1179	----	ON REVENUES By Xenophon Translation by H. G. Dakyns Xenophon the Athenian was born 431 B.C. He was a pupil of Socrates. He marched with the Spartans, and was exiled from Athens. Sparta gave him land and property in Scillus, where he lived for many years before having to move once more, to settle in Corinth. He died in 354 B.C. Revenues describes Xenophon's ideas to solve the problem of poverty in Athens, and thus remove an excuse to mistreat the Athenian allies. PREPARER'S NOTE This was typed from Dakyns' series, "The Works of Xenophon," a four-volume set. The complete list of Xenophon's works (though there is doubt about some of these) is: Work Number of books The Anabasis 7 The Hellenica 7 The Cyropaedia 8 The Memorabilia 4 The Symposium 1 The Economist 1 On Horsemanship 1 The Sportsman 1 The Cavalry General 1 The Apology 1 On Revenues 1 The Hiero 1 The Agesilaus 1 The Polity of the Athenians and the Lacedaemonians 2 Text in brackets "{}" is my transliteration of Greek text into English using an Oxford English Dictionary alphabet table. The diacritical marks have been lost. WAYS AND MEANS A Pamphlet On Revenues I For myself I hold to the opinion that the qualities of the leading statesmen in a state, whatever they be, are reproduced in the character of the constitution itself. (1) (1) "Like minister, like government." For the same idea more fully expressed, see "Cyrop." VIII. i. 8; viii. 5. As, however, it has been maintained by certain leading statesmen in Athens that the recognised standard of right and wrong is as high at Athens as elsewhere, but that, owing to the pressure of poverty on the masses, a certain measure of injustice in their dealing with the allied states (2) could not be avoided; I set myself to discover whether by any manner of means it were possible for the citizens of Athens to be supported solely from the soil of Attica itself, which was obviously the most equitable solution. For if so, herein lay, as I believed, the antidote at once to their own poverty and to the feeling of suspicion with which they are regarded by the rest of Hellas. (2) Lit. "the cities," i.e. of the alliance, {tas summakhidas}. I had no sooner begun my investigation than one fact presented itself clearly to my mind, which is that the country itself is made by nature to provide the amplest resources. And with a view to establishing the truth of this initial proposition I will describe the physical features of Attica. In the first place, the extraordinary mildness of the climate is proved by the actual products of the soil. Numerous plants which in many parts of the world appear as stunted leafless growths are here fruit-bearing. And as with the soil so with the sea indenting our coasts, the varied productivity of which is exceptionally great. Again with regard to those kindly fruits of earth (3) which Providence bestows on man season by season, one and all they commence earlier and end later in this land. Nor is the supremacy of Attica shown only in those products which year after year flourish and grow old, but the land contains treasures of a more perennial kind. Within its folds lies imbedded by nature an unstinted store of marble, out of which are chiselled (4) temples and altars of rarest beauty and the glittering splendour of images sacred to the gods. This marble, moreover, is an object of desire to many foreigners, Hellenes and barbarians alike. Then there is land which, although it yields no fruit to the sower, needs only to be quarried in order to feed many times more mouths than it could as corn-land. Doubtless we owe it to a divine dispensation that our land is veined with silver; if we consider how many neighbouring states lie round us by land and sea and yet into none of them does a single thinnest vein of silver penetrate. (3) Lit. "those good things which the gods afford in their seasons." (4) Or, "arise," or "are fashioned." Indeed it would be scarcely irrational to maintain that the city of Athens lies at the navel, not of Hellas merely, but of the habitable world. So true is it, that the farther we remove from Athens the greater the extreme of heat or cold to be encountered; or to use another illustration, the traveller who desires to traverse the confines of Hellas from end to end will find that, whether he voyages by sea or by land, he is describing a circle, the centre of which is Athens. (5) (5) See "Geog. of Brit. Isles." J. R. and S. A. Green, ch. i. p. 7: "London, in fact, is placed at what is very nearly the geometrical centre of those masses of land which make up the earth surface of the globe, and is thus more than any city of the world the natural point of convergence for its different lines of navigation," etc. The natural advantages of Boeotia are similarly set forth by Ephorus. Cf. Strab. ix. 2, p. 400. Once more, this land though not literally sea-girt has all the advantages of an island, being accessible to every wind that blows, and can invite to its bosom or waft from its shore all products, since it is peninsular; whilst by land it is the emporium of many markets, as being a portion of the continent. Lastly, while the majority of states have barbarian neighbours, the source of many troubles, Athens has as her next-door neighbours civilised states which are themselves far remote from the barbarians. II All these advantages, to repeat what I have said, may, I believe, be traced primarily to the soil and position of Attica itself. But these natural blessings may be added to: in the first place, by a careful handling of our resident alien (1) population. And, for my part, I can hardly conceive of a more splendid source of revenue than lies open in this direction. Here you have a self-supporting class of residents conferring large benefits upon the state, and instead of receiving payment (2) themselves, contributing on the contrary to the gain of the exchequer by the sojourners' tax. (3) Nor, under the term careful handling, do I demand more than the removal of obligations which, whilst they confer no benefit on the state, have an air of inflicting various disabilities on the resident aliens. (4) And I would further relieve them from the obligation of serving as hoplites side by side with the citizen proper; since, beside the personal risk, which is great, the trouble of quitting trades and homesteads is no trifle. (5) Incidentally the state itself would benefit by this exemption, if the citizens were more in the habit of campaigning with one another, rather than (6) shoulder to shoulder with Lydians, Phrygians, Syrians, and barbarians from all quarters of the world, who form the staple of our resident alien class. Besides the advantage (of so weeding the ranks), (7) it would add a positive lustre to our city, were