Chapter V: Introduction (4)

To some the phrase means nothing less than Gladstonian Home Rule "all round," in other words that we should meet the objections to dissolving the legislative and executive Union with Ireland by dissolving also the older Union with Scotland, and even (for some do not shrink from the _reductio ad absurdum_) the yet older unity of England and Wales. Consider what this means. For more than two hundred years the English and Scottish races have been united by a constitutional bond strengthened by mutual respect and good feeling, and Scotsmen, like Englishmen, have taken their part in the government of these islands. If in the division of labour and of honours there has been a balance of advantage, it has not been against the virile Scottish race, from which have sprung so many of our great soldiers and administrators, so many leaders of the nation. And such a combination is to be broken up, and Scotland to become a colony, because Ireland, unwilling to bear her share in the duties of government, desires to be reduced to that status! To such a proposal Mr. Gladstone's phrase about Home Rule applies in all its force:--

"Can any sensible man, can any rational man, suppose that at this
time of day, in this condition of the world, we are going to
disintegrate the great capital institutions of this country for the
purpose of making ourselves ridiculous in the sight of all mankind,
and crippling any power we possess for bestowing benefits through
legislation on the country to which we belong?"

The proposal would be incredibly stupid, if it were not recklessly mischievous.

But to most advocates of the federal system the word means less than this; and the conception, usually vaguely expressed, is that the relations of England, Scotland, and Ireland, should be something like those of the communities which make up (to quote instances commonly given) the German Empire, the Swiss Federation, the United States of America, or the British self-governing dominions of Canada, Australia, and South Africa. So expressed, the aspiration for a federal union deserves respectful consideration.

In the first place, it must not be forgotten that no proposal of this nature has yet been put forward, even in general terms, by any English or Irish Party. Mr. John Redmond, the leader of the Irish Nationalists, has indeed said that he and his friends "were only asking what had already been given in twenty-eight different portions of the Empire:"[46] and a speaker usually more careful in his language[47] lately suggested to his audience that they should

"ask the twenty-eight Home Rule Parliaments if the Empire would be
split in pieces if there were a twenty-ninth."

But in order to make up the number of Parliaments and Legislatures within the Empire to twenty-eight it is necessary to include in one category the Parliament of the United Kingdom, the colonial Parliaments of Newfoundland and New Zealand, the federal Parliaments of Canada and Australia, the provincial or state Legislatures (widely differing from one another in their constitution and powers) comprised in those Federations, the Union of South Africa and its constituent provinces, and the tiny assemblies surviving in the Channel Islands and the Isle of Man. From a reference so vague and confused no inference as to the real meaning or desire of either speaker can safely be drawn.[48]

But let us put aside, with the foreign confederacies (which have in most cases been achieved or maintained by armed conflict), the practically independent Parliaments within the British Empire, and confine ourselves to the Federations of Canada and Australia, and to the Union (sometimes incorrectly called a Federation) of South Africa.

In the first place, it is not immaterial to observe that each of the Legislatures here referred to resulted, not from the dissolution of an existing union, but from the voluntary assumption by communities formerly independent of one another of a closer bond. In other words, there was in each case a real _Jaedus_ or treaty, not imposed by the Imperial power, but having a local origin and springing from the need of common action. The operative force was centripetal; and as the force continues to operate, the tendency of the mass is towards a chemical in lieu of a mechanical fusion.[49] But in the case of the United Kingdom a change from organic union to Federation would be the beginning of dissolution; and the centrifugal force, once set in motion, might lead further in the same direction.

Again, there can be no true federation without (1) provincial legislatures and executives, (2) a central Parliament and executive, (3) a careful definition of the powers of each, and (4) a federal court to which should be entrusted the duty of determining questions arising between the federal and provincial governments and legislatures. If, therefore, provincial or state Governments are created for Ireland and for Scotland, a like Government should logically be created for England. Are we prepared to see four (or, if Wales be added, five) legislatures, and four (or five) executives, in these islands? Have we considered the possible effect on our whole system of government, on the theory of Cabinet responsibility to Parliament, on the powers of the House of Commons over grievance and supply? Must not each unit in a Federation be put as regards financial matters upon a like footing; and, if so, can Ireland bear her share? Is federation consistent with the predominance of one state, England, in wealth and population? These questions are vital, and none of them have received consideration. By declaring in general terms for Federalism you go but a little way.

And if we treat the proposal for Federation as indicating a desire to adopt a constitution under which the relations of the United Kingdom to each of its constituent parts would be as the relation of some one of the three self-governing Dominions to the states or provinces of which it is composed, the question remains, which of those Dominions should be adopted as a model? For they differ not only in form but in essence.

Under the British North America Act, 1867, and the amending statutes, there is "one Parliament for Canada" (sect. 17), while each province has its Legislature. Each provincial Legislature is empowered exclusively to make laws in relation to certain specified subjects (including property and civil rights and the administration of justice), and also in relation to "all matters of a merely local or private nature in the province"; while the Dominion Parliament may "make laws for the peace, order, and good government of Canada in relation to all matters not coming within" the classes of subjects assigned exclusively to the provincial Legislatures. The division of functions has given rise to much confusion and litigation; but, speaking generally, the trend of judicial decision has been towards a wide interpretation of the provincial powers. The "residuary powers" are in the Dominion Parliament.

The constitution of the Commonwealth of Australia, as defined by the Commonwealth of Australia Constitution Act, 1900, is of a different character. The Federal Parliament is entrusted with power to make laws with respect to a number of subjects divided into no less than 39 classes (sect. 51); the State Legislatures have concurrent powers of legislation, but in case of conflict the law of the Commonwealth is to prevail over the State law (sect. 109). The "residuary powers" are in this case left to the States. There is power to alter the Constitution with the consent of a majority of the electors in a majority of the States and of a majority of the electors of the Commonwealth (sect. 123)--a power which has been freely used.

