The Framework of Home Rule

So were Lord Farrer, Lord Welby, and Mr. Currie in coming to diametrically opposite conclusions. The crux of the discussion, stripped of academical reasoning, was simple. Everything turned, obviously, on the nature, amount, and origin of Irish expenditure. Sir David Barbour had passed lightly over these vital points, recommending only that any future saving of expenditure in Ireland ought to be used for Irish purposes—a further admission of Ireland's separate political existence—and shutting his eyes to future increases of expenditure. Lord Farrer and his colleagues, while agreeing that it was impossible to alter the taxation of Ireland so long as the Union lasted, agreed that additional local expenditure in Ireland could not be regarded as a set-off to undue taxation, not only because such a doctrine was inherently fallacious on economic grounds, and would hardly be listened to in the case of any other country than Ireland, but because Irish expenditure was subjected to no proper means of control. Both Irish revenue and Irish services, the former being only theoretically, the latter actually, distinct and separate, were outside the control of Irishmen, who had therefore no motive for economy. Nor was there any proper measure of determining what expenditure was good for Ireland and what was bad, though they held that there was reason to believe that much of Irish administration was both bad and costly. With regard to the extensive system of Imperial loans, whose charge swelled the Irish expenditure, they quoted the unchallenged evidence of Mr. Murrough O'Brien[109] to the effect that the system of Imperial loans for temporary emergencies and charity loans—"made to keep the people quiet or to keep them alive"—tends to increase the poverty of Ireland, "does not prevent the recurrence of famine, distress, and discontent," and that "a great deal of the money nominally meant to be spent on productive works has been misspent and wasted." They also dwelt, with emphasis, on official figures showing the extravagance of Civil Government in Ireland, the cost having risen from 1s. 10d. per head of the population in 1820 to 19s. 7d. per head in 1893, whereas the cost of Civil Government in Great Britain had only risen from 1s. 7d. to 11s. 5d. The charge for legal salaries and five principal Departments in Ireland was double the right figure according to population, and represented an excess cost of nearly £200,000. In wealthy and progressive Belgium, Civil Government cost 10s. per head, or little more than half as much per head as in Ireland.[110] The absurdity of representing such excess charges and the wasteful expenditure of a blundering philanthropy, as a recompense for over-taxation, was manifest.

Meanwhile, the rise in the cost of Irish Government, coupled with a stagnant revenue, had decreased the annual contribution of Ireland to Imperial services, which had fallen from five and a half millions in 1860 to two millions in 1894; unless, indeed, half the cost of Irish police, virtually a branch of the Imperial Army, and costing double the amount of Scottish and English police, were to be reckoned, not as an Irish expense, on the principle adopted by the Treasury, but as a part of Imperial expenditure. In any case both partners suffered from excessive and unwise expenditure in Ireland.

The gist of their conclusions was as follows:[111]

1. It is impossible, under the Union, to vary taxation for the benefit of Ireland.

2. Additional benevolent expenditure in Ireland is not a remedy for over-taxation.[112]

"We entertain a profound distrust of benevolences, doles, grants-in-aid, by whatever name they are called, ... or by whatever machinery it is proposed to distribute them, convinced, as we are, that in some form or other political influence or personal interest will creep in so as to defeat, in part at any rate, the attainment of the objects for which the expenditure is made."

3. "We believe that the expenditure of public funds cannot be wisely and economically controlled unless those who have the disposal of public money are made responsible for raising it as well as spending it." Grants of money "tend to weaken the spirit of independence and self-reliance," the absence of which qualities "has been the main cause of the backward condition" of Ireland.

4. "One sure method of redressing the inequality which has been shown to exist between Great Britain and Ireland will be to put upon the Irish people the duty of levying their own taxes and of providing for their own expenditure."

