My own opinion is that the past influence upon Ireland of free trade, in the first instance with Great Britain, and later with the outside world, though a highly interesting and important topic in itself, is commonly exaggerated, to the neglect of the vastly more important question of the tenure of land. Free trade did not cause the famine. On the contrary, the presage of the famine was one of the minor causes which induced Peel to take up Cobden's policy for the free importation of foodstuffs. The effect of that policy upon Ireland sinks into insignificance beside an agrarian system which had reduced the ma.s.s of the Irish peasants to serfs, kept them near the borders of dest.i.tution, and in a state of sporadic crime for a century and a half before, and for forty years after the repeal of the Corn Laws, and, at the climax of a period of high protection for agricultural products, rendered it possible for a mere failure of the potato-crop to cause death to three-quarters of a million persons. These things do not happen in properly governed, in other words in self-governed, countries, whatever their fiscal system, and they have never happened to Irishmen in any other part of the world but in their own fertile island. Manufacturing industries stand on a different footing. Most of the staple industries of Ireland, notably the woollen industry, and the apt.i.tudes which brought them into being, were deliberately destroyed long ago by fiscal measures imposed by England, and their destruction aggravated the misery and exhaustion produced by a bad land system. How far their partial revival under the fiscal Home Rule of Grattan's Parliament was genuine, and might, with a continuance of fiscal Home Rule, have been permanent, it is impossible to say. The r.e.t.a.r.ding effect of the Rebellion, and the long start already obtained by Great Britain in the industrial race, are factors beyond accurate calculation. But one thing is certain, that the revival of industries was, at that stage, of trivial importance beside the rural regeneration of Ireland, and that Grattan's Parliament had not the remotest influence for good upon the land question, which it neglected as heartlessly as its predecessors for a century before and its successors for seventy years afterwards.[102]

Industries are valuable a.s.sets for any country; but countries almost wholly agricultural, like Denmark, can prosper remarkably, and without Protection, provided that they possess or evolve a sound system of agrarian tenure, in other words, a sound relation between tenant and landlord, or, in default of that, peasant ownership. In every country in the world that has been a _sine qua non_ of prosperity. Suppose that English labourers had built out of their own money and by their own hands the factories, docks, and railways in which they worked, and that the resulting profits, wages deducted, went solely to ground landlords.

That gives us some idea of the old Irish land system, whose overthrowal began only in 1870; a system under which the landlord put no capital into the land, though his rent represented the full profits of the tenant's capital and labour, less an amount equivalent to a bare subsistence wage, governed by compet.i.tion.

The present influence upon Ireland of the Imperial fiscal system, now that peasant proprietorship has been half accomplished, is another matter upon which I shall have to say more presently, when we have completed our review of Anglo-Irish finance. Let us return to the point we had reached: that free trade with the outside world and the equalization of taxation between Great Britain and Ireland approximately coincided in point of time, and were also contemporaneous with rapid and continuous growth in the wealth and population of Great Britain, and a steady and continuous decline in the Irish population. We know now, moreover, though n.o.body knew it then, because the calculation was not yet made, that Ireland was paying a large contribution to Imperial services, over and above her local expenditure. In the half-century between 1810 and 1860 she had paid an average yearly sum of nearly four millions, and a total sum of nearly two hundred millions. In the year 1859-60, when the now equalized spirit duties were raised to 10s., she paid 5,396,000; a sum considerably more than double the expenditure on Irish services, and equivalent to no less than five-sevenths of the revenue raised in Ireland.

Parliament gave no serious attention to any of these phenomena from the time of the fiscal union in 1817 until after the introduction of Mr.