The case of South Africa is sometimes cited as a precedent for loosening the bonds in the United Kingdom. It is a strong precedent for closer union. The South Africa Act, 1909, created in fact as well as in name, not a Federation but a true Legislative Union. Under the Act, the South African colonies were "united in a legislative union under one government under the name of the Union of South Africa" (sect. 4). The legislative power is vested in the Parliament of the Union (sect. 19), which has full power to make laws for the peace, order, and good government of the Union (sect. 59). In each province (formerly a colony) there is an administrator appointed by the Governor-General of the Union in Council (sect. 68), and a Provincial Council (sect. 70); but the powers of the Provincial Councils are confined within narrow limits (sect. 85), and their ordinances (they are not called laws) have effect within the province as long as and so far as they are not repugnant to any Act of the Union Parliament (sect. 86). The Supreme Courts of the old colonies become provincial divisions of the Supreme Court of South Africa (sect. 98), and the colonial property and debts are transferred to the Union (sects. 121-124). In fact, in South Africa, where, as in Ireland, the distinction in the past has been racial and not territorial, Union and not Federation has gained the day. It is safe to prophesy that the coming proposals of the Government will not follow the South African plan.

DEVOLUTION.

The South African precedent leads naturally to a few observations on the proposals for the extension of local self-government, usually classified under the head of Devolution. These proposals differ, not in degree only but in kind, from schemes for the granting of responsible government, or Gladstonian Home Rule. Under all devolutionary schemes, properly so-called, the central Parliament and executive remain the ultimate depositaries of power; and the powers entrusted to local bodies are administrative only, and can be resumed at will. The Acts by which County Councils were set up, first in Great Britain and afterwards in Ireland, were steps in this direction. The Welsh Intermediate Education Act, 1889, was another. The establishment by the Agriculture and Technical Instruction (Ireland) Act, 1899, of a Council of Agriculture, as Agricultural Board, and a Board of Technical Instruction, was a third. By these statutes wide powers are delegated to representative bodies directly or indirectly elected by popular vote; but in each case the delegated powers are strictly defined, their exercise is made subject to central control, and the right of Parliament to modify or withdraw any of them is absolute and unquestioned. The appointment by the House of Commons of a Grand Committee for Scottish Bills is another experiment of a similar character, though on different lines. Such delegations of power are consistent with the maintenance in its entirety of the Union of the Kingdom, and there is no reason whatever why further progress should not be made in the same direction. The events of 1907 are evidence that Devolution, regarded merely as a means of satisfying the political cry for Home Rule, is indeed "dead." But when the din of political battle has once more passed by, it may be possible to obtain consideration for a moderate and clearly defined scheme of delegation which, if applied not exclusively to Ireland, but to the whole country, might relieve the House of Commons of much of its work, and strengthen the habit of local self-government throughout the United Kingdom.

FOOTNOTES:

[Footnote 20: See "_Times_ Special Commission," vol. v. p. 175, and "Home Rule. What is it?" by A.W. Samuels, K.C. (Simpkin Marshall, 1911), p. 60.]

[Footnote 21: See No. 213 of the Liberal League publications.]

[Footnote 22: Erskine Childers, "The Framework of Home Rule" (Arnold, 1911).]

[Footnote 23: See speech of J.M. Robertson, M.P., London, January 11, 1912.]

[Footnote 24: "Home Rule Problems" (P.S. King & Son, 1911).]

[Footnote 25: Written in March, 1912.]

[Footnote 26: See Egerton, "Federations and Unions in the British Empire" (Clarendon Press, 1911). Introduction.]

[Footnote 27: On the financial questions involved the Government have been advised by a Committee containing financial experts; but the Report of this Committee is withheld from publication, and it is believed that its advice will not be followed.]

[Footnote 28: House of Commons, April 8, 1886.]

[Footnote 29: Quoted in "The True History of the American Revolution," by S.G. Fisher (Lippincott, 1903).]

[Footnote 30: Childers, p. 340.]

[Footnote 31: See Cambray, "Irish Affairs and the Irish Question" (Murray, 1911), p. 146.]

[Footnote 32: Mr. Gladstone always declined to call it a "Parliament," but some Ministers of to-day are less scrupulous.]

[Footnote 33: Dicey, "A Leap in the Dark" (Murray, 1911), p. 71.]

[Footnote 34: See "The Church of Ireland and Home Rule," by J.H. Bernard, D.D., Bishop of Ossory, 1911.]

[Footnote 35: House of Commons Papers, 1864, xli. 79.]

[Footnote 36: Parliamentary Papers, 2079.]

[Footnote 37: Parliamentary Papers (Cd. 2905).]

[Footnote 38: "Home Rule Problems," p. 124.]

[Footnote 39: See the Newfoundland railway case of 1898 (Parliamentary Papers, Cd. 8867, 9137).]

[Footnote 40: "A Leap in the Dark," p. 110.]

[Footnote 41: "Home Rule Problems," p. 112.]

[Footnote 42: Mr. Redmond rejected the provisions of the 1893 Bill, saying in the House of Commons on August 30, 1893, that "as the Bill now stands, no man in his senses can any longer regard it as a full, final, or satisfactory settlement of the Irish Nationalist question."]

[Footnote 43: Speech at Belfast, February 8, 1912.]

[Footnote 44: July 18, 1886, at Cockermouth.]

[Footnote 45: See "The Perils of Home Rule," by P. Kerr-Smiley (Cassell, 1911), p. 45, where Lord Morley's opinion to the same effect is quoted.]

[Footnote 46: Speech at Whitechapel (_Times_, October 11, 1911).]

