6d. ; in 1815 it was 65s. t The number of acres enclosed from 1800-9 was 1,550,000, from 1810-19 the same, and from 1820-29, 375,000. The average price of wheat during the iirst period was 82s. 2d., during the second 88s. 8d., and during the thii-d 58s. 5d. The rent of agricultural land in Scotland was increased during the war from two to five and a quarter millions. Mackenzie's 2'he Nineteenth Coihiry — A History, p. 20.1. J Pitt's scale had been as follows : — Below 50s., a prohibitory duty of 24s. Zd. ; from 50s. to 54s., 2s. &d. ; above 54s., M. a quarter. The .scale of 1804 raised the 60s. limit to 63s. from 63s. to 66s. the 2s. 6d was charged, and above 66s., 6d. to FINANCE AND POLITICS. . Chap. IV..' not without blooclsliecl, the " new Corn Law " of 1815, under which all importation was prohibited when the average price of British corn was below eighty shillings a quarter,* was forced on the country. It was fully hoped and beheved that the Corn Laws of 1815 would keep up the price of corn and maintain it steadily at about four pounds a quarter. But, like all legislative interference in fiscal matters, it failed in its object. The price was not main- tained, and the fluctuations exceeded anything that had gone before.! The corrective of a large area and an extended market in main- taining regular prices, was entirely lost by the limitation of pro- duction to the British Islands. The supply of corn produced within so limited an area would of necessity either exceed or else fall short of the demand. In one year there would be a great surplusage, and the price would fall disastrously for the farmer : in another, there would be a great deficiency, and the price would rise disastrously for the consumer. The price, depending as it did on the varj'ing condition of the home crop,t was ever fluctuat- ing ; and, so soon as a bad home harvest forced the price of gi-ain above the point of prohibition (as in 1817 and 1818), foreign corn was poured into England. Thus there was, as Canning * A price some seventeen shillings liigher than that of the existing corn law. The mode in whicli tlie average price of wheat was obtained for the purposes of import and duty was as follows : — If the average price of British corn, as found by the market price in different localities, in the six weeks immediately succeeding the fifteenth of February, May, August, and iSTovember of each year, had been below 80s., no foreign corn was allowed to be imported during the following quarter ; if above, it laight cOme in. The same system of obtaining the average iirice was followed xmder the sliding scale. -|- The highest average price of wheat between 1815^28 was 96s. in 1817, and tllft lowest 44s. in 1822. In 1816, the price of wheat fluctuated between 52s. 6cl. .and 103s. In 1817, between about 74s. and Ills. ; in 1822, it fell at one time as low as 3Ss. From 1801-10 the imports averaged 600,000 quarters a year. In 1815, when the. average price fell to 65s. , there were no foreign imports. 1 n 1817 and 1818, almost famine years, when the price rose to 96s., the imports amounted together to two and a half millions of quarters. The price then fell very considerably below 80s., and between 1819-24 the imports almost ceased, in 1821 only two quarters being imported, and in 1822 none at all. Between 1826-31, the harvests were deficient, and the price of corn rising, the imports, encouraged under the sliding scale of 1829, attained con- siderable proportions, as much as 1,700,000 quarters being imported in 1830. Between 1832-6, the harvests being excellent, and the price of corn low, importation again fell. Then came a turn, the harvests again failed, and the price rose to 70s. a quarter in 1839. Between 1839-42 the imports averaged over two and a half million quarters a- year ; in 1843 and 1844 nearly a million ;' in 1845 only 315,000. Then in 1846 tha imports rose to three millions, and in 1847 to over four and a half millions. J See Tooke, vols. ii. and iii., many instances. 1815—28/ . IHE COEN LAWS. 71 once said, "a perpetual series of alternations between a drought and a deluge." * These sudden imports had not moreover been anticipated or paid for by corresponding exports, and great dis- turbance to trade, and to the money markets, inevitably followed both at home and abroad. Again, the limitation of the market, and the beHef that the price of corn could be artificially main- tained at a high figure, naturally led to enormously increased production, which, in its turn, rapidly drove down the price. Discouragement ensued, tillage gave place to pastm'e, and the supply being checked, prices again rose, and again production was encouraged, with the same result as before — prices ever find-^ ing a lower level, and much capital being wasted in the process. In spite of its protection, the agricultural interest never ceased to complain of the grievous evils from which it suffered. So in 1822, a slight attempt was made, while maintaining the price, to check the serious evil of sudden imports, by the reduction of the limit of prohibition from 80s. to 70s., and the unposition at this latter figure of a considerable duty, diminishing as tlie price rose. In 1826,-f a great scarcity induced Ministers to admit half a million quarters of wheat (and other grain in addition) at reduced duties, and it became evident that the existing system must be amended. In 1827, Canning's Government undertook a reform of the law, and, by means of an improved " sliding scale," attempted to obviate the great fluctuations in price, and the evil of sudden large imports. The Duke of Wellington, however, who had been a party to the preparation of the scale when the Liver- pool Government was still in existence, now — the only occasion, perhaps, on which the Duke allowed party spirit completely to overclotid his sense of right + — so strongly condemned the pro-- * //., March 1st, 1827. f It must have been of this occasion that Charles Greville (1st S., i. 272) notes in. liis diai-y, in 1830, "I remember once before, a council was put off because I was at Egbnm for the races. This was a council in '27, I think, to admit foreign corn. " This occurrence might well have served Greville as the text for one of those remorseful homilies upon the evils of horse racing, as carried on by the Clerk to the Privy Council, with which he usually concludes his account of a bad fit of the gout, or an unsuccessful visit to Newmarket. J See Stajileton's Canning, pp. 318 — 337 ; and Wellington's letter to Huskisson of March 28th, 1827, Despatches, N.S., iii. 612. Greville tells the story of Aber-- deen's complimenting the Duke on his " Despatches," whereupon he said, with the. greatest simplicity', " It is very true ; when I read them, I was myself astonished, and I cannot think how the devil I could have written them " (2nd S,, i. 47). 7-2 FINANCE'' AND POLITICS. Qhap. IV, posal, that the Bill was thrown out in the Lords. But after Canning's death, and the Duke's accession to office', his own Government re-introduced substantially the same proposals — though not quite so good — and the "new scale" was passed in 1828. Under this scale prohibition Avas abolished, and corn could be imported at a duty varying inversely with the price — the lower the price the higher the duty, the higher the price the lower the duty. But the sliding scale itself introduced a fresh evil. The duty, as it approached the upper end of the scale, rapidly diminished ; and when the price of corn was rising, it was to the advantage of the dealers* to keep back their stocks, with a view, not only of raising the price, but of thereby importing the corn at a lower rate of duty. Thus scarcity was aggravated ; and, vice versa, when a fall in price was anticipated, the dealers hurried in their supplies in order to obtain the higher price, as well as to avoid the larger dutj'j the market became still more overstocked, and the price rapidly fell.t Thus the risks incurred through the uncertainty and fluctuation of i)rice, caused by the duty, were so enormous as to make even ])erfectly legitimate trading very speculative, and greatly to injure and hamper business.! The sliding scale, like the old fixed dutj', was intended to secure to the farmer a constantly remunerative price. But — as Tooke points out — "instead of the 64s. or even 60s., which thej' were taught to expect by their landlords, who had been instrumental in obtaining the law (and who had regulated their rents accordingly, as a great concession, from 80s., which had before been their standard), they found they were obliged, after ' * In the time of Edward VI. the trade of corn dealers and distributors was illegal. The middlemen, it was thought, would "corner" corn, and would cause artificid fluctuations and rise in ]irice. The consumer had therefore, at whatever incon- venience, to go direct to the farmer for his supplies. This law, though it had long fallen into practical disuse, was not finally repealed until 1772. •)- In Septemher, 1838, says Tooke (iii. 30), the aggregate average price of six weeks came to 73s. 2d., "when suddenly, in the single week, 1,513,000 quartei-s of wheat and wheat meal were liberated, at the low duty of Is. the quarter," The price at once declined from 77s. to 61s. Wd. t For instance (to take the case quoted by JlcCuUoch, Adam Smith, p. 516), a cargo of wheat is commissioned when the price of wheat is 71s. per quarter, mean- while, before it is delivered, the price falls to 68s., and the duty consequently rises at once from 6s. Sd. to 16s. Sd. a quarter. Thus, with a variation of price of wheat itself of only 3s., the merchant realizes 13s. a quarter less. On the other hand, if tjie price had risen, the merchant would have made a large. and unexpected profit. (See also Tooke, iii. 34, &c.) lS28-43i , THE COEN I4AWS. Vi a feverish state of high but rapidlj^ fluctuating prices between 1828 and 1831, to submit to a nearly progressive decline, pro- tracted through five successive seasons, of no less than 50 per cent, in the price of wheat — from 75s. in February, 1831, to 36s. in January, 1836."