'If Wf^. A FEW WORDS ON THE EINANCES. A FEW WORDS THE FINANCES. One of the most common and one of tlie most effective methods of attacking the Conservative Government is to say, " See what a terribly extravagant and unbusiness-like lot jou are. We, tlie Liberals, held office for five years, we remitted so many millions of taxes, we paid oft* so many millions of the national debt, and at the end of our office we handed over to our successors a surplus of five and a half millions Aand yet you, you wretched Conservatives, at the end of your five years of office, you have hardly paid off any of the national debt, you have increased the taxes, and so far from handing over a surplus to us who trust to be your successors, we expect you will 'present us with a bill for a deficit of eight millions." Now, I wish to investigate and answer that charge, and although I shall have to deal with things which are very wearisome and tiresome — namely, figures — I will ask you, my readers, as practical, business-like men, to say at the end whether I fairly investigate and fully answer these charges. A Chancellor of the Exchequer has been defined to be a surplus-gettin^-- •animal. But his functions in the matter are almost purely mechanical. He is in this position — he must spend what is necessary, and he can only save part of what he receives. That seems to be rather an elementary truth, but a truth which is almost invariably forgotten. Peace and prosperity are the two fairies which smile upon a Chancellor of the Exchequer. Every time they open their lips they drop gold .and diamonds into his lap. War and adversity are the two demons that mock at all his efforts — they touch him witli a wand, his surplus fades away into a deficit, and his calculations are frustrated and defeated. A period of prosperity fills the exchequer, for this obvious 4 reason — when profits are high the income tax increases ; when business is good the stamp tax increases ; when everj one's pockets are full every one puts his hands into his pockets and spends money, and the customs and the excise revenues increase ; but when there is adversity, falling profits and diminished wages, exactly the reverse process takesr place. ITow, if you will compare the two periods of Mr. Gladstone*^ ministry and Lord Beaconsfield's ministry, each of them being a period of five years, you will find that one has been a cycle of unpa- ralleled prosperity and the other has been a cycle of unparalleled adversity. You, as men of business, know that prosperity and adversity succeed each other in cycles. Prosperity causes over- trading, and overtrading is always punished by collapse ; collapse produces caution, caution produces sound business, and sound business in its turn is rewarded by prosperity. Mr. Gladstone took office at the end of 1868, just when the wheel of fortune was beginning to rise to the summit. You will remember that the year 1866 had been a period of collapse. Overend and Gurney's came down and brought countless houses down along with them. In 1868 matters began to revive, and in 1869 a fresh era of prosperity commenced. In December, 1869, the Suez Canal was opened ; that revolutionised the whole form of the eastern trade, the old sailing vessels were dismissed, quantities of new, fast iron steamers were made by every nation in the world, and the iron trade received enormous advances, as also the coal trade. Then as to 1870 ; it was at first supposed that the outbreak of war between France and Germany would be a great misfortune to us, but exactly the reverse happened; the shutting up of all the cotton and silk and iron industries of France brought enormous success and benefit to trade in England. Then came 1871 ; the war came to an end, France started up again, and with her wonted energy resumed business. The enormous indemnity which she paid to Germany caused a spirit of speculation in Germany, and so an im- mense business commenced again in that part of the world. 1871 was also the period in which all the nations of the world seemed to assemble in London for the purpose of collecting loans. These loans, as we all know now to our sorrow, were — the majority of them — swindles, but at the time and until they were found out they paid enormous interest, and this money and the ill-gotten gains it represented were scattered broadcast over the world in every conceivable commercial transaction, generally hollow but very productive for a time to those who received the profits. Then came 1872, when the world seemed to have gone wild — no one seemed able to demand enough, for he found some one else who could purchase at any price. 