[Footnote 47: Sir John Simon at Dewsbury (_Times_, February 8, 1912).]

[Footnote 48: No such charge of ambiguity applies to the forcible letters of "Pacificus" on "Federalism and Home Rule" (Murray, 1910).]

[Footnote 49: The changes in the Australian Constitution have been in favour of greater unity.]

IV

HOME RULE FINANCE

By THE RIGHT HON. J. AUSTEN CHAMBERLAIN, M.P.

The financial problems connected with the grant of Home Rule in 1912 are among the most complicated that call for solution, and differ fundamentally from those which faced the Governments of 1886 and 1893. And by common consent, the problems are not merely different; they are immensely more difficult. No clauses in the earlier Bills lent themselves more readily to destructive criticism; and though the provisions of the new scheme are still shrouded in mystery, it is inherent in the conditions under which it must be framed that the financial clauses will prove to be even less defensible on the grounds of logic or equity than those of either of its predecessors.

Since the first Home Rule Bill was introduced the interests of Ireland--social, economic, industrial, and political--have become increasingly identified with those of the other parts of the United Kingdom. The commercial, banking, and railway systems of Ireland are intimately associated with those of the greater and more firmly established systems of Great Britain. Irish railways are so largely controlled at the present time by British concerns, and there exist so many agreements and understandings between them and British companies as to facilities and rates, that they might be regarded as part of the same network of communications. Hardly less close are the relations which now exist between British and Irish banks.

It is not, however, on the commercial side only that greater intimacy and more firmly established relations exist now than formerly. Irish industries are agricultural, dairying and manufacturing. In each of these branches the country is increasingly dependent on the markets of England and Scotland; while reciprocally the products of the factories and workshops of Great Britain find in Ireland one of their most important markets. We do not always sufficiently realise that on the other side of the St. George's Channel lies a country whose annual imports amount to sixty-five millions sterling. Even less do we realise that one-half (thirty-two millions sterling) is the value of the imports of manufactures, mainly British, into Ireland. This trade in manufactured goods is not only already enormous; it is rapidly growing. It has increased by more than four millions in four years. Any ill-considered legislative measure which interfered with or disturbed this great volume of trade would no doubt cause serious loss to Ireland; but it would bring bankruptcy and disaster to many British firms and their workmen.

It is, nevertheless, in respect of the political changes and the legislative measures passed in the last quarter of a century that the most serious obstacles will be found in the way of framing any satisfactory scheme for financing a measure of Home Rule. The Irish Local Government system, framed on the British model by the Act of 1898, the Congested Districts Board, and the Department of Agriculture, have hitherto depended financially, either wholly or in part, on Imperial grants in aid. Local taxation payments alone from the Imperial Exchequer amounted in 1910-11 to L1,478,000. The financial scheme under Home Rule must obviously contemplate and provide for the continuance of those grants. Land Purchase schemes have been enacted which have already had the effect of converting a quarter of a million tenants into owners under a contingent liability of 120 millions sterling guaranteed by the Imperial Exchequer. No financial scheme can ignore the fact that the earliest of the annuities created under the Wyndham Act will not expire before 1972, so that the Imperial liability for the payment of the bulk of the annuities already created will continue for at least seventy years more.

Finally, we are faced with the fact that in the last twenty-five years the relations of the State to its citizens have been completely reformed and extended. Social reform is now in the programme of all parties. Education costs several times as much as in 1885. The aged poor have been provided with pensions by the State, and the Insurance Act of last year will shortly call for additional subventions from the Imperial Treasury.

In addition to the new duties thus undertaken by the State, the cost of Defence and of the Civil Services has grown by leaps and bounds. We need not look too closely into the apportionment of these charges whilst we remain partners in a United Kingdom, but if the partnership is to be dissolved at the suit of Irish Nationalism, a new balance must be struck, and on any fair basis the contribution of Ireland under present-day conditions should far exceed the amount under either of the schemes for which Mr. Gladstone made himself responsible. Both schemes recognised the equity of some contribution for these services from Ireland, and it must be assumed that the same broad principles will be applied in any scheme which may be framed hereafter.

By way of introduction to any adequate discussion of the possible financial proposals of any Home Rule measure, it is desirable to set out in some detail the existing financial relations of Ireland and Great Britain. The Treasury calculations on this subject are embodied in two White Papers which have been prepared and published annually during the last eighteen years. It is true that doubts have from time to time been cast on the accuracy of these calculations and of the methods by which the materials on which they are based have been collected. As to this, it is only necessary to say that the information in the possession of the Treasury officials is infinitely more voluminous and likely to be more accurate than any in the possession of private individuals; and there is no reason to suppose the succession of eminent public servants, who have been in turn responsible for the preparation of these returns have been moved in one direction or the other by prepossessions or bias. Their one attempt has been throughout to present a statement, as accurate as it is possible to make it on the one hand of the cost of the existing administration in Ireland and the expenditure incurred there, and on the other of the revenue derived from persons or property living or situated in that country. As the Prime Minister said on November 27 of last year--

"The utmost pains have been taken to make the estimates of 'true'
revenue approximately correct, and it is believed that the total
revenue as given in the revised returns approximates closely to the
facts."[50]

So long as Ireland is an integral part of the United Kingdom, such an investigation has mainly an academic interest. The State is a homogeneous entity; the taxes imposed on individuals similarly circumstanced are the same (with some trifling exceptions--all in favour of Ireland) in whatever quarter of the United Kingdom the individual resides. But the case is wholly different when a proposal is made to split up the State into its constituent parts. It then becomes necessary to inquire if there is any prospect that the constituent parts will have resources sufficient for the various services, commitments and liabilities--present and contingent--which do or will belong to them. And the beginning of any such inquiry is, as has been already said, the present Irish revenue and expenditure.