Gladstone's second Home Rule Bill in 1893. No settled conclusions were arrived at as to the relative wealth of the two countries, as to the capacity of Ireland to bear the British scale of taxation, or even as to the amount of revenue derived from and expended in the countries respectively, with the consequent contributions made to common Imperial services. A Committee sat in 1864-65, which compiled some interesting information and heard some important witnesses, but ignored the main questions at issue and produced what Sir Edward Hamilton described later as an "impotent" Report. Sir Joseph MacKenna, an able Irish banker, again and again, between 1867 and 1876, pleaded for an inquiry into Anglo-Irish finance, alleging gross injustice in the incidence of Irish taxation, and obtained nothing more than a rough return showing that between 1841 and 1871 the gross tax revenue per head of the population had risen in Ireland from 9s. 6.7d. to 1 6s. 2.2d. and had fallen in Great Britain from 2 9s. 9.5d. to 2 4s. 1.6d. For the first time also it was shown that the national beverages of England and Ireland, beer and whisky, respectively, were taxed in a ratio unfair to Ireland. In 1886 Mr. Gladstone, in preparing his first Home Rule Bill, had to re-open the question of the relative resources of Ireland and Great Britain for the first time since the Union, because he proposed a fixed annual contribution, unchangeable for thirty years, from Ireland towards the Imperial services. He fixed the contribution at one-fifteenth or approximately half that of two-seventeenths fixed by Pitt in 1800, and the new figure was certainly not too low. In 1888 the question was again incidentally raised by Mr. Goschen, who apportioned certain equivalent grants towards local taxation in England, Scotland, and Ireland, in the proportion of 80, 11, 9, apparently on the principle that those were the proportions in which each country respectively contributed to Imperial expenditure. Mr. Gladstone, in preparing the Home Rule Bill of 1893, made investigations which threw additional light on the true amount of revenue derived from Ireland, with allowance made for revenue from dutiable goods taxed in Ireland but consumed in Great Britain, and _vice versa_, but his financial scheme, as revised in the course of the Session and pa.s.sed by the House of Commons, evaded the crucial issue by making Ireland's contribution to Imperial services a quota, one-third, of her true annual revenue. This quota, moreover, was indirectly reduced by temporary subsidies in aid of Irish charges (_e.g._, for Police) and was estimated, with these deductions, not to exceed at the outset one-fortieth.

III.

THE FINANCIAL RELATIONS COMMISSION OF 1894-1896.

It was now apparent that, with or without Home Rule, the whole subject needed serious investigation, and in 1894, after the defeat of Mr.

Gladstone's Bill, a Royal Commission under the Presidency of Mr. Hugh Childers was appointed to consider the "Financial Relations between Great Britain and Ireland." Their Report deserves careful study, because it contains within it all the essential materials for forming a judgment upon the financial problem of to-day. All that it lacks are the complementary figures of the subsequent seventeen years, and these figures, which I shall presently add, do not affect the conflict of principles, though they throw into more vivid relief than ever the outcome of conflicting principles.

In composition it was a very strong Commission; it consulted the highest financial authorities in the Kingdom; it made for two years an exhaustive examination, historical and practical, of the questions submitted to it, and although the members disagreed on some important points, the conclusions upon which they were unanimous cannot be impugned. The terms of reference were:

"1. Upon what principles of comparison, and by the application of what specific standards, the relative capacity of Great Britain and Ireland to bear taxation may be most equitably determined.

"2. What, so far as can be ascertained, is the true proportion, under the principles and specific standards so determined, between the taxable capacity of Great Britain and Ireland.

"3. The history of the financial relations between Great Britain and Ireland at and after the Legislative Union, the charge for Irish purposes on the Imperial Exchequer during that period, and the amount of Irish taxation remaining available for contribution to Imperial expenditure; also the Imperial expenditure to which it is considered equitable that Ireland should contribute."

It will be observed that Questions 1 and 2 deal with abstract points, No. 3 (except the last clause) with concrete facts.[103]

In their short unanimous Report the Commissioners began by stating that "Great Britain and Ireland must, for the purposes of this inquiry, be considered as separate ent.i.ties."

To Question 1 they made no unanimous answer. This was immaterial, because, as a result of numerous tests (a.s.sessment to estate duties and income-tax, consumption of commodities, population, etc.) all arrived unanimously at an answer to the next question.

Answer to Question 2 (and incidentally, as will be seen, to part of Question 3): "That whilst the 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_."

The wording of the answer needs to be explained by reference to the text of the Report.

(_a_) In saying "tax revenue" the Commissioners meant to exclude non-tax revenue--_e.g._, Post Office receipts, etc.--but the Commissioners in their various separate Reports generally employed the figures of total revenue. Taking these as our basis, the Irish revenue then raised would have been nearly one-twelfth instead of one-eleventh of the British revenue. In other words, of the total revenue of the United Kingdom, Ireland paid nearly _one-thirteenth_. (_b_) As to the true Irish taxable capacity of "one-twentieth," some confusion arises owing to the use of the phrase by different Commissioners in different senses. Mr. Childers and Sir David Barbour appear to have meant one-twentieth of the United Kingdom's taxable capacity, the others one-twentieth of Great Britain's. In order to be on the conservative side, I shall adopt the former estimate. The discrepancy is not material to the conclusions of the Commissioners, as, for reasons which I need not go into, they agreed that the minimum amount of over-taxation was two millions and three-quarters.