* Thus, the "sliding scale" in no way im- proved the position. Instead of obviating extremes of price, it led to great and rapid fluctuations injurious to trade, bad for the farmers, and disastrous to the consumer ; especiallj^ to the work- ing man, who could never with certainty anticipate how far his wages would go in providing his family with the necessary of life.t So the matter stood, when, in 1841, the Whigs, in their frantic efforts to retain office, declared for a fixed duty of 8s. a quarter in substitution for the sliding scale. But the introduction of their proposed fixed duty would have brought but little improvement. The duty would have been too heavy a burden when the price of corn was high ; it would have been too low for protective pur- poses when the price of corn was low — and the corn laws were nothing, if not " protective." Indeed, between the sliding scale and the total repeal of the corn laws, there \\as, as the Whigs soon found, no halfway-house ; and after a judicious interval, Lord John Eussell, in his Edinburgh Letter of 1845, threw over the fixed dutj', and declared for free imports. In 1843, Peel — still a protectionist, at least in the matter of corn — had revised the "sliding scale," with a view to diminish the fluctuations in the price, by making the scale vary more * Sisiory of Prices, iii. , 20. f The great fluctuations that occurred in the price of wheat can be seen from the following table : — In 1828 highest 76s. ; lo 1829 76s. 1830 74s. 1831 74s. 1832 63s. 1833 1834 56s. 49s. 1835 44s. 1836 60s. 1837 60s. 1838 78s. 51s. ; difference 49 pei ■ cent. 55s. 37 55s. 35 59s. 27 51s. 24 49s. 14 40s. 22 36s. 22 36s. 68 51s. 17 52s. 49 Between 1836 and 1839 there was a difference of 116 per cent, between the highest and lowest prices. . Canning, when introducing his proposals, had expressly advocated them on the ground that they would ' ' tend to ec^ualize the prices, and keep that equaUzatioji of 74' FINANCE AND POLITICS. Ghap. IV.- gradually and evenly with it.* But the Corn Laws were rapidly becoming an anachronism, and, day by day, it was becoming more and more evident that the supposed interests of the agriculturists were antagonistic to those of the nation at large. " The history of agricultural abundance " was, in those days, as has been well said, " the history of agricultural distress." Thoughtful men had begun to recognise that an artificial interference with the price of food could not much longer be maintained. Such a system had been possible so long as the landowning and farming interests were predominant ; and so long as they could persuade Parlia- ment that their protection was essential to the welfare, safety, and social order of the nation at large, f But for some time past the predominance of the landed interest had been on the wane.j Since the beginning of the century, the manufactm'ing interest had gradually been increasing out of all proportion to the agricultural interest, in numbers, in wealth, and in influence. The iron trade, the coal trade, and the cotton trade, had risen to importance within the last fifty years. The iron industry, which at the beginning of the century was pro- ducing only between 200,000 and 300,000 tons of pig iron, by 1835 had increased its production to a million, and by 1844 to nearly a million and a half. [1 The quantity of coal shipped had risen prices steady. The market will, injeeil, assume such a steadiness, that, instead of a Huctuation between 112s. at one time and 38s. at another, the vibrations will probably be found to be limited within the small circle of from about 55s. to about 65s. The plan will provide against the mischief arising from sudden gluts in th^ market at one time, and sudden dearths compelling us to legislate occasionally iu contradiction to our general system of legislation at another." {H. , March 1, 1827. ) * Tlie difi'erence between the two scales will be seen from the following : — Old Scale (somewhat altered since 1828). At 40s. duty, 46s. Sd. ; at 50s. duty, 36s. Sd. At 53s. ,, 21s. 8rf. ; at 60s. ,, 26s. 8rf. At 66s. ,, 21s. 8(«. ; at 70s. ,, 10s. 8d. At 72s. ,, 2s. Sd. ; at 73s. (and above). Is. New Scale. At 50s. (and below) duty, 20s. ; at 55s., 17s. ; at 60s., 12s. At 65s., 7s. ; at 70s., 4s. ; at 72s., 2s. ; at 73s. (and above), Is. •f Arthur Young had written in 1771 : — "If ever unfortunate questions should be started, in which a preference must be given to one, none but a fool can imagine, that the landlords of this great empire, of above four score millions of acres, arc to yield to the transitory sons of trade and manufacture." Farvur's Tour, iv. 362. J " In 1685 the produce of the soil (in England) far exceeded the value of the other fruits of human industry." Macaulay, i. 243. - II Porter, p. 584. See an interesting account of the rise and growth of the "Iron trade and allied industries," by Sir Lowthian Bell, iu Reign of Quceti. Victoria, ii. ', 1888—43. THE COEN' LAWS. to from four millions and a quarter tons In 1819, to over nine million tons in 1844.* The change that had taken place in the processes of cotton and woollen manufactures had concentrated labour. A change marked bj' the fact that even as early as the beginning of the centurj', Parliament had thought it necessary to inter^re in the regulation of labour, iirst in the cotton factories, and subsequently in other factories and in mines. Towns such as Manchester, Liverj)ool, Glasgow, and Blackburn, had in the last fiftj' years sprung from stagnant townships into active and populous centres of industrj'. Every year was adding to their population and rateable value. t In 1831, out of a population of 16i millions, 1,243,000 adults were employed in agriculture. In 1841, out of a population of 18f millions, 1,200,000 only were so employed, t "Well might Sir James Graham saj', in 1843, that from an agricultural the English had become a commercial people. The change had been clearly marked in 1832, by the transfer- ence under the Reform Act of a considerable amount of represen- tation from the landowners to the growing industrial centres. By widening the basis of representation that Act had moreover given to the people a greater interest in, and a greater know- ledge of jiiolitical questions, — and the Corn Laws could not stand discussion. Then, as population increased, and the demands for food gradually outstripped the capabilities of home supply, the vexatious interference of the Corn Laws with the importation of food, grew more and more apparent and irksome. Again, means of communication were day by day increasing, and sources of supply abroad were multiplying ; the danger of famine or scarcity in time of war was becoming less and less of a bugbear. The fiscal changes that had been made, the gradual approach to freedom of trade, logically led to further changes in the same direction. Why, it began to be naturally asked, should one branch of industry remain strictly and heavily protected, while • Porter, p. 281. - t The jiopulation of Manchester and Salford together numbered in 1774, 27,000 persons ; in 1801, 90,000 ; in 1831, 183,000 ; and in 1841, nearly 300,000. That of Blaclibum trebled in the first forty years of the century. Liverpool in 1801 con- tained a population of 78,000 persons, in 1831 of 16r.,'000, and in 1841, 223,000.' Glasgow in the same periods had risen from 77,000 to 200,000 and to 274,000. Sea McCuUoch, Com. Diet., Ency. Brit., "Manchester," &c. X Porter, p. 61. :0 PINANCE AJSiD POLITICS, Cijap. IV. the protection .formerly enjoyed by the bthei's had been almost swept away ? Moreover, while other branches of industry had palpably benefited by the changed order of things, the position of the agricultural interest, in spite of the protection it enjoyed, had seldom been otherwise than deplorable. The agriculturists, ■ — " agriculturasses," as Cobbett was fond of calling them, — had over and over again come to Parliament "whining for protection " ; their distress had been a constant theme of reso- lution, discussion, and inquiry, and more than once had taken a prominent place in the Speech from the Throne. Finally, a considerable breach had alread)" been made in the wall of corn-protection by the permission given in 1843 for the importation of Canadian corn at a merely nominal duty. It seemed scarcely logical to allow Canadian corn, and therefore American corn at but little more, to be introduced at a low fixed figure, while charging on all other corn an enormous and prohibitory dutj'.* Thus, the power of the landed and agricultural interest had been diminishing, and it was becoming more and more questionable whether it were to the advantage of the country artificially to bolster it up : f opinion was rapidly ripening for a radical change * The limit and the duty on Canadian had always been lower than that on foreign corn. In 1815, for instance, the limit of prohibition was 67*. instead of 80s. In 1825 the duty was fixed at a unilbrm charge of 5s. per quarter whatever the price in England. At that time Huskissou estimated that the quantity of wheat that Canada could then supply did not exceed 50,000 quarters, the Canadian wheat now annually imported amounting to some 711,000 quarters {1886, P. P., 290 of '87). The 5s. duty was reduced in 1843 to Is. But the Canadian imjiort duty on corn was itself only 3s., so that American wheat could be sent through Canada to England at a duty of but 4s. As a matter of fact, however, this roundabout trade had scarcely developed before the Corn Laws disappeared. ■|- McCulloch {Adam i^init/i, p. 524) estimates that the extra average annual amount paid by the consumer in 1840-6 in the price of his corn, consequent on the increased piice due to corn laws, amounted to nine millions, and of this, he asserts, only £1,800,000 to £2,250,000 went as extra profit to the fanners and landowners, the rest being swallowed up by the extra labour and capital employed in bringing into culttvation inferior lands, which would not otherwise- have been cultivated. Thus, the consumer lost nine millions and the producer only gained about two. In his Com. Diet., " Corn," however, he estimates that, under the improved Corn Law of 1843, the total annual loss to the consumer, after allowing for the corn which did not come til market, was £4,500,000, and the gain to the landlords only £900,000, Mr. Deacon Hume, in his evidence before the Import Committee of 1840 (Q. 122-8), estimates tliat the public were " paying as effectually out of their pockets as if it did go to the revenue in the form of direct taxes," no less than £36,000,000 a year on account of the protective duties on corn, butchers' meat, and other agricultural produce. 1828—43. THE CORN LAWS. 77 in the relations of the State to the land. Moreover, that " grega- rious collection of cant and cotton men,"* as its enemies were pleased to designate the" "League," had become a great fact, and a great power in the State. All this had been gradually permeating the mind, not only of manj^ irresponsible persons, but of the man on whom rested the responsibility of ultimate decision. Peel's conversion, by his enemies proclaimed a sudden one, was in reality the growth of years, and the result of much painful thought and hesitation. Gradually, very gradual^, he had become convinced that it was not to the interest, either of the agriculturists themselves, still less of the country generally, that the price of the principal article of food should be artificially maintained. As long ago as 1834, he had stated specifically in a letter to Croker, that he did not wish in any way to rest the support of the Corn Laws on the " invidious and startling argument — that the landed interest, as the most important, ought to be a favoured class, for the benefit of which the rest of the community maj' properly be taxed." He desired rather to rest the case on the argimient that the Corn Laws were but, a " part of a whole system of restrictions intended equally to favour domestic produce and domestic manufacture." The country was " equally bound to repeal all duties intended not for revenue but for protection, and the manufacturers, if they succeed in repealing the duty on foreign corn, must be at once prepared for the repeal of every protecting duty whatever." " But," added he, " it does not follow that, even if the duties on manufactures were repealed, that on corn should also necessarily be repealed, for the question of the apportionment of the public and local burdens must be con- sidered ; " does not the land bear more than its fair charges ? and if it does, the land is entitled at least to a protection equivalent to the excess, f In later years, Peel had more than once openly declared, that in his opinion, apart from a small duty on foreign corn, which should be imposed as an equivalent for " the special burdens borne by the agriculturists," additional protection could * Times, Nov. 18, 1843. •i" Croker, ii. 222, 78 FINANCE AND POLITICS. Chap. IV only be vindicated on the ground, that it was for the interests of the country generally.