Chapter 14

much of it is wasted owing to the lack of popular control, too low in the sense that it is a scandal to spend nearly as much on police as on the education of children, and £800,000 more on Old Age Pensions than on the education of children. If part or even the whole of the additional expense eventually necessary is raised by rates, so much the better. Accurate comparison is difficult with the English and Scottish expenditure on elementary education, because the greater part of the cost in those countries is borne by private endowments and local rates, whereas in Ireland no local rate is raised for elementary education, there are no endowments, and private subscriptions are very small.[128] It is certain, however, that far greater sums, in proportion to population, are spent in England and Scotland than in Ireland. This is little to be wondered at if we consider the painful history of education in Ireland; but we cannot recall the past, and, as I urged in Chapter IX., one of the first duties of a free Ireland will be to improve the education of the children.

The Irish vote for Universities and Colleges, £166,000, has been swelled by the recent establishment of the National University. No item in the whole list represents money better spent.

With regard to other Irish services, I shall make use, with Professor Oldham's consent, of some interesting tables compiled by him, showing the principal variations in Irish expenditure since the year 1891-92.[129]

They include certain expenses which I have already alluded to, and others which I shall have to remark upon further, besides giving a general view of the growth in the cost of Irish government. Neither of lists A or B is exhaustive:

A. INCREASES OF EXPENDITURE.

1910-11. 1891-92. £ £ 1. Old Age Pensions 2,408,000 -- 2. Primary Education 1,632,000 843,755 3. Universities and Colleges 166,000 26,000 4. Payments to Local Taxation Account 1,477,500 399,260

5. Ireland Development Grant 191,500 --

6. Post Office 1,404,500 749,046 7. Cost of collecting Irish Revenue 298,000 223,362 8. Surveys of the United Kingdom 81,000 47,603

9. Land Commission 414,500 91,826 10. Department of Agriculture 415,000 44,630 11. Other items (five[130]) 240,500 172,918 --------- --------- 8,728,500 2,598,400

Nos. 1 to 4 I have already dealt with, but it is interesting to note the contrasting figures of 1893-94.

No. 5. The Ireland Development Grant of £191,500 is interesting as an example of the haphazard methods of Anglo-Irish finance. It is an annual sum voted for various development purposes, and was originally established (at the figure of £185,000) in 1903 as an equivalent for the capitation grants for school attendance in England, given under the Education Act of 1902 in lieu of school fees. In allotting the Irish equivalent, Mr. Goschen's proportion of 80, 11, 9 was for the first time condemned by all parties. What the proportion ought to be was a matter of dispute, but it was fixed in this case on the basis of population. Since the English grant has now risen to £2,500,000, the Irish proportion therefore is now, strictly speaking, inadequate.

Nos. 6, 7, and 8 are examples of charges debited by the Treasury against Ireland which are open to criticism as long as the Union lasts, and which meet with much complaint in Ireland. Obviously, however, the first two at any rate are charges which an Ireland financially independent would have to bear.

No. 9. The Land Commission vote of £414,500 is of course the direct result of an abnormally bad system, necessitating abnormal and costly remedial administration. Ireland herself is not morally responsible for a penny of it, but if she is wise she will shoulder the cost as a corollary of responsible government. Small administrative economies may be made, and the cost will disappear altogether with the completion of Land Purchase, say in fifteen years, but in the immediate future no reduction can be counted on with certainty. The figure given includes the cost of the Land Commission proper, which deals with Judicial Rents and manages finance, as well as the cost of the Estates Commissioners who conduct the machinery of Land Purchase. It also includes losses on the flotation of Land Stock at a discount, and the interest and sinking-fund on the Stock raised to pay the bonus to landlords.