1873 represents the greatest period of inflation of English commerce that ever existed, for English commerce which in 1869 represented 532 millions had in 1873 increased to 682 millions. England had taken 400 years to build up a commerce of 532 millions, and in four years she added 150 millions to it. She a,dded 25 per cent, in four years to the labours of 400 years, an achieve- ment unparalleled in the history of the world. But it was too good to last. England, which had for five years been indulging in a debauch of brandy and champagne, awoke one morning to soda-water and cold tea. And it was at this particular time the present Government took office. Now, let me make a contrast. In 1873 the first note of coming calamity was struck from three different parts of the world. In 1873 came the crash in Vienna ; in 1873 Jay Cooke's house crashed and tumbled in America, and brought down half the American banks after it; in 1873 was the Bengal famine, which cost ultimately ten millions of money. Then in 1874 the fall in'iron and coal set in, and the fall singularly enough was accelerated by one of the greatest discoveries of the present day— namely, the Bessemer process for making steel, because it enables you to make steel with half the amount of labour and half the expenditure on coal, and when made it is infinitely more lasting than iron. In addition to that, and which was doubly imfor- tunate, this Bessemer process was incapable of being applied to some of the most valuable iron mines in England, and the result was that incalculable loss and adversity fell upon the coal and iron miners. About this time the great foreign loans began to be found out ; this brought a collapse. They had been paying interest out of the prin- cipal—the only principle, I believe, there was in the transaction from beginning to end — and wlien they failed tliose wlio Lad lent foun(3 themselves ruined. 1875 was the first of three years of bad harvests^ three years in which the corn cro}:* is calculated to have fallen short to the extent of 25 per cent., causing what is calculated to be a loss of 25 millions in each year to the agricultural population of the country,. and that lasted though 1876 and 1877. In 1876 came the repudia- tion by Turkey, and I need hardly remind you of the enormous loss which resulted from that. In addition to that Egypt began to totter^ and those who had lent their money there found they were in a difficulty. In 1877 there was the famine in China and Madras, and the fall of silver, which made the rupee, which at one time was worth 2s., represent only Is. 8d. and Is. 6d. This, of course, affected the whole of the Indian trade, because it was impossible for any one to- speculate with any confidence, for he did not know when he made a bargain whether, when paid, the rupee would be at the price he cal- culated upon. Then in the beginning of 1878 the City of Glasgow Bank fell, the Eochdale Bank and the West of England Bank felL All the banks which traded in Indian securities got into difficulties. Their shares, which used to represent c£45, now represent d£12 to £15^ Trade, which rose in the five years of Mr. Gladstone's rule from 532: millions to G82 millions, fell in the second five years to 614 millions. ISTow let me ask attention to these respective cycles of prosperity and adversity, and consider what effect they have upon the fortunes of a Chancellor of the Exchequer. Mr. Gladstone used the famous- phrase, that during his term of office the revenue advanced not by steps but by leaps and bounds. It seemed as if it was absolutely impossible to keep the revenue back. The Government might remit a tax one year and next year find the revenue larger than before. They might estimate any branch of produce at as much as they thought it was possible to realise, and next year find it two or three millions more.. The result was that, although the Liberals were able to reduce taxa- tion to the extent of nearly 12 millions, they found the revenue had advanced from 1869 to 1874 to the extent of four millions and three- quarters; not only that, but they found from year to year that whatever they estimated the revenue to be it turned out something enormously larger, and in five years the difference bet^^een wliat they estimated it would produce and what it actually did produce was as nearly as possible 15 millions of money. Now, a financier must be a. fool if he hasn't a surplus when he can't keep back his revenue, or who, having given away as much as he wishes, finds his pockets full to bursting for the next year. Let me compare the fortunes of the succeeding Chancellor of the Exchequer, and first of all let me recall, what was really the character of the five-and-a-half millions surplus left by Mr. Gladstone. Pro1>ably some who are not familiar with this matter have visions of Sir Stafford Northcote paying his first visit to the Treasury, and being handed round by an obsequious permanent^ official, showing him bundles of sovereigns in one direction and piles of notes in another. Nothing of the sort took place. What is meant by saying that Mr. Gladstone left five-and-a-half millions sm']:)lus is that if the next year had gone on producing the same income, and the expenditure had not exceeded the estimate, there would have been a, surplus of that amoiuit at the end of that next year. The actuai balances when Sir Stafford Northcote came into office were not greater than they ordinarily are, and the actual difference between the expen- diture and the income for the last year was only c£8G9,000. Now, Sir Stafford did what every Chancellor of the Exchequer does whenever he finds he has more money than he wants — namely, remits taxation to get rid of it. Accordingly Sir Stafford Northcote dealt with the five-and- a-half millions in this way : he at once remitted the whole taxation on sugar, and from that day no s]>oonful of sugar that anybody consumes has been touched by the exciseman. He