* This had been his position, and he himself, after the event, thus described the influences that weighed with him in taking the momentous decision of 1845. "It was from the combined influence of these various consicTerations — from diminished confidence in the necessity or advantage of protection ; from the increasing difficulty of resisting the application to articles of food of those principles whioli had been gradually applied to so many other articles ; from the result of the experiment made with regard to cattle and meat in 1842 ; from the evidences of rapidly increasing consumption ; from the aggravation of every other diffioulty in the maintenance of the Com Laws, by the fact of their suspension on the first real pressure — it was from tlie combined influence of such considerations that I came to the conclusion that the attempt to maintain those laws inviolate after their suspension would be impolitic ; that the struggle for their maintenance would assume a new chai'acter, and that no advantage to be gained by success could counterbalance the consequences of failure, or even the evils attending protracted oonflict."t There can be no finality in legislative reform. One advance of necessity leads to another. The stepping-stone of further progress is formed bj' the definite acceptance of past action. The logic of his own actions of earlier years, would have inevi- tably led Peel to their ultimate and irresistible conclusion — the abolition of all protective duties of whatever nature. He had put his hand to the plough, and, come what might, he would not have looked back. And there is little question, but that he would in any case have gradually educated his Partj^, as he had educated himself, into a belief in the necessity, first of the reduction and then of the abolition of the tax on corn, had not the sudden failure of the crops precipitated matters and forced his hand,| By 1845 the repeal of the Corn Laws was, famine or no famine, only a question of time, though it is certain that a continuation of * " I believe that, on the general principle of free trade, there is now no great difference of opinion, and that all agree in the general rule that we should purchase in the cheapest market, and sell in the dearest." Then had come significant " cheers." "I know," said Peel, "the meaning of that cheer. I do not now wish to raise a discussion on the Corn Laws or the Sugar Duties, which I contend how- ever, are 'exceptions to the general rule." Peel, H., May 10th, 1842. + "Tamworth Address," July, 1847, quoted in his own Memoirs, ii.105. See Lord Aberdeen's remark to the Queen in 1846 (Prince Consort, i. 313). t " Men, and the conduct of men, are much more the creatures of circumstances than they generally appear in history." Peel to Lord Stanhope, Memo, on Walpole. Stan7iope's Miscellanies, pp. 89, 90. ' • 1845. THE COEN LAWS. 79 good harvests would Imve somewhat delaj'ed the "bagman's millennium," just as the bad harvests did in fact quicken its con- summation. The beneficial result springing from the freedom of trade granted in other directions, combined as they were with good harvests had, during the earlier months of 1845, made the question of the Corn Laws appear of less moment than it had appeared a year or two before, when the state of the country was so deplorable.* Indeed, the League themselves had become some- what discouraged, just at the moment when success was really within their grasp. f The year 1845, fiscally most encouraging and satisfactory, agriculturall}' was most disastrous. Cobden had once j)rophesied that " three weeks of showery weather, when the wheat is in bloom, would repeal the Corn Laws," and his words were coming true. The harvest completely failed both in England and Ireland, and largely on the Continent too, and in Ireland there was super- added the potato blight, reducing a large portion of the country to the verge of starvation. A wail of distress rose from one end of England to the other. " Famine, against which we had warred, came to our aid," said Mr. Bright, in after days. The Prime Minister was alarmed. | After consultation with Graham, the Home Secretary, who cordially agreed with him on the necessity of taking prompt action in order to avert scarcity or even famine, he called his Cabinet together in the end of October. [] He then warned his colleagues that the question of a modifica- tion of the Corn Laws was imminent, and proposed to them the * Compare Motley's Life of Cohden, a book in which the stoiy of tlie somewhat prosaic, life of a political commercial traveller is invested with all the charm of an inimitable style. f "The close of the session of '45," says Mr. Disraeli, with pardonable exaggera- tion, "found them (the League) nearly reduced to silence. Low prices, abundant harvests, and a thriving commerce had rendered appeals ... a wearisome iteration. They lost at the same time elections and the ear of the House." — Life of Lord George Bentinck, p. 9. My readers will readily pardon me for quoting in this chapter very freely from this most humorous of political biographies, even if they cannot always feel, with the author, that it combines "the accuracy of the present with the impartiality of the future." X The Duke, in his usual laconic and forcible style, said in January, 1846, that " rotten potatoes have done it all ; they put Peel in a d d fright." II See for the histoi-y of the crisis, especially Peel's own Memoirs Cedited by Stan- hope and Cardwell, 1858) vol. ii. ; Morley's Life of Cobden ; Montgi'edien's History of the Free Trade Movement ; Ashworth's Cohden and the League ; Sir James Graham, Life, ii. ; Alison's History, ka., &c. 80 FINANCE" AND POLITICS. Chap. IT, temporary susiperislon' oF the 'Corn Laws, in' order freely to' aHmit corn; a "suspension " that, it was clear, would almost certainly sooner or later spell "repeal." Graham, Sidney Herbert, and Aberdeen, were at first alone convinced of the necessity and advantage of taking this tremendous step. The rest of the Cabinet were not yet prepared for the inevitable, and decision was postponed from week to week. Matters became worse, and Peel, more and more thoroughly convinced that immediate action must be taken, continued to urge on his colleagues the necessity of suspending the Corn Laws, and of following up the action by a proposal to Parliament radically to modify the existing system. But his plea for prompt action Was met by further delay ; definite conclusion was postponed. The Cabinet was in fact hopelessly divided on the subject, but, desiring if possible to keep together, were not as yet ripe for resignation. Meanwhile, the early and frequent meetings of the Cabinet had made it clear to the public that thei Government were perturbed, and the reason for their perturbation was not far to seek. Now was the time for the AVhigs ; * and " with no false delicacy for a Con- servative Cabinet in convulsions," Lord John threw over the fixed duty, as " no longer worth while to contend for," and declared for the unqualified repeal of the Corn Laws.t Such a declaration by the leader of the Opposition naturally brought matters to a crisis. Continued inaction on the part of the Governinent was no longer possible, 1 and the Prime Ministei- annoiinced to his colleagues that, in his opinion, it was essential that the Government should call Parliament together, and propose to them a mea- sure that would " ensure the ultimate and not remote extinc- tion of protective duties " on corn. || But a minority of the Cabinet was still unconvinced of the need,** and Peel, feeling that, under these circumstances, he might not be able to carry through his proposals, and believing that the public interest would be very seriously injured by his failure, resigned. ft * Edinburgh Letters, Nov. 22nd, 1845. f Sen/incl; p. 19. + Peel in his Mpmoirs, (ii. 179) declares that Ijis conduct was not influenced by Eussell's letter ; but, the Whig pronouncement cannot have failed, consciously or unconsciously, to have accelerated matters, if nothing more. II Deo. 2nd., 1845. ilcmoirs, ii. 219. See also Cabinet Memos, of Nov 26th and 29th, pp. 182, 185. ** Lord Stanley and the Duke of Buccleuch alone actually dissented, but the assent of others was veiy reluctantly given. See ifemoirs, ii. 221. f f Dec. 5th, 1846. THE COEN LAWS. 81 Then that partj- -who, with the zeal of converts to a new-found faith, were clamouring for Free Trade, were called upon to form a Government to carry out their doctrine. But Peel, not un- naturallj', refused to pledge himself unconditionally to support Russell's measure, whatever it might be ; and family dissensions arising among the potentates of the Whig party — Grej-'s dread of Palmerston at the Foreign Office, and Palmerston's refusal to accept any other post — enabled Lord John, " availing himself with happy readiness of the distressing incident, . . to hand back with courtesy the poisoned chalice to Sir Robert."* So Peel had, perforce, to come back to office, and to carry out that policy on which the country were now fully determined — the abolition of the Corn Laws. Stanlej- 1 alone excepted, all his colleagues clave to him ; such as were yet unconverted probably thinking, with the direct- minded old Didje, that " a good Government for the country was more important than Corn Laws, or any other consideration," and " that the only alternative to Peel resuming office, was that Her Majesty would be under the necessity of taking Cobden and Co. as Her Ministers ! " Not, indeed, that many were now left to defend a statute which prevented the free importation of food at a time when famine was imminent. The nation had been con- verted in battalions, and baptised in platoons, | and if the conver- sion had been somewhat sudden, it had at least been pretty universal. With Peel, the nation at large was not ashamed to confess, that its opinions had been modified by experience ; and the House itself, elected on a Protectionist platform, having repeatedly' supported the Corn Laws by overwhelming majorities, now by a majority of 97, finally condemned them. But the division was fatal to Peel. Already, before the Corn Laws came up, "he had forfeited the hearts of his adherents, though he had not lost their votes ; " and now, deserted by many of his best friends, he had to depend for support on the votes of * Bentinck, p. 34. + His place at the Colonial Office was taken by Mr. Gladstone. The Duke of Buccleuch returned to office. t Disraeli said of the Protectionists [B., May 15th, 1846) that, like the Saxons of old, they "were converted in battalions and baptized in platoons. It was utterly impossible to bring these individuals from a state of reprobation to a state of grace with a celerity sufficiently quick." 