it admitted that the men of Athens, her sons, have reliance on themselves rather than on foreigners to fight her battles. And further, supposing we offered our resident aliens a share in various other honourable duties, including the cavalry service, (8) I shall be surprised if we do not increase the goodwill of the aliens themselves, whilst at the same time we add distinctly to the strength and grandeur of our city. (1) Lit. "metics" or "metoecs." (2) {misthos}, e.g. of the assembly, the senate, and the dicasts. (3) The {metoikion}. See Plat. "Laws," 850 B; according to Isaeus, ap. Harpocr. s.v., it was 12 drachmae per annum for a male and 6 drachmae for a female. (4) Or, "the class in question." According to Schneider (who cites the {atimetos metanastes} of Homer, "Il." ix. 648), the reference is not to disabilities in the technical sense, but to humiliating duties, such as the {skaphephoria} imposed on the men, or the {udriaphoria} and {skiadephoria} imposed on their wives and daughters in attendance on the {kanephoroi} at the Panathenaic and other festival processions. See Arist. "Eccles." 730 foll.; Boeckh, "P. E. A." IV. x. (Eng. tr. G. Cornewall Lewis, p. 538). (5) Or, reading {megas men gar o agon, mega de kai to apo ton tekhnon kai ton oikeion apienai}, after Zurborg ("Xen. de Reditibus Libellus," Berolini, MDCCCLXXVI.), transl. "since it is severe enough to enter the arena of war, but all the worse when that implies the abandonment of your trade and your domestic concerns." (6) Or, "instead of finding themselves brigaded as nowadays with a motley crew of Lydians," etc. (7) Zurborg, after Cobet, omits the words so rendered. (8) See "Hipparch." ix. 3, where Xenophon in almost identical words recommends that reform. In the next place, seeing that there are at present numerous building sites within the city walls as yet devoid of houses, supposing the state were to make free grants of such land (9) to foreigners for building purposes in cases where there could be no doubt as to the respectability of the applicant, if I am not mistaken, the result of such a measure will be that a larger number of persons, and of a better class, will be attracted to Athens as a place of residence. (9) Or, "offer the fee simple of such property to." Lastly, if we could bring ourselves to appoint, as a new government office, a board of guardians of foreign residents like our Guardians of Orphans, (10) with special privileges assigned to those guardians who should show on their books the greatest number of resident aliens--such a measure would tend to improve the goodwill of the class in question, and in all probability all people without a city of their own would aspire to the status of foreign residents in Athens, and so further increase the revenues of the city. (11) (10) "The Archon was the legal protector of all orphans. It was his duty to appoint guardians, if none were named in the father's will."--C. R. Kennedy, Note to "Select Speeches of Demosthenes." The orphans of those who had fallen in the war (Thuc. ii. 46) were specially cared for. (11) Or, "help to swell the state exchequer." III At this point I propose to offer some remarks in proof of the attractions and advantages of Athens as a centre of commercial enterprise. In the first place, it will hardly be denied that we possess the finest and safest harbourage for shipping, where vessels of all sorts can come to moorings and be laid up in absolute security (1) as far as stress of weather is concerned. But further than that, in most states the trader is under the necessity of lading his vessel with some merchandise (2) or other in exchange for his cargo, since the current coin (3) has no circulation beyond the frontier. But at Athens he has a choice: he can either in return for his wares export a variety of goods, such as human beings seek after, or, if he does not desire to take goods in exchange for goods, he has simply to export silver, and he cannot have a more excellent freight to export, since wherever he likes to sell it he may look to realise a large percentage on his capital. (4) (1) Reading {adeos} after Cobet, or if {edeos}, transl. "in perfect comfort." (2) Or, "of exchanging cargo for cargo to the exclusion of specie." (3) I.e. of the particular locality. See "The Types of Greek Coins," Percy Gardner, ch. ii. "International Currencies among the Greeks." (4) Or, "on the original outlay." Or again, supposing prizes (5) were offered to the magistrates in charge of the market (6) for equitable and speedy settlements of points in dispute (7) to enable any one so wishing to proceed on his voyage without hindrance, the result would be that far more traders would trade with us and with greater satisfaction. (5) Cf. "Hiero," ix. 6, 7, 11; "Hipparch." i. 26. (6) {to tou emporiou arkhe}. Probably he is referring to the {epimeletai emporiou} (overseers of the market). See Harpocr. s.v.; Aristot. "Athenian Polity," 51. (7) For the sort of case, see Demosth. (or Deinarch.) "c. Theocr." 1324; Zurborg ad loc.; Boeckh, I. ix. xv. (pp. 48, 81, Eng. tr.) It would indeed be a good and noble institution to pay special marks of honour, such as the privilege of the front seat, to merchants and shipowners, and on occasion to invite to hospitable entertainment those who, through something notable in the quality of ship or merchandise, may claim to have done the state a service. The recipients of these honours will rush into our arms as friends, not only under the incentive of gain, but of distinction also. Now the greater the number of people attracted to Athens either as visitors or as residents, clearly the greater the development of imports and exports. More goods will be sent out of the country, (8) there will be more buying and selling, with a consequent influx of money in the shape of rents to individuals and dues and customs to the state exchequer. And to secure this augmentation of the revenues, mind you, not the outlay of one single penny; nothing needed beyond one or two philanthropic measures and certain details of supervision. (9) (8) See Zurborg, "Comm." p. 24. (9) See Aristot. "Pol." iv. 15, 3. With regard to the other sources of revenue which I contemplate, I admit, it is different. For these I recognise the necessity of a capital (10) to begin with. I am not, however, without good hope that the citizens of this state will contribute heartily to such an object, when I reflect on the large sums subscribed by the state on various late occasions, as, for instance, when reinforcements were sent to the Arcadians under the command of Lysistratus, (11) and again at the date of the generalship of Hegesileos. (12) I am well aware that ships of war are frequently despatched and that too (13) although it is