remitted a penny of the income tax; he remitted several taxes as to post horses and other things, and he transferred a number of claims formerly made on rate- payers to the taxpayers — this of course made no difference to the taxpayer ; only formerly a collector came in the name of the muni- cipality, and now he comes in the name of the Queen. In this way Sir Stafford Northcote got rid of the anticipated surplus and brought himself down to the ordinary working balance. That was the last year in which Sir Stafford Northcote was able to perform any feat of this sort, because distress and adversity told its tale rapidly on the 8 Chancellor's balances. So far from every item of revenue increasing, year after year progress became diminished, then it stopped, and retrogression commenced. So far from there being an enormous surplus income over the estimates each year, the surplus became smaller, and in the last year, cautiously as the revenue had been esti- mated, it was actually smaller by a considerable amount than the estimate. The result, therefore, is that whereas Mr. Lowe, in liis five years of office, obtained 15 millions more than was expected. Sir Stafford Northcote only got <£2,659,000 — so that in their five years of office the Conservatives were about 12| millions worse oif than the Whigs. If the Conservatives had had the same financial luck as the Liberals, by this year they would not only have paid all the costs of the expected war with Russia, the war with Afghanistan, and the war with the Zulus, but they would have had a surplus in their hands of five millions. Therefore, when we are asked what became of Mr. Gladstone's surplus, the answer is that there never was a surplus at all, and when asked why Sir Stafford Northcote hadn't a surplus, the answer is, because the people were not good enough to pay suffi- cient taxes into the exchequer. JSTow, as to the expenditure. Mr. Grant Duff was recently making a speech to his constituents, and in an airy sort of way he said the Liberal expenditure during five years averaged 70 millions, whereas the Tory expenditure averaged 80 millions. In the first place let me give you one caution — whenever you hear a person talking to you of averages, don't believe a word he says. There is no such thing in reality as an average — the items of which an average is made up exist, but there is nothing in nature corresponding to an average itself. There are j)erhaps in a room 400 genuine Conservatives, and if any one wanted to make up an average Conservative he would measure all of them, or he would weigh all of them, or he would take the length of all their noses, and then he would divide it all by 400, which would produce his average Conservative, but I need hardly say that that individual would not represent any one in the room nor in the whole world. The reason Mr. Duff makes his statement in this way is that he may compare five years of unparalleled peace and prosperity 9 with five years of unparalleled adversity, the last two containing the -cost of three wars. Mr. Duff is one of the Liberal party's good young men. I suspected there was something wrong in his figures, and I have taken the precaution to look into the oflicial records and work out an average myself. This is the strict arithmetical result. Mr. Duff says the expenditure of the Liberal party's five years of office averaged 70 millions. I find the exact average to be ^71,416,000; so that the good young man is out to the extent of .£1,416,000 on one side. Then I find that the average of the expenditure of the Conservatives was not 80 millions but ^£79,377,000, so that the good young man was out .£623,000 on the other side ; in other words, whereas he made out there was an average difference of ten millions of expenditure, there really was an average difference of eight millions, which for a Liberal good young man I think is an important mistake, especially when addressing his constituents. Now, as to detail. I have com- pared the actual ordinary expenditure of the last Liberal year of office with that of the last Conservative year of office, and I find the difference to be .£7,363,490 up to the 31st March. That seems an important difference. Let us perform a dissecting* operation upon this. In the first place two millions a year of this arose from the fact that the Conservatives had made increased provision for the payment of the national debt, partly by means of a sinking fund, and partly by means of converting the permanent debt into terminable annuities which expire in 1885. It may be an expensive thing to pay off debts, but no one can call it extravagant. In the next place two millions of this money is money which, as I said before, is transferred from the ratepayer to the taxpayer. Half of the cost of the county police, lunatic asylums, and the whole of the cost of the county prisons have been transferred from the ratepayer to the taxpayer, but it makes no difference to the country. The only difference is that by the transfer of prisons we have been able to diminish the number of local prisons from 113 to 68, and reduce the expenditure to the extent of .£80,000 a year. Another item of this apparent expenditure is .