Against Home Rule (1912) Part 8

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 55,900,000, or at the rate of 1 7_s._ 5_d._ per head; in Ireland the average yield was 5,800,000, or at the rate of 1 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 const.i.tutional 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 embarra.s.sing. 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 4,100,000 of revenue other than Customs and Excise, nearly 1,200,000 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 2,900,000 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.

Pa.s.sing 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 1,400,000 more than the revenue. To this expenditure must be added about 300,000 for the State Share of the benefits under Part I. of the National Insurance Act, about 50,000 in respect of Part II., and about 100,000 for cost of administration of both parts, increasing the immediate deficit to about 1,550,000. 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 4,000,000 on the 1910-11 figures if the taxable capacity of Ireland be taken at one-twenty-fifth, and to nearly 3,500,000 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 a.s.sociation, 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 330,000,000, Great Britain may be shown by a precisely similar calculation to have contributed no less than 5,800,000,000 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 21 127 1829-30 21 109 1839-40 23 115 1849-50 32 176 1859-60 40 98 1869-70 48 123 1879-80 57 163 1889-90 70 226 1899-00 89 465 1909-10 93 [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 impa.s.sable 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_) 1,466,000 for interest and management of Irish share of National Debt.

(_b_) 1,466,000 for contribution to Imperial Defence.

(_c_) 110,000 for contribution to Imperial Civil Services.

(_d_) 1,000,000 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 48,000,000, and Irish Sinking Fund to begin at 360,000, 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 1,000,000, 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 4,502,000 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, a.s.sumed 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 a.s.sumed 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 a.s.sumed, 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 a.s.sumed 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 3,200,000, and with a prospective immediate increase by about 450,000 on account of the Insurance Act. The actual budget deficit would thus be about 3,650,000. The Imperial Parliament would collect about 7,794,000, and after deducting 5,346,000 would hand back to the Irish Exchequer the difference of 2,458,000. The revenues upon which the Chancellor in the Irish Parliament could rely would be, therefore, 6,366,000. Out of this an expenditure of 9,562,000 would have to be met. The postal services would probably not stand any increased charges; there is left, therefore, only 5,211,000 of free revenue, and only 2,753,000 under the unrestricted control of the Irish Parliament. With such resources it would be obviously impossible to make good a deficit of 3,206,000 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 2,000,000.

A totally different scheme accompanied the Home Rule Bill of 1893 as introduced. The princ.i.p.al 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.