uncertain whether the venture will be for the better or for the worse, and the only certainty is that the contributor will not recover the sum subscribed nor have any further share in the object for which he gave his contribution. (14) (10) "A starting-point." (11) B.C. 366; cf. "Hell." VII. iv. 3. (12) B.C. 362; cf. "Hell." VII. v. 15. See Grote, "H. G." x. 459; Ephor. ap. Diog. Laert. ii. 54; Diod. Sic. xv. 84; Boeckh, ap. L. Dindorf. Xenophon's son Gryllus served under him and was slain. (13) Reading {kai tauta toutout men adelou ontos}, after Zurborg. (14) Reading { (uper) on an eisenegkosi} with Zurborg. See his note, "Comm." p. 25. But for a sound investment (15) I know of nothing comparable with the initial outlay to form this fund. (16) Any one whose contribution amounts to ten minae (17) may look forward to a return as high as he would get on bottomry, of nearly one-fifth, (18) as the recipient of three obols a day. The contributor of five minae (19) will on the same principle get more than a third, (20) while the majority of Athenians will get more than cent per cent on their contribution. That is to say, a subscription of one mina (21) will put the subscriber in possession of nearly double that sum, (22) and that, moreover, without setting foot outside Athens, which, as far as human affairs go, is as sound and durable a security as possible. (15) "A good substantial property." (16) Or, "on the other hand, I affirm that the outlay necessary to form the capital for my present project will be more remunerative than any other that can be named." As to the scheme itself see Grote, "Plato," III. ch. xxxix.; Boeckh, op. cit. (pp. 4, 37, 136, 600 seq. Eng. tr.) Cf. Demosth. "de Sym." for another scheme, 354 B.C., which shows the "sound administrative and practical judgment" of the youthful orator as compared with "the benevolent dreams and ample public largess in which Xenophon here indulges." --Grote, op. cit. p. 601. (17) L40:12:4 = 1000 drachmae. (18) I.e. exactly 18 or nearly 20 per cent. The following table will make the arithmetic clear:-- 6 ob. = 1 drachma 10 minae = 6000 ob. 100 dr. = 1 mina = 1000 dr. 600 ob. = 1 mina 1000 dr.:180 dr.::100:18 therefore nearly 1/5 3 ob. (a day) x 360 = 1080 ob. p.a. = nearly 20 per cent. = 180 dr. p.a. As to the 3 obols a day (= 180 dr. p.a.) which as an Athenian citizen he is entitled to, see Grote, op. cit. p. 597: "There will be a regular distribution among all citizens, per head and equally. Three oboli, or half a drachma, will be allotted daily to each, to poor and rich alike" (on the principle of the Theorikon). "For the poor citizens this will provide a comfortable subsistence, without any contribution on their part; the poverty now prevailing will thus be alleviated. The rich, like the poor, receive the daily triobolon as a free gift; but if they compute it as interest for their investments, they will find that the rate of interest is full and satisfactory, like the rate on bottomry." Zurborg, "Comm." p. 25; Boeckh, op. cit. IV. xxi. (p. 606, Eng. tr.); and Grote's note, op. cit. p. 598. (19) = L20:6:3 = 500 drachmae. (20) = I.e. 36 per cent. (21) = L4:1:3 = 100 drachmae. (22) I.e. 180 per cent. Moreover, I am of opinion that if the names of contributors were to be inscribed as benefactors for all time, many foreigners would be induced to contribute, and possibly not a few states, in their desire to obtain the right of inscription; indeed I anticipate that some kings, (23) tyrants, (24) and satraps will display a keen desire to share in such a favour. (23) Zurborg suggests (p. 5) "Philip or Cersobleptes." Cf. Isocr. "On the Peace," S. 23. (24) I.e. despotic monarchs. To come to the point. Were such a capital once furnished, it would be a magnificent plan to build lodging-houses for the benefit of shipmasters in the neighbourhood of the harbours, in addition to those which exist; and again, on the same principle, suitable places of meeting for merchants, for the purposes (25) of buying and selling; and thirdly, public lodging-houses for persons visiting the city. Again, supposing dwelling-houses and stores for vending goods were fitted up for retail dealers in Piraeus and the city, they would at once be an ornament to the state and a fertile source of revenue. Also it seems to me it would be a good thing to try and see if, on the principle on which at present the state possesses public warships, it would not be possible to secure public merchant vessels, to be let out on the security of guarantors just like any other public property. If the plan were found feasible this public merchant navy would be a large source of extra revenue. (25) Reading, with Zurborg, {epi one te}. IV I come to a new topic. I am persuaded that the establishment of the silver mines on a proper footing (1) would be followed by a large increase in wealth apart from the other sources of revenue. And I would like, for the benefit of those who may be ignorant, to point out what the capacity of these mines really is. You will then be in a position to decide how to turn them to better account. It is clear, I presume, to every one that these mines have for a very long time been in active operation; at any rate no one will venture to fix the date at which they first began to be worked. (2) Now in spite of the fact that the silver ore has been dug and carried out for so long a time, I would ask you to note that the mounds of rubbish so shovelled out are but a fractional portion of the series of hillocks containing veins of silver, and as yet unquarried. Nor is the silver-bearing region gradually becoming circumscribed. On the contrary it is evidently extending in wider area from year to year. That is to say, during the period in which thousands of workers (3) have been employed within the mines no hand was ever stopped for want of work to do. Rather, at any given moment, the work to be done was more than enough for the hands employed. And so it is to-day with the owners of slaves working in the mines; no one dreams of reducing the number of his hands. On the contrary, the object is perpetually to acquire as many additional hands as the owner possibly can. The fact is that with few hands to dig and search, the find of treasure will be small, but with an increase in labour the discovery of the ore itself is more than proportionally increased. So much so, that of all operations with which I am acquainted, this is the only one in which no sort of jealousy is felt at a further development of the industry. (4) I may go a step farther; every proprietor of a farm will be able to tell you exactly how many yoke of oxen are sufficient for the estate, and how many farm hands. To send into the field more than the exact number requisite every farmer