No. 10. The vote of £415,000 for the Department of Agriculture, whose origin and functions I described in Chapter IX., does not accurately show the actual cost of the Department, because it excludes the greater part of an Endowment Income of £166,000 a year, derived partly from the Irish Church Fund, partly from the Irish Local Taxation Account, and partly from the interest on a capital endowment of £200,000, as well as other small miscellaneous grants. But it includes a sum of about £44,000 for some museums, colleges, gardens, etc., whose English counterparts are subsidized under different votes, as well as the sum of £144,000 for the Congested Districts Board.[131] Nor does this latter sum represent the full cost of the Congested Districts Board, which has also an Endowment Income from the Irish Church Fund of £41,250, a subsidy from the Ireland Development Grant, and a fluctuating income from various sources--rents, etc.

Part of the expense of the Department itself must be regarded as abnormal, in view of the extraordinarily backward economic condition of the country when it was founded. Nor, valuable as the Department's work is, can it be safely assumed that the cost is not extravagant. As long as any Department relies on an Imperial vote there can be no certainty that the expenditure will be economical. The whole cost of the Congested Districts Board is abnormal. Its very existence is evidence of the failure of external government in Ireland, and, as I urged in Chapter IX., the whole question of the treatment of the congested districts needs thorough investigation at the hands of a responsible Irish Government.

B. REDUCTIONS IN EXPENDITURE.

1910-11. 1891-92.

£ £ 1. Relief of Distress 5,000 183,675 2. Pauper Lunatics Grant 111,655 3. Teachers' Pensions Grant 90,000 4. Railways (Ireland) Grant 61,000 341,934 5. Local Government Board 92,500 132,748 6. Chief Secretary's Offices 27,500 39,681 7. Registrar-General's Office 13,000 29,926 8. Justice and Police 2,090,500 2,129,849 --------- --------- 2,289,500 3,059,468

Most of these reductions are deceptive. No. 1 is the saving of an abnormal grant, Nos. 2 and 5 signify mere transfers to Grants in Aid of Local Taxation, No. 7 a transfer of duties to the Department of Agriculture.

The table shows a total reduction of £769,968, while Table A shows a total increase of £6,130,000. Together they account for an increase since 1891-92 of £5,360,032.

Here is a similar table, confined to Justice and Police:

C. EXPENDITURE ON JUSTICE AND POLICE.

1910-11. 1891-92. £ £ 1. Judicial Salaries ... ... ... 102,000 110,244 2. Dublin Metropolitan Police ... 93,500 91,998 3. Royal Irish Constabulary ... ... 1,371,000 1,362,348 4. Judicial Pensions, etc. ... ... 15,000 18,656 5. Law Charges ... ... ... ... 65,500 71,977 6. Superior Courts Offices ... ... 110,500 116,851 7. County Courts Offices ... ... 109,000 112,895 8. Prisons, etc. ... ... ... ... 112,000 134,429 9. Reformatories, etc. ... ... ... 112,000 110,451

2,090,500 2,129,849

To Nos. 1, 2, and 3 I have already referred. The whole charge of two millions, though it shows a slight decrease in twenty years, is grossly out of proportion to the resources of Ireland. Under heads 6 and 7 are included a number of posts which are notoriously little more than sinecures.

To sum up once more, the cost of the Irish Government as paid out of the common purse in the last completed financial year was £11,344,500, or £2 11s. 9d. per head of the population, as compared with a cost per head of £1 9s. 2d. in England, and in Scotland of £1 13s. 31/2d. But this is not the minimum figure with which we have to reckon in considering the Home Rule scheme; some items show a marked increase in the Estimates of the current year: (1) The increase in Old Age Pensions, not certain yet, will be at least £250,000. (2) The Land Commission is £544,000, as compared with £414,500. (3) Universities and Colleges, £186,256, as compared with £166,000. (4) Department of Agriculture, £426,609, as compared with £415,000. (5) Registrar-General's Office, £29,020, as compared with £13,000. (6) Valuation and Boundary Survey, £44,581, as compared with £30,000. (7) Public Works and Buildings in Ireland, £273,370, as compared with £215,000. Even with allowance for over-estimates, especially in the last of these items,[132] we must anticipate an increase of nearly half a million under the above heads, to which we must add £150,000 recently allocated by the Road Board to Ireland for the year 1911-12, and £34,750 already allocated by the Development Commissioners. If Ireland comes prematurely into the National Insurance scheme, and assumes eventual financial responsibility for her share of the cost, that will be an additional source of expense; but it is to be hoped that her leaders, in common prudence, will henceforth endeavour to stem the rising flood of Irish expenditure, and so facilitate the retrenchments imperatively necessary under Home Rule. As it is, the total outgoings of the current year (1911-12), swelled by the increases shown above, will probably amount to £12,000,000, while this total will in its turn be added to by the office costs of the Irish Legislature and the salaries of Ministers.