5. "If it is objected that the course we suggest may lead to the imposition of new Customs duties in Ireland, we might reply that in this case, as in that of the Colonies, freedom is a greater good than free trade. We doubt, however, whether Irishmen, if entrusted with their own finance, would attempt to raise fiscal barriers between the two countries; for we are satisfied that Ireland, and not Great Britain, would be the loser by such a policy. The market of Great Britain is of infinitely greater importance to Ireland than that of Ireland to Great Britain." The only point on which the three Commissioners differed concerned Ireland's contribution to Imperial services. Lord Farrer and Mr. Currie, taking Home Rule as the foundation of their argument, and prophesying, quite correctly, that under the Union, in a few years, Ireland's contribution would disappear altogether, recommended that no such contribution should be exacted by law until Ireland's taxable capacity approximately reached that of Great Britain. Lord Welby, regarding Home Rule as an essential but a distant ideal, was for an immediate reorganization of Anglo-Irish finances which should provide for a large reduction of Irish Civil expenditure, the saving to be devoted, on Sir David Barbour's principle, to Irish purposes, and for a fixed contribution from Ireland to the Army, Navy, National Debt, etc. How Lord Welby, consistently with his previous argument, could count upon any reduction of expenditure in Ireland under the existing political system it is difficult to see. At any rate, subsequent events proved both him and Sir David Barbour signally wrong on this important point.[113]

In every other point the wisdom of the three Commissioners has been abundantly proved by lapse of time. Do not the conclusions set forth above bear upon them the stamp of common sense? If it were not for the inveterate prejudice against Home Rule on other than financial grounds, no one would dream of disputing them; for they are based on principles universally accepted in every part of the British Empire but Ireland, and in most parts of the civilized world. They constitute, in fact, financially, one of the strongest arguments possible for political Home Rule.

There, at any rate, lies a clear issue. Seventeen years have not altered the essential principles involved. On the contrary, it will be seen that every year of the seventeen has strengthened the argument of Lord Farrer and his colleagues, and weakened the argument of Sir David Barbour. But, before proceeding to this final demonstration, let me in general terms describe what befell the Royal Commission's Report, which was published in 1896. For a moment all Ireland, irrespective of class or creed, was alight with patriotic excitement. Few listened to Sir David Barbour's view, namely, that so long as Irish expenditure came near Irish revenue there could be no Irish grievance. Home Rulers and Unionists met on friendly platforms to denounce the over-taxation of Ireland and to display figures showing the hundreds of millions of profit made by Great Britain out of an unconscionable fiscal bargain. This criticism missed the real point and the unanimity was short-lived. No change could be made in the system without Home Rule, and the dissension about Home Rule was strong enough to prevent Irishmen from uniting against a fiscal system which was not only unjust but demoralizing to Ireland. A Unionist Government was in power for nine more years after 1896, and a Liberal Government, pledged temporarily not to give Home Rule, for four further years. The natural result was that, in default of Home Rule, all parties in Ireland embraced Sir David Barbour's insidiously attractive reservation, and have ever since fallen into the habit of regarding additional expenditure on Ireland, not only on its merits, but as a set-off to excessive taxation and as something having no relation whatever to the taxable resources of the country. Nobody took seriously Sir David Barbour's counsel of perfection about the reduction of the cost of Irish Civil Government and the allocation of the saving to Ireland, because such a process was, humanly speaking, impossible. Expenditure is never reduced except by those who raise the money for it. On the other hand, in the face of the findings of the Royal Commission, and in the face of Ireland's economic condition, no Government which refused Home Rule could have refused large additional Irish expenditure. Much of it, indeed, was merely an automatic reflection of the immense growth of national expenditure in the wealthy and expanding partner-country over the water, and took the form of "equivalent grants," whether for the corresponding British head of expense or for something totally different. No doubt some of the money was well spent, but all of it came in a wrong form, through wrong channels, and was regarded in Ireland in a false light. Lastly came Old Age Pensions applied on the British scale to a far poorer population.

Every word of Lord Welby's and Lord Farrer's condemnation was justified by events; every prophecy they made has been fulfilled. And the worst of it is that the delay has damaged the prospects of Home Rule. The habit of dissociating income from revenue becomes inveterate. The habit of nursing an old grievance and of expecting "restitution" for funds unwarrantably levied in the past is hard to shake off. Restitution has gone too far already. Perpetuated, it would ruin Ireland. Home Rulers worth their salt must leave this cry to those Unionists who descend to use it; but it is surely amazing that any Irishman, least of all those who claim to represent the wealth and intelligence of the country, should tolerate a political system which inexorably involves a fiscal system so humiliating to Ireland. Until three years ago it could easily have been put an end to without affecting the independent solvency of Ireland, even on the basis of an enormously swollen civil expenditure, and with the inclusion of services strictly Imperial in origin and character. Now it is a different matter, and we are faced with the opposition of British statesmen who, by sustaining the Union, drove Ireland to the verge of insolvency, and now use insolvency as an argument against Home Rule.