This was the main outstanding conclusion of the Royal Commission.

Translated into figures, it showed the following facts: In 1893-94 the total revenue of the United Kingdom from all sources was 96,855,627. Of this sum the revenue contributed by Great Britain from all sources was 89,286,978; by Ireland, 7,568,649--that is, between one-eleventh and one-twelfth of the British revenue.

If Ireland in 1893-94 had paid in proportion to her true taxable capacity of one-twentieth, the maximum arrived at by any member of the Commission, the revenue derived from her would have been 4,842,781.

In other words, there was held to be an excess payment from Ireland of 2,725,868.

It was not suggested by any member of the Commission that Ireland, since the Union, had grown richer at a more rapid rate than England, and was therefore more capable of bearing taxation. On the contrary, it was admitted that she had grown, relatively, much poorer. On the most moderate estimate, therefore, the over-taxation of Ireland since the Union, computed strictly on the principle laid down, could be represented as amounting in 1894 to something like two hundred and fifty millions, or, if we date from the fiscal union of 1817, two hundred millions.

The answer given by the Commissioners to Question 3, so far as it goes, is explanatory of the previous answer.

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

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

And they added the opinion "that ident.i.ty of rates of taxation does not necessarily involve equality of burden."

Their answers, so far as they were complete, to the other inquiries contained in Question No. 3 about the tax revenue of Ireland and the net contribution of Ireland in the past to Imperial services, are to be found in figures included in the body of the Report, and these figures formed, of course, the basis of their unanimous conclusion as to the over-taxation of Ireland.

These figures, to which I have often alluded in this volume, necessitate a short digression, because they and subsequent Returns of the same sort form the only official data upon which to estimate the present financial position of Ireland.

They were extracted partly from annual Returns originally issued by the Treasury for the Home Rule Bill of 1893, and ent.i.tled "Financial Relations (England, Scotland, and Ireland)," and partly from a new doc.u.ment known as the "Pease" Return, No. 313 of 1894. These Returns, taken together, represented the first serious attempt by the Treasury to construct an account covering a period from 1819-20 to 1890-91, and showing (_a_) the exact revenue derived from Ireland and Great Britain respectively; (_b_) the local expenditure in Ireland and Great Britain respectively, as distinguished from Imperial expenditure incurred for the benefit of the whole United Kingdom; (_c_) the net contribution of Ireland and Great Britain respectively to this latter expenditure for Imperial services only.

Since 1894 two regular annual Returns have been compiled, the one showing the revenue, local expenditure, and net Imperial contribution of Scotland, Ireland, and England (including Wales), the other giving an historical summary of similar figures for Great Britain and Ireland only, from 1819-20 to the current date.

Two insoluble problems have had to be grappled with by the Treasury in preparing these Returns: first, to differentiate Imperial expenditure from local expenditure; second, to arrive at the "true" net revenue of the partners as distinguished from the revenue collected within their respective limits. Both these problems arise whenever an attempt is made to look behind a system of unitary finance into the burdens and contributions of different portions of a united realm, and the latter, though not the former, of the two may arise in just as acute a form if the realm consists of federated States with a common system of Customs and Excise.

With regard to the first problem, it is, of course, easy, in the case of a Federation, to distinguish between central, or Federal, expenditure and local, or State, expenditure, because the functions of the Federal Government and State Governments are delimited in the Const.i.tution, and the separate expenditures form the subject of separate balance-sheets.