would consider a dead loss. (5) But in silver mining (operations) the universal complaint is the want of hands. Indeed there is no analogy between this and other industries. With an increase in the number of bronze-workers articles of bronze may become so cheap that the bronze-worker has to retire from the field. And so again with ironfounders. Or again, in a plethoric condition of the corn and wine market these fruits of the soil will be so depreciated in value that the particular husbandries cease to be remunerative, and many a farmer will give up his tillage of the soil and betake himself to the business of a merchant, or of a shopkeeper, to banking or money-lending. But the converse is the case in the working of silver; there the larger the quantity of ore discovered and the greater the amount of silver extracted, the greater the number of persons ready to engage in the operation. One more illustration: take the case of movable property. No one when he has got sufficient furniture for his house dreams of making further purchases on this head, but of silver no one ever yet possessed so much that he was forced to cry "enough." On the contrary, if ever anybody does become possessed of an immoderate amount he finds as much pleasure in digging a hole in the ground and hoarding it as in the actual employment of it. And from a wider point of view: when a state is prosperous there is nothing which people so much desire as silver. The men want money to expend on beautiful armour and fine horses, and houses, and sumptuous paraphernalia (6) of all sorts. The women betake themselves to expensive apparel and ornaments of gold. Or when states are sick, (7) either through barrenness of corn and other fruits, or through war, the demand for current coin is even more imperative (whilst the ground lies unproductive), to pay for necessaries or military aid. (1) Or, "on a sound basis." (2) "Exploited." (3) Or, "at the date when the maximum of hands was employed." (4) Reading {epikataskeuazumenois}, or, if {episkeuazomenoi}, transl. "at the rehabilitation of old works." (5) Cf. "Oecon." xvii. 12. (6) "The thousand and one embellishments of civil life." (7) "When a state is struck down with barrenness," etc. See "Mem." II. vii. And if it be asserted that gold is after all just as useful as silver, without gainsaying the proposition I may note this fact (8) about gold, that, with a sudden influx of this metal, it is the gold itself which is depreciated whilst causing at the same time a rise in the value of silver. (8) Lit. "I know, however." The above facts are, I think, conclusive. They encourage us not only to introduce as much human labour as possible into the mines, but to extend the scale of operations within, by increase of plant, etc., in full assurance that there is no danger either of the ore itself being exhausted or of silver becoming depreciated. And in advancing these views I am merely following a precedent set me by the state herself. So it seems to me, since the state permits any foreigner who desires it to undertake mining operations on a footing of equality (9) with her own citizens. (9) Or, "at an equal rent with that which she imposes on her own citizens." See Boeckh, "P. E. A." IV. x. (p. 540, Eng. tr.) But, to make my meaning clearer on the question of maintenance, I will at this point explain in detail how the silver mines may be furnished and extended so as to render them much more useful to the state. Only I would premise that I claim no sort of admiration for anything which I am about to say, as though I had hit upon some recondite discovery. Since half of what I have to say is at the present moment still patent to the eyes of all of us, and as to what belongs to past history, if we are to believe the testimony of our fathers, (10) things were then much of a piece with what is going on now. No, what is really marvellous is that the state, with the fact of so many private persons growing wealthy at her expense, and under her very eyes, should have failed to imitate them. It is an old story, trite enough to those of us who have cared to attend to it, how once on a time Nicias, the son of Niceratus, owned a thousand men in the silver mines, (11) whom he let out to Sosias, a Thracian, on the following terms. Sosias was to pay him a net obol a day, without charge or deduction, for every slave of the thousand, and be (12) responsible for keeping up the number perpetually at that figure. So again Hipponicus (13) had six hundred slaves let out on the same principle, which brought him in a net mina (14) a day without charge or deduction. Then there was Philemonides, with three hundred, bringing him in half a mina, and others, I make no doubt there were, making profits in proportion to their respective resources and capital. (15) But there is no need to revert to ancient history. At the present moment there are hundreds of human beings in the mines let out on the same principle. (16) And given that my proposal were carried into effect, the only novelty in it is that, just as the individual in acquiring the ownership of a gang of slaves finds himself at once provided with a permanent source of income, so the state, in like fashion, should possess herself of a body of public slaves, to the number, say, of three for every Athenian citizen. (17) As to the feasibility of our proposals, I challenge any one whom it may concern to test the scheme point by point, and to give his verdict. (10) Reading {para ton pateron}, with Zurborg, after Wilamowitz- Mollendorf. (11) See "Mem." II. v. 2; Plut. "Nicias," 4; "Athen." vi. 272. See an important criticism of Boeckh's view by Cornewall Lewis, translation of "P. E. A." p. 675 foll. (12) Reading {parekhein}, or if {pareikhen}, transl. "whilst he himself kept up the number." See H. hagen in "Journ. Philol." x. 19, pp. 34-36; also Zurborg, "Comm." p. 28. (13) Son of Callias. (14) = L4:1:3 = 600 ob. (15) Or, "whose incomes would vary in proportion to their working capital." (16) See Jebb, "Theophr." xxvi. 21. (17) According to the ancient authorities the citizens of Athens numbered about 21,000 at this date, which would give about 63,000 as the number of state-slaves contemplated for the purposes of the scheme. See Zurborg, "Comm." p. 29. "At a census taken in B.C. 309 the number of slaves was returned at 400,000, and it does not seem likely that there were fewer at any time during the classical period."