One respects the clean and honest side of Unionism, but there can be nothing but reprobation for the meanness of this latter-day argument. For generations Ireland herself has asked to be free both from coercion and bribes, sanely conscious in her soul that both are equally demoralizing. The aim—though in the past not generally the conscious aim—of Unionism was to sap the moral fibre of Ireland now by one means, now by the other. At last the aim is avowed, so that men who applauded Mr. Chamberlain in 1893 for sneering at Irish patriotism as a "sickly plant which needed to be watered by British gold" merely because her contribution under the Home Rule Bill was to be small are now urging Ireland to maintain the Union—in Mr. Walter Long's words—for its "eleemosynary benefits."[114] Ireland herself must and will rise to a higher moral level than that, when she is fully awake to the gravity of the situation. Those who love her most will not lose a minute in explaining that situation. Too much time already has been lost.

CHAPTER XII

I.

2. An estimated true taxable capacity still falling as compared with that of Great Britain, and now standing at a maximum of 1 to 24.[115] That is, Ireland ought strictly to be paying no more than one-twenty-fifth of the United Kingdom revenue.

3. A revenue rising, but very slowly and inelastically as compared with that of Great Britain, and now showing a ratio of 1 to 15; so that the "over-taxation" of Ireland, as reckoned on the Royal Commission's principles, is still at least three millions.[116]

4. A local expenditure growing rapidly and disproportionately to Irish revenue; now just double the expenditure of 1893-94.

5. A net contribution to Imperial services automatically diminishing with the growth of Irish expenditure, disappearing altogether in 1909-10, and now converted into an adverse balance against Ireland of £1,312,500.

In Great Britain during the same seventeen years, population, taxable capacity, revenue, expenditure, and net contribution to Imperial services have all grown steadily, and, what is more important, in healthy proportions to one another.

On the next page will be found the comparative figures for Ireland and Great Britain of revenue, expenditure, and contribution for 1893-94 and 1910-11.

Let me remark at the outset (a) that they and other official figures given in this chapter are taken from the annual Treasury returns alluded to at p. 242, "Revenue and Expenditure (England, Scotland, and Ireland)" and "Imperial Revenue (Collection and Expenditure) (Great Britain and Ireland)." For the current year 1910-11 the official numbers of these Returns are 220 and 221, and the latter of the two is virtually a continuation of the original return, No. 313 of 1894; (b) that the non-collection of a large part of the revenue of 1909-10, owing to the delay in passing the Budget, makes the revenue figures of the last two years, regarded in isolation, misleading; those of the first year being abnormally low, those of the last abnormally high. I therefore give the mean figures of the two years. Expenditure is, of course, unaffected, (c) That the Irish revenue shown as "true" is reduced by heavy deductions from the revenue as actually collected in Ireland. At p. 244 I explained that this adjustment can be regarded only as approximately correct, owing to the admittedly unreliable methods adopted by the Treasury, (d) That the revenue shown includes non-tax as well as tax revenue.

If all the elements of the problem be considered together, it will be seen that the fiscal partnership is as ill-matched as ever, and has produced results increasingly anomalous. Each of the partners and their united interests suffer. Ireland is still more heavily taxed relatively to Great Britain, yet Ireland's contribution to Imperial services has been converted into a minus quantity. Why? Because Irish expenditure, paid out of the common purse, has doubled, while Irish revenue has increased by less than a third.

What has become of Sir David Barbour's argument in favour of the existing fiscal system? He admitted that Ireland was overtaxed by two millions and three-quarters. But he showed, it will be remembered, that if not only the revenue, but the expenditure and contribution to Imperial services had all been in proportion to Ireland's real taxable capacity of one-twentieth, she would have been a loser by a million.[117] Ireland, therefore, he argued, had certainly no grievance, while Great Britain received the substantial, though not strictly sufficient, sum of two millions as Ireland's contribution to Imperial expenses.

