Chapter 13

THE PRESENT FINANCIAL SITUATION

I.

ANGLO-IRISH FINANCE TO-DAY.

The finances of Ireland since the Union, when reviewed by the Royal Commission in 1894-1896, exhibited five principal features:

1. A declining population.

2. An estimated true taxable capacity falling as compared with that of Great Britain, and standing in 1893-94 at a maximum of 1 to 19.

3. A revenue stationary for thirty-four years, and showing in 1893-94 a ratio of 1 to 12 with that of Great Britain.

4. A growing local expenditure (though stationary for the last four years).

5. A dwindling net contribution to Imperial services (though stationary for the last four years).

If we review the subsequent seventeen years, we find:

1. A population still declining, though at a slower rate.

2. An estimated true taxable capacity still falling as compared with that of Great Britain, and now standing at a maximum of 1 to 24.[115] That is, Ireland ought strictly to be paying no more than one-twenty-fifth of the United Kingdom revenue.

3. A revenue rising, but very slowly and inelastically as compared with that of Great Britain, and now showing a ratio of 1 to 15; so that the "over-taxation" of Ireland, as reckoned on the Royal Commission's principles, is still at least three millions.[116]

4. A local expenditure growing rapidly and disproportionately to Irish revenue; now just double the expenditure of 1893-94.

5. A net contribution to Imperial services automatically diminishing with the growth of Irish expenditure, disappearing altogether in 1909-10, and now converted into an adverse balance against Ireland of £1,312,500.

In Great Britain during the same seventeen years, population, taxable capacity, revenue, expenditure, and net contribution to Imperial services have all grown steadily, and, what is more important, in healthy proportions to one another.

On the next page will be found the comparative figures for Ireland and Great Britain of revenue, expenditure, and contribution for 1893-94 and 1910-11.

Let me remark at the outset _(a)_ that they and other official figures given in this chapter are taken from the annual Treasury returns alluded to at p. 242, "Revenue and Expenditure (England, Scotland, and Ireland)" and "Imperial Revenue (Collection and Expenditure) (Great Britain and Ireland)." For the current year 1910-11 the official numbers of these Returns are 220 and 221, and the latter of the two is virtually a continuation of the original return, No. 313 of 1894; _(b)_ that the non-collection of a large part of the revenue of 1909-10, owing to the delay in passing the Budget, makes the revenue figures of the last two years, regarded in isolation, misleading; those of the first year being abnormally low, those of the last abnormally high. I therefore give the mean figures of the two years. Expenditure is, of course, unaffected, _(c)_ That the Irish revenue shown as "true" is reduced by heavy deductions from the revenue as actually collected in Ireland. At p. 244 I explained that this adjustment can be regarded only as approximately correct, owing to the admittedly unreliable methods adopted by the Treasury, _(d)_ That the revenue shown includes non-tax as well as tax revenue.

Ireland. Great Britain.

1893-94. 1910-11. 1893-94. 1910-11.

Population 4,638,000 4,381,951 33,469,000 40,834,790 (estimated)

"Collected" revenue £9,650,649 £11,704,500 £88,728,428 £156,574,250 (including non-tax (mean of two (mean of two revenue) years, 1910- years, 1910- 11, 1909-10) 11, 1909-10)

"True" revenue £7,568,649 £10,032,000 £89,286,978 £155,137,250 (including (mean of two (mean of two non-tax revenue) years, 1910- years, 1910- 11, 1909-10) 11, 1909-10)

Local Expenditure £5,602,555 £11,344,500 £30,618,586 £60,544,000

Contribution to £1,966,094 Nil[A] £58,668,392 £94,593,250 Imperial Services

[A] Local Expenditure in excess of "true" revenue (as averaged for years, 1910-11, 1909-10): £1,312,500.

Irish expenditure has been rapidly overtaking Irish revenue during the last three years. In 1907-08 there was a balance available for Imperial services of £1,811,000; in 1908-09, of only £583,000; and in 1910-11, on the basis of a mean of that and the previous year, the deficit shown above of £1,312,500. The principal cause is the Old Age Pensions Vote, which began in 1908.