The essential figures for such an investigation are contained in the following statement. This shows separately the expenditure on the various items which have been the subject of discussion or special mention in the different financial schemes proposed in connection with Home Rule. On the revenue side the effect of the delayed collection of duties under the Budget of 1909-10 has been eliminated by taking the average revenue in the two years in certain items. The figures of expenditure relate to the year 1910-11. The corresponding figures for both collection and contribution are set out in this table in consequence of the suggestion made in some quarters that we should revert to the Gladstonian proposal of 1886 and credit Ireland with the full revenue as collected. Though any such proposal is patently absurd it is mentioned here for the sake of completeness.

STATEMENT SHOWING ESTIMATED REVENUE AND EXPENDITURE IN IRELAND (BASED ON WHITE PAPERS 220 AND 221 OF 1911).

Revenue As collected. As contributed. L L 1. Customs[A] 2,922,000 2,866,000 2. Excise (_ex._ licences)[A] 4,872,000 2,952,000 3. Licence Duties[A] 284,000 284,000 4. Estate, etc.[A] 914,000 914,000 5. General Stamps[A] 310,000 333,000 6. Income Tax[A] 1,106,000 1,307,000 7. Postal Services 1,155,000 1,155,000 8. Miscellaneous 139,000 139,000

Total L11,702,000 L9,950,000

[A] = Average of two years, 1909-10 and 1910-11.

Expenditure. L 1. Civil list and miscellaneous charges (_ex._ Lord-Lieutenant's salary) 118,500 2. Lord-Lieutenant's salary 20,000 3. Local Taxation Payments 1,477,500 4. Public Works 415,500 5. Civil Service Departments 289,500 6. Department of Agriculture 415,000 7. Police 1,464,500 8. Judiciary, etc. 924,000 9. Education, etc. 1,805,000 10. Old Age Pensions 2,408,000 11. Superannuation, etc. 103,000 12. Ireland Development Grant 191,500 13. Miscellaneous 12,000 14. Revenue Departments 298,000 15. Postal Services 1,404,500

Total L11,346,500

The first striking fact in the foregoing statement is the large difference between "contributions" and "collections," _i.e._ between the "true" revenue derived from Ireland and the sums merely collected there. During the last two financial years this difference amounted to an average of L1,752,000. The excise collections alone represent an excess of L1,920,000 over the actual contribution. This, of course, arises from the movements of duty-paid spirits and beer between different parts of the United Kingdom. The last Report of the Commissioners of Customs and Excise (Cd. 5827) gives the amount of home-made spirits on which duty has been paid in Ireland at 5,209,000 proof gallons, whereas the quantity retained for consumption was only 2,776,000 proof gallons. A similar but smaller difference exists in the case of beer. To credit Ireland with the full amounts of the duties collected in Ireland, as was done by Mr. Gladstone in 1886, and as is now proposed in some quarters, would, in effect, amount to a gift from the British Exchequer of L1,750,000 a year. And there is obviously no security that the Irish Exchequer could rely on this boon being continued for more than a short time. There would be nothing to prevent the British spirit merchant from removing his spirits to this country in bond and paying the duty here after arrival. It is obvious that the Treasury would be compelled to grant facilities for this course. The present system is merely one of book-keeping and administrative convenience, but as the withdrawal of this sum from the British Exchequer to which it properly belongs would have to be made good from other British sources, there would be every inducement for the British merchant to effect such slight changes of method as would transfer the whole of this sum from the Irish to the British Exchequer. Having regard to the fact that on the other sources of revenue the collections in Ireland are estimated to fall short of the actual contributions by nearly L200,000, and that these are in the main direct taxes paid by the individuals concerned, it is not unlikely that a scheme which gave to Ireland the full benefit of her revenues as collected would in a short time be converted from a gain of some L1,700,000 to a loss of L100,000 to L200,000 to the Irish taxpayer. Stability in the tax system and reliability upon the realisation of the estimated revenue could not be assumed if "collections" instead of "contributions" were to be made the basis of any financial arrangements.

Turning next to the contributed revenue upon which alone an Irish Parliament could rely, we note first the large proportion of the revenue represented by Customs and Excise. Contrasted with the figures for Great Britain, it is seen by the following table that whereas in Ireland the revenue from Customs and Excise amounts to 60 per cent. of the total, in Great Britain the proportion was not more than 36 per cent.

PERCENTAGE OF REVENUE FROM DIFFERENT SOURCES CONTRIBUTED BY IRELAND AND GREAT BRITAIN RESPECTIVELY IN TWO YEARS ENDING MARCH 31, 1911.[51]

Ireland. Great Britain.
Per cent. Per cent.

Customs 29 18-1/2 Excise (_ex._ licences) 30 17-1/2 Estate, etc., duties 9 14-1/2 Income tax 13 23-1/2 Postal, etc. 11 15 Other sources 8 11 --- --- 100 100