£643,000 a year for interest upon loans to municipalities, School Boards, sanitary 10 authorities, town coimcils, and so forth — the Government jmys an? interest of three per cent., and receives from the bodies to whom it lends three and a-Laif per cent., so that the £643,000 is only an apparent expenditure, because it is balanced by a much larger receipt which comes in under the head of "miscellaneous revenue." That explains away £4,643,000 of this seven millions. Now the rest is undoubtedly due to growth in the cost of Government, partly in the cost of the civil service, and partly in the cost of the Army and Navy.. This growth is a thing that goes steadily on from year to year just as much under a Liberal Government as under a Conservative Govern- ment, and the reason is that every year we insist on having things better managed, and if they are better managed, it means they are managed more expensively. We would no more consent at the present day to submit to the way in which things were managed (most economically no doubt) fifty years ago than we should consent to cover our drawing-rooms with cai*pets of rushes which Queen Elizabeth considered good enough for her own palace. Now, as to the source of this growth — it is popularly supposed that the House of Commons- is the great check on the Chancellor of the Exchequer. It is exactly the reverse. It is the House of Commons which is perpetually imploring him to increase his expenditure, and perhaps the Liberal' party are the greatest offenders in this respect. A Chancellor's greatest enemies are philanthropists — one person wants ships inspected,, another person wants factories inspected, another person wants mines inspected; o]ie person is crotchety for prisoners, and is indignant that the last new-caught burglar has not got a chaplain and a schoolmaster all to himself. Another has a weakness for paupers,, and is indignant because every pauper has not got lump sugar in his t^ea. As I said before, all these things cost money. Now as to the growth of one particular item, the item of edu- cation, and it should be borne in mind that any growth upon this item is due to one of the great measures of the Liberal Government. In the first year of Mr. Gladstone's Government the expenditure on education was ^£840,000 ; in the last year it was ^£1,424,000 ; and for the present year it is ^£2,733,000, so that you easily can see how the 11 items grow ; and if it is remembered that the cost of prisons and reformatories and police and so forth grow in the same ratio, it will be understood that this growth in the expenditure is something absolutely necessary and absolutely unavoidable. If you choose to diminish this growth you can only do it by having things (to use a common expression) cheap and nasty. Another large element of expense is that upon the Army and Navy. There are various causes for that increase, which I will not now enter upon. One of these causes is, that under the system of Army organisation introduced by the Liberals, we have to pay for two- armies instead of one : for an effective Army in the ranks, and also for a Eesei*ve Army in their own homes. Another cause is, that in order to compete with the general rise in wages, we have to raise the allow- ances of the rank and file, and the pay of the non-commissioned officers and the Reserve forces. But I ask this question. Does any man in his senses think that in the past and present crisis we have had a soldier or a sailor too much, or that any soldier or sailor is paid more than the market price for his services ? When in 1871 Mr. Lowe, in conse- quence of the panic arising from the Franco-G-erman war, increased the estimate for the Army, he made one of the noblest and most patriotic speeches ever made. He said we should not grudge the' expenditure on the Army and Navy, for it represents what we pay in insurance upon the life of the nation. But no man, however parsi- monious he may be, would attempt to save expenses by insuring in a rotten or insolvent office. During four hundred years England has engaged in many wars, and she has emerged from every war ulti- mately victorious. And I ask you to consider what would be the result if England emerged from a war defeated. When the great ^larshal Blucher came to London in 1815, after the battle of Waterloo, in going round the city, he was observed to become suddenly depressed. His companions thought he had received bad news, but after a while he suddenly broke out with the words, " Ach, Gott, what a beautiful city to sack !" I ask you what would be the consequences to the interests of the Empire if the Cossacks had three- 12 .days' loot in the City of London ? But modern nations have invented ,^ mode of sacking a city they have never seen, and that is by a new- fangled system of indemnities. When the Germans defeated the French they imposed upon them an indemnity of two hundred millions sterling, and it is said that Prince Bismarck has never since recovered ;his temper because he didn't make it four hundred millions. When .the Eussians defeated the Turks they imposed upon them an in- demnity of one hundred and seventy- six millions. No doubt they took the greater part of that out in land, because they could not get anything else. Just upon the principle that a young spendthrift, when ,he is contracting his second or third loan, has to take part of it in pictures and sherry, and