But in a Union, and above all in a Union to which one part of the realm is an unwilling party, like that of the British Isles, it is clear that no absolutely accurate line can be drawn between Imperial and local expenditure. The Army, the Navy, and a number of other things are clearly enough Imperial, but there are many debatable items. For example, Is the upkeep of the Lord-Lieutenant an Irish or an Imperial charge? Is a loss on Post Office business in Ireland to be charged against Ireland, or should Ireland be credited with a proportion of the profits of the whole postal business of the United Kingdom? More searching questions still: Is the enormous charge for the Irish Police, which is under Imperial control, and exists avowedly for the purpose of forcibly maintaining, in the Imperial interest, an unpopular form of government in Ireland, to be charged against Ireland? Or, again, should Ireland be debited with the cost of the machinery for carrying out Land Purchase, a policy admittedly rendered necessary by the enforced maintenance in the past of bad land laws? Obviously such questions can never be answered so as to satisfy both Irishmen and Englishmen, because they go to the root of the political relations between Ireland and Great Britain. The Royal Commission, therefore, was naturally unable to give a unanimous answer to the last clause of Question No. 3 of their Terms of Reference--namely, "What is the Imperial expenditure to which Ireland should equitably contribute?" Some members held that under the Union even a theoretical cla.s.sification was unjustifiable, while it was obvious that under the Union no effect could be given to it. Still, the cla.s.sification had to be made, in order to arrive at a theoretical estimate of the financial situations of Great Britain and Ireland respectively, and the Treasury, charged with the preparation of this estimate, took the only course open to it in reckoning as Irish expenditure all expenditure which would not have to be incurred if Ireland did not exist. It was the perfectly correct course for the Treasury to take in dealing with the task set before them, and, as we shall see, it provides the only basis on which to construct the balance-sheet of a financially independent Ireland.

The insolubility of the second problem--that of discovering the "true"

revenue of Ireland and Great Britain respectively--arises from the difficulty of tracing the pa.s.sage of dutiable articles from one part of the kingdom to the other, and of tracing the incidence of direct imposts such as income-tax and stamps. The great bulk of Irish revenue is derived from indirect taxes on commodities, liquor, tobacco, tea, sugar, etc. Since the consumer pays the tax, revenue is rightly credited to the country of consumption. The tax, for example, on tobacco manufactured in Ireland may be collected in Ireland, but the revenue from Irish-made tobacco exported to and consumed in Great Britain is rightly credited to Great Britain. The converse holds true. Half the tea consumed in Ireland has paid duty in London, but the whole of the revenue from tea consumed in Ireland must be credited to Ireland. Now, since 1826, no official records had been kept by the Customs-houses of the transit of goods between Ireland and England, except in the solitary case of spirits. The data, therefore, did not exist, and do not exist now, except in the case of spirits, for an accurate computation. This is frankly confessed by the Treasury officials. They base their published figures on certain arbitrary methods of calculation which have never been submitted to any public inquiry, and which, as they admit, contain an element of guesswork. The matter is an exceedingly important one to Ireland, because ever since 1870 an increasingly heavy deduction has been made by the Treasury from her "collected" revenue, and her "true" revenue has proportionately diminished. Part of this deduction is no doubt due to the fact that her exports of tobacco and liquor have, in recent times, much exceeded her imports, but the margin for error is nevertheless large. Mr. Gladstone, in framing his Home Rule Bill of 1886, was so sensible of the inherent difficulties of the calculation that, while retaining Customs and Excise under Imperial control, he credited to the Irish Exchequer the whole of the revenue collected within Ireland. On the balance of Anglo-Irish exchange in dutiable articles, as roughly estimated at that time, this provision meant an annual allowance to Ireland of nearly a million and a half pounds, the princ.i.p.al reason being that Ireland, which is a larger manufacturer of spirits and tobacco, was exporting more than she consumed of these commodities. In the Bill of 1893, as part of a wholly different financial scheme, Mr.

Gladstone abandoned the plan just described, and provided for the annual calculation of "true" Irish revenue, as distinguished from "collected"

revenue; but it is a proof of the obscurity and intricacy of the whole business that the Treasury officials made a mistake of 400,000 in the initial calculation, with the result that Mr. Gladstone had to recast his financial scheme from top to bottom.

In the Return of 1894, as presented to the Royal Commission, this error was eliminated, but the method of calculation remained imperfect. n.o.body knows now what the true figures are, and there is good reason to think that Irish revenue has always been, and still is, substantially underestimated.