Let us apply the same reasoning to the present situation. Ireland, by hypothesis, is "overtaxed" by three millions,[118] but if not only the revenue, but the expenditure and contribution to Imperial services of Ireland were all in proportion to her real taxable capacity, which we may estimate now at one-twenty-fifth, we find that she would be a loser by five millions. Her "true" revenue from all sources ought on this supposition to be £6,605,900; it is £10,032,000. Her local expenditure ought to be £2,875,540; it is £11,344,500. Her contribution to Imperial services ought to be £3,730,360; it is a minus quantity of £1,312,500. Sir David Barbour's reasoning, then, leads us to this astounding paradox, that Ireland, while overtaxed by three millions, gains five millions by the arrangement. Moreover, whether we accept Sir David Barbour's reasoning or not, it is a fact that to-day Ireland, which contributed to Imperial services five and a half millions in 1860, and two millions in 1894, now, so far from contributing anything, costs a million and a quarter more than she brings in. This, certainly, was not a result he either anticipated or would have approved of. On the contrary, he anticipated a reduction in Irish civil expenditure, to be saved for Irish purposes, without prejudice to the Imperial contribution. It makes the brain dizzy to compare his anticipation with the reality.

How, on the other hand, stands the argument of Lord Farrer and Mr. Currie? They prophesied a great increase in Irish expenditure and the disappearance of the contribution to Imperial services. That has come true. Lord Welby (and indeed the majority of the Commission) was with them in declining to regard excessive local expenditure as a set-off to excessive and unsuitable taxation, and in condemning root and branch the system of grants, aids, and doles as wasteful in itself and as sapping the self-reliance of Irishmen. There again they were right. They were at one with all their colleagues in holding that under the Union it was impossible to differentiate between the taxation of Ireland and Great Britain, and they prescribed, as the only sound remedy, Home Rule. Once more they were right.

The figures of to-day constitute the reductio ad absurdum of the Union. For over a century in Ireland we have defied the laws of political economy, but they have conquered us at last. Sound finance demands that revenue and expenditure should be co-related. Ireland's economic circumstances are widely different from those of Great Britain, but she has been included, without any regard to her needs and without any reference to Irish expenditure, in a system of taxation designed exclusively for the capacities and needs of Great Britain. Hence Irish revenue is both excessive and inadequate.

"Excessive"? "Inadequate"? What do these terms really mean? Let us once and for all clear our minds of all obscurity and look the facts in the face. No one knows what Irish revenue and expenditure ought to be, or would be, if Irishmen had controlled their own destinies. It is useless to parade immense sums as the cash equivalent of over-taxation; it is idle to array against them rival figures of over-expenditure. Normal Irish revenue and normal Irish expenditure are matters of speculation. For all we know, Ireland, had she been permitted normal political development, would be raising a larger revenue, and feeling it less; while it is absolutely certain that she would be paying her own way and contributing to Imperial services more, in proportion to her resources, than she did before the Union. The political and therefore the economic development of Ireland have been deliberately and forcibly arrested. I do not say malignantly, because there was no malignant intention. But the action, if mistaken, was deliberately and consistently sustained. Much of Irish industrial talent was lost irrevocably before the old industrial restrictions were removed. There remained the land, an immense source of potential wealth, if properly developed under a rational system of agrarian tenure. For the best part of a century after the Union, the agrarian tenure, dating from the first genuine colonization of Ireland, when the land was confiscated wholesale and the peasantry enslaved, was maintained by force of arms. Thirty years ago (if we date from the Land Act of 1881) we began to change this tenure into another equally defective, though far more favourable to the tenant. A little later, but only eight years ago, on a thorough and systematic scale, we began the parallel policy of Land Purchase. Even now, having transferred half the land to peasant ownership, and placed the other half under judicial rents, many of our statesmen are unwilling to give Ireland the control of its own affairs. On the contrary, step by step with the economic enfranchisement of the farmers, has gone the policy of destroying their personal and political independence, and forcing them to look outside their own country for financial aid, by spending money upon Ireland which Irishmen have no direct responsibility for raising. What a travesty of statesmanship! First, having assisted the farmer to buy his own land, to clap him on the back with "Now, my fine fellow, you are a free man." In the same breath to tell him that he is not fit to have a direct voice in the management of his own country's affairs, and to try and reconcile him to this insult by sapping that very independence of character which the acquirement of a freehold has begun to instil in him.