is very lucky if he hasn't to take it out in paving-stones and coffins. We find the money balance left against the Turks is thirty- seven millions. I would like to ask what amount of indemnity rich, wealthy England would be asked to pay in such an .eventuality as I have alluded to ? What figures in millions do you suppose that indemnity would be put down at ? Don't you think that as part of the indemnity they would kindly offer to take over India, Canada, Jamaica, or the West Indian Islands ? That is a subject which I will leave to you for your consideration, and I would ask you? for the future, when you are told that the Conservative Government has been an extravagant Government, that they have spent more than they ought, that they have wasted what they have spent, to put the .question in reply, "Will you be so good as to give me chapter and verse, and name the particular figures uj^on which you rely, and refer to the official documents by which they are supplied ?" Upon a recent occasion Mr. Grant Duff was making one of his .attacks upon the Government, and he said, " Compare us two parties. We were in office five years, and we diminished the National Debt by .25 millions. You have been in office five years also, and you have reduced the National Debt by not quite one and a-half millions." Mr. Grant Duff is a very superior young man. He is, for a human being, as nearly as possible omniscient, and therefore anything he says, at all events as regards facts and figures, invariably carries a great deal of weight with it. Now, in reference to this statement of 13 Mr. Grant Duff, in tlie first place, as regards tlie actual fact, it is- strictly true. Mr. Grant Duff could not be indicted for perjury before" a Britisb jury for anything he said, and still the statement lie made* conveys an impression as false as any statement which any man, statesman or otherwise, could advance. Let me explain this matter, which I can do in a few sentences. The national debt consists of three^ items — permanent debt, terminable annuities, and unfunded debt. The Conservative Government during its five years of office has reduced the funded debt and terminable annuities to the extent of <£22, 625,000 ; it has increased the unfunded debt to the extent of ^21,420,000. The" difference, therefore, is ^£1,205,000, and that is the exact sum Mr. Grant Duff gives us credit for having reduced the National Debt. Now, how" far does that convey a correct impression as to the facts of the case ? One would be led to suppose from this that the c£21,420,000 which we had added to the unfunded debt was an addition to the burdens of the' Empire exactly of the same class as the ^£22,625,000 which we deducted from the National Debt, and therefore that the only balance' remaining in our favour was the =£1,205,000. As a matter of fact, the actual additional burden to the resources of the Emj^ire in consequence of this .£21,420,000 is the astonishing sum of ^£4,000 yearly — not a penny more. In the last year of the Whig Government the un- funded debt was four and a-half millions, and the charge on the' resources of the Empire in respect of it was <£] 34,400, and a few odd shillings and pence. Last year the unfunded debt was twenty-five and three-quarter millions, and what was the actual charge upon the resources in respect of it? — ^£138,000, and a few odd shillings and pence. That seems like a conundrum, but I will explain it. The only part of that twenty-five and three-quarter millions which is actually charged upon the resources of the Empire is the sum of five and a-half millions which we have raised to pay the' current expenses of the last two years' war. The whole of the remainder of that amount is money which we have invested in other securities,- and which return us a higher interest than we are paying for it. d£3,800,000 has been invested in the purchase of the Suez Canal shares. We pay a little over three per cent, and the Khedive" 14 pays us five per cent., whicli not only returns the whole of the interest we have to pay, but also forms a sinking fund, by means of which in about thirty-three years the whole cost of the Suez Canal shares will be paid off. About eighteen millions of the remainder is .money which has been advanced to municipalities for sanitary purposes, to School Boards, for harbours of refuge, and the like, and which pays (back to the Grovernment a larger sum in interest than the Government pays for it. And therefore, so far from these twenty-five millions being a burthen upon the resources of the Empire, the greater part of it is actually a benefit to the revenue. Now, I think when a superior youno- man like Mr. Grant Duff makes a statement to his constituents, a-nd through them leads the British public to suppose that the Govern- ment raised the unfunded debt from five millions to twenty-five millions without any redeeming circumstance, Mr. Grant Duff is making a statement which, if it were made by an advocate at the bar, I should say was characterised rather by ingenuity than ingenuousness. I have one other remark to make in reference to Mr. Grant Duff's speech, and that is, that almost the whole of the eighteen millions I allude to has been advanced by the present Government under the operation of statutes which were passed by the Liberals