--"A Companion to School Classics" (James Gow), p. 101, xiii. "Population of Attica." With regard to the price then of the men themselves, it is obvious that the public treasury is in a better position to provide funds than any private individuals. What can be easier than for the Council (18) to invite by public proclamation all whom it may concern to bring their slaves, and to buy up those produced? Assuming the purchase to be effected, is it credible that people will hesitate to hire from the state rather than from the private owner, and actually on the same terms? People have at all events no hesitation at present in hiring consecrated grounds, sacred victims, (19) houses, etc., or in purchasing the right of farming taxes from the state. To ensure the preservation of the purchased property, the treasury can take the same securities precisely from the lessee as it does from those who purchase the right of farming its taxes. Indeed, fraudulent dealing is easier on the part of the man who has purchased such a right than of the man who hires slaves. Since it is not easy to see how the exportation (20) of public money is to be detected, when it differs in no way from private money. Whereas it will take a clever thief to make off with these slaves, marked as they will be with the public stamp, and in face of a heavy penalty attached at once to the sale and exportation of them. Up to this point then it would appear feasible enough for the state to acquire property in men and to keep a safe watch over them. (21) (18) Or, "senate." See Aristot. "Athen. Pol." for the functions of the Boule. (19) So Zurborg. See Demosth. "in Mid." 570; Boeckh, "P. E. A." II. xii. (p. 212, Eng. tr.) See Arnold's note to "Thuc." iii. 50, 7. (20) Or, "diversation," "defalcation." (21) Or, "as far as that goes, then, there is nothing apparently to prevent the state from acquiring property in slaves, and safeguarding the property so acquired." But with reference to an opposite objection which may present itself to the mind of some one: what guarantee is there that, along with the increase in the supply of labourers, there will be a corresponding demand for their services on the part of contractors? (22) It may be reassuring to note, first of all, that many of those who have already embarked on mining operations (23) will be anxious to increase their staff of labourers by hiring some of these public slaves (remember, they have a large capital at stake; (24) and again, many of the actual labourers now engaged are growing old); and secondly, there are many others, Athenians and foreigners alike, who, though unwilling and indeed incapable of working physically in the mines, will be glad enough to earn a livelihood by their wits as superintendents. (25) (22) Or, "with this influx (multiplying) of labourers there will be a corresponding increase in the demand for labour on the part of the lessees." (23) Or, "got their mining establishments started." (24) Or, "of course they will, considering the amount of fixed capital at stake," or, "since they have large resources at their back." I have adopted Zurborg's stopping of this sentence. (25) See "Mem." II. viii. 1, for an illustrative case. Let it be granted, however, that at first a nucleus of twelve hundred slaves is formed. It is hardly too sanguine a supposition that out of the profits alone, (26) within five or six years this number may be increased to at least six thousand. Again, out of that number of six thousand--supposing each slave to being in an obol a day clear of all expenses--we get a revenue of sixty talents a year. And supposing twenty talents out of this sum laid out on the purchase of more slaves, there will be forty talents left for the state to apply to any other purpose it may find advisable. By the time the round number (27) of ten thousand is reached the yearly income will amount to a hundred talents. (26) "Out of the income so derived." (27) Or, "full complement." As a matter of fact, the state will receive much more than these figures represent, (28) as any one here will bear me witness who can remember what the dues (29) derived from slaves realised before the troubles at Decelea. (30) Testimony to the same effect is borne by the fact, that in spite of the countless number of human beings employed in the silver mines within the whole period, (31) the mines present exactly the same appearance to-day as they did within the recollection of our forefathers. (32) And once more everything that is taking place to-day tends to prove that, whatever the number of slaves employed, you will never have more than the works can easily absorb. The miners find no limit of depth in sinking shafts or laterally in piercing galleries. To open cuttings in new directions to-day is just as possible as it was in former times. In fact no one can take on himself to say whether there is more ore in the regions already cut into, or in those where the pick has not yet struck. (33) Well then, it may be asked, why is it that there is not the same rush to make new cuttings now as in former times? The answer is, because the people concerned with the mines are poorer nowadays. The attempt to restart operations, renew plant, etc., is of recent date, and any one who ventures to open up a new area runs a considerable risk. Supposing he hits upon a productive field, he becomes a rich man, but supposing he draws a blank, he loses the whole of his outlay; and that is a danger which people of the present time are shy of facing. (28) Or, "a very much larger sum than we have calculated on." Lit. "many times over that sum." (29) Or, "tax." See below, S. 49; for the whole matter see Thuc. vii. 27, vi. 91; Xen. "Mem." III. vi. 12, in reference to B.C. 413, when Decelea had been fortified. As to the wholesale desertion of slaves, "more than twenty thousand slaves had deserted, many of them artisans," according to Thucydides. (30) Or, "the days of Decelea." Lit. "the incidents of Decelea." (31) I.e. "of their working since mining began." (32) Lit. "are just the same to-day as our forefathers recollected them to be in their time." (33) Or, "whether the tracts already explored or those not yet opened are the more prolific." It is a difficulty, but it is one on which, I believe, I can offer some practical advice. I have a plan to suggest which will reduce the risk of opening up new cuttings to a minimum. (34) (34) Or, "I have a plan to make the opening of new cuttings as safe as possible." The citizens of Athens are divided, as we all know, into ten tribes. Let the state then assign to each of these ten tribes an equal number of slaves, and let the tribes agree to associate their fortunes and proceed to open new cuttings. What will happen? Any single tribe hitting upon a productive lode will be the means of discovering what is advantageous to all. Or, supposing two or three, or possibly the half of them, hit upon a lode, clearly these several operations will proportionally be more remunerative still. That the whole ten will fail is not at all in accordance with what we should expect