The same obscurity shrouded, and still shrouds, the "true" Irish revenue from income-tax and stamps, whose proceeds it is exceedingly difficult to trace under a system of unitary finance, and which are traced by the Treasury in a fashion again admittedly unreliable.[104]

In regard to taxes on consumption the same difficulty has been met with in Australia since the federation of the Colonies and the delegation to the Commonwealth Government of exclusive control over Customs and Excise. The product of these duties makes up the bulk of Australian revenue, and is far too large for the needs of the Commonwealth Government. The Const.i.tution of 1900 provided that the surplus should be returned to the individual States in proportion to their "true"

contributions to the revenue, and for the calculation of these "true"

contributions an elaborate system of book-keeping was inst.i.tuted, in order to trace the ultimate place of consumption of dutiable articles.

Each State was then credited with its "true" revenue, and debited, among other things, with a proportionate share of the expense of any Department transferred by the Const.i.tution from the State to the Commonwealth. The system caused general dissatisfaction, owing, as the Australian Official Year Book puts it, "to the practical impossibility of ensuring that in every case a consuming State will be duly credited with revenue collected on its behalf in a distributing State." That is the well-founded complaint of Ireland in regard to the Treasury returns.

Hitherto in Australia efforts to change the system for another allocating the surplus on a basis of population have not been successful.[105] The Canadian Federal Const.i.tution uses the basis of population for the distribution of small subsidies to the Provinces, but complaints have arisen as to its fairness. British Columbia, for example, for a long time complained that her subsidy was too small, one of the grounds being that her consumption of dutiable goods was unusually large. No means existed of verifying this complaint by figures.[106]

With this explanatory digression about a very important feature of Anglo-Irish finance, I return to the findings of the Royal Commission of 1894-1896. The figures supplied to them were as shown on the opposite page.

It will be noticed that the average "true" revenue of Ireland was stationary at a little over five millions from 1820 to 1850, rose with a bound to seven and a half millions with the equalization of taxes in the decade 1850-1860, and remained stationary at that figure for the remaining thirty-four years. Expenditure in Ireland quadrupled in the whole sixty-four years; and the net contribution to Imperial services, after rising from three and a half millions (in round numbers) in 1820 to five and a half millions in 1860, fell automatically, as the expenditure rose, and had stood at two millions from 1890 afterwards.

Population had fallen by two millions, but the "true" revenue raised per head of population rose from 15s. 5d. in 1819 to 1 13s. 5d. in 1894, while the local expenditure rose from 4s. 7d. per head in 1820 to 1 5s.

in 1894.

STATEMENT SHOWING THE ESTIMATED LOCAL EXPENDITURE INCURRED IN IRELAND, AND THE BALANCE OF TRUE REVENUE WHICH IS AVAILABLE FOR IMPERIAL SERVICES AFTER SUCH EXPENDITURE HAS BEEN MET:

Revenue as Adjustment Estimated Estimated Balance Population Collected (+) or (-) True Local available Revenue Expenditures for Imperial Services Decadal figures.

-------------------------------------------------------------------------------- 1819-20 5,253,909 + 2,655 5,256,564 1,564,880 3,691,684 6,801,000 1829-30 4,161,217 +1,040,908 5,502,125 1,345,579 4,156,576 7,767,401 1839-40 4,571,150 + 841,739 5,412,889 1,789,567 3,626,322 8,175,124 1849-50 4,338,091 + 523,374 4,861,465 2,247,687 2,613,778 6,574,278 1859-60 7,097,994 + 602,430 7,700,334 2,304,334 5,396,000 5,798,967 1869-70 7,331,058 + 95,274 7,426,332 2,938,122 4,488,210 5,412,377 1879-80 7,831,316 - 550,520 7,280,856 4,054,549 3,226,307 5,174,836 1889-90 9,005,932 -1,271,254 7,734,678 5,057,708 2,676,970 4,704,750

Annual figures.

-------------------------------------------------------------------------------- 1890-91 9,301,463 -1,506,988 7,734,475 5,723,399 2,071,076 -- 1891-92 9,639,344 -1,671,226 7,968,105 6,021,810 1,946,295 -- 1892-93 9,425,177 -1,986,780 7,438,397 5,540,508 1,897,880 -- 1893-94 9,650,649 -2,082,000 7,568,649 5,602,555 1,966,094 1,638,000

In 1893-94, the last year under review, Ireland, in round figures, was producing a net revenue of seven and a half millions, was costing five and a half millions, and was, therefore, contributing to Imperial services a surplus of two millions. In the same year, while contributing her two millions, she was overtaxed, according to the lowest estimate of the Commissioners, by two and three-quarter millions.