themselves. £16,500,000 of that amount has been advanced by the Government under the operation of statutes the Liberal Government passed, and upon the passing of which they excessively prided themselves ; so far as I know, the only sums jof money that have been advanced under statutes passed by the Con- servative Government is the money they have advanced for the purpose -of improving the dwellings of the working classes under the Artisans* Dwellings Act. I think, therefore, I have made a tolerably successful defence as regards that part. The last point to which I should wish to draw attention is the com- parative weight of taxation during the Liberal and Conservative periods of office. When you are told that the Conservatives have raised and spent so many millions last year more than their prede- cessors, you naturally imagine that you have been more heavily taxed. This is the purest delusion. Part of the growth of the revenue Arises from the growth of the population. The population is growing 15 at the rate of nearly 1,000 a day, and each year the amount of the taxes must increase, because the number of the taxpayers has increased; But no single taxpayer contributes more than he had previously done. Again, the profits on the Post Office and Telegraph Services represent, not taxes, but payment for work done. These brought in .£573,000 in the year just ended more than they had done in the last year the Liberals were in office. But no one supposes that he is being taxed when he sends a telegram, or puts a postage- stamp on a letter. Another large part of the revenue is raised by stamps on commercial transac-. tions, and this again varies according as the number of such transac- tions increases or decreases. The only real way of comparing the weight of taxation in two different periods is to see what taxes have (been taken off and what taxes have been put on in each period, and to strike a balance between them. Now let us see how the account stands between the two Grovern- ments on this principle : — In 1874 the G-overnment wholly abolished the duty on sugar, which brought in nearly d£2,283,000 yearly. Again§t this we mav put an increase to the tobacco duty in 1878, which brings in a trifle anore than ^£500,000. This exactly represents the different burthen of the two taxes. Take a family of four : the man and his wife, and his two children, all use sugar, but it is only the man who smokes. So the tax has been taken off an article of necessity which is consumed by a,11 the members of the family, and placed upon an article of luxury which is only consumed by one. Again, in 1874 the Grovernment took off various duties on horses, .amounting to .£480,000 a year. These duties pressed heavily on the means of travelling, especially in the neighbourhood of railway stations. In 1876 they took off duties on the employment of boys and men on <:asual jobs, which checked the free use of labour, and which brought in c£32,000 yearly. Against these we may place an additional tax upon dogs — not farmers' or shepherds' dogs — imposed in 1878, and which produces .£70,000. Here again we find that taxation to the amount of .£512,000 yearly has been taken off matters of commercial im- 16 portance, wliile taxation to the amount of .£70,000 has been placed ■flpon objects of mere amusement. The balance of revenue has been made up out of the Income-tax, and I observe in a recent speech that the Conservatives have been taunted with raising this to 5d., as if that sum had never been reached before. Now the actual state of the case is as follows: — During:^ the five Liberal years the Income-tax was levied at the following- rates, in pence : — 5, 4, 6, 4, 3 = 22. During the five Conservative years the rates were 2, 2, 3, 3, 5 = 15. So that in Income-tax alone each person assessed has paid 7d. in the pound less during the Con- servative than the Liberal period. During all the difficulties of the last two years the Income-tax has never yet reached the figure to which it was raised by Mr. Lowe in 1871, when he got into a fright in consequence of the war between G-ermany and France. But even this does not represent the whole state of the case. In 1876 the Con- servatives enlarged the exemptions from Income-tax to an extent which benefited those who were then subject to it to the extent of .£390,000 a year. Under the Liberal Government only persons with a smaller annual income than £100 wer« wholly exempt from the tax. The Consei*vatives raised the limit of exemption to annual incomes of £150. Under the Liberals the tax was assessed with an abatement of £80 on incomes under £300. The Conservatives raised the abatement to .£120, and extended it to incomes under £400. The result is that the Income-tax, as it is now levied, touches no working man nor clerk, while its pressure upon persons of small incomes has been greatly reduced. So far from any class being more heavily taxed by the Conservatives than by the Liberals, the exact reverse is the fact. Taking the five years together, every class has been much more lightly taxed, and even at i)resent the whole of the working classes, and the class immediately above the working class, are much more lightly taxed than they ever were under Mr. Gladstone's administration. \ \ 0* ^, 'mJ:^^^ '^ ^-w-j '^*:^:S >/*..«