from the history of the past. It is possible, of course, for private persons to combine in the same way, (35) and share their fortunes and minimise their risks. Nor need you apprehend, sirs, that a state mining company, established on this principle, will prove a thorn in the side (36) of the private owner, or the private owner prove injurious to the state. But rather like allies who render each other stronger the more they combine, (37) so in these silver mines, the greater number of companies at work (38) the larger the riches they will discover and disinter. (39) (35) "To form similar joint-stock companies." (36) See "Cyneg." v. 5. (37) Or, "deriving strength from combination." (38) Co-operators. (39) Reading {ekphoresousi}, after Cobet. This then is a statement, as far as I can make it clear, of the method by which, with the proper state organisation, every Athenian may be supplied with ample maintenance at the public expense. Possibly some of you may be calculating that the capital (40) requisite will be enormous. They may doubt if a sufficient sum will ever be subscribed to meet all the needs. All I can say is, even so, do not despond. It is not as if it were necessary that every feature of the scheme should be carried out at once, or else there is to be no advantage in it at all. On the contrary, whatever number of houses are erected, or ships are built, or slaves purchased, etc., these portions will begin to pay at once. In fact, the bit-by-bit method of proceeding will be more advantageous than a simultaneous carrying into effect of the whole plan, to this extent: if we set about erecting buildings wholesale (41) we shall make a more expensive and worse job of it than if we finish them off gradually. Again, if we set about bidding for hundreds of slaves at once we shall be forced to purchase an inferior type at a higher cost. Whereas, if we proceed tentatively, as we find ourselves able, (42) we can complete any well-devised attempt at our leisure, (43) and, in case of any obvious failure, take warning and not repeat it. Again, if everything were to be carried out at once, it is we, sirs, who must make the whole provision at our expense. (44) Whereas, if part were proceeded with and part stood over, the portion of revenue in hand will help to furnish what is necessary to go on with. But to come now to what every one probably will regard as a really grave danger, lest the state may become possessed of an over large number of slaves, with the result that the works will be overstocked. That again is an apprehension which we may escape if we are careful not to put into the works more hands from year to year than the works themselves demand. Thus (45) I am persuaded that the easiest method of carrying out this scheme, as a whole, is also the best. If, however, you are persuaded that, owing to the extraordinary property taxes (46) to which you have been subjected during the present war, you will not be equal to any further contributions at present, (47) what you should do is this: (48) during the current year resolve to carry on the financial administration of the state within the limits of a sum equivalent to that which your dues (49) realised before the peace. That done, you are at liberty to take any surplus sum, whether directly traceable to the peace itself, or to the more courteous treatment of our resident aliens and traders, or to the growth of the imports and exports, coincident with the collecting together of larger masses of human beings, or to an augmentation of harbour (50) and market dues: this surplus, I say, however derived, you should take and invest (51) so as to bring in the greatest revenue. (52) (40) Or, "sinking fund." (41) {athrooi}--"in a body." It is a military phrase, I think. In close order, as it were, not in detachments. (42) "According to our ability," a favourite Socratic phrase. (43) {authis}. See for this corrupt passage Zurborg, "Comm." p. 31. He would insert, "and a little delay will not be prejudicial to our interests, but rather the contrary," or to that effect, thus: {kai authis an (anutoimen ou gar toiaute te anabole blaben genesthai an) emin oiometha} "vel simile aliquid." (44) Or, "it is we who must bear the whole burthen of the outlay." (45) {outos}, "so far, unless I am mistaken, the easiest method is the best." (46) Or, "heavy contributions, subscriptions incidental to," but the word {eisphoras} is technical. For the exhaustion of the treasury see Dem. "Lept." 464; Grote, "H. G."xi. 326. (47) Or, "you will not be able to subscribe a single penny more." (48) {umeis de}, you are masters of the situation. It lies with you to carry on, etc.; {dioikeite} is of course imperative. (49) Or, "taxes." (50) Reading, after Zurborg, {dia ta ellimenia}. Or, if the vulg. {dia en limeni}, transl. "an augmentation of market dues at Piraeus." (51) I.e. as fixed capital, or, "you should expend on plant." (52) Or, adopting Zurborg's emend, {os an pleista eggignetai}, transl. "for the purposes of the present scheme as far as it may be available." Again, if there is an apprehension on the part of any that the whole scheme (53) will crumble into nothing on the first outbreak of war, I would only beg these alarmists to note that, under the condition of things which we propose to bring about, war will have more terrors for the attacking party than for this state. Since what possession I should like to know can be more serviceable for war than that of men? Think of the many ships which they will be capable of manning on public service. Think of the number who will serve on land as infantry (in the public service) and will bear hard upon the enemy. Only we must treat them with courtesy. (54) For myself, my calculation is, that even in the event of war we shall be quite able to keep a firm hold of the silver mines. I may take it, we have in the neighbourhood of the mines certain fortresses--one on the southern slope in Anaphlystus; (55) and we have another on the northern side in Thoricus, the two being about seven and a half miles (56) apart. Suppose then a third breastwork were to be placed between these, on the highest point of Besa, that would enable the operatives to collect into one out of all the fortresses, and at the first perception of a hostile movement it would only be a short distance for each to retire into safety. (57) In the event of an enemy advancing in large numbers they might certainly make off with whatever corn or wine or cattle they found outside. But even if they did get hold of the silver ore, it would be little better to them than a heap of stones. (58) But how is an enemy ever to march upon the mines in force? The nearest state, Megara, is distant, I take it, a good deal over sixty miles; (59) and the next