82 FINANCE AND POLITICS. Chap. IV, his former opponents.* The Conservative party could not maintain the Corn Laws, but neither could they forgive the man who had now, as they considered, for the second time betrayed them. And, as soon as the Bill was safe, " they who," as Lord George Bentinck put it, " loved the treason which had recently been committed, though they hated the traitor," joined in oppo- sition with those who abhorred both. An Irish Coercion Bill gave them the pretext they sought, and the very evening on which the Corn Law Repeal Bill passed its third reading in the House of Lords, the Minister to whom it was due, and with whose name it will be for ever associated, was hurled from place and power, never to return, t Thus fell Peel's Government in what is now universally con- ceded to have been the accomplishment of a noble work. They fell, as Peel proudly put it, "in the face of day and with their front to the enemy." t * But he was manfully supported by many of the landed interest, in spite of the strain they believed he had put on their pockets, as well as on their principles. Lord Malmesbury said to Lord Palmerston, even as early as 1842, " Peel hit us a right- hander with his Corn Laws, and a hard left-hander with his income tax, and this measure about timber a regular facer." (Bulwer's Life, of Lord Palmerston, iii. 99.) According to the analysis given by Mr. Harris in his History of the Radical Parly in Parliament, on the division of March 2nd, 112 Conservatives voted for the Com Bill and 231 against, 227 Liberals supporting it and 11 opposing it — majority for, 97 (p. 349.) + June 25th, 1846. I cannot resist rc-quoting that graphic descriptions of the division given by the later and more successful educator of the Tory party :^ " It was not merely their numbers that attracted the anxious observation of the Treasury Bench, as the Protectionists passed in defile before the Minister to the hostile lobby. It was impossible that he could have marked them without emotion : the flower of that great partv which had been so proud to follow one who had been so proud to lead them. Tbey were men to gain whose hearts, and the hearts of their fathers, had been the aim and exultation of his life. They had extended to him an unlimited confidence, and an admiration without stint. They had stood by him in the darkest hour, and had borne him from the depths of political despair to the proudest of living positions. . . . They had been not only his followers but his friends ; had joined in the same pastimes, drunk from the same cup, and in the pleasantness of private life had often forgotten together the cares and strife of politics. ''He must have felt something of this, while the Manners, the Somersets, the Bentincks, the Lowthers, and the Lennoxes passed before him. . . They trooped on : all men of metal and large-acred squires, whose spirit he had so often quickened, and whose counsel he had so often solicited in his fine Conservative speeches in Whitehall Gardens. . . When Prince Metternich was informed at Dresden, with great ostenta- tion, that the Emperor had arrived, 'Yes ; but without his army,' was the reply. Sir Robert Peel was still first Minister of England, as Napoleon remained Emperor for a while after Moscow. . . ' They say we are beaten by 73 1' whispered the most important member of the Cabinet, in a tone of surprise to Sir Robert Peel. Sir Robert did not reply, or even turn his head. He began to comprehend his position, and that the Emperor was without his army. " {Life of Lord George Bentinck, p. 299. ) X Peel's parting speech, containing the well-known reference to Cobden and the eloquent appeal to posterity, was delivered on June 29th, 1846. E., v. 187 (3rd series), p. 1041. 1846. THE CORN LAWS. 83 For a few years more, the section of a party led by Bentinck went on fighting against facts, and hoping against hope, that the nation would re-impose upon itself the burden of protection. But facts proved too stubborn, and after the general election of 1852, after Lord George's quondam guide, philosopher, and friend, had not only himself introduced a " regular free trade budget," but had referred to the doctrines of protection as "obsolete opinions," hope disappeared. A Protectionist Ministry had declared for "unrestricted competition;" and the Protec- tionist party vanished into space. But the wrench had been terrific. The Conservative party, disorganised, discredited with the country, losing at once their leader and the ablest of his stafi", for eight-and-twenty years wandered in the wilderness, rarely enjoying, even for a space, the sweets of office, never again obtaining real power until after the election of 1874. The tax on corn— with the exception of the registration duty — came finally to an end in 1849.* In 1850, the average price of wheat was about 39s. to 40s. a quarter. For nearly five-and-twenty years the prices of all agricultural produce rose, while great im- provements were made in the process of farming ; and for the first quarter of a century after the final abolition of the Corn Laws, the complaints of the agriculturists were no more heard in the land. The crop of 1875 was a poor one, and during the next eight years there were only two good harvests, while some, and notably that of 1879, were deplorably bad. These deficient harvests, combined with considerable losses of cattle and sheep, themselves destroyed much agricultural capital. Coincident with this, came a vast increase in the area of production of corn and cattle abroad, together with an extension of the means of communi- cation, so great as to lead, bj'' competition, to a rapid fall in the cost of transport, thus depriving the British farmer of that " natural protection " on which he had been taught to calculate.! * The duty on corn was not finally repealed in 1846. It was to remain temporarily in force, at a reduced rate, iintil February, 1849, after which time only a registration duty of Is. a quarter was to be charged, a duty repealed by Mr. Lowe in 1869. f See Sir James Caird on "Agriculture" in Reign of Queen Victoria, ii. Evidence before, and Report of, Royal Commission on Depression of Trade, 1886 ; Annual Agricultural Returns of Great Britain, &c. It is estimated (Caird, p. 151) that between 1851 and 1874 the capital value of G 2 84 FINANCE AND POLITICS. Chap. IV. The wheat acreage in the United Kingdom in 1852, was, according to McCulloch, 3,750,000 acres; the acreage in 1867 (the first year of agricultural returns) was about 3,840,000 acres; in 1887 it was reduced to 2,390,000 acres. In 1867, the total cultivated acreage was ahout 23J millions of acres, of which 11,700,000 were under com crops, 5,000,000 under green crops, and 6,800,000 under clover, flax, hops, &c. In 1887 the total cultivated acreage was the same, and but 9,700,000 acres were under corn crops, and 4,700,000 under green crops, while 9,000,000 acres were under clover, &c. In 1866,* 85 million cwt. of wheat and wheat flour and other corn and meal, were imported; in 1883 the amount had risen to 114 million cwt.; in 1886 it was but 100 million cwt.t Free trade in corn and other agricultural products has been carried to its most rigorous conclusions ; with the result that, though the agricultural interest has latterly suffered, at least the nation at large obtains its food cheaply and abundantly. land and of the stock and crops upon it increased by no less a sum than £650,000,000. But agreat deal of this— estimated at £42,800,000 for 1885, and at some £200,000,000 or more in all, has subsequently been lost. See David "Wells, Contcmpm-ary Review, September, 1887. Report of Royal Commission on Depression of Trade, p. xix. Evidence, Q., 7675, &c. (C. 4715 and 4893), and Hastings Berkeley's Wealth and Welfare (1887). The assessments for the income tax under Schedule B., "in respect of the occupation of lands, tenements and hereditaments," rose from an annual value of 48 millions in 1849 to &%\ millions in 1886, having been as high as 69| millions in 1877 {Stat. Abstracts). But all these income tax comparisons must be taken with caution, in consequence of the many changes of assessment and collection that have from time to time been made. * Annual Agricultural Returns of Great Britain. Unfortunately these returns do not go further back than 1806. Sir James Caird states that in 1851 the cost of the wheat consumed, with a population of 27 millions, was £53,500,000 ; in 1885, with the population increased to 36 millions and with a consumption one quarter larger per head, the total cost was only £43,700,000. In other words, a lai-ger number of persons were better fed at a diminished aggregate cost (p. 144, Agriculture). These gi-eat imports have of course vastly profited the shipping and dock trade of the country. t The value of the total imports of food products, including sugar, but excluding "dried fruits," amounted in 1866 to 68 millions sterling, which rapidly rose, until in 1883 it attained its maximum of 1574 millions sterling. Since then it has steadily diminished, and in 1886 amounted to but 113 millions sterling. CHAPTER V. THE WHIGS AGAIN. 1846—52. Peel was succeeded in June, 1846, by a Whig family party,* under the leadership of Lord John Eussell, with Peel as their "crutch" — a rickety concern altogether, without a majority on which they could count in the Commons, and with an unfriendly House of Lords. Strong neither in personal ability nor in the support they received, the one strength of the Government lay in the fact that no one wanted to turn them out. Peel and his followers, conscious that they could not form a Government themselves, supported Russell as the only alterna- tive to a Protectionist Miuistrj^, while the Protectionists on their side were not anxious to come into office in a hopeless minority. So, while Peel yet lived, the Whigs were secure in their places ; and it was only after his death, four years later, f that the hopes of the Tory party revived, and they began to believe, either that a coalition with the Peelites was yet feasible, or that, perhaps, after all, the country was with them on the ques- tion of Protection, — hopes which, though subsequently doomed to disappointment, were sufficient, while they lasted, to foster the opinion and to encourage the feeling that the country could have enough even of a Russell Ministry. The new Government were unfortunate from their start. In those days a bad harvest affected the revenue, and the condition of the people themselves, to an infinitely greater degree than is * The Cabinet, "formed to represent the party of progress, did everything but represent it. It looked too much like a family party, to which the nearest and dearest friends of the Minister had been invited. Tlie men who had fought the battle of Free Trade had no place in the Whig Council. " (Walpole, iv. 291. ) + July, 1850. 