Exclusive of the licence duties the average yield (contribution) of Customs and Excise in Great Britain amounted in the last two years to L55,900,000, or at the rate of L1 7_s._ 5_d._ per head; in Ireland the average yield was L5,800,000, or at the rate of L1 7_s._ 10_d._ per head. The incidence of our consumption taxes is thus seen to be at the present time practically the same in Ireland as in Great Britain; and the much larger proportion of the Irish revenue obtained from them is due to the smaller relative yield of direct taxes. Ireland being mainly an agricultural country, income tax, death duties, and stamps yield much less per head of the population there than in Great Britain. Such conditions are highly suggestive of inelasticity. An Irish Chancellor of the Exchequer will find no such fiscal reserves in direct taxes as does his more fortunate British colleague. This conclusion should give pause to those who think that if the Customs and Excise continued to be controlled from Westminster, it would be still possible to extract the larger revenue needed for the growing expenditure of Ireland by higher rates of income tax and death duties. Such a course would increase the burdens of the direct taxpayers of Ireland, but it would not fill the Irish Treasury. On the other hand, it is clear that there is no chance of relief being afforded to the Irish indirect taxpayer under Home Rule, supposing Customs and Excise were handed over to the Irish Parliament. Yet whenever a British Chancellor of the Exchequer has found it necessary to increase any of the taxes on consumption, the protests from the Irish benches have been invariably both loud and vehement. Irish members have pointed to the low wages earned in Ireland, the greater addiction of the people to tea and spirits, and the higher toll of their earnings consequently extracted by the Exchequer. The yield of existing taxes, therefore, whether direct or indirect, is not elastic in Ireland. Neither of them afford sufficient resources to meet the necessities of an Irish Parliament.

There are, of course, other reasons why there should be no delegation of the power to impose Customs and Excise. The constitutional objections to such a course are overwhelming. It would involve the abandonment of the plea that Home Rule for Ireland was the prelude to Home Rule all round; in other words, that separation was the condition precedent to federalism. In every federal system in the world the control of Customs and Excise has been retained by the central authority. This is true not only of the quasi-federations within the British Empire; it is equally true of the United States, Germany, and Switzerland. One can scarcely be surprised at the emphatic repudiation which such a proposal received at the hands of the Parliamentary Secretary to the Board of Trade (Mr. J.M. Robertson) when, on February 7, 1912, in a speech at Lincoln, he said--

"There was, however, just one thing that must remain one for three
kingdoms, and that was the fiscal system, Customs and Excise. _It
was a federal union we want, a federal state._ If they were to do
as some of his unreflecting Home Rule friends, Irish and English,
have done, and demand that Ireland should not only have power to
lay taxes but to fix Customs and Excise then they had no State left
at all."

Another obvious objection to such a course is that it necessitates the erection of a Customs barrier between Ireland and Great Britain. Tariff Reformers are ready to admit that the present fiscal system is at least as injurious to Ireland as to other portions of the United Kingdom. The power to impose Customs duties on British goods--and the proportion of British total imports is so large that if this power were limited to foreign goods it would be financially valueless--would no doubt provide the Irish Exchequer with considerable funds and might be used to develop her prosperity. But the separation of the Customs systems for the purpose of enabling Ireland to impose tariffs in her own interests would necessarily be followed by a demand for treaty-making powers such as have been successfully claimed and are now enjoyed by British Dominions overseas. Under a general tariff for the United Kingdom the same advantages would accrue to Ireland without any corresponding damage to British or Imperial interests.

Thus, whether Customs and Excise are handed over to the Irish Parliament or retained by the Imperial Parliament, the consequences are equally embarrassing. In the one case Ireland would be deprived of the control of some 60 per cent. of her present revenue, and of all power of expansion; in the other, British trade with Ireland might be gravely injured by hostile legislation, and the union of the three kingdoms in financial and commercial policy would be destroyed. But this is not federation, nor is it a step towards it. It is separation pure and simple. Unless we are prepared to accept separation as the end of our policy the control of Customs and therefore of Excise, must remain an Imperial affair.

There can, therefore, be no justification for taking the control of the Customs and Excise from the Imperial Parliament. The Irish Parliament would thus be left with some 40 per cent. of present revenue under her own control. But the power to raise further revenue within the limits legally reserved to the Irish Parliament would be even less than this figure would imply. For of the L4,100,000 of revenue other than Customs and Excise, nearly L1,200,000 comes from the Postal Services; and even if these services were controlled by Ireland, it may be taken that the rates charged will be the same as in Great Britain. Of the remaining L2,900,000 nearly one-half comes from income tax. It has already been pointed out that its yield cannot be materially increased. There are only two ways by which an Irish Chancellor might attempt such a task. He might raise the rate of income tax or he might lower the exemption limit. The former course would almost certainly be followed by two equally undesirable results. So far as the tax continued to be paid in Ireland it would fall with crushing force on the already heavily-burdened agricultural industry. Still, from the point of view of the Exchequer, there might be some additional revenue on this account. On the other hand, there would be a check to the investment of capital in Ireland--and no country needs capital more--and a powerful temptation to transfer it where the tax would be lower. It may be seriously questioned, therefore, whether any increase in the income tax above the British rate is practicable. The other alternative, namely, the lowering of the exemption limit, would be so unpopular that no Irish Chancellor is ever likely to consider it seriously.

Passing from the consideration of revenue it is necessary to examine the relation of present revenue to present expenditure. The first table in the present article shows that the ascertainable expenditure for Irish purposes in 1910-11 was about L1,400,000 more than the revenue. To this expenditure must be added about L300,000 for the State Share of the benefits under Part I. of the National Insurance Act, about L50,000 in respect of Part II., and about L100,000 for cost of administration of both parts, increasing the immediate deficit to about L1,550,000. This calculation, moreover, includes no charge against Irish revenue on account of Imperial Services--navy and army; National Debt, interest and management; the diplomatic services, and so forth. The equity of such payments has been consistently recognised in the two Bills and the three financial schemes submitted by Mr. Gladstone. However moderate the scale of contribution it would in the present case double or treble the margin between Irish revenue and Irish expenditure for local purposes. If, for example, the precedent of the 1886 Bill were followed, and Ireland charged with a contribution for Imperial services in proportion to the estimated relative taxable capacities, the additional charges on the Irish Exchequer would amount to not less than about L4,000,000 on the 1910-11 figures if the taxable capacity of Ireland be taken at one-twenty-fifth, and to nearly L3,500,000 if it be taken at one-thirtieth.