If all the elements of the problem be considered together, it will be seen that the fiscal partnership is as ill-matched as ever, and has produced results increasingly anomalous. Each of the partners and their united interests suffer. Ireland is still more heavily taxed relatively to Great Britain, yet Ireland's contribution to Imperial services has been converted into a minus quantity. Why? Because Irish expenditure, paid out of the common purse, has doubled, while Irish revenue has increased by less than a third.

Let me give the final survey of Anglo-Irish finance since the Union, in the tabular form shown by Professor Oldham at the meeting of the British Association in September, 1911:

NET BALANCES PAID BY IRELAND TO GREAT BRITAIN.

Single Irish "True" Expenditure Balance Decadal Year. Revenue. in Ireland. One Year. Balance. £ £ £ £ 1819-20 5,256,564 1,564,880 3,691,684 36,916,840 1829-30 5,502,125 1,345,549 4,156,576 41,565,760 1839-40 5,415,889 1,789,567 3,626,322 36,263,220 1849-50 4,861,465 2,247,687 2,613,778 26,137,780 1859-60 7,700,334 2,304,334 5,396,000 53,960,000 1869-70 7,426,332 2,938,122 4,488,210 44,882,100 1879-80 7,280,856 4,054,549 3,226,307 32,263,070 1889-90 7,734,678 5,057,708 2,676,970 26,769,700 1899-1900 8,664,500 6,980,000 1,684,500 16,845,000

Averaged Balances for 90 years 315,603,470 Add, Actual Balances, 1900-09 16,214,000

Net Payments, in 99 years 331,817,470 Deduct Drawings, deficit of 1909-10 2,357,500

Net Payments, in 100 years 329,459,970 Add, Actual Balance, 1910-11 321,000

Net Balances paid by Ireland to Great Britain, 1809-1911 329,780,970

What has become of Sir David Barbour's argument in favour of the existing fiscal system? He admitted that Ireland was overtaxed by two millions and three-quarters. But he showed, it will be remembered, that if not only the revenue, but the expenditure and contribution to Imperial services had all been in proportion to Ireland's real taxable capacity of one-twentieth, she would have been a loser by a million.[117] Ireland, therefore, he argued, had certainly no grievance, while Great Britain received the substantial, though not strictly sufficient, sum of two millions as Ireland's contribution to Imperial expenses.

Let us apply the same reasoning to the present situation. Ireland, by hypothesis, is "overtaxed" by three millions,[118] but if not only the revenue, but the expenditure and contribution to Imperial services of Ireland were all in proportion to her real taxable capacity, which we may estimate now at one-twenty-fifth, we find that she would be a loser by five millions. Her "true" revenue from all sources _ought_ on this supposition to be £6,605,900; it _is_ £10,032,000. Her local expenditure _ought_ to be £2,875,540; it _is_ £11,344,500. Her contribution to Imperial services _ought_ to be £3,730,360; it _is_ a minus quantity of £1,312,500. Sir David Barbour's reasoning, then, leads us to this astounding paradox, that Ireland, while overtaxed by three millions, gains five millions by the arrangement. Moreover, whether we accept Sir David Barbour's reasoning or not, it is a fact that to-day Ireland, which contributed to Imperial services five and a half millions in 1860, and two millions in 1894, now, so far from contributing anything, costs a million and a quarter more than she brings in. This, certainly, was not a result he either anticipated or would have approved of. On the contrary, he anticipated a reduction in Irish civil expenditure, to be saved for Irish purposes, without prejudice to the Imperial contribution. It makes the brain dizzy to compare his anticipation with the reality.