86 PINANOB AND POLITICS. Chap. V. the case now, when the commercial interest is proportionately so far more important than the agricultural. The harvest in 1846 was again disastrously bad in England as well as in Ireland — indeed, it was not until 1849 that good harvests began once more to prevail * — and, in order to enable enough corn to be imported, the immediate suspension even of the reduced and temporary duty, as well as of the Navigation Laws, was rendered necessary. The course of the Irish famine — one of the saddest chapters of our history — is too well known to require repetition. The year 1845 had been had, but 1846 was far worse, the failure of the crops in Ireland in that year entailing a money loss alone of from sixteen to twenty millions ; t and the famine rendered necessary an expenditure by the Government, in 1846 and 1847, of some ten millions sterling, in addition to a very considerable amount dis- tributed in private relief. But it was not famine alone that brought disaster. In conse- quence of, or side by side with, the great unshackling of com- merce that had taken place in the last few years, there had been an enormous development and extension of the railway system, a rapid increase in the formation of financial and industrial com- panies, and considerable expansion in trade and business gene- rally. Legitimate enough at the beginning, this activity had, as usual — for history, if it repeats itself in nothing else, repeats itself in financial panics — degenerated into speculation and over- trading, a state of things which, in 1847, received its inevitable check. The actual collapse was due chieflj' to the impossibility of meeting the enormous liabilities to which the country had com- mitted itself. In the years 1840-3 the railway capital authorized * Tooke, T. 8, &c. ■|- The estimated loss for 1846 on the potato crop — as given to the Government hy Mr. Griffiths (afterwards Sir Richard) — was eleven and a quarter, and that on the oat crop, over four and a half millions. See Labouchere's Speech, H., January 19th, 1847. Three millions of persons were at one time receiving relief A quarter of a million pei'sons, at least, actually died of starvation or famine fever. In five years the popula- tion of Ireland was reduced from 8,300,000 to 6,500,000 ; nearly a million of persons emigrated to the States, to form that Irish Party in America whose bitter hostility to England has been so marked a feature in American politics. See Sir Charles Trevelyan's very interesting personal narrative, published in the Edinburgh Beview at the time, and since republished in pamphlet form ; Walpolc'ft History, iv. 296; McCarthy's ifu'toj-j/ of o^tr own Times, vol. i. chap. xvii. ; News- paper accounts of the time, Sea. 1846-47. THE WHIGS AGAIN. 87 had amounted to about eighteen millions, an annual average of under five millions. In 1844, the total capital authorized was eighteen millions ; in 1845, sixty millions ; in 1846, one hundred and twenty-four millions.* Few escaped the mania ; and, while most of the lines were still in the air, and everyone was sanguine that their fortunes were about to be made, the value of shares continued rapidly to rise, and the great railway promoters were the heroes of the hour.t But a rude shock was given to the popular optimism when the real outlay on the railways began, and a considerable portion of the capital subscribed had to be called up. The pinch began to be felt in 1846. Those — the majority — who had bought for the rise, and with no intention of holding, finding themselves less and less able to meet the continued a,nd increasing calls on their shares, were forced to sell their holdings for what they would fetch. Shrinkage, once begun, is even more rapid than the in- flation which it succeeds. But a short time before, everyone had wanted to buy, now ever3'body wanted to sell, and buyers there were none. Some railways, the shares of which had been at a premium, were actually abandoned. As to others, ugly rumours of fraud and peculation were afloat. The price of the stock even of the soundest lines fell disastrously. On the top of the collapse in the railway market, came a collapse in many of the numerous new joint-stock banks and other companies. Panic seized on all. The buoyant confidence of a short time before, gave place to feverish suspicion. The Bank rate of discount rapidly rose from 3 to 8, and even to 12 per cent. The price of Consols fell in a * These figures are those given hy Mr. Tooke in his History of Prices (iv., 314, &c.) The figures given by Sir S. Northcote, in his very interesting account of the crisis {Twenty Years Finandal Policy, pp. 87 and 100), are not quite so high ; and the figures given by Mr. Porter (Progress of the Nation, p. 327) differ from both. See also Mr. Humphry "Ward's article, in the Reign of Queen Victoria, on "Locomotion" ; J?rancis' History of PuiAlways ; Leoni Levi, Manual of the, Mercantile Law; Economist, Oct. 21st, 1848 ; Speech of Chancellor of the Exchequer, H., Nov. 26th, 1847, &c. The cost of the principal railways (including purchase of land) at the time varied between fifty and fifty-five thousand pounds a mile. f The most notorious of these was Hudson, the "Railway King." Lord Campbell (Life, ii. 217) relates that Hudson once said to him, "The old nobility, sir, are all paupers. I am going to-morrow to Clumber, where a large party of nobles is invited to meet me ; but I could buy them all. " Greville, with a guileless innocence most unusual in him, mentions, as something new and strange, that "even ladies have been dabbling in stocks ! " In one instance, says Walpole (iv. 18), there were "three competing lines before the House, yet, though it was obvious that only one of them could be passed, the shares of all three were quoted at a premium." (,8 FINANCE AND POLITICS. Chap. V. few months from 96 to 82,* and the inflation of '45 ended in the panic of '47. In October, the Government were reluctantly forced to consent to the temporary suspension of the Bank Charter Act of three years before, and to recommend the direc- tors, if necessary, to increase the issue of notes, beyond the legal limit.! This action partially restored confidence, and the know- ledge that the law could, if necessary, be broken, rendered in- fringement unnecessary. Much positive loss and distress were occasioned by the absurd inflation and the subsequent collapse. But now, when losses and gains can be calmly balanced against one another, it is clear that the country as a whole was the richer for the vast impetus that was given at this time to the extension of railways and other means of communication, and that, like the inflation and collapse of 1826 and of 1836, though unlike the monetary crisis of 1857 and of 1866, the boom of 1847 was founded on a substantia] basis of permanent value. While England was suffering from commercial crisis and de- pression, foreign relations were strained, and Europe itself was in a most unsettled state. The climax came in 1848. Italy was in arms ; the Pope a fugitive ; Hungary in revolt ; Metternich expelled from Vienna ; Germany torn by revolution ; Poland and the Peninsula disturbed. In France the citizen King, at once obstinate and weak, cunning and short-sighted, extravagant and parsimonious, trying to combine despotism and representative government, divine right with elective sovereignty, refused reform and made a revolution. The events of 1830 were re-enacted, though at first without the bloodshed. The King of France took off his wig — " in an instant," says Victor Hugo, " he was but an elderly tradesman " I — and he, whose supposed enmity had, but a few months before, caused an invasion panic in England, now sought her hospitable shores disguised as " Mr. Smith," and landed at Newhaven, the place which his sailor son had pre- * In the second week of October, 1847, the bank rate of discount was 10 per cent., Consols at one moment touching 78, having been as high as 101 in 1847. On February 23rd, 1848, on the news of the French Revolution, they touched 79J. On the day of the Chartist demonstration (April 10th, 1848) they touched 80. By the beginning of 1851 they were again at 96, and by the end of the year, just before the coup d'itat, they were at 99. See note, II. 20. + Oct. 25th, 1847. See //. U, for history of the Bank Act. t Choses Vues, ii. 68. 1848. THE WHIGS AGAIN. 89 viously picked out as the fittest for a descent on English territory.* In England, the popular will prevailing in the Government of the country, the revolutionary storm passed harmlessly by- Physical-force Chartism, its monster petition driven to the House in three hackney cabs, spluttered out on Kennington Common. Physical-force Eepeal found its end in a cabbage-garden. t But the accumulation of political disturbances abroad helped to accentuate the distress at home. The craze and the crisis, the doubts and the dangers, enormously depreciated the value of many kinds of property. Employment, especially on railway construction, hitherto abundant, and highly paid, was checked ; gi'eat and rapid fluctuations took place in the prices of articles of general consumption, and the revenue, that had been rapidly on the increase, again for a time declined. The distress was not confined to England and Ireland. Some of the Colonies, notably the West Indies, suffered from great depression — generally attri- buted to the recent admission and competition of foreign sugar into England— and, in 1847 and 1848, some ^600,000 to £700,000 had to be voted for their relief. Nor, indeed, was the general foreign poHcy of the Government between 1847 and 1851 calculated to allay apprehensions, or to tend to a reduction of expenditure to meet the decline of revenue. Lord Palmerston's policy of meddlesome " non-intervention " — scanning the horizon I to see to what capital he should next send * See Lord Shaftesbury's lAfc, ii. 238, &c. t " Chartism " in April, " Repeal " in August, 1848. J See Evelyn Ashley's Life of Lord Palmerston (ed. 1876) i. 4. Lord Palmerston once wrote privately to Lord Normanby (the Ambassador at Paris) that he could not "answer for the Broad Brims of the Cabinet" (September, 1847 ; ib. i. 143) ; and he was fond of " scoring a notch off his own bat " whenever he could. Every capital ■ in Europe — Paris, Berlin, Constantinople, St. Petersburg, Vienna, Pesth, Lisbon, Madrid, Athens, Brussels, Geneva, Ifaples, Palermo, Rome, &o. ; King, Emperor, Czar, President — all received his admonitions. In one instance