The scheme framed cannot assume immediate economies, and a responsible Ireland alone can decide the nature and extent of the drastic economies which must be made in the future. Beyond the brief remarks and hints made in the course of this chapter, I myself venture only to lay down the broad proposition that, to the last farthing, Irish revenue must govern and limit Irish expenditure. For any hardship entailed in achieving that aim Ireland will find superabundant compensation in the moral independence which is the foundation of national welfare. She will be sorely tempted to sell part of her freedom for a price. At whatever cost, she will be wise to resist.

If Irish revenue is to be the measure of Irish expenditure, it follows that it must be wholly, or at any rate predominately, under Irish control. Let us look a little more closely, therefore, into its amount and composition.

III.

IRISH REVENUE.

As I have already pointed out, in order to arrive at the present revenue of Ireland, our best course is to take the mean tax revenue of the two years 1909-10 and 1910-11, and to add to it the non-tax revenue of 1910-11, which was, of course, unaffected by the delay in passing the Budget of 1909. For clearness, however, I first set out separately the Irish figures of these two years, distinguishing between tax revenue and non-tax revenue, and giving the "collected" revenue and the "true" revenue in different columns:

1909-10. 1910-11.

Revenue as Revenue as Collected. "True." Collected. "True"

TAX REVENUE. £ £ £ £ Customs 2,742,000 2,755,000 3,103,000 2,977,000 Excise 4,487,000 2,898,000 5,826,000 3,734,000 Estate, etc., Duties 684,000 684,000 1,144,000 1,144,000 Stamps 293,000 315,000 326,000 351,000 Income Tax 388,000 451,000 1,825,000 2,164,000 Land Value Duties -- -- 1,000 1,000

Total Irish Revenue from Taxes 8,594,000 7,103,000 12,225,000 10,371,000

NON-TAX REVENUE. Postal Service 900,000 900,000 935,000 935,000 Telegraph Service 180,000 180,000 185,500 185,500 Telephone Service 30,000 30,000 35,000 35,000 Crown Lands 26,000 26,000 24,500 24,500 Miscellaneous 116,000 116,000 114,500 114,500

Total Irish Non-Tax Revenue 1,252,000 1,252,000 1,294,500 1,294,500

Aggregate Irish 9,846,000 8,355,000 13,519,500 11,665,500 Revenue

Percentage of the Aggregate Revenue of the United Kingdom 7.52 6.38 6.57 5.67

On p. 276 are the details of the mean tax revenue, "collected" and "true," of the two years 1909-10, 1910-11, with the non-tax revenue of the latest year, 1910-11, added to them.

PRESENT IRISH REVENUE (MEAN OF THE LAST TWO YEARS).

Details of Revenue. Mean Collected Mean "True" or Tax "Contributed" Tax Revenue of the Revenue of the Years 1909-10, Years 1909-10, 1910-11. 1910-11.