It may be worth while here to refer to the amazing statement that Great Britain has made a large "profit out of the Union." At the last meeting of the British Association, Prof. Oldham affected to prove that Ireland "in the course of one hundred years ... had sent across the Channel as her contribution to the British Exchequer a clear net payment of about 330 millions sterling." The same contention has been urged by Lord MacDonnell. This calculation ignores the fact that even the Irish Parliament between 1782 and 1800 acknowledged its obligation to contribute to Imperial services, and voted contributions for Imperial purposes, besides raising and maintaining in Ireland a force of 12,000 to 15,000 men, some of whom were available for foreign service. It makes no allowance also for the debt which Ireland brought into the Union when the Exchequers were amalgamated in 1817. The importance of the last item may be judged from the fact that if the whole of the so-called contribution to Imperial services, _i.e._ the excess of true revenue over local expenditure, had been employed since 1817 in paying interest at 3 per cent. on the old Irish debt and the whole of any balance remaining after payment of interest had been used for redemption of the capital, this debt would only have been extinguished in 1886. If a contribution of only 1 per cent. to the cost of Imperial services had been previously charged against this excess, there would be a large balance of the Irish debt still outstanding. As a matter of fact, in the same period that Ireland is said to have contributed L330,000,000, Great Britain may be shown by a precisely similar calculation to have contributed no less than L5,800,000,000 for Imperial purposes. The measure of "injustice to Ireland" meted out by unsympathetic Britons in respect to the Imperial contribution extracted from Ireland may be seen from the following comparison for different dates in the last century.

RATIOS OF POPULATIONS AND CONTRIBUTIONS TO IMPERIAL SERVICES OF IRELAND AND GREAT BRITAIN AT DECENNIAL INTERVALS.

Ratio of British to Ratio of British to
Irish Populations. Irish Contributions.

1819-20 2.1 12.7 1829-30 2.1 10.9 1839-40 2.3 11.5 1849-50 3.2 17.6 1859-60 4.0 9.8 1869-70 4.8 12.3 1879-80 5.7 16.3 1889-90 7.0 22.6 1899-00 8.9 46.5 1909-10 9.3 [52]

The truth is that from a financial point of view Ireland has no valid complaint to make on the score of her contributions for Imperial purposes. Between 1820 and 1840 the Irish population was a little less than one-half of the population of Great Britain; her contribution for Imperial Services varied from one-eleventh to one-thirteenth. In 1899-1900 the British contribution was 46-1/2 times the Irish, though the population was less than nine times as large. If any contribution for Imperial Services from Ireland is justified, and Mr. Gladstone at least acknowledged it, no one can say that the contribution actually taken from Ireland has been excessive.

As already stated we are still without any information as to the financial proposals to be included in the Home Rule Bill of 1912. The Government have appointed a Committee to advise them upon this subject. Though the cost of the Committee has been met out of public funds, and sources of information were laid open to them which are not readily available to the public, the Prime Minister has steadily refused to supply to Parliament any information as to the results of their labours.[53] The terms of reference to the Commission; the witnesses examined by them; the information placed at their disposal; the character of the conclusions and recommendations; these have, all alike, been refused to the House of Commons. But while Parliament has been denied this information, there is every reason to believe that the leaders of the Nationalist Party have been taken fully into the confidence of the Government. We do not know whether, for example, the Customs or Excise or both will be imposed and collected by the future Irish Parliament. We do not know whether any contribution will be required for the Irish share of Imperial services. We are equally uncertain whether any and what purely Irish services will be retained by the Imperial Parliament, and charged on the Imperial Exchequer. And lastly, the intentions of the Government in regard to the payment of a subsidy from the Imperial Exchequer to the Irish Parliament, with which rumour is busy, are as yet unrevealed.

In spite of this lamentable paucity of information as to the Government plan, I think it can be safely said that no scheme even remotely resembling any of those presented in connection with the two previous Bills can be put forward now. Each of those schemes would involve the Irish Parliament in a huge deficit from the very outset. Even if the schemes were adapted to the changed modern conditions the same impassable gap between available revenue and certain expenditure remains. Those schemes presumably embodied principles which the Governments of 1886 and 1893, and the Nationalist parties of those dates regarded as adequate. It would be strange if it were otherwise, seeing that an examination and comparison of the separate schemes can discover no other consistent principles except the solitary one of juggling with the revenues, expenditures, and contributions in such manner as would start the Irish Parliament with a small surplus. In view of the importance of these earlier attempts to secure an approximation to financial equilibrium, it appears desirable to examine how Ireland would fare in modern conditions under each of them.

The essential features of the 1886 scheme were as follows:--

1. Customs and Excise to be under the complete control of the Imperial Parliament.

2. Irish Parliament to have power to levy any other taxes.

3. Ireland to contribute annually to the Consolidated Fund of the United Kingdom.

(_a_) L1,466,000 for interest and management of Irish share of National Debt.

(_b_) L1,466,000 for contribution to Imperial Defence.

(_c_) L110,000 for contribution to Imperial Civil Services.

(_d_) L1,000,000 for Irish Constabulary.

4. Contributions 3 (_a_) to 3 (_d_) were not to be increased for thirty years, but might be diminished.

5. Irish share of National Debt to be reckoned at L48,000,000, and Irish Sinking Fund to begin at L360,000, increasing by amount of interest released on redeemed portion of debt.

6. Contribution to Imperial Defence and Civil Services not to exceed one-fifteenth of the total cost in any year.

7. Irish contribution to be credited with receipts on account of Crown Revenues in Ireland.

8. If expenditure on Constabulary fell below L1,000,000, contribution 3 (_d_) to be correspondingly reduced.

9. Customs and Excise _collected_ in Ireland were to be subject to following charges:--

(_a_) Cost of collection, not more than 4 per cent.