he addressed (in 1848) a despatch to the British minister at Madrid, . in which he instructed him to represent to the Queen of Spain that she was governing the country in a manner opposed to its sentiments and opinions, and that she would do well to strengthen and liberalise her Ministry. The Spanish Government not unnaturally considered this interference in their internal affairs "so offensive to the dignity of a free and independent nation " that the despatches were actually retui'ned, and for a time diplomatic relations were broken off. And while Palmerston was so free of his advice and expostulations with others, he was very touchy when the foreign Ministers of other countries ventured to criticise his own proceedings. "When, for instance, in one of his civis liomami-s moods, he had, in a high-handed way, seized the Greek merchant ships in order to obtain repa- 90 EINANOE AND POLITICS. Chap. V. a despatch of advice, remonstrance, warning, or encouragement ; ordering the fleet hither and thither, at one time to Lisbon, at another to the Bosphorus, and instructing the Admiral to take Athens on his way back * — brought England once to the verge of war with Russia, and more than once into most serious and strained relations with France. Peace was indeed preserved, as Lord Palmerston reminded Mr. Cobden in 1851, during the term of his office, not onlj' between England and the other Powers,- but between the Great Powers themselves. But many lovers of peace persisted in thinking that this was in spite, and not in consequence, of the policy of the Foreign Secretary. Be this as it may, certain it is that during the earlier days of the Government the revenue went down, and the expenditure went up ; and deficits again occurred ; while the position was in no way retrieved by any stroke of financial genius. Seemingly content to drift aimlessly along, without system or purpose, the Government as often as not allowed the House of Commons to recast their Budgets for them. Their first complete financial j'ear, that of 1847, ended in a deficit on the ordinary expenditure of over a million, besides the two millions spent, one on a Kaffir war, and one orr Ireland, in addition to the eight millions raised by loan t for the latter purpose. In one year eleven millions were added to the debt in a time of peace, without a sixpence of extra taxation being imposed. The next year was a year of Budgets. The income tax was again to expire. Peel had fully expected to be able by 1848 to dispense with its aid. But panic, distress, and mismanagement had so demoralized the revenue and afi'ected the expenditure, that while the income of the year 1848 (exclusive of the sevenpenny in- come tax) could only be taken at forty-six millions, the expenditure would amount to fiftj'-four and a half millions, leaving a deficit of eight millions and a half. The income tax was only producing about 5 J millions a year, so that, at the best, with the tax renewed, ration from Greece, because they refused to pay Don Pacifico's little bill, the French remonstrances and suggestions were to him "really laughably absurd and ridiculously impertinent," while those of Russia were mere "swagger and attempts to bully." (Ih. i. 189 and 196.) * Palmerston to Admiral Parker. {lb, i. 183.) f This loan was negotiated at 89J. The credit of the country had fallen back almost to that of prc-Peel days. 1848. THE WHIGS AGAIN. 91 there would still be a deficit of 3;^ millions. Clearly there was no option but to renew the tax. The Government proposed, not only to renew it, btit to renew it for five years ; and in order to fill the void still remaining, to raise it to Is. in the pound for the first two. But this the House declined to allow, and the Government, not thinking it wise to " force upon an unwilling House an addition to an un- popular tax," dropped the original proposition, took the tax for three years only at the old rate, and fell back upon the discredited expedient of proposing to borrow the balance required. Even then the House was not satisfied, and so undisguised was their contempt for the financial ability and the economical powers of the Government, that they further insisted on referring to Com- mittees the estimates of the expenditure with a view of seeing if they could not be reduced. As the French invasion panic had coUapsed with the July Monarchy, it was, in fact, found possible to make reductions in the war expenditure, as well as in the Civil Service, amounting in all to some £870,000.* The result of the financial j^ear 1848, thanks to these reduc- tions, and to increased revenue, was less unsatisfactor}"^ than might have been expected. Excluding, on the one hand, the cost of the Kaffir war, £1,100,000, which was met by loan, and on the other, the half million of " appropriations in aid " that were pressed into the service of the year, the ultimate deficiency amounted to but three-quarters of a million. And, from this time onwards, though their Budgets underwent many vicissitudes, and though the House paid little regard to their wishes and intentions, the financial misfortunes of the Government ceased. Expansion of trade and the return of good harvests soon enabled the revenue to recover from the shock of 1847. Between that year and 1852, 4f millions of taxation was lemitted ; yet the tax revenue of 1852 was only less than that of 1846 by a million and a half. Then, also, public opinion, moved thereto by the increasing exertions of the politicians of the Manchester School, made for economy ; and the expenditure, especially that on the naval and military services, which had been steadily increasing since 1844, was now agaiii gradually reduced. In 1835 — the lowest point that * Army, £273,000 ; Militia, £150,000 ; Kavy, £208,000 ; Civil Service, £235,000. See Reports of Select Committees, P. Ps. 555, J., and 543 of 1848. 92 FINANCE AND POLITICS. Chap. V. the expenditure of the country has ever touched in this century — the army expenditure was seven and a half millions and the navy but four, or together just over Hi- millions.* By 1842 the expenditure had risen, for the army to £8,200,000, for the navy to £6,640,000; in all nearly 15 millions. Stationary for two years, this expenditure by 1846 was at £16,860,000 : army, £9,000,000; navy, £7,800,000. In 1845, as mentioned in the Queen's Speech, and again in 1846, it had become necessary considerably to increase the outlay on the fleet, in order to begin the creation of a steam navy — the first of those costly reconstruc- tions which have so often added to the naval or military expen- diture of the country. In 1847 the French panic brought the expenditure up to £18,500,000— army, £10,500,000, navy, £8,000,000. From thence, until 1851, each succeeding year * In 1700, a year of peace, and a year in which the expenditure touched far the lowest point reached since the Revolution, or subsequently, the army with 12,700 men, cost some £433,000 ; and the navy, with 7,750 men, £819,000 ; in all a million and a quarter. In 1783 Pitt found the navy expenditure at seven millions and a half for 66,000 men, seamen and marines, and the ordinary army charge at six and three-quarter millions with 124,000 men — of whom 25,000 were foreign troops in British pay — a totd. to 3s. &d. , but the additional duty at once led to such an increase of illicit distillation, that the old duty was reverted to in the following year. The increase of 1853 was successfully introduced, and was followed by rapid increases in 1854, 1855, 1858, and 1860, without apparently any ill effects (see C. 82, 1870). As a set-off to the increased spirit duty and to the extension of the income tax to Ireland, a debt of £4,500,000, bearing an annual interest of £245,000, due from Ireland to the English Exchequer for famine loans, was wiped off. J Tliere had been, since 1780, a tax on legacies in the form of a receipt stamp, but the duty had been largely evaded. Pitt, in 1796, charged the duty on the property while still in the hands of the executors. P The debate on these bills is worth studying {R. , May 22, 1796). Fox opposed the " Personal Property Bill," as well as the " Landed Property Bill," on the ground of the "novelty of the principle of a tax on capital," a principle whicli, if carried out to H8 PINANCE AND POLITICS. Chap. VI. In 1805, he had returned to the charge. But not thinking it wise again directl)' to attack the landed interest, he had contented himself with extending the legacy duty to all bequests payable out of, or charged on the real estate. By this extension, however, he obtained the greater portion of the revenue which he had in- tended to raise by the proposals of ten years before, which had only applied to collateral successions.* The legacy duty was, however, at the same time extended to direct successions to per- sonal property, and thus, the inequality between the taxation of real and personal .property was continued in another way. Since Pitt's time no attempt had been made by any govern- ment to alter the law, until, in 1853, Mr. Gladstone took up the question and proposed to abolish the exemption from legacy duty enjoyed by real property. Nevertheless, on the ground that it had to bear a heavy burden of rates, real property was still to receive more tender consideration than personal property, t Thus the pajnnent of the duty might be spread over four years, instead of being payable on succession; while, if the "successor" to a life interest died before the expiration of the four years, the unpaid j)ortion of the duty ceased to be payable. The "successor" to real and rateable property, moreover, was to be taxed, not, as in the case of personal property, on the capitalized market value of the property to which he succeeded, but only on the value of his life interest, after deduction of the incumbrances. Unless the com- putation were made in this way, great difficulty would, it was argued, arise, the capital value of a real estate not being easily ascertained. Moreover, as the common custom of entail involved a system of life-tenants, any attempt to tax the capitahzed value, would lead, by forcing sales and in other ways, to interference with the ordinary custom and law as affecting land : uncontem- plated social changes would be brought about by that which was intended to be simply a fiscal measure. its logical conclusion, would, said he, "enable the State to seize upon the whole pro- perty of the country," thereby lessening the " desire for acquisition." Sir P. Francis denounced the proposed tax on landed property " as a political measure immoderately increasing the influence of the Crown, and full of danger in its obvious consequences to the constitution and freedom of the country." Doleful were the predictions of the evil results which would accrue to the nation, and " especially to the great pro- prietors," who would be ruined by the enormous sums extracted'from them. It was estimated that the proposed duty on personal'property would produce about £250,000, and that on real property about £140,000 a year. See iZ ^:)4. + See- Jppendix M. 1853. , "1853." 