How, on the other hand, stands the argument of Lord Farrer and Mr. Currie? They prophesied a great increase in Irish expenditure and the disappearance of the contribution to Imperial services. That has come true. Lord Welby (and indeed the majority of the Commission) was with them in declining to regard excessive local expenditure as a set-off to excessive and unsuitable taxation, and in condemning root and branch the system of grants, aids, and doles as wasteful in itself and as sapping the self-reliance of Irishmen. There again they were right. They were at one with all their colleagues in holding that under the Union it was impossible to differentiate between the taxation of Ireland and Great Britain, and they prescribed, as the only sound remedy, Home Rule. Once more they were right.

The figures of to-day constitute the _reductio ad absurdum_ of the Union. For over a century in Ireland we have defied the laws of political economy, but they have conquered us at last. Sound finance demands that revenue and expenditure should be co-related. Ireland's economic circumstances are widely different from those of Great Britain, but she has been included, without any regard to her needs and without any reference to Irish expenditure, in a system of taxation designed exclusively for the capacities and needs of Great Britain. Hence Irish revenue is both excessive and inadequate.

"Excessive"? "Inadequate"? What do these terms really mean? Let us once and for all clear our minds of all obscurity and look the facts in the face. No one knows what Irish revenue and expenditure ought to be, or would be, if Irishmen had controlled their own destinies. It is useless to parade immense sums as the cash equivalent of over-taxation; it is idle to array against them rival figures of over-expenditure. Normal Irish revenue and normal Irish expenditure are matters of speculation. For all we know, Ireland, had she been permitted normal political development, would be raising a larger revenue, and feeling it less; while it is absolutely certain that she would be paying her own way and contributing to Imperial services more, in proportion to her resources, than she did before the Union. The political and therefore the economic development of Ireland have been deliberately and forcibly arrested. I do not say malignantly, because there was no malignant intention. But the action, if mistaken, was deliberately and consistently sustained. Much of Irish industrial talent was lost irrevocably before the old industrial restrictions were removed. There remained the land, an immense source of potential wealth, if properly developed under a rational system of agrarian tenure. For the best part of a century after the Union, the agrarian tenure, dating from the first genuine colonization of Ireland, when the land was confiscated wholesale and the peasantry enslaved, was maintained by force of arms. Thirty years ago (if we date from the Land Act of 1881) we began to change this tenure into another equally defective, though far more favourable to the tenant. A little later, but only eight years ago, on a thorough and systematic scale, we began the parallel policy of Land Purchase. Even now, having transferred half the land to peasant ownership, and placed the other half under judicial rents, many of our statesmen are unwilling to give Ireland the control of its own affairs. On the contrary, step by step with the economic enfranchisement of the farmers, has gone the policy of destroying their personal and political independence, and forcing them to look outside their own country for financial aid, by spending money upon Ireland which Irishmen have no direct responsibility for raising. What a travesty of statesmanship! First, having assisted the farmer to buy his own land, to clap him on the back with "Now, my fine fellow, you are a free man." In the same breath to tell him that he is not fit to have a direct voice in the management of his own country's affairs, and to try and reconcile him to this insult by sapping that very independence of character which the acquirement of a freehold has begun to instil in him.

I described in Chapter IX. how a number of patriotic Irishmen, working both at industrial and agricultural development, have striven to counteract this fatal tendency, and to persuade their countrymen to rely on themselves alone. But I venture to repeat what I said then, that without the bracing discipline of Home Rule, and, above all, of the financial Home Rule, these efforts are doomed to comparative failure.

It is absolutely necessary to produce an equilibrium between revenue and expenditure in Ireland, as in every other country in the world. Whatever the temporary strain upon Ireland, whatever the sacrifices involved, the thing must be done, and done now or never. Great Britain's interest is something, but it is trivial beside that of Ireland. The situation is growing worse, not better, and Irishmen should unite to insist that the whole system should stop.

II.

IRISH EXPENDITURE.

Let us look a little more closely at Irish expenditure, as disclosed in the Treasury returns.

