material of jam, sweetmeats, and confectionery; sugar therefore was freed when circumstances permitted. It was impossible to raise a large revenue from rare luxuries or from non-necessaries whose consumption would quickly shrink under taxation. There remained, therefore, only those articles which had once been luxuries and were now conventional necessities. These were alcoholic liquors the sheet anchor of British finance,' tobacco and tea. For all of them there was an insistent demand; and in the case of alcohol and tobacco any check to consumption had its compensation in the improvement of the national health. 1881 may be taken as a sample year of Gladstonian finance in its maturity. The total revenue was £69,000,000; direct taxes £21,000,000, stamps £4,000,000, indirect taxes £44,000,000. Of the last alcohol in various forms yielded 31, tobacco 9, and tea 4 millions. (4) Select the final stage of manufacture as the point at which the tax is imposed. Gladstone applied this rule to the taxation of beer. Hops and malt are ingredients. In 1862 he converted the duty on hops into an addition to the brewer's licence. In 1880 he shifted the malt duty from the quarter of barley to the barrel of beer. His purpose was twofold-to free the processes of brewing from Excise control and to prevent the pyramiding of the tax. For when the tax was paid at an early stage in production it was handed on with additions by each agent-maltster, brewer, publican-to cover the cost of advancing it; in this way the consumer paid more than the Exchequer received. Here Gladstone reversed the advice of Adam Smith, because Adam Smith's reason the greater difficulty of defrauding the revenue if the duty is carried back to the raw material-was no longer important when illicit trade had been stamped out. (5) To help the wage-earner, free industry first and reduce the price of articles in general consumption second-in that order. Down to 1860 Gladstone had sometimes to choose between freeing industry from protection and reducing taxation on articles in general consumption. On free trade philosophy the former course was clearly to the interest of employers. It was also, Gladstone argued, in the interest of the labouring class. I do not hesitate to say that it is a mistake to suppose that the best method of giving benefit to the labouring classes is simply to operate on the articles consumed by them. If you want to do them the maximum of good you should rather operate on the articles which give them the maximum of employment.1 1 Speeches, ed. A. T. Bassett, p. 273. (6) Employ specific in preference to ad valorem duties. This was a further step in an improved Customs administration. Pitt took the first step when he consolidated the Customs and introduced specific duties to the extent then practicable; Huskisson the second when with the help of Deacon Hume he classified the tariff. After a parliamentary investigation in 1851-2 Gladstone decided in favour of specific duties levied according to quantity and grade without reference to price. The removal of manufactured articles from the tariff permitted this. It was therefore a device which suited a free trade system. It is worthy of note, however, that in 1880 one of the grounds on which the renewal of the French Commercial Treaty of 1860 broke down was the insistence of France on completing the conversion of ad valorem into specific duties. For Great Britain objected that, as the French classification was not minute enough, specific duties worked unfavourably to English exports. By following these rules Gladstone secured a resilient revenue, i.e. a revenue which bounded up when the loads upon it were lightened. He set out with this objective in 1853 and based his hopes on the experience of the previous twenty years. From 1830 to 1841 commercial legislation was on the whole stationary.' Between 1842 and 1853, 'when you remitted a million a year, your Customs and Excise revenue grew faster than when you remitted nothing or next to nothing at all. I ask, is not this a conclusive proof that it is the relaxation and reform of your commercial system which has given to the country the disposition to pay taxes along with the power also which it now possesses to support them?' 1 Gladstone was justified in his hopes of continued resilience through continued reform. As his economic biographer says: In the thirty years between 1852 and 1882, during which the finances of the country were chiefly under the control of Mr. Gladstone, taxation to an amount of fifty-three millions was imposed, while taxation to an amount of seventy-two and a half millions was remitted; a balance of remission of no less than twenty and a half millions. In 1852 the gross 'tax revenue' . . . amounted to fifty-four millions; in 1881 it amounted to seventy-one and a half millions. Twenty millions had been remitted, yet the receipts were by seventeen millions greater than before." Section 5. Conclusion Mr. Gladstone, like Lord Salisbury, was of Eton and Christ Church. Every Liberal Chancellor of the Exchequer between 1853 and 1898, and nearly every Conservative Chancellor of the 1 Speeches, ed. A. T. Bassett, p. 272. 2 Sydney Buxton, Mr. Gladstone, p. 170. Exchequer, was his financial disciple. The Radicals were sometimes restive under him, but they rose no higher than the Board of Trade, and besides they were usually members of no University. Charles Adderley (Lord Norton), President of the Board of Trade 1874-8, was never weaned from Conservatism, but he was a strong churchman and, as Mrs. Gladstone used to say, 'the kindest of dear William's enemies.' Adderley was not of his stature, but he had the constructive instincts which produced a Chamberlain after him. He was a pioneer of town planning at Saltley near Birmingham, he resisted successfully the Whig Government's design of transporting convicts to the Cape, which therefore honoured him by Adderley Street, Cape Town, and he had a feeling for the national aspirations of the Colonies. But the strongest disciples of Gladstone were the permanent heads of the Board of Trade and the Colonial Office: men like Lord Farrer, Permanent Secretary to the Board of Trade 1865-1886, Lord Blatchford, Permanent Under-secretary of State for the Colonies 1860-1871, and after him Sir R. G. W. Herbert, 18711892, who, like Northcote, was an ex-private secretary of the Grand Old Man. And all three were of Eton or Oxford or both. That the Empire survived it, is proof surely of the Empire's immortality. Changing as he did from a Conservative of slaveowning origin to a