119 The existing legacy duty was producing about £1,300,000 a-year, the probate duty just over a million ; in all, personal property was burdened to the extent of about £2,400,000 a-year. The amount of revenue which the succession duty would produce was estimated at £500,000 for the immediate year, rising to £1,200,000 in the following year, and to £1,600,000 for 1855, ultimately reaching £2,000,000 a-year. And Mr. Gladstone's own estimate of the produce of the tax was considerably under those of its opj)onents. He reckoned on a receipt of tw6 millions, the Opposition doubled the figure, to the intense alarm of themselves and of the landowners.* The actual produce of the tax disappointed the estimates both of friend and foe. In 1854 it yielded under a quarter of a million. By 1860, instead of the two millions a-year, expected and required, it had reached but £600,000.+ Even by 1871, when a further addition to the tax was proposed, the receipts had onlj' risen to £800,000, and, in 1885, to but £935,000 (and that a very excep- tionally productive yield), when, for the fourth time, an attempt was made to put the succession duty on real, more on a par with the probate duty on personal property.! * "He had not spoken to any person out of doors, whose opinion was worth having, who did not say that it was perfectly idle to suppose that the amount collected under the proposed legacy duty would he limited to £2,000,000. The general opinion among those who were most competent to form a judgment was that the duties would amount to £4,000,000 per annum." Mr. Cairns (afterwards Earl Cairns), H., April 29, 1853. Other speakers and writers of authority estimated the receipts at from three to four millions. "Why, my Lords," said one angry peer, " the Chancellor of the Exchequer will he a kind of yulture soaring over society, waiting for the rich harvest which death will pour into his treasury." — Lord Malmes- bury, H., July 22, 1853. Even as late as 1857 the ofKcial mind was unconvinced of the falsity of the estimate. The Commissioners of Inland Revenue, in their first report of 1857, estimated that the receipts from the duty had reached half a million in 1856, and were " evidently increasing rapidly." " It was (said they) the opinion of the Con- troller, that if no disturbing circumstances occur, this increase will continue until the whole receipt from Legacy and Succession Duties reaches the maximum sum of £2,500,000, which will probably be in twelve years from 1853." + Actually £601,775. Table (p. 156) in Appendix to Keport of I. L. E. Com. 1870 (C. 82, I.). See also p. 22 of their Report for 1857, and Report of 1885, p. 228. t In 1883 the gross receipts were £846,000, in 1886 £840,000 (net £815,000). The average annual gross duty since the imposition of the tax has been about £700,000. While these pages are passing through the press, Mr. Goschen proposes in his Budget of 1888 to increase the succession duty by one half. The object of the Chancellor of the Exchequer in 1853, was to impose a succession duty which would yield about two millions a year. By 1884, the receipts, on this estimate, would have amounted ^o about sixty millions sterling, while only about twenty-one or twenty-two millions were actually received. The amount of taxation which real property must have escaped between 1796 and 1872, in consequence of the rejection of Pitt's proposal, can hardly be put at a lesser sura ; and meanwhile from 120 FINANCE AND POLITICS. Chap. VI Mr. Gladstone subsequently* attributed the failure of his pre- dictions to the previously unappreciated fact that real property went in a direct line, in a much larger number of cases than personal property, and was, therefore, more frequently liable only to the lowest per-centage of charge, namely one per cent. But it is clear that this explanation can account only for a part of the failure, and not for the enormous discrepancy which occurred between the estimated and the actual receipts. The chief reason was that sufficient allowance had not been made for the encumbered state of real property. Encumbrances, already taxed under Pitt's Act of 1805, escaped that of 1853, with the result that the value of the property which became liable to the succession duty was very much less than the estate. The plan, moreover, of basing payment on "annuity," instead of by " saleable value," vastly diminished the productiveness of the tax.t The probate duty also " called for reform ; " the gross, instead of the net proper!}- was charged with dutj' ; intestate were charged at a higher rate than testate estates ; the scale of charge was rbitrary and unfair ; from the duty were exempt both " settled" personalty and real estate. But everything could not be done at once, and probate had to wait. Wait it did, for a considerable time ; and not until 1880 and 1881 were the anomalies remedied, while the exemptions still exist. + The latter portion of the Budget was devoted to what may be called the fourth revision of the customs tariff, the first being time to time the probate duty has been largely increased. For these figures, see the returns of the succession duty given in I. L. R. Comms. Reports, 1857, 1870, 1881, and 1885, Appendix. * Budget Speech, H., Feb. 10th, 1860. ■|- Sir S. Northcote (Tuxniy Years of Financial Policy, pp. 208-10) points out how great was the difference in amount between the property which became liable to the succession duty and that which was liable to legacy duty. The value of the property subject to legacy duty in 1860 was about £60,000,000, the value of that subject to succession duty only about £28,000,000. In the same year, while 31 per cent, of the succession duty was received from the succession of children, only 22 per cent, of the legacy duty was so derived. The 1. L. R. Com. of 1870 in their report (p. 97) are unable " to throw much light on the subject " ; and do not "think that much apology is due for the error in the calculations made in this office." Compare "Wallace's Epitome of the Death Duties, ])p. 17, 18, &c. ; Thring's (S'iJccemo)i Duly Act of 1853 ; Dowell, iii., 150 ; Trevor's Digest of Taxes on Succession ; Reports of I. L. R. Com. for 1857, 1870, 1881, 1885, and 1886, &c. See //. 1^'^ and //. 316. X See U. 202. .1853. "1853." 121 -that of 1842, the second that of 1845, and the third that of 1846. Yet even in 1853 the principle of complete freedom of trade was not fuUj^ carried out. For another seven j^ears protective customs duties were maintained on some forms of manufacture, on some forms of food, and on some colonial products. The import duties on all semi-manufactures (except timber), and on manufactures in their preliminary stages — namelj', certain sorts of linen and cotton, silk and worsted yarn, manufactured skins, and some manufactures of hair, copper, lead, tin, and other materials — were abolished. Protective duties were, however, to be still maintained "on the last stage of the finished article." But the duties on foreign manufactures were in most cases reduced by one half, bringing them to the level of those charged on similar goods from British possessions. The duty on cotton, on linen, and on woollen goods, was reduced from 10 to 5 per cent, ad valorem.* The duties on the costlier manufactures of metal were fixed at from 2s. to 15s. the hundredweight, the in- ferior sorts being admitted free. The silk manufacturer, always especially favoured, was still to retain his substantial protective duty of 15 per cent, against foreign imports, and the duty of 10 per cent, on lace was now reduced. All the differential duties, as between foreign and colonial manufactures, disappeared. t In accordance with the re^iort of a committee, " rated " duties — i.e., duties levied on the bulk or according to quantity — were, as far as possible, to be substituted for "ad valorem" duties — i.e., duties varying accord- ing to value, t The additional fractional duties levied on innumer- able articles, under Baring's vexatious 5 per cent, levy of 1840, was struck off. * See /. G;>. t The difierential duties on some articles of food, timlier, wine, spirits, &c., were, however, still maintained, most of them until 1860. A differential duty may be defined as one differing in amount for goods of the same quality, according to the place from whence they come. t The Select Committee on Customs of 1851 and 1852 (P. P. No. 498 of 1852) re- ported (p. 16) that "the number of articles subject to ad valorem duties may be largely reduced with advantage to trade, and without material loss to the. revenue" — and they stated that they had "strong evidence" how difficult it was to "assess duties varying on difli'ereDt classes of the same article " — especially in the case of tea (before the last change), sugar and nutmegs — "because the natural desire of the importer is to introduce articles of very highest quality admissible under the lowest rate of duty." A statement in itself containing one of the strongest arguments for free trade. 122 FINANCE AND POLITICg. Chap. VI. The customs duties on glass,* nine in number— the excise duty had been abolished by Peel— were, with the exception of those on certain flint cut and fancy glass, to be gradually abo- lished. The remaining duties disappeared in 1860. At a cost of only £50,000, unproductive duties, and duties on semi-manufac- tured articles, to the number together of 123, were to be repealed. At a similar cost, 133 other small duties were to be reduced. At a cost of £230,000, the duties on thirteen articles of food, chiefly fruit, raw or dried, and dairy produce, were also to be reduced.! The import duties on seeds, practically a duty on the raw material of an agricultural industry, reduced by Peel, disappeared. In all, no less than 146 diiferent customs duties, heads or sub- heads, were repealed, while 242 were reduced. The list of taxes repealed included the most heterogeneous assortment of odds and ends. Paint brushes, blacking, and spectacles ; presei-ved cucumbers, hams and honey ; fish (including turtle — in contra- distinction to the railway official's well-known dictum that ■ ' tor- toises is hinsecks ") and anchovies (not included as " fish ") ; poultry and game, alive or dead ; cider, perrj', elder-flower water; carriages, furniture woods, and pictures. 