TAX REVENUE. £ £ Indirect{Customs 2,922,500 2,866,000 Taxation{Excise 5,156,500 3,316,000 (incl. licences £284,500)

Total Indirect Taxation 8,079,000 6,182,000

{Estate Duties 914,000 914,000 Direct Taxation{Stamps 309,500 333,000 {Income Tax 1,106,500 1,307,500 {Land Value Duties 1,000 1,000

Total Direct Taxation 2,331,000 2,555,500

Total Tax Revenue 10,410,000 8,737,500

NON TAX REVENUE (1910 11). Postal Service 935,000 935,000 Telegraph Service 185,500 185,500 Telephone Service 35,000 35,000 Crown Lands 24,000 24,500 Miscellaneous 114,500 114,500

Total Non Tax Revenue (1910 11) 1,294,500 1,294,500

Collected "True" or Revenue "Contributed" at the Revenue at the Present Day. Present Day,

Aggregates 11,704,500 10,032,000

The two aggregate figures at the bottom, £11,704,500 and £10,032,000, approximately represent the Treasury estimate of the "collected" and the "true" revenue of Ireland, respectively, at the present day. They are confirmed by the figures of previous years; for the average revenue of the five years, 1904-09, was as follows: "collected," £11,320,000; "true" or "contributed," £9,612,400, the new taxation of 1909-10 having added £500,000 to the "true" revenue. I must again remind the reader, however, that the figures are open to the criticism that the adjustment between the "collected" tax revenue and the "true" revenue is inaccurate owing to the methods employed by the Treasury. It will be observed that the resulting net deduction from the "collected" tax revenue of to-day, a deduction attributable, on the balance of the various figures, almost exclusively to Excise,[133] and mainly to the Excise duty on spirits, amounts to £1,672,500, and makes all the difference between the solvency and insolvency of Ireland regarded as an independent financial unit. Her expenditure, it will be remembered, was £11,344,500, her "collected" revenue £11,704,500, leaving a surplus of £360,000, which becomes a deficit of £1,312,500 if we reckon only the "true" or "contributed" revenue of £10,032,000. On the other hand, the principle, as distinguished from the methods of adjustment, is perfectly sound if we wish to arrive at a correct idea of the financial position of Ireland. The £1,672,500 virtually represents the duties on goods exported from Ireland, and consumed in Great Britain, or rather the excess of these duties over those levied on goods exported from Great Britain and consumed in Ireland. The consumer pays the tax on dutiable commodities, and a financially independent Ireland could not raise revenue twice over from the same commodity. She would, for example, have to give a drawback from the Excise duty on spirits exported to England, since a Customs duty would be levied on its import into England. On the other hand, she would be entitled to every penny of revenue derived from the tea and sugar imported into and consumed within her borders, and to the full income tax on property held by Irishmen.

Now, for two reasons, I do not propose to make any exhaustive inquiry into the accuracy of Treasury adjustments for "true" revenue. My first reason is, that full material for calculation cannot be obtained by any private individual, and could not be obtained and worked up even by the Treasury without an enormous expenditure of time and trouble. The most careful inquiry I have seen is embodied in an exceedingly able pamphlet by "an Irishman," entitled "The Financial Relations of Ireland with the Imperial Exchequer," and I mention below a few of the criticisms made by the writer. His and other investigations seem to prove that Irish revenue is considerably underestimated, perhaps by half a million.[134] My second reason is that errors of adjustment in either direction cannot affect in any substantial way the kind of financial scheme we are to adopt in the Home Rule Bill.

Let us fix our attention, then, on the second of the two columns in the table on p. 276, showing the aggregate "true" revenue of Ireland at the present day. Disregard the non-tax revenue from the various postal services (which represents payment for services rendered, and is swallowed up by an excess on the expenditure side of £249,000), and examine the heads of tax revenue shown in the upper half of the column. It will be seen that 70-75 per cent. of Irish "true" revenue is derived from Customs and Excise duties, which, with the exception perhaps of licence duties, may be classed as indirect taxation. The deduction for "true" revenue, it will be observed, has considerably modified the proportion, which for "collected" revenue works out at 77.61 per cent., or nearly four-fifths.