Liberal home-ruler, Gladstone excited great animosity among some of his generation, but in retrospect he stands out above them all as the financial genius who was also a scholar and a high-minded man. We may believe that the foreign policy of Gladstone was weak and his Irish policy premature and that the Liberal party halted too long at the point to which he brought it. We may poke fun at Gladstone for devoting so much of his time to abolishing the income tax which in the end he improved and settled more securely on the taxpayers' shoulders. We may urge that the man who took so serious a view of debt should have done more to pay it off. We may enlarge, as did Northcote, on his little financial failures. But it is beyond question that when he had to complete the work of others he completed it well: that while he was in power the country not only paid its way but knew how it paid it: that the economies which turn a deficit into a surplus were obtained by his superb administrative skill: that in improving the plan of national finance he did not do it at the expense of business enterprise, but on the contrary left that enterprise healthy and elastic, so that in 1914, twenty years after he retired, it could sustain the stress of an immensely expensive war with a success which far outdistanced the tax-paying capacity of other Great Powers. ૧ ૬ 42 3C CHAPTER V TOWARDS A NEW ECONOMIC POLICY Section 1. The Resurrection of the Imperial Spirit. Section 2. Joseph Chamberlain and the Empire of To-day. Section 3. Social Reform and the Aftermath of War. Section 4. The Lessons of War Control. Section I. The Resurrection of the Imperial Spirit ENGLAND has been described as the country that no one knows. It is even more truly the country that does not know itself. In economic essence England is the Mother Country of an Empire, and yet for nearly half a century, say 1830 to 1870, she thought herself an isolated nation in a free trade world that would shortly come to be. The Colonies instinctively knew better; as also did those Englishmen who lived outside England. But the colonists rarely visited England; and when colonial administrators retired they had been absent too long from the country of their youth to carry weight in it. It was the obstinate loyalty of the Colonies and the apprehension of trade rivalry from Germany and the U.S.A. which turned Great Britain back to her old imperial path. The return was part of a restored faith in a constructive statesmanship; and the success of Britain in the development of her greatest overseas possession, India, strengthened the case for governmental intervention in domestic and colonial development. But the British Empire is a patchwork and the authorities have frequently approached apparently new problems without reference to the experience acquired by their successful solution elsewhere. After the Mutiny the Indian Government found that government meant development, and development a direct share in the economic enterprise of railways and irrigation. Not otherwise could India be saved from the periodic paralysis of famine. While the Government of India was thus breaking new ground, opinion at home under encouragement from the self-governing Colonies slowly veered to a new valuation of overseas possessions, but very slowly at first. By 1849 the foundations of responsible government had been well laid in Canada, and between that date and about 1870 leading men of all parties believed that the Colonies having acquired selfgovernment would go on to acquire political independence. The Tories mildly regretted it: the Liberals were pained at the incipient protectionism of Canada: the Radicals reminded both that Colonies cost money and brought no profit. All, however, were agreed that it was the duty of the Mother Country to part on friendly and dignified terms. By the 70's this feeling was weakening; for the triumph of the North in the American Civil War dispelled the hope that an independent South would trade freely with free-trade England, and America's purchase of Alaska from Russia in 1867 was recognised as the first item in a programme of imperial expansion. In 1868 the Royal Colonial Institute was founded. Hitherto colonial reformers had been occupied with plans of colonisation, the political disabilities of the Colonies, and their abuse as receptacles of criminals and paupers. But now their value as outposts of a Greater Britain was appreciated once again; and the country supported Disraeli in his strategic purchase (through the Rothschilds) of the Suez Canal shares in 1875 and his proclamation of Queen Victoria as Empress of India in 1877. In 1882 the German Colonisation Society was founded. Then began the scramble for the partition of Africa. Hitherto Africa had meant to England two things: a seaboard from which her Navy had stamped out the slave trade, and a port of call on the route to India, either the ocean route by Cape Colony or the Isthmus land route by Suez and Aden. But in the 80's Africa began to reveal her internal values and a rivalry set in between the leading European Powers for the possession of the African interior. Many British statesmen were averse to expansion, but their hand was forced. The Chartered Companies-the British North Borneo, the Royal Niger, the Imperial British East Africa, and the British South Africa-all formed in the 1880's, repeated the record of the East India Company by converting trading concessions into virtual dominion. Meanwhile the great self-governing Colonies also were developing their interiors. The last traces of irritating intervention by the Mother Country had disappeared and they looked now with greater friendliness to the old mother who, they knew, would fight for them at a pinch and who was always sending new children. Canada's day dawned in 1885 when the C.P.R. was completed. By 1897 the harvest was at hand, and in this year of Queen Victoria's Diamond Jubilee Sir Wilfrid Laurier set the seal on the changed feeling by offering a tariff preference for which no equivalent or consideration was asked. During the next ten years the other self-governing Dominions followed suit. Broadly speaking, the preferential tariffs of the Dominions were lower than their general tariffs by 4% in 1914 and 9% in 1924; and the percentage of British exports consigned to Empire markets other than India and Newfoundland rose from 23.7% of all exports to 26.2% in the decade after 1914. India granted no preference and used the fiscal freedom gained during the Great War to embark on protection, but she is still Britain's |