1 The duties reduced were still more incongruous, the surprising thing in regard to most of them being, not that they were reduced, but that they were not at once repealed. They included a very large number of duties on articles of food, mostly protective and differential, such as those on apples, pears, oranges, lemons, |1 nuts, dates, grapes, onions, medlars, &c.; on butter, cheese, and eggs ; on biscuit and on bread ; — duties finally repealed in 1860. They further included a vast number of duties on fancj' articles, also repealed in 1860, such as on clocks, " musical harmoniums, i! * For instance, there was a dnty charged on " all plate glass, cast or rolled, of •whatever thickness, however small each pane, plate or sheet, whether silvered, polished or rough." Another if "painted, or otherwise ornamented." A thii'd on "all white flint glass bottles, not cut, engraved, or otherwise ornamented, and beads and bugles of glass," and so on, in the endless and costly specifications and distinc- tions that are necessary under a system of manifold customs duties. The whole of the duties only produced about £10,000 a-year. -I- 16 & 17 Vict. c. 54. X The duty on " pictures " used to be a shilling " each picture," " and further — the srjuare foot " another shilling ! As though we were Western Americans, who are populariy supposed to buy their pictures ' ' by the square yard. " The duty produced i;:;,370 a-year. II From 2s, 8rf. to 8d. per bushel. Huskisson had reduced the duties on these fruits by one-third in 182G. 1£53. « 1853." 123 or serapliines," hats and bonnets, jewels, dice, artificial flowers, perfumerj', canes, umbrellas, toys, down to daguerreotype plates. The duties on candles,, soap, starch, paper, and tallow were reduced, though left in existence until the fifth revision. Those on raisins and plums, maintained, even now, for revenue pur- poses, were also reduced. The excise duty on soap — the tax on cleanliness, injurious to health, affecting the comfort of the people, vexatious and injurious to the manufacturer — was abolished, at an ultimate cost of over a milHon a year. The tax had been in existence for nearly a centurj- and a half, and was, with the exception of that on paper, the last remaining of the series of excise duties imposed on home manufactures in the eighteenth century.* The customs duty on soap was also very considerably reduced to 8d. per hundredweight, a duty to be finally repealed in 1860. It was proposed to reduce the stamp duty on newspaper advertisements by two-thirds. The House, however, determined to go still further, and in spite of the protests of the Government, abolished the tax. Two years later the last remaining tax on newspapers disappeared. t The life insurance duty was reduced from 2s. 6d. to 6d.; and hopes were held out that the duty on fire and marine insurance would soon follow suit. I The hackney cab and post-horse licences were simj)lified and reduced. || Two verj' beneficial reforms were carried through. In lieu of the varjdng and graduated stamp duties on receipts and drafts of * Tlio diity on soap was imposed in 1712. In 1782 the duty was at tlie rate of 2JA a jjoiind on "hard," and Ijc?. on "soft " soap. Vansittart, when forced to give up the income tax in 1816, raised the duty on hard soap to 3d. ; a duty, that to- gether with those on the other taxed materials of which soap was made, repre- sented a burden of irom 120 to 130 per cent, on the vahie. Soap was, however, so indispensable au adjunct of daily life, that, in spite of the heavy duty, its consumption contiiiuaJly increased. In 1833 Althorp reduced the duty from 3d. to IJrf. on hard, and from IjcL to Id. on soft soap, duties which were increased five per cent, by Baring's levy of 1840. The reduction of duty at once encouraged the consumption. By 1852 the reduced duty was producing veiy nearly as much as did the double duty in existence before 1832. f See II. 104. The advertisement duty was at the rate of Is. 6rf. for each advertise- ment (reduced from 3s. 6d. in 1833) without regard to its length. The newspaper tax was, generally, at the rate of a penny a sheet, reduced from fourpence in 1836. + The life insurance duty dated from 1808. The duty, now very minute, ranges from a penny to a shilling on policies varying from under £10 to £1,000. On policies above this sum the charge is 10s. lor every £1,000. The duty on fire in- surance was reduced in 1864, again in 1865, and repealed in 1869. The marine insurance was reduced and simplified in 1867, and still remains in force. .' ' II See //. 9S-6. 124 FINANCE AND POLITICS. Chap. VI. £5 and upwards, the duty varying between 3d. and 10s., and the receipt having to be made out on stamped paper, a uniform system of " penny taxation " was introduced, and the use of adhesive stamps was allowed — the necessity of a stamp being, however, carried down to receipts of £2. This has been one of the most successful among minor fiscal reforms ; and the system has been found to be so convenient to business men, and so profitable to the Exchequer, that it has been gradually extended to many other instruments, while the use of adhesive stamps in lieu of stamped paper has also been extended to stamps of higher denominations. In 1881, the ordinary penny postal stamp was allowed to be used instead of the special " receipt " stamp.* On bills of exchange and promissory notes, instead of the heavy and irregular charges, with their " short date " and " long date " bills, the lowest duty being £2, Mr. Gladstone substituted a minimum Id. duty below £5, gradually rising by steady steps of Is., for each £100 of value, up to a limit of ^£4,000 — a limit which was subsequently abolished in 1860, when an extra 10s. stamp for every additional £1,000 was imposed. These stamp reforms were still further extended by Mr. Lowe in 1870, when he consolidated the stamp laws.t The other improvement made was in the assessed taxes. In- stead of varj'ing and progressive duties, and higher proportionate charges for each additional article kept or used, combined with exceptions almost as numerous as those in a German grammar, a specified sum was in future to be paid for each article, and all exemptions, except in the case of horses used for agricultural purposes, were to disappear. | The discriminating dutj' on dogs was to be commuted into an uniform charge of 12s., with an exemption for those used in the care of sheep or cattle. || The tea duty, which Mr. Disraeli, in his Budget of the pre- vious year, had proposed gradually to reduce, was lowered at once from 2s. 2^d. to Is. lOd. per pound. In 1854, the duty was further to fall to Is. 6^., in 1855 to Is. Sd., and in 1856 to * The number of these "penny receipt stamps " issued in 1886 reached a total of no less than 237,000,000. Adhesive stamps (not all penny) may he now used to denote duties on sixteen different instruments. See Reports I. R. Comm., 1857, 1870, and 1884, &c. t See //. 105. t See II. S2-95. II See //. 8i. The duty of 12s. Was still far too high, and evasion still continued 1853. '< 1853." 125 Is., at which rate it Tvas to remain. The total gross loss by 1856, with the duty at a shilling, would be ^3,100,000, the estimated net loss, after allowing for recovery from increased consumption, ^£2,000,000. The net loss for 1853 would be about a million. Finally, under the Act of 1848, the duty on foreign sugar would, in the current year, fall by about Is. 6d. a cwt., and in the following year would be reduced to that charged on colonial sugar. The total gross loss from all the remissions and reductions would, it was estimated, amount in the year to over 2i millions, the net loss being £1,656,000. In 1854, there would be a further loss of a million, and when all the reductions had taken effect, the gross loss would be about £5,400,000 a year, a loss which, as ah-eady mentioned, would, it was expected, be fully recouped by increased consumption. The result of these reductions and remissions in stimulating trade and consumption, was most satisfactorj\ The recoverj^ in customs and excise was truly remarkable. On balance, while the gross remissions under those two heads, amounted in the year to about £1,700,000, the actual receipts of the year from taxation came to one million more than those of 1852, an elasticity of revenue in twelve months of nearly two and three-quarter millions, while in the previous year, in which there were practically no remissions, there had been an increase of the revenue of but some quarter of a million.* The total gross revenue of the year was £59,100,000, and the expenditure £55,800,000, leaving the very substantial surplus of nearly three millions and a half. But we have not yet completed the tale of the herculean task of the year. Two other great operations, the one fiscal the other financial, were attempted. The customs law was to be consoli- dated, the interest on a portion of the debt was to be further reduced. The original funded debt, dating from the time of William III., had been contracted at eight per cent. ; t but in the course of * " The years 1852 and 1853 were periods of great activity, and generally of great prosperity " — Tooke, v. '228. -|- The loan from the Bank of England at its creation in 1694 was contracted at 8 per cent. The first 6 per cent, stock was issued in 1706, the first 5 per cent, in 1707, the first 4 per cent, in 1713, the first 3 per cent, (the "Consolidated 126 PINANOE AND POLITICS. Chap. VI. the next fifty or sixty years this high interest was gradually diminished, and by 1749 nearly the whole of the funded debt, then amounting to 71 millions, was bearing but four per cent, interest. In that year and the next, the interest on the four per cent, stock (amounting to nearly 60 millions) was converted partlj' into 31 per cent., and partly into 3 per cent., at a saving of about £400,000 a-j'ear. In 1756, under the arrangement of five years before, the greater portion of the 3^ per cents., then amounting to about 88 millions, fell to 8 per cent., and, with the exception of six millions of 31- per cents., the whole of the ninety millions of debt, was now in 3 per cent, stock. The money required for the seven years' war was borrowed either in four per cents. or in "consolidated threes." The monej^ for the American war, and the wars arising out of it, was provided by the issue, as well, of five per cents, and " reduced threes." In 1786 the funded debt amounted to £240,000,000, of which £34,000,000 was in four per cents., and £18,000,000 in five per cents., the rest in three per cents. At these respective figures the debt substantially stood when the great war began. Pitt, and his successors, raised the bulk of his loans in three per cent, stock;* and, in 1815, the total funded debt amounted to £816,000,000, of which (in round numbers) £150,000,000 was in five per cents., £75,000,000 in four per cents., £11,000,000 in three and a half per cents., and the remainder — £580,000,000 — in three per cent, stock. In 1822 Vansittart converted the outstanding five per cent, stock, then amounting to £158,000,000, into four per cents. ; and effected a saving of interest of some £1,200,000 a-year.t In 1824 Eobinson converted about £76,000,000 of four per Annuities") in 1722, but until 1742 only a very little 3 per cent, stock was issued. The outstanding 8 per cent, stock — amounting to £3,200,000 — was converted in 1707 and 1708 partly into 6 per cent, and partly into 5 per cent, stock. The 6 per cent, stock — amounting to £21,000,000 — was (with the exception of one small annuity) converted in 1716 and 1717 into 5 per cent. The 5 per cent, stock— at one time amounting to £46,400,000— had, by 1730, been practically all reduced to 4 per (ient., the chief conversion taking place in 1727. (See Debt Return, P P 443 1858; out olf print.) * &