For purposes of comparison, I set out first the main heads of Civil Expenditure for England, Scotland, and Ireland in the year 1910-11:[119]

Population. England, Scotland, Ireland, 36,075,269. 4,759,521. 4,381,951.

£ £ £ Civil Government Charges, 1910-11: (_a_) On Consolidated Fund: (1) Civil List, Salaries, Pensions, and Miscellaneous Charges 340,500 148,000 138,500 (2) Development and Road Improvement Funds (3) Payments to Local Taxation Accounts, etc. 7,199,500 1,204,500 1,477,500 (_b_) Voted 26,121,500 4,180,500 8,026,000

Total Civil Government Charges 33,661,500 5,533,000 9,642,000

Customs and Excise and Inland Revenue 3,157,000 464,000 298,000 Post Office Services 15,798,500 1,930,000 1,404,500

Total Expenditure 52,617,000 7,927,000 11,344,500

£ s. d. £ s. d. £ s. d. Per head of population 1 9 2 1 13 31/2 2 11 9

The totals, if we consider relative populations, appear startling.

Look at the third, or Irish, column, and set aside the two last items, "Customs, Excise, and Inland Revenue," and "Post-Office Services," which represent the cost of collecting Irish Revenue and maintaining the Irish postal, telegraph, and telephone services. We may note in passing, however, that the Post-Office receipts in Ireland in 1910-11, according to the Treasury estimate, were less than the outgoings by £249,000 (receipts, £1,155,500; outgoings, £1,404,500).

The Civil Government Charges are the most important heads of expense, and these are divided into two main classes: (_a_) charged on Consolidated Fund; (_b_) Voted.

Class (_a_) consists of (1) Salaries, Pensions, etc.; (2) Development and Road Improvement Funds; (3) Payments to Local Taxation Accounts.

In other parts of Return No. 220 will be found the details of expenditure in these various classes:

(1) The Salaries and Pensions need not detain us long. The principal item is judicial salaries, £102,000, as compared with £282,000 for England, which has more than eight times the population of Ireland. Another item, £20,000 for the Lord-Lieutenant, is double the sum allotted to any Colonial Governor, even of the Dominion of Canada, which has nearly twice the population of Ireland. But the extravagance lies, not in the cash amount, but in the fact that the Irish Lord-Lieutenancy is, under present conditions, an anomalous institution. No Irishman would grudge a penny of the sum if the Lord-Lieutenant, like a Colonial Governor, presided over a responsibly governed Ireland.

(2) Road Improvement and Development Funds. This category is blank for the year 1910-11. There will be payments for the current year which will swell the Irish expenditure.

(3) Payments to Local Taxation Accounts, £1,477,500. This raises an intricate subject, into which I cannot enter in great detail. It is well known that the whole system of relieving local taxation out of Imperial taxation needs thorough revision. Meanwhile Ireland, like other parts of Great Britain, has been allotted at various times a multitude of different grants under various Acts, but principally under the Local Government (Ireland) Act, 1898, and the Finance Acts of recent years.

Local Government on the British pattern was, as I have already described, extended to Ireland only in 1898. The money now raised in Ireland by Local Taxation is about £4,800,000, exclusive of the Grants in Aid which we are now considering, and which appear, rightly, on the national balance-sheet because they come from the common purse.[120] They are based on different principles, and originated in many different ways. Some are fixed annual sums, determined either by some arbitrary standard or (as in the case of the Licence Duty grants and the Customs and Excise grants[121]) on the Irish proceeds of certain duties in a year taken as standard. The Estate Duty grants still vary with the total product of duties in the United Kingdom, and are still allocated on the proportion settled by Mr. Goschen in 1888--namely, 9 parts to Ireland, 11 to Scotland, and 80 to England.[122] If the proportion were to be revised now, and, on Mr. Goschen's method, made to correspond to the respective estimated contributions to Imperial Services, Ireland, instead of getting £418,000, would get nothing at all. The largest item in the list--namely, the "Agricultural Grant," a fixed annual sum of £728,000, dating from the Local Government Act of 1898--was designed partly to reconcile Irish landlords to the passage of that Act. Nearly half of it represented the remission of the landlord's half-share of the poor-rate on agricultural land, as estimated in the standard year 1896-97. The English precedent for this was the Agricultural Rates Act of 1896, which relieved the English owner of agricultural land in a similar way. Irish conditions were so different, however, that it was felt necessary in this case to balance the landlord's boon with an equivalent boon to the tenant; so that half the tenant's share of the county cess was also remitted. The result was a disproportionately large grant as compared with those received by England and Scotland.[123] We must remark, as one of the minor intricacies of Irish finance, that all these grants do not actually go in relief of Local Taxation. Some of them are diverted to public Departments, such as the Board of Intermediate Education, the Congested Districts Board, and the Department of Agriculture.