As the reader is aware, this is not a new feature in Irish finance. It formed the basis of the Report of the Financial Relations Commission with regard to the over-taxation of Ireland. Much the greater part of Irish revenue, even since the abolition of protective duties and the substitution of direct taxation, has always been derived from taxes on articles of common consumption, the simple reason being that Ireland is a country where there is little accumulated wealth from which to extract direct taxation. In Great Britain, whose circumstances dictate the finance of the United Kingdom, no less than 54.79 per cent. of the tax revenue is derived from direct taxation, only 45.21 per cent. from Customs and Excise.[135]

The Irish figures show that to retain in the hands of the Imperial Parliament the control of Irish Customs and Excise will be to retain almost paramount control over Irish revenue; to deny Ireland the main lever she needs for co-ordinating her expenditure and her revenue, and for making her taxation suitable to her economic conditions. It will be to preserve the framework of a fiscal system which the highest financial authorities have pronounced to be unfair to Ireland, and which incontrovertible facts show to be uneconomical both for Ireland and Great Britain.

Meanwhile that system has at length produced a deficit, with which I shall deal in the next chapter. Its amount, probably exaggerated, must necessarily remain uncertain under the present fiscal Union. One thing alone is certain, that it will grow as long as that Union lasts.

FOOTNOTES:

[115] _I.e._, on the generally accepted basis of (1) assessment to death duties, (2) assessment to income-tax. With regard to (1), in the last report of the Inland Revenue Commissioners, the figure for the United Kingdom was £371,808,534; for Ireland, £15,872,302, or 1/234. With regard to (2), the figure for the United Kingdom was 1009.9 millions; for Ireland, 39.7 millions, or 1/254. Deduct a small allowance for the difference between resources and taxable capacity, and the result approximately is one-twenty-fifth.

[116]

Total revenue (including non-tax revenue) of United Kingdom (mean of two years. 1909-10, 1910-11) £165,147,500 One-twenty-fifth £6,605,900 Actual "true" revenue contributed by Ireland (mean of two years, 1909-10, 1910-11) £10,032,000 ----------- "Over-taxation" £3,426,100

If only the tax-revenue be taken, the over-taxation amounts to £3,109,800 (total revenue for United Kingdom, £140,680,000; one-twenty-fifth=£5,627,200; actual Irish revenue, £8,737,000). Some members of the Royal Commission made certain allowances for education grants, etc., which it would be useless to parallel now.

[117] See pp. 248-249.

[118] See p. 259, footnote.

[119] Treasury Return, No. 220, 1911.

[120] A list is given at p. 10 of Return 220 (1911), and an admirable exposition of the whole subject from the Irish standpoint will be found in Professor Oldham's seventh published lecture on the "Public Finances of Ireland" (1911).

[121] The "Whisky Money" was so treated under the Finance Act of 1910.

[122] See p. 238.

[123] Between 1896 and 1898 the equivalent grants to Scotland and Ireland were based on the Goschen proportion, 80, 11, 9, the English grant being taken as standard. Scotch grants are now determined by special legislation.

[124] See Chapter XIV.

[125] Only part of the Dublin Metropolitan Police is paid out of State Funds, the rest by the City of Dublin.

[126] The relative figures were: Ireland, £2,408,000; Scotland, £1,064,000; England, £6,325,500. The recent removal of the disqualification for Poor Law Relief adds considerably to these amounts.

[127] In the poorest parts of Ireland they range as low as 9s.

[128] See pp. 174-176. In 1908, England and Wales spent £21,987,004 on elementary education, and raised £10,467,804 for it in rates. Of the rest, £11,104,305 came from Parliamentary grants. Fees and endowment incomes of voluntary schools are not included (Statistical Abstract of United Kingdom, 1910).

The actual Parliamentary Votes, as they appear in the accounts for 1910-11, are: England (Class IV.), "Board of Education," £14,166,500; Scotland, "Public Education," £2,250,000; Ireland, "Public Education," £1,632,000. But the English Votes include sums devoted to technical education, museums, etc., whose counterparts in Ireland come under other departments.

[129] Two years earlier than the date I have chiefly used for the purposes of comparison, but the difference is not material. In point of fact, the expenditure was £300,000 less in the later than in the earlier year.

[130] (1) Rates on Government Buildings; (2) Superannuation; (3) Government Printing; (4) Board of Works; (5) Home Office.

[131] Department of Agriculture, Endowment Fund:

{ (1) Local Taxation Account £78,000 Income from --{ (2) Irish Church Fund £70,000 (3) Interest on Capital sum of £200,000.

Also (in 1909-10): From Ireland Development Fund £7,000 Under an Act of 1902 £5,000

[132] The amount _voted_ for Public Works in 1910-11 was £259,848 [see "Civil Service Estimates" for 1911-12 (No. 63--1911)]; the amount _spent_, according to Return No. 220, £215,000.

[133] Under the heads of Excise, the principal deduction is in Spirits (£1,793,000 in 1910-11) and Beer (£309,000 in 1910-11).

The items of Irish tax revenue in which the Treasury make _no_ adjustment are: Excise Licenses (£356,000 in 1910-11); Club Duty (£2,000 in 1910-11); "other items" (£10,000 in 1910-11); Cards and Patent Medicines (£10,000 in 1910-11); "Estate, etc., Duties" (£1,144,000 in 1910-11); Income Tax (Schedules A and B) (£694,000 in 1910-11--abnormally large figure owing to non-collection in previous year); Land Value Duties (£1,000 in 1910-11).

All the heads of Customs revenue are subject to adjustment, though the total result is only a small deduction from Ireland (£126,000 in 1910-11). In all but two the adjustment is in favour of Ireland. The two exceptions are "Foreign Spirits," where a deduction of £25,000 is made in 1910-11, and Tobacco, where a deduction of £620,000 is made in 1910-11.

[134] _Income Tax_, Schedules C and D (dividends from Government Stocks, public companies, foreign dividends, etc.). The Treasury estimate (as stated in a side-note to the Return) is based on statistics of _Estate Duty_ for the five years ending 1908. But what light can Estate Duty throw on (for example) the dividends collected at the source from British or foreign securities held by Irish banks? Schedule C deals with "Government Stocks, etc.," Schedule D with "Public Companies, Foreign Dividends, etc.," but in the adjustment for "true" revenue no distinction is made between them. Now the Banking Statistics (Ireland) of 1910 show that dividends were payable at the Bank of Ireland on £38,732,000 of Government securities, and that, in addition, a debt bearing interest was due to the Bank from the Government of 21/2 millions. Income Tax on these items alone would be £65,000, less rebates; but the whole of Schedule C, which includes Foreign and Colonial Government Stocks, is given in 1909-10 as only £30,000.

No attempt is made to credit Ireland with a share of the profits made by English and Scottish companies through business done in Ireland.

The only reliable items in Income Tax are those of A and B (Land, Houses, and Occupation of Land), where in 1908-09 Ireland contributed about 6 per cent. of the total; under other heads, according to the Treasury, only 3.5 per cent. The writer estimates the true contribution as several hundred thousand pounds more.

_Post Office_.--The Treasury give no clue as to how they calculate the profit and loss on Postal Services. Figures of letters, telegrams, parcels, etc., delivered in Ireland are known from the Postmaster-General's report, but the report does not distinguish Irish from English postal orders, of which 1211/2 millions were issued in the United Kingdom in 1909-10. There is good reason to believe that a part of the postal profit now wholly credited to England should in reality be credited to Ireland.

_Stamps_.--Far too little allowance is made by the Treasury for stamps on transfers executed through English and Scottish exchanges for shares bought or sold by Irishmen, and for bonds, deeds, insurances, issues of capital, etc.

_Tea and Sugar_.--The Treasury base their calculation "on quantities inter-changed between Great Britain and Ireland in 1903-04," and I learn from the Inland Revenue Department that by this means the consumption per head of the population was arrived at, and that the present official figures are based on the assumption that the relation of consumption per head in Ireland to consumption per head in the United Kingdom as a whole has not altered since 1903-04. The unreliability of this assumption is manifest. It is probable that the heavy additional duty on spirits has raised the consumption of tea in Ireland more than in Great Britain, and the figures of Imports compiled by the Department of Agriculture seem to confirm this view.

[135] On the basis of the mean revenue of 1909-10 and 1910-11.