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remunerative business of the Post Office) about doubled itself, and amounted by 1898-9 to nearly 25 millions. Secondly, in the local governments of England the rates rose from about 164 millions in 1867-8 and 19 millions in 1874-5 to 37 millions in 1897-8. Thirdly, under the euphemistic heading 'In relief of rates', the central Government has acquired the habit of handing over to local governments sums which in 1867-8 were about a million, and in 1874-5 about 1 million, but by 1897-8 had risen to as much as ten millions a year, without reckoning lesser subventions to other parts of the kingdom. Fourthly, we have been congratulating ourselves on paying off the National Debt', which in 1867-8 stood at 800 millions, but just before the present war had fallen to 640 millions. But really we have been paying with one hand to borrow with the other; for all the time, and all over England, we have been amassing a local debt, which in 1874-5 was 92, but by 1897-8 had risen to 262 millions (of which about 100 millions is remunerative), with a tendency to go on rising at a rate of more than ten millions a year. As the war with its debt has since intervened, it is below the mark to estimate the present indebtedness, central and local, of the British Islands at 1,000 millions.

The upshot is that in the 30 years before the war we have been increasing the expenditure of government at an alarming rate, and both externally and internally, but with a difference. While we were adding less than 20 millions to external expenditure on the Army and Navy together, we have been adding twice as much to our internal expenditure. To take only the three items of Civil Service and Revenue Departments (without the Post Office), of rates, and of local subventions, the increase at the most moderate estimate cannot be put at less than 39 millions. Another way to realize

this extravagance on ourselves is to compare external and internal expenditure just before the war. The annual external expenditure on Army and Navy was in round numbers 45 millions; but the annual internal expenditure, central and local, exceeded 100 millions.

In consequence of the war which has since occurred we shall have to reconsider our financial policy. Are we to retrench in external or in internal expenditure? Between these alternatives no man can hesitate. What with the war and what with the future we are so far from being able to retrench in external expenditure that we are now compelled to spend on our forces sums compared with which the former increases will prove insignificant. Yet we go on burning the candle at both ends by increasing internal, as well as external, expenditure. The Civil Service and Revenue Departments Estimates for 1901-2 (of The Times, March 25) provide food for some sad reflections. It might have been expected that every effort would have been made during the war to save the taxpayer and manage the business of the home Government economically; instead of which we find that since 1898-9 the expenditure on those Departments (without the Post Office) has been allowed to rise by annual increments from nearly 25 to 26 millions, while the business of the Post Office has now become more expensive by no less than two millions a year. Similarly, the latest Local Government returns show that rates have quickly risen to 38 millions a year, and local loans to a total of 276 millions, while local subventions' in relief of rates' were standing at nearly 12 millions a year. There is no sign of retrenchment anywhere.

Meanwhile, as if nothing else were before them, people go on propagating gigantic schemes for housing, educating, helping, and pensioning the

working classes out of rates and taxes. They flatter themselves that these domestic luxuries are consistent with those warlike necessities, and that the revenue is of infinite expansion, as if the millennium were at hand. But we have too many irons in the fire, and too many vulnerable points ..., in India, in all Asia, in America, in Egypt, in South Africa. Suppose that after this war we were to drift into another, accompanied by a revolt in South Africa or elsewhere, and that at the same time the delicately balanced equilibrium of our commercial prosperity were to suffer disturbance. How should we then look back on our increase of internal as well as external expenditure, and with what provision for the future?

So far from increasing, we ought now to begin to diminish our internal expenditure. It is not difficult to indicate many weak points, but one is sufficient for the present. The local subventions, annually transferred from central to local revenues, cannot be sound finance. One power collects them, another spends them. The locality which spends them has but little interest in their being economically imposed, and the Exchequer which collects them even less interest in their being economically expended. Intended to relieve rates, they have risen with rates, and have only added to local extravagance. Nor is it an answer to say that this is the business of each locality. Taxes and rates only differ in words; the persons who pay are the same, and to increase their rates is to diminish both their ability and their willingness to pay their taxes, and vice versa. Moreover, local subventions are largely paid out of death duties, which, being taxes on national capital, ought not to be expended locally, or even annually, but put to reserve. Indeed, Sir, it is time to form a national reserve. It is time to view internal in the light of external, and local in the light of central,

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expenditure. It is time to consider our national finances as a whole; and if Parliament were to give notice that, after a term of ten years so as to avoid temporary difficulties, all local subventions should cease, the nation would then have over ten millions a year to pay for this and for future wars. Si vis pacem, para bellum.

MR. AUSTEN CHAMBERLAIN ON FISCAL POLICY

FROM The Times, MONDAY, OCTOBER 19, 1903. The Chancellor of the Exchequer is to be congratulated on his speech which you report this morning. He recognizes that there are other things to be considered besides imports and exports. He rises to the hopes which you expressed in your article yesterday, when you said:

The country will expect the Government to apply them'selves seriously to the questions of national defence, and particularly to the reform of the War Office and the Army, while their late colleague is educating the country as to the 'conditions of the international industrial struggle.' He sees that we must consider our national finances as a whole. He sees that more import duties may be necessary for other purposes than retaliation on protectionist nations and for other purposes than the effort to make the British Empire self-supporting. He sees that they should be used to lower the income-tax to a peace level, from which we may raise it hereafter to pay for war. In truth, the Government has many excellent reasons for import duties and for indirect taxes in general without going beyond the purpose of revenue, which after all must remain the main purpose. More indirect taxation would not only relieve the income-tax and provide a reserve for war, but would also tend to equalize direct and indirect taxpayers, and to make the

general body of consumers feel the immense and increasing expenditure, which at present they regard with too light a heart. So far as the cost of production is not unduly raised, the policy of increasing import duties for the sake of revenue would be for the general good. The new Chancellor of the Exchequer therefore is on the right path. But I venture to suggest that he has not yet realized how entirely it is his duty to recall the agitated mind of the people from visionary schemes of retaliation to the national revenue, expenditure, and debt, which are by no means in a satisfactory state for discharging the necessary functions of government.

In the first place, he does not really prove that it is the general good of the nation to empower the Government to impose import duties, beyond the main purpose of revenue, for the further purpose of retaliating on foreign nations who send us our imports but refuse to take our exports free. Statistics force him to admit that our exports are not diminishing. Like the Prime Minister and like his father, he concentrates attention on the familiar fact that we are not balancing our imports by our exports, but does not prove that we are not balancing them out of income. Hence, though it may be true that some classes might be benefited by import duties levied on the whole community, provided always that extreme care were taken not unduly to raise the cost of production, yet it does not follow that a policy for the benefit of these classes would be for the general good. The foreign trade of our great mercantile country is conducted by an automatic machinery, in which our imports are balanced by a highly complex sum comprising exports, freights, interest on foreign loans, dividends on foreign stocks, bankers' commissions and remittances from abroad, together with occasional shipments of bullion from home. So long as this whole balance is

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