All these grants will cease, as such, after Home Rule, while their amount must be reckoned as part of the cost of Irish Government. The Irish Parliament will have to revise the whole system of relief to Local Taxation and establish it on some simple and rational basis. Meanwhile, it is important to remember that the Irish grants form the major part of the Guarantee Fund set up by the Land Purchase Acts, and, until the last amending Land Act of 1909, were chargeable--the Estate Duties Grant, hi the first instance, the Agricultural Grant in the second instance--with the increasingly heavy losses incurred in floating Land Stock below par. In 1908-09 the sums so withdrawn amounted to £90,000. That liability was removed by Mr. Birrell's Act, and they now remain chargeable only with any arrears in the annuities paid by the purchasing tenants. This is a negligible liability, and should properly be placed upon the Irish Government as a whole, which, if it pleased, could recover the money from localities.[124]

We now reach the category _(b)_ "Voted," and find in the Irish column the truly enormous sum of £8,026,000--nearly double that of Scotland (£4,180,500), which has a population slightly greater, and more than a third of that of England (£26,121,500), which has a population eight times as great.

When we search the various tables of detailed expenditure, three prominent items arrest our attention:

Constabulary and Dublin Metropolitan Police[125] £1,464,500 Old Age Pensions £2,408,000 Public (_i.e._, Primary) Education £1,632,000

£5,504,500

Those three items may be said to epitomize the history of Ireland under the Union--coercion, pauperization, deficient education. The first two are, of course, intimately connected. The existing cost of police, surviving needlessly at the monstrous figure shown, represents the past cost of enforcing laws economically hurtful to Ireland. The economic hurt is reflected in the cost of Old Age Pensions paid to a disproportionately large number of old people, below the official standard of wealth, in a country drained by emigration for seventy years past of its strongest sons and daughters. Police in Ireland costs twice as much as in England and Scotland, where (with the exception of the _London Metropolitan Police_) it is a local, not a national charge, while Irish Old Age Pensions cost in 1910-11 more than twice as much as Scottish Pensions, and amounted to two-fifths of English Pensions.[126] With full allowance for excess payments owing to the lack of all birth records prior to a certain date, the Irish figure is relatively enormous. It is £100,000 greater than the whole cost of Irish Government in 1860, and, with the addition made in the estimates of the present year, it is just a million more than what, according to Sir David Barbour's reasoning, would have been the whole cost of Irish Government in 1893-94, had Irish expenditure, like Irish revenue, been in proportion to the taxable capacity of Ireland.

I touched upon the Irish aspect of the policy of Old Age Pensions at p. 181. Whatever the pecuniary charge, I suggest that it is absolutely necessary for Ireland in the future to control both payment and policy, and she might find it in her best interest, with due notice and due regard to present interests, to halve the scale of pensions. It is not a question of the general policy of Old Age Pensions, but of the applicability of a certain scale to Ireland, where agricultural wages (for example) average only 11s. 3d. as compared with 18s. 4d. for England, and 19s. 7d. for Scotland.[127] Of all ways of remedying a backward economic condition, that of excessive pensions is the worst.

The cost of Irish Primary Education--£1,632,000, as I pointed out in