(_b_) Contributions to Consolidated Fund of the United Kingdom.

(_c_) Payments to National Debt Commissioners.

(_d_) Any sums required under the Land Act of that Session the balance being paid over to the Irish Government.

10. The Lord Lieutenant's salary not to fall on the Irish Exchequer.

Broadly the scheme gave to the Irish Government credit for the Customs and Excise _collected_ in Ireland and charged it with annual payments of L4,502,000 in addition to the cost of collection. It is clear that Mr. Gladstone, at the time when the Irish population was about one-eighth of the United Kingdom, assumed Ireland to have a taxable capacity of one-fifteenth. If such a scheme were introduced at the present moment it is obvious that, owing to the further decline in the population of Ireland, a smaller figure for taxable capacity must be taken. What that figure should be it is difficult, if not impossible, to decide satisfactorily. It is generally assumed that on the basis of the calculations made by the Financial Relations Commission in 1896, the present relative taxable capacity for Ireland would be about one-twenty-fifth that of the United Kingdom. In the last two financial years the Irish contribution to Income Tax has been one-twenty-eighth, and the contribution to Estate Duties one-twenty-sixth of the total collection in the United Kingdom. These proportions, taken as measures of taxable capacity must be exceptionally favourable to Ireland, where the proportion of Income Tax payers and of persons possessing property paying Death Duties is relatively to the total population smaller than in the United Kingdom as a whole. If, therefore, for the sake of the present calculations the mean of two proportions--_i.e._ one-twenty-seventh deducible from the Income Tax and Death Duty contributions is assumed, we employ a figure exceptionally favourable to Ireland. The financial statement on the next page showing the 1886 scheme applied to present conditions has been drawn up on this basis. The revenue is here assumed to come in at the average rate of the last two years (1909-10 and 1910-11) and the expenditure is taken as that of 1910-11.

The state of the Irish Exchequer under the foregoing scheme would be indeed a parlous one. It would start with a deficit of L3,200,000, and with a prospective immediate increase by about L450,000 on account of the Insurance Act. The actual budget deficit would thus be about L3,650,000. The Imperial Parliament would collect about L7,794,000, and after deducting L5,346,000 would hand back to the Irish Exchequer the difference of L2,458,000. The revenues upon which the Chancellor in the Irish Parliament could rely would be, therefore, L6,366,000. Out of this an expenditure of L9,562,000 would have to be met. The postal services would probably not stand any increased charges; there is left, therefore, only L5,211,000 of free revenue, and only L2,753,000 under the unrestricted control of the Irish Parliament. With such resources it would be obviously impossible to make good a deficit of L3,206,000 by any increase of taxation. It must not be overlooked, also, that the effect of crediting Ireland with Customs and Excise as "collected" instead of as "contributed" is practically to make the Irish Parliament a further free gift of nearly L2,000,000.

A totally different scheme accompanied the Home Rule Bill of 1893 as introduced. The principal features of the new scheme were as follows:--

1. Customs, excise, and postage to be imposed by the Imperial Parliament.

2. Excise and postage to be collected and managed by the Irish Parliament.

3. Customs to be collected and retained by the Imperial Parliament in view of contribution to Imperial services.

4. Excise duties collected in Ireland on articles consumed in Great Britain to be handed over to Imperial Exchequer.

5. If Excise duties be increased the yield of the excess duties to be handed over to the Imperial Exchequer.

6. If Excise duties be reduced and Irish revenue diminished, the deficiency to be made good to Irish revenue.

7. Two-thirds of the cost of the Constabulary to be repaid to the Imperial Exchequer.

Some of the provisions of this scheme are of exceptional interest. If it had ever been in operation the plan, for example, of adjusting the payments from one exchequer to the other in the event of changes being enacted by the Imperial Parliament in the Excise duties must have been fruitful of difficulties and created much friction. If the duties had been reduced there might have been an increased consumption. Who can say how much of the revenue lost to the Irish Exchequer in the event of a reduction of duties would have been due to the reduced rates of duty, and how much had been regained by increased consumption. Again, if the Excise duties had been increased, as in the Budget of 1909, to such a degree that the total revenue at the higher duty was less than the total revenue from the lower duty, who could have determined whether this was a case requiring a payment from the Irish to the British Exchequer, or from the British to the Irish Exchequer.

Perhaps the most striking novelty of the first scheme of 1893 was the retention of the Customs duties in lieu of Ireland's contribution to Imperial Services. At that time the estimated value of the Customs contributed by Ireland was L2,400,000, and seeing that in 1886 her reasonable share of liability on account of Imperial Services was put at L4,600,000, the very large gift to Ireland represented by this scheme may be readily imagined. Even with the full advantage of this gift the estimated Irish surplus was put at L500,000. During the discussions of the Bill an error in the Excise contributions, reducing the revenue available to the Irish Exchequer by L356,000 was discovered. The reduced surplus of L144,000 was regarded by Mr. Gladstone as "cutting it too fine," and the financial scheme was completely recast. Before explaining the third scheme it might be well to examine as before how the original scheme of 1893 would work out at the present time. This is shown in the following balance sheet.

SCHEME B (BASED ON BILL OF 1893, AS INTRODUCED).

REVENUE. L EXPENDITURE. L

1. Excise (true revenue 1. Civil Government
_ex._ licences) 2,952,000 charges (_ex._ Constabulary
2. Local Taxes-- and Lord
(_a_) Stamps 333,000 Lieutenant's salary) 6,952,000
(_b_) Death Duties 914,000 2. Collection of Ireland
(_c_) Income Tax 1,307,000 Revenues, etc. 298,000
(_d_) Excise licences 284,000 3. Postal Services 1,404,000
3. Postal Revenue 1,155,000 4. Contribution to Constabulary
4. Miscellaneous 150,000 (2/3rds of
--------- L1,464,500) 976,000
7,095,000
Deficit 2,535,000
--------- ---------
9,630,000 9,630,000

The narrow surplus of L144,000 has disappeared, and instead there is on present-day figures the substantial deficit of L2,535,000. Here again it may be observed that the Excise duties are fixed by the Imperial Parliament, and the Postal charges are presumably also invariable. The first Budget deficit would, as before, be not less than L3,000,000. The taxes within the absolute control of the Irish Parliament would have been producing a revenue of L2,838,000. It is within this range of taxation, or by the imposition of new direct taxes, that the Irish Chancellor of the Exchequer would have been compelled to raise an additional L3,000,000 in order to make the two sides of his account balance.

Owing to the mistake already referred to, Mr. Gladstone prepared and presented a third scheme, whose principal features were as follows:--

1. Ireland's contribution to Imperial expenditure to be one-third of the true revenue of taxes levied in Ireland.

2. Ireland to be credited with miscellaneous receipts and surplus (if any) arising from postal services.

3. Ireland to pay out of revenues credited to her, two-thirds of the cost of the Constabulary, all Civil Government charges and any deficit on postal services.

4. The Customs and Inland Revenue duties and the rates for Postal charges to be fixed and collected by Imperial Parliament.

5. After six years (1) Irish contribution to Imperial Services to be revised; (2) the collection of Inland Revenue duties to be undertaken by Irish Government; (3) Irish legislation to impose the stamp duties, income tax, and excise licences. The financial clauses as thus remodelled and simplified were expected to produce a surplus of L512,000. The characteristic feature of this arrangement was the provision for handing over to the Imperial Exchequer one-third of the Irish true tax revenue as Ireland's payment on account of Imperial Services. How matters would stand if this arrangement were applied to the present financial situation in Ireland may be seen from the following table.

SCHEME C (BASED ON BILL OF 1893, AS AMENDED).

REVENUE. L EXPENDITURE L

1. Customs 2,866,000 1. Civil Government
2. Excise (_ex._ licence Charges 6,952,000
duties) 2,952,000 2. Constabulary (2/3rds
3. Stamps 333,000 of L1,464,000) 976,000
4. Death duties 914,000 3. Estimated deficit on
5. Licence duties 284,000 Postal Services 249,000
6. Income Tax 1,307,000
7. Crown Lands, etc. 25,000
---------
8,681,000
---------
8. 2/3rds of L8,965,000 5,757,000
9. Miscellaneous Receipts
115,000
---------
5,902,000
Deficit 2,275,000
--------- ---------
Total 8,177,000 Total 8,177,000
--------- ---------

The main Irish objection to a scheme of this description is that, whatever tax be imposed, the amount taken from the Irish taxpayer would be 50 per cent. greater than the amount going into the Irish Exchequer. It is easy to foresee that such an arrangement would have led to much friction and difficulty, and that it could not have lasted even the six years for which it was provisionally fixed. If applied to the present situation Ireland would have been contributing less than L3,000,000 for Imperial services, although a very moderate estimate of what her contribution should be would require her to pay at least L5,000,000. In spite of this modest payment, however, this scheme would have confronted the Irish Chancellor of the Exchequer with a deficit of more than L2,250,000 rising at once to L2,700,000 in consequence of the Insurance Act.

In reviewing the three financial schemes which have previously seen the light, the following facts stand out clearly:--

1. Some contribution was expected from Ireland for Imperial services in each scheme.

2. The rates of customs, excise, and postage were in all cases to be controlled by the Imperial Parliament.

3. The customs were in every case to be collected by officers of the Imperial Exchequer.

4. In the two schemes of 1893 "true" revenue and not "collected" revenue was the basis of the financial arrangement.

5. Each of these schemes would involve the Irish Parliament from the outset in a huge deficit.

In view of these facts it is certain that any arrangement which pretended to give a Budget surplus to the Irish Parliament would involve, overtly or covertly, the payment of a large subsidy to Ireland out of the Imperial Exchequer. Such a contingency is not likely to make Home Rule more acceptable, or the path of any Bill through Parliament more easy.

FOOTNOTES:

[Footnote 50: See Parliamentary Debates.]

[Footnote 51: Based on White Papers 233 (1910) and 220 (1911).]

[Footnote 52: No contribution from Ireland in this year; local expenditure is estimated to have been in excess of revenue contributed.]

[Footnote 53: Since the above was written, Mr. Birrell has promised (March 27, 1912) to publish the report "some time" after the introduction of the Home Rule Bill.]

V

HOME RULE AND THE COLONIAL ANALOGY.

BY L.S. AMERY, M.P.

There is no argument in favour of Home Rule for Ireland which is more frequently used to-day than that which is based on the analogy of our Colonial experience. In the history of every one of our Colonies--so runs one variant of the argument--from Lord Durham's report on Canada down to the grant of responsible government to the Transvaal, "Home Rule" has turned disaffection into loyalty, and has inaugurated a career of prosperity. Why should we then hesitate to apply to Irish discontent the "freedom" which has proved so sovereign a remedy elsewhere? Again, if our Dominions have been able to combine local Home Rule with national unity--so runs another variant--why should a policy which works successfully in Canada or Australia not work in the United Kingdom? Another suggestion freely thrown out is that Home Rule is only the beginning of a process of federalisation which is to bring us to the goal of Imperial Federation. In one form or another the Colonial Analogy occupies the foreground of almost every speech or article in favour of Irish Home Rule. The ablest, as well as the most courageous, piece of Home Rule advocacy which has so far appeared, Mr. Erskine Childers's "Framework of Home Rule," is based from first to last on this analogy and on little else.