II.

For purposes of comparison, I set out first the main heads of Civil Expenditure for England, Scotland, and Ireland in the year 1910-11:[119]

(1) The Salaries and Pensions need not detain us long. The principal item is judicial salaries, £102,000, as compared with £282,000 for England, which has more than eight times the population of Ireland. Another item, £20,000 for the Lord-Lieutenant, is double the sum allotted to any Colonial Governor, even of the Dominion of Canada, which has nearly twice the population of Ireland. But the extravagance lies, not in the cash amount, but in the fact that the Irish Lord-Lieutenancy is, under present conditions, an anomalous institution. No Irishman would grudge a penny of the sum if the Lord-Lieutenant, like a Colonial Governor, presided over a responsibly governed Ireland.

Local Government on the British pattern was, as I have already described, extended to Ireland only in 1898. The money now raised in Ireland by Local Taxation is about £4,800,000, exclusive of the Grants in Aid which we are now considering, and which appear, rightly, on the national balance-sheet because they come from the common purse.[120] They are based on different principles, and originated in many different ways. Some are fixed annual sums, determined either by some arbitrary standard or (as in the case of the Licence Duty grants and the Customs and Excise grants[121]) on the Irish proceeds of certain duties in a year taken as standard. The Estate Duty grants still vary with the total product of duties in the United Kingdom, and are still allocated on the proportion settled by Mr. Goschen in 1888—namely, 9 parts to Ireland, 11 to Scotland, and 80 to England.[122] If the proportion were to be revised now, and, on Mr. Goschen's method, made to correspond to the respective estimated contributions to Imperial Services, Ireland, instead of getting £418,000, would get nothing at all. The largest item in the list—namely, the "Agricultural Grant," a fixed annual sum of £728,000, dating from the Local Government Act of 1898—was designed partly to reconcile Irish landlords to the passage of that Act. Nearly half of it represented the remission of the landlord's half-share of the poor-rate on agricultural land, as estimated in the standard year 1896-97. The English precedent for this was the Agricultural Rates Act of 1896, which relieved the English owner of agricultural land in a similar way. Irish conditions were so different, however, that it was felt necessary in this case to balance the landlord's boon with an equivalent boon to the tenant; so that half the tenant's share of the county cess was also remitted. The result was a disproportionately large grant as compared with those received by England and Scotland.[123] We must remark, as one of the minor intricacies of Irish finance, that all these grants do not actually go in relief of Local Taxation. Some of them are diverted to public Departments, such as the Board of Intermediate Education, the Congested Districts Board, and the Department of Agriculture.

All these grants will cease, as such, after Home Rule, while their amount must be reckoned as part of the cost of Irish Government. The Irish Parliament will have to revise the whole system of relief to Local Taxation and establish it on some simple and rational basis. Meanwhile, it is important to remember that the Irish grants form the major part of the Guarantee Fund set up by the Land Purchase Acts, and, until the last amending Land Act of 1909, were chargeable—the Estate Duties Grant, hi the first instance, the Agricultural Grant in the second instance—with the increasingly heavy losses incurred in floating Land Stock below par. In 1908-09 the sums so withdrawn amounted to £90,000. That liability was removed by Mr. Birrell's Act, and they now remain chargeable only with any arrears in the annuities paid by the purchasing tenants. This is a negligible liability, and should properly be placed upon the Irish Government as a whole, which, if it pleased, could recover the money from localities.[124]

Those three items may be said to epitomize the history of Ireland under the Union—coercion, pauperization, deficient education. The first two are, of course, intimately connected. The existing cost of police, surviving needlessly at the monstrous figure shown, represents the past cost of enforcing laws economically hurtful to Ireland. The economic hurt is reflected in the cost of Old Age Pensions paid to a disproportionately large number of old people, below the official standard of wealth, in a country drained by emigration for seventy years past of its strongest sons and daughters. Police in Ireland costs twice as much as in England and Scotland, where (with the exception of the London Metropolitan Police) it is a local, not a national charge, while Irish Old Age Pensions cost in 1910-11 more than twice as much as Scottish Pensions, and amounted to two-fifths of English Pensions.[126] With full allowance for excess payments owing to the lack of all birth records prior to a certain date, the Irish figure is relatively enormous. It is £100,000 greater than the whole cost of Irish Government in 1860, and, with the addition made in the estimates of the present year, it is just a million more than what, according to Sir David Barbour's reasoning, would have been the whole cost of Irish Government in 1893-94, had Irish expenditure, like Irish revenue, been in proportion to the taxable capacity of Ireland.

I touched upon the Irish aspect of the policy of Old Age Pensions at p. 181. Whatever the pecuniary charge, I suggest that it is absolutely necessary for Ireland in the future to control both payment and policy, and she might find it in her best interest, with due notice and due regard to present interests, to halve the scale of pensions. It is not a question of the general policy of Old Age Pensions, but of the applicability of a certain scale to Ireland, where agricultural wages (for example) average only 11s. 3d. as compared with 18s. 4d. for England, and 19s. 7d. for Scotland.[127] Of all ways of remedying a backward economic condition, that of excessive pensions is the worst.

The cost of Irish Primary Education—£1,632,000, as I pointed out in Chapter IX.—is at once too high and too low; too high in the sense that much of it is wasted owing to the lack of popular control, too low in the sense that it is a scandal to spend nearly as much on police as on the education of children, and £800,000 more on Old Age Pensions than on the education of children. If part or even the whole of the additional expense eventually necessary is raised by rates, so much the better. Accurate comparison is difficult with the English and Scottish expenditure on elementary education, because the greater part of the cost in those countries is borne by private endowments and local rates, whereas in Ireland no local rate is raised for elementary education, there are no endowments, and private subscriptions are very small.[128] It is certain, however, that far greater sums, in proportion to population, are spent in England and Scotland than in Ireland. This is little to be wondered at if we consider the painful history of education in Ireland; but we cannot recall the past, and, as I urged in Chapter IX., one of the first duties of a free Ireland will be to improve the education of the children.

With regard to other Irish services, I shall make use, with Professor Oldham's consent, of some interesting tables compiled by him, showing the principal variations in Irish expenditure since the year 1891-92.[129]

They include certain expenses which I have already alluded to, and others which I shall have to remark upon further, besides giving a general view of the growth in the cost of Irish government. Neither of lists A or B is exhaustive:

A. INCREASES OF EXPENDITURE.

Nos. 1 to 4 I have already dealt with, but it is interesting to note the contrasting figures of 1893-94.

No. 5. The Ireland Development Grant of £191,500 is interesting as an example of the haphazard methods of Anglo-Irish finance. It is an annual sum voted for various development purposes, and was originally established (at the figure of £185,000) in 1903 as an equivalent for the capitation grants for school attendance in England, given under the Education Act of 1902 in lieu of school fees. In allotting the Irish equivalent, Mr. Goschen's proportion of 80, 11, 9 was for the first time condemned by all parties. What the proportion ought to be was a matter of dispute, but it was fixed in this case on the basis of population. Since the English grant has now risen to £2,500,000, the Irish proportion therefore is now, strictly speaking, inadequate.

No. 10. The vote of £415,000 for the Department of Agriculture, whose origin and functions I described in Chapter IX., does not accurately show the actual cost of the Department, because it excludes the greater part of an Endowment Income of £166,000 a year, derived partly from the Irish Church Fund, partly from the Irish Local Taxation Account, and partly from the interest on a capital endowment of £200,000, as well as other small miscellaneous grants. But it includes a sum of about £44,000 for some museums, colleges, gardens, etc., whose English counterparts are subsidized under different votes, as well as the sum of £144,000 for the Congested Districts Board.[131] Nor does this latter sum represent the full cost of the Congested Districts Board, which has also an Endowment Income from the Irish Church Fund of £41,250, a subsidy from the Ireland Development Grant, and a fluctuating income from various sources—rents, etc.

Part of the expense of the Department itself must be regarded as abnormal, in view of the extraordinarily backward economic condition of the country when it was founded. Nor, valuable as the Department's work is, can it be safely assumed that the cost is not extravagant. As long as any Department relies on an Imperial vote there can be no certainty that the expenditure will be economical. The whole cost of the Congested Districts Board is abnormal. Its very existence is evidence of the failure of external government in Ireland, and, as I urged in Chapter IX., the whole question of the treatment of the congested districts needs thorough investigation at the hands of a responsible Irish Government.

B. REDUCTIONS IN EXPENDITURE.

Most of these reductions are deceptive. No. 1 is the saving of an abnormal grant, Nos. 2 and 5 signify mere transfers to Grants in Aid of Local Taxation, No. 7 a transfer of duties to the Department of Agriculture.

To sum up once more, the cost of the Irish Government as paid out of the common purse in the last completed financial year was £11,344,500, or £2 11s. 9d. per head of the population, as compared with a cost per head of £1 9s. 2d. in England, and in Scotland of £1 13s. 3½d. But this is not the minimum figure with which we have to reckon in considering the Home Rule scheme; some items show a marked increase in the Estimates of the current year: (1) The increase in Old Age Pensions, not certain yet, will be at least £250,000. (2) The Land Commission is £544,000, as compared with £414,500. (3) Universities and Colleges, £186,256, as compared with £166,000. (4) Department of Agriculture, £426,609, as compared with £415,000. (5) Registrar-General's Office, £29,020, as compared with £13,000. (6) Valuation and Boundary Survey, £44,581, as compared with £30,000. (7) Public Works and Buildings in Ireland, £273,370, as compared with £215,000. Even with allowance for over-estimates, especially in the last of these items,[132] we must anticipate an increase of nearly half a million under the above heads, to which we must add £150,000 recently allocated by the Road Board to Ireland for the year 1911-12, and £34,750 already allocated by the Development Commissioners. If Ireland comes prematurely into the National Insurance scheme, and assumes eventual financial responsibility for her share of the cost, that will be an additional source of expense; but it is to be hoped that her leaders, in common prudence, will henceforth endeavour to stem the rising flood of Irish expenditure, and so facilitate the retrenchments imperatively necessary under Home Rule. As it is, the total outgoings of the current year (1911-12), swelled by the increases shown above, will probably amount to £12,000,000, while this total will in its turn be added to by the office costs of the Irish Legislature and the salaries of Ministers.

The scheme framed cannot assume immediate economies, and a responsible Ireland alone can decide the nature and extent of the drastic economies which must be made in the future. Beyond the brief remarks and hints made in the course of this chapter, I myself venture only to lay down the broad proposition that, to the last farthing, Irish revenue must govern and limit Irish expenditure. For any hardship entailed in achieving that aim Ireland will find superabundant compensation in the moral independence which is the foundation of national welfare. She will be sorely tempted to sell part of her freedom for a price. At whatever cost, she will be wise to resist.

If Irish revenue is to be the measure of Irish expenditure, it follows that it must be wholly, or at any rate predominately, under Irish control. Let us look a little more closely, therefore, into its amount and composition.

III.

As I have already pointed out, in order to arrive at the present revenue of Ireland, our best course is to take the mean tax revenue of the two years 1909-10 and 1910-11, and to add to it the non-tax revenue of 1910-11, which was, of course, unaffected by the delay in passing the Budget of 1909. For clearness, however, I first set out separately the Irish figures of these two years, distinguishing between tax revenue and non-tax revenue, and giving the "collected" revenue and the "true" revenue in different columns:

The two aggregate figures at the bottom, £11,704,500 and £10,032,000, approximately represent the Treasury estimate of the "collected" and the "true" revenue of Ireland, respectively, at the present day. They are confirmed by the figures of previous years; for the average revenue of the five years, 1904-09, was as follows: "collected," £11,320,000; "true" or "contributed," £9,612,400, the new taxation of 1909-10 having added £500,000 to the "true" revenue. I must again remind the reader, however, that the figures are open to the criticism that the adjustment between the "collected" tax revenue and the "true" revenue is inaccurate owing to the methods employed by the Treasury. It will be observed that the resulting net deduction from the "collected" tax revenue of to-day, a deduction attributable, on the balance of the various figures, almost exclusively to Excise,[133] and mainly to the Excise duty on spirits, amounts to £1,672,500, and makes all the difference between the solvency and insolvency of Ireland regarded as an independent financial unit. Her expenditure, it will be remembered, was £11,344,500, her "collected" revenue £11,704,500, leaving a surplus of £360,000, which becomes a deficit of £1,312,500 if we reckon only the "true" or "contributed" revenue of £10,032,000. On the other hand, the principle, as distinguished from the methods of adjustment, is perfectly sound if we wish to arrive at a correct idea of the financial position of Ireland. The £1,672,500 virtually represents the duties on goods exported from Ireland, and consumed in Great Britain, or rather the excess of these duties over those levied on goods exported from Great Britain and consumed in Ireland. The consumer pays the tax on dutiable commodities, and a financially independent Ireland could not raise revenue twice over from the same commodity. She would, for example, have to give a drawback from the Excise duty on spirits exported to England, since a Customs duty would be levied on its import into England. On the other hand, she would be entitled to every penny of revenue derived from the tea and sugar imported into and consumed within her borders, and to the full income tax on property held by Irishmen.

Now, for two reasons, I do not propose to make any exhaustive inquiry into the accuracy of Treasury adjustments for "true" revenue. My first reason is, that full material for calculation cannot be obtained by any private individual, and could not be obtained and worked up even by the Treasury without an enormous expenditure of time and trouble. The most careful inquiry I have seen is embodied in an exceedingly able pamphlet by "an Irishman," entitled "The Financial Relations of Ireland with the Imperial Exchequer," and I mention below a few of the criticisms made by the writer. His and other investigations seem to prove that Irish revenue is considerably underestimated, perhaps by half a million.[134] My second reason is that errors of adjustment in either direction cannot affect in any substantial way the kind of financial scheme we are to adopt in the Home Rule Bill.

Let us fix our attention, then, on the second of the two columns in the table on p. 276, showing the aggregate "true" revenue of Ireland at the present day. Disregard the non-tax revenue from the various postal services (which represents payment for services rendered, and is swallowed up by an excess on the expenditure side of £249,000), and examine the heads of tax revenue shown in the upper half of the column. It will be seen that 70-75 per cent. of Irish "true" revenue is derived from Customs and Excise duties, which, with the exception perhaps of licence duties, may be classed as indirect taxation. The deduction for "true" revenue, it will be observed, has considerably modified the proportion, which for "collected" revenue works out at 77.61 per cent., or nearly four-fifths.

As the reader is aware, this is not a new feature in Irish finance. It formed the basis of the Report of the Financial Relations Commission with regard to the over-taxation of Ireland. Much the greater part of Irish revenue, even since the abolition of protective duties and the substitution of direct taxation, has always been derived from taxes on articles of common consumption, the simple reason being that Ireland is a country where there is little accumulated wealth from which to extract direct taxation. In Great Britain, whose circumstances dictate the finance of the United Kingdom, no less than 54.79 per cent. of the tax revenue is derived from direct taxation, only 45.21 per cent. from Customs and Excise.[135]

The Irish figures show that to retain in the hands of the Imperial Parliament the control of Irish Customs and Excise will be to retain almost paramount control over Irish revenue; to deny Ireland the main lever she needs for co-ordinating her expenditure and her revenue, and for making her taxation suitable to her economic conditions. It will be to preserve the framework of a fiscal system which the highest financial authorities have pronounced to be unfair to Ireland, and which incontrovertible facts show to be uneconomical both for Ireland and Great Britain.

Meanwhile that system has at length produced a deficit, with which I shall deal in the next chapter. Its amount, probably exaggerated, must necessarily remain uncertain under the present fiscal Union. One thing alone is certain, that it will grow as long as that Union lasts.