closest, Thebes, a good deal nearer seventy. (60) Supposing then an enemy to advance from some such point to attack the mines, he cannot avoid passing Athens; and presuming his force to be small, we may expect him to be annihilated by our cavalry and frontier police. (61) I say, presuming his force to be small, since to march with anything like a large force, and thereby leave his own territory denuded of troops, would be a startling achievement. Why, the fortified city of Athens will be much closer the states of the attacking parties than they themselves will be by the time they have got to the mines. But, for the sake of argument, let us suppose an enemy to have arrived in the neighbourhood of Laurium; how is he going to stop there without provisions? To go out in search of supplies with a detachment of his force would imply risk, both for the foraging party and for those who have to do the fighting; (62) whilst, if they are driven to do so in force each time, they may call themselves besiegers, but they will be practically in a state of siege themselves. (53) Or, "the proposed organisation." (54) See ch. ii. above. (55) Or, reading {en te pros mesembrian thalatte}, "on the southern Sea." For Anaphlystus see "Hell." I. ii. 1; "Mem." III. v. 25. It was Eubulus's deme, the leading statesman at this date. (56) Lit. "60 stades." (57) The passage {sunekoi t an erga}, etc., is probably corrupt. {Ta erga} seems to mean "the operatives;" cf. Latin "operae." Others take it of "the works themselves." Possibly it may refer to military works connecting the three fortresses named. "There might be a system of converging (works or) lines drawn to a single point from all the fortresses, and at the first sign of any thing hostile," etc. (58) I.e. "they might as well try to carry off so many tons of stone." (59) Lit. "500 stades." (60) Lit. "more than 600 stades." (61) The {peripoloi}, or horse patrol to guard the frontier. See Thuc. iv. 57, viii. 92; Arist. "Birds,"ii. 76. Young Athenians between eighteen and twenty were eligible for the service. (62) Or, "for the very object of the contest." The construction is in any case unusual. {peri on agonizontai} = {peri touton oi}. Zurborg suggests {peri ton agonizomenon}. But it is not the income (63) derived from the slaves alone to which we look to help the state towards the effective maintenance of her citizens, but with the growth and concentration of a thick population in the mining district various sources of revenue will accrue, whether from the market at Sunium, or from the various state buildings in connection with the silver mines, from furnaces and all the rest. Since we must expect a thickly populated city to spring up here, if organised in the way proposed, and plots of land will become as valuable to owners out there as they are to those who possess them in the neighbourhood of the capital. (63) I adopt Zurborg's correction, {prosphora} for {eisphora}, as obviously right. See above, iv. 23. If, at this point, I may assume my proposals to have been carried into effect, I think I can promise, not only that our city shall be relieved from a financial strain, but that she shall make a great stride in orderliness and in tactical organisation, she shall grow in martial spirit and readiness for war. I anticipate that those who are under orders to go through gymnastic training will devote themselves with a new zeal to the details of the training school, now that they will receive a larger maintenance whilst (64) under the orders of the trainer in the torch race. So again those on garrison duty in the various fortresses, those enrolled as peltasts, or again as frontier police to protect the rural districts, one and all will carry out their respective duties more ardently when the maintenance (64) appropriate to these several functions is duly forthcoming. (64) I follow Zurborg in omitting {e}. If {e} is to stand, transl. "than they get whilst supplied by the gymnasiarch in the torch race," or "whilst exercising the office of gymnasiarchs themselves." See "Pol. Ath." i. 13. (65) "State aid." V But now, if it is evident that, in order to get the full benefit of all these sources of revenue, (1) peace is an indispensable condition--if that is plain, I say, the question suggests itself, would it not be worth while to appoint a board to act as guardians of peace? Since no doubt the election of such a magistracy would enhance the charm of this city in the eyes of the whole world, and add largely to the number of our visitors. But if any one is disposed to take the view, that by adopting a persistent peace policy, (2) this city will be shorn of her power, that her glory will dwindle and her good name be forgotten throughout the length and breadth of Hellas, the view so taken by our friends here (3) is in my poor judgment somewhat unreasonable. For they are surely the happy states, they, in popular language, are most fortune-favoured, which endure in peace the longest season. And of all states Athens is pre-eminently adapted by nature to flourish and wax strong in peace. The while she abides in peace she cannot fail to exercise an attractive force on all. From the mariner and the merchant upwards, all seek her, flocking they come; the wealthy dealers in corn and wine (4) and oil, the owner of many cattle. And not these only, but the man who depends upon his wits, whose skill it is to do business and make gain out of money (5) and its employment. And here another crowd, artificers of all sorts, artists and artisans, professors of wisdom, (6) philosophers, and poets, with those who exhibit and popularise their works. (7) And next a new train of pleasure-seekers, eager to feast on everything sacred or secular, (8) which may captivate and charm eye and ear. Or once again, where are all those who seek to effect a rapid sale or purchase of a thousand commodities, to find what they want, if not at Athens? (1) Or, "to set these several sources of revenue flowing in full stream." (2) Cf. "a policy of peace at any price," or, "by persisting for any length of time in the enjoyment of peace." (3) {kai outoi ge}. The speaker waves his hand to the quarter of the house where the anti-peace party is seated. (4) After Zurborg, I omit {oukh oi eduoinoi}. (5) Reading {kai ap arguriou}, with Zurborg. (6) Lit. "Sophists." See Grote, "H. G." viii. lxvii. note, p. 497. (7) E.g. chorus-trainers, musicians, grammarians, rhapsodists, and actors. (8) Or, "sacred and profane." But if there is no desire to gainsay these views--only that certain people, in their wish to recover that headship (9) which was once the pride of our city, are persuaded that the accomplishment of their hopes is to be found, not in peace but in war, I beg them to reflect on some matters of history, and to begin at the beginning, (10) the Median war. Was it by high-handed violence, or as benefactors of the Hellenes, that we obtained the headship of the naval forces, and the trusteeship of the treasury of Hellas? (11) Again, when through the too cruel exercise of her presidency, as men thought, Athens was deprived of her empire, is it not the case that even in those days, (12) as soon as we held aloof from injustice we were once more reinstated by the islanders, of their own free will, as presidents of the naval force? Nay, did not the very Thebans, in return for certain benefits, grant to us Athenians to exercise leadership over them? (13) And at another date the Lacedaemonans suffered us Athenians to arrange the terms of hegemony (14) at our discretion, not as driven to such submission, but in requital of kindly treatment. And to-day, owing to the chaos (15) which reigns in Hellas, if I mistake not, an opportunity has fallen to this city of winning back our fellow-Hellenes without pain or peril or expense of any sort. It is given to us to try and harmonise states which are at war with one another: it is given to us to reconcile the differences of rival factions within those states themselves, wherever existing. (9) Lit. "her hegemony for the city," B.C. 476. (10) "And first of all." (11) See Thuc. i. 96. (12) B.C. 378. Second confederacy of Delos. See Grote, "H. G." x. 152. (13) B.C. 375. Cf. "Hell." V. iv. 62; Grote, "H. G." x. 139; Isocr. "Or." xiv. 20; Diod. Sic. xv. 29. (14) B.C. 369 (al. B.C. 368). Cf. "Hell." VII. i. 14. (15) See "Hell."VII. v. 27. Make it but evident that we are minded to preserve the independence (16) of the Delphic shrine in its primitive integrity, not by joining in any war but by the moral force of embassies throughout the length and breadth of Hellas--and I for one shall not be astonished if you find our brother Hellenes of one sentiment and eager under seal of solemn oaths (17) to proceed against those, whoever they may be, who shall seek (18) to step into the place vacated by the Phocians and to occupy the sacred shrine. Make it but evident that you intend to establish a general peace by land and sea, and, if I mistake not, your efforts will find a response in the hearts of all. There is no man but will pray for the salvation of Athens next to that of his own fatherland. (16) "Autonomy." (17) See Thuc. v. 18, clause 2 of the Treaty of Peace, B.C. 422-421. (18) Reading, with Zurborg, {peironto}. Or, if the vulgate {epeironto}, transl. "against those who sought to step." Again, is any one persuaded that, looking solely to riches and money-making, the state may find war more profitable than peace? If so, I cannot conceive a better method to decide that question than to allow the mind to revert (19) to the past history of the state and to note well the sequence of events. He will discover that in times long gone by during a period of peace vast wealth was stored up in the acropolis, the whole of which was lavishly expended during a subsequent period of war. He will perceive, if he examines closely, that even at the present time we are suffering from its ill effects. Countless sources of revenue have failed, or if they have still flowed in, been lavishly expended on a multiplicity of things. Whereas, (20) now that peace is established by sea, our revenues have expanded and the citizens of Athens have it in their power to turn these to account as they like best. (19) Reading {epanoskopoin}. (20) Or, "But the moment peace has been restored." But if you turn on me with the question, "Do you really mean that even in the event of unjust attacks upon our city on the part of any, we are still resolutely to observe peace towards that offender?" I answer distinctly, No! But, on the contrary, I maintain that we shall all the more promptly retaliate on such aggression in proportion as we have done no wrong to any one ourselves. Since that will be to rob the aggressor of his allies. (21) (21) Reading, after Cobet, {ei medena uparkhoimen adikountes}. Or, if the vulgate {ei medena parakhoimen adikounta}, transl. "if we can show complete innocence on our own side." VI But now, if none of these proposals be impracticable or even difficult of execution; if rather by giving them effect we may conciliate further the friendship of Hellas, whilst we strengthen our own administration and increase our fame; if by the same means the people shall be provided with the necessaries of life, and our rich men be relieved of expenditure on war; if with the large surplus to be counted on, we are in a position to conduct our festivals on an even grander scale than heretofore, to restore our temples, to rebuild our forts and docks, and to reinstate in their ancient privileges our priests, our senators, our magistrates, and our knights--surely it were but reasonable to enter upon this project speedily, so that we too, even in our own day, may witness the unclouded dawn of prosperity in store for our city. But if you are agreed to carry out this plan, there is one further counsel which I would urge upon you. Send to Dodona and to Delphi, I would beg you, and consult the will of Heaven whether such a provision and such a policy on our part be truly to the interest of Athens both for the present and for the time to come. If the consent of Heaven be thus obtained, we ought then, I say, to put a further question: whose special favour among the gods shall we seek to secure with a view to the happier execution of these measures? And in accordance with that answer, let us offer a sacrifice of happy omen to the deities so named, and commence the work; since if these transactions be so carried out with the will of God, have we not the right to prognosticate some further advance in the path of political progress for this whole state? 
29252	----	generously made available by The Internet Archive/American Libraries.) War Taxation _Some Comments and Letters_ OTTO H. KAHN 1917 War Taxation _Contents_ Some Comments Pages 7 to 42 Letters I THE INCOME TAX _Pages 43 to 60_ II RETURN UPON TAXABLE AND TAX-EXEMPT SECURITIES _Pages 61 to 70_ _War Taxation_ The recent publication of a little pamphlet entitled "Some Comments on War Taxation" elicited numerous interesting comments by the readers. The points to which these comments mainly related were the statements contained in the pamphlet that: _First._ If our neighbor Canada continues her present policy of not taxing incomes, or if she imposes only a moderate tax while rates of income taxation in America are fixed at oppressively and unnecessarily high rates, there can be little question that the ultimate result will be an outflow of capital to Canada, and that men of enterprise will seek that country. _