Home Rule finance is already the subject of a whole library of books and pamphlets, and there is some danger that the money question may occupy a place out of all perspective and proportion in the coming controversy. Men quarrel over money very easily, and some of the fiercest opponents of Home Rule still imagine that they can silence the Home Rulers by talking "money" at the top of their voices. But the Home Rulers must not be drawn into that net. They must refuse to view this matter as a question merely of book-keeping and accounts. They must remember always that the financial difficulty is simply another statement of the fact of Irish poverty, and that Irish poverty is due to the Act of Union. It is not any financial arrangement, but Home Rule itself, that will cure the difficulties of Irish finance.

On the one side, the English are being told that they are going to be bled white in order to please Ireland. On the other side, the Irish are being warned by their extremists that England hopes to undo the effects of Home Rule by a dowry of impoverishment. On both sides of the Channel the enemies of Home Rule hope to use this as a weapon to defeat the cause. Let us, therefore, keep our heads, and look at the problem calmly and sanely.

What is the present position in regard to Irish finance? It has totally changed since 1893. It follows, therefore, that the financial proposals of the 1886 and the 1893 Bills are of little value to us as a guide to the policy of 1912.[72] In those days the British Government could cheerfully propose a fixed contribution of over 4,000,000 from the new Irish Parliament, as in the Bill of 1886, or an allocation of one-third of the general revenue of Ireland, for Imperial expenditure, as in the Bill of 1893. Lord Morley has told us that in 1886 Mr. Parnell was gravely disturbed over the finance proposals of Mr. Gladstone. We thought him unreasonable at the time, and perhaps a little mean. I can remember Liberals saying hard things about the Irish att.i.tude in those days. But the events that have occurred since prove that Mr. Parnell, on that occasion, was only exercising his customary shrewdness. He saw to the root of the matter. He was evidently possessed with the fear that he might be saddled with a poverty-stricken Home Rule Parliament, and the course of events since 1886 has somewhat justified his fear.

THE NEW IRISH DEFICIT

For since 1886, two events have happened. The first has been that Ireland instead of being the creditor is now the debtor of England. The most recent Treasury estimate, as given by Mr. Asquith in his first reading speech on the Home Rule Bill of 1912 gives the true deficit of Ireland for 1912-3 at 1,500,000. I am aware that the Treasury estimates are open to many criticisms, which have been brilliantly stated by Professor Kettle in his handbook on "Home Rule Finance,"[73]

but for our present purposes we are bound to accept these figures.

What do they show? In the first place, they fully bear out the forecast of the Financial Relations Commission that the position of Ireland under the Act of Union would become steadily worse. We have probably not yet reached the bottom of the hill. Ireland is so poor that each new Act for the relief of poverty increases the disproportion between the expenditure of Great Britain and Ireland. There is no way out of that vicious circle. If England were to increase Irish taxation she would simply increase the poverty which she has to relieve. During the last fifty years, in fact, the British Government has had to give back in some form of relief an equivalent for almost every increase of taxation enforced upon Ireland. If Ireland cannot pay, England must pay. That means that unless Home Rule is given during the next twenty years Ireland will become an increasingly heavy charge upon Great Britain.

In face of these facts, it is clear that Great Britain will be wise to "cut the loss." Considerable scorn has been thrown on the suggestion made by Professor Kettle and others that Great Britain should present Ireland with a dowry of 20,000,000 on the occasion of setting up a Home Rule Parliament. Mr. Kettle called it a "wedding present," to which Mr. F.E. Smith retaliated with some humour that it was really a "separation allowance." Mr. Kettle has since replied with even better humour that as Home Rule is the only true marriage between the nations his description is the more correct. This is all a pretty play of wit, but we must not allow it to conceal from us the fact that if John Bull deals generously with Ireland at this present moment he will be playing the part, not merely of a philanthropist, but of a good business man.

There are many ways in which this generosity can be shown. A big capital sum of money would probably be bad both for England and for Ireland. It would give Ireland a sense of dependence, and it would leave England with a sense of injury. There are many other better ways of making this financial adjustment. The charge which has turned Ireland into a debtor to England, for instance, is the 2,500,000 drawn from the Imperial Exchequer for Irish Old-age Pensions. The men and women who are receiving those pensions are the veterans of the famine period, and England has a special obligation towards them.

The Home Rule Bill of 1912 provides that these old age pensions should be kept for the moment as an Imperial charge. That will be both a generous and humane provision.

Another proposal made by Irish financial reformers is that the Royal Irish Constabulary, a force which costs 1,370,000 a year, should be regarded and paid for as an Imperial force. The argument is that the Royal Irish Constabulary was created in the interests of the English garrison--was, in fact, an army of occupation, which, since the new settlement of the Irish land question, has become, in Mr. Kettle's witty phrase, an "army of no occupation."

That proposal is not adopted in the Home Rule Bill of 1912. The force is kept under the control of the British Government for six years, and it will then be handed over to Ireland. In the meantime, it will be paid for out of the money reserved from Irish revenue by the Imperial Government. We shall have to wait, therefore, for six years before the Irish Government is able to apply economy to what is perhaps the most expensive and most extravagant service in the whole administration of Ireland.

The general financial proposals of the 1912 Bill are as follows:--

The British Treasury takes the Irish revenue and divides it into three portions. The first is the postal revenue, which will be both collected and controlled by the Irish Government, as the Post Office will be handed over immediately. The second is the "transferred" revenue, amounting to 6,350,000, which is the estimated cost of the services delegated to the Irish Parliament, such as the Civil Service, the payment of judges, and so forth. This revenue will still be collected by the Imperial Government, but handed over to Ireland. The third portion will be the "reserved" revenue, consisting of the amount retained by the British Treasury for the services over which it will retain control. Those services will be as follows:--

Old Age Pensions 2,660,000 National Insurance 190,000 Land Purchase 616,000 Constabulary (Royal Irish) 1,380,000 Collection of Revenue 300,000 --------- 5,146,000 ---------

This leaves the profit and loss account for Great Britain as follows:--

Receipts. Expenditure.

9,485,000 On "Reserved Services" 5,046,000 On "Transferred Sum" 6,350,000 ----------- 11,396,000 -----------

The upshot is that the British deficit, which stands at present at 1,500,000, will rise to 1,911,000. That will be covered by a grant of 500,000 a year. That grant will be reduced annually by decrements of 50,000 until it reaches 200,000.

There is no need for the British taxpayer to be alarmed at this balance-sheet. The essential fact is that Home Rule will work steadily on the side of thrift and saving. The substantial points are--(1) that pensions will from this time forward steadily decrease; (2) that the Royal Irish Constabulary will be diminished; and (3) that any increase in the prosperity of Ireland will result in an increasing yield of taxation collected by the British Treasury and devoted to the benefit of the British taxpayer. The British taxpayer, in a word, is thoroughly well looked after.

Doubtless these proposals will be subjected to much criticism in committee, and no one would pretend that they could not be improved in detail. It might be argued, for instance, that it would be better for Great Britain to make herself responsible for the Royal Irish Constabulary as an Imperial charge, and therefore have a motive for reducing it. That action might be taken as a generous subst.i.tute for the bonus of 500,000 a year, which may possibly not produce favourable effects on the relations between the two countries. As against the extra charge to the British Treasury, you would have the fact that the British Government could immediately proceed to reduce the Constabulary.

But once give Ireland a chance by some such settlement as this, and then the main problem of finance will solve itself. For we cannot ignore one very important aspect of that problem--the extravagance of Irish government. One of the most startling revelations of the Financial Commission Report was that Ireland, a poor country, cost twice as much to govern as Belgium, a country of nearly twice the population. Mr. Kettle has shown since that the Civil Service of Ireland is four times as great, and costs more than four times as much, as the Civil Service of Scotland.[74]

Why is this? Because at the present moment two systems of government are existing in Ireland side by side--the old and the new. The old is for the most part an enc.u.mbrance and an impediment, but the new is required for doing the work of land purchase and agricultural development. Ireland is like a household into which a new staff of servants is being imported, while n.o.body dares to disturb the old.

Could there be a more extravagant way of governing a country?

The only way to put that house in order is to give it Home Rule. All the rights of existing civil servants must be respected, and therefore the saving on that account will only be gradual. Mr. Kettle estimates it at 700,000 within a reasonable time. That is probably even an under-estimate. For once this kind of saving begins, it soon tells on a nation's expenditure. Ireland is at present governed from the point of view of the place-hunters. Once Ireland begins to be governed from the point of view of the Irish people, then the reign of extravagance will be at an end.

Once the Home Rule Parliament is set up we shall be able to distinguish clearly between Ireland's local and her Imperial obligations. We shall hear much indignant talk against any proposal that Ireland shall pay less than her full proportional contribution for Imperial Defence.

Those who are so moved on this question seem to forget that the British Colonies pay practically nothing. Yet we have never heard that they are paupers on that account. They certainly derive more from the Empire than Ireland. Therefore, there would be nothing either degrading or unjust even if Ireland were relieved from all Imperial expenditure for a term of years. For Ireland requires time to recover from the impoverishment of the past, and it may be wise to give her that time.

But once that time is over, the Irish Parliament will probably wish to follow in the steps of the Grattan Parliament, and contribute her honest due to the Empire of which she will be a part. But that due must be paid, not out of deficit, but out of surplus. As long as Ireland has a deficit produced by poverty, it is absurd to talk to her about Empire. Once she has a surplus--and a surplus will soon come with the working of Home Rule--then she will play her part in a manly way.

For we must never forget that Home Rule in itself is a great financial a.s.set. During the brief period of the Grattan Parliament, as we have seen, Ireland doubled her exports. During that time the Parliament carried out public works in every part of Ireland, and industry throve.

Those things cannot be done by an absentee Parliament. They can only be done by a Parliament on the spot. They are intensely and earnestly needed by Ireland at present. For Ireland is largely an industrial derelict, waiting for the restoring hand of a central governing power.

It is impossible to put this aspect of the matter into figures. Here we must move in faith. But we cannot see this matter clearly unless we believe firmly--as we have every justification for believing--that Home Rule means wealth to Ireland.

THE FINANCIAL COMMISSION

But we have to remember that since 1893 a great and authoritative Financial Commission has reported that England stands in debt to Ireland.

The British public has never quite realised what the Report of 1896 signified, or quite understood the effect which it produced on the Irish nation. The Financial Relations Commission was a body created by the Liberal Government in 1894, soon after the defeat of the Home Rule Bill, and partly as a consequence of that defeat. It consisted of fifteen of the ablest financiers in the United Kingdom, including two great Treasury Chiefs, Lord Farrer and Lord Welby, Sir Robert Hamilton, Sir David Barbour, and that great Parliamentary financial expert Mr.

W.A. Hunter. The chair was occupied by an ex-Chancellor of the Exchequer, Mr. Childers.[75] The Commission sat for two years, and carried out a most searching investigation. They reported in 1896.

Their united Report consists of only two pages in the Blue Book,[76]

and the essence of it is contained in five short paragraphs, as follows:--

(1) That Great Britain and Ireland must, for the purpose of this inquiry, be considered as separate ent.i.ties.

(2) That the Act of Union imposed upon Ireland a burden which, as events showed, she was unable to bear.

(3) That the increase of taxation laid upon Ireland between 1853 and 1860 was not justified by the then existing circ.u.mstances.

(4) That ident.i.ty of rates of taxation does not necessarily involve equality of burden.

(5) That whilst the actual tax revenue of Ireland is about one-eleventh of that of Great Britain, the relative taxable capacity of Ireland is very much smaller, and is not estimated by any of us as exceeding one-twentieth.

Now, what does this amount to? As worked out in the various minority reports, it means that, in the opinion of this Commission, Ireland has been over-taxed for many years at the rate of over 2,000,000 a year.

As to the precise sum the Commissioners differ. Some went as high as 3,500,000, others down to 2,000,000, but all, except Sir Thomas Sutherland and Sir David Barbour, set it at about 2,000,000. Mr.

Childers, unhappily, died before the close of the Commission. But he wrote an epoch-making Report, in which he estimated the excess of taxation at 2,250,000.[77]

Now, it is useless to make light of this Report. It was the solemn judgment of the highest financiers of the day on the financial workings of the Act of Union. If we turn back to the debates in Parliament in 1800, especially to the speeches of Pitt, prophesying that the Act of Union would take the wealth of England across St. George's Channel, and apply it to Ireland, we cannot escape some sombre reflections on the short-sightedness of great statesmen. Pitt's judgment was disturbed by the existence of a war with France, which created in him an intense desire to unite the two countries. Otherwise he would probably have foreseen that for a rich partner to unite his finances with a poor partner certainly meant bankruptcy for the one, and probably, in the end, also ruin for the other. Taking the nineteenth century as a whole, the fundamental financial error has been this--that Ireland has been taxed on the theory of equality with England in point of wealth. That equality has not existed. What was a light burden for the one country has proved for the other a burden too heavy to be borne.

The result has been that Ireland, being continually overtaxed, has sunk steadily in her resources, and has gradually become less and less of a taxable country. The taxes have returned less and less, and have had to be returned in the form of relief of poverty. A crisis in that situation is now reached, and it is quite clear that we stand at the parting of two roads. Now that the balance is beginning to work against England, it is certain that the only alternative to the restoration of Ireland is the gradual dragging down of England.

It is useless and unjust to argue, in answer to this great Report, that Ireland ought not to have been regarded as a financial unit at all. Any country that is an island, and possesses a social organisation of its own, with a definite relationship between rich and poor, must necessarily be a financial unit. But even if that were not so, it is too late to argue the question with any honour. For we must never forget that the whole financial legislation of the United Kingdom in regard to Ireland is based upon the Act of Union, which was practically a solemn treaty between the two countries, pa.s.sed--we will not say how--by both the British and the Irish Parliaments. It is the essence of that treaty that Ireland entered into it upon certain financial terms, and among those terms was the condition that she should be treated as a separate financial unit.

This Report, therefore, immensely strengthens the claim of Ireland to more generous financial terms in 1912 than in 1886 or in 1893.

We want to set up in Ireland a high and strong sense of financial responsibility. The control therefore, as well as the expenditure, must be placed as far as possible in Irish hands, and for that purpose the management, as well as the collection, of Irish taxes ought to be left as far as possible with the Irish Exchequer that must be set up.

The tendency is started by the principle of the Bill of 1912, and the policy of the next decade will be to place in Irish hands as rapidly as possible both the collection and the administration of the finance for all the great Irish services, including those at present "reserved"

as well as those at present "transferred."

This brings us finally to the vexed problem of Customs and Excise. It is notorious that the greater part of the Irish revenue--the revenue of a poor country, derived for the most part through indirect taxation--is drawn from Customs and Excise.[78]

It is not, perhaps, surprising, therefore, that the Bill of 1912 should go some way towards meeting the demand that has sprung up in various quarters, both in Ireland and in England, for the control of customs and excise by the Irish Parliament. The proposal of the Government is that we should extend to Ireland, with some variations, what is at present the financial arrangement in regard to customs and excise between the British Treasury and the Isle of Man. The first fact to be remembered quite clearly is that the Irish Parliament is absolutely debarred from creating any new duty. It will not be able to draw up any new set of tariffs. In other words, it will have to adapt its revenue to the general financial policy of the central government, whether that be a free trade policy or a tariff reform policy. But Ireland is to be allowed to vary her customs within certain limits. She may, for instance, reduce her customs to the lowest point, on the only condition that she loses thereby equivalent revenue. But on the main custom duties which fall on such articles as tea, sugar, cocoa, tobacco, and so forth, she cannot raise her customs beyond 10 per cent. The only exceptions will be beer and spirits, on which Ireland may raise her customs or her excise to any point that she desires. It will be necessary, of course, to have rebates or countervailing duties in regard to articles transferred from Great Britain to Ireland, or _vice versa_, and to that very slight extent alone will these proposals affect the trade relations between Ireland and England.

I may add that the same power of reduction or addition will extend both to income tax and death duties up to the limit of 10 per cent. for increase--a provision which will safeguard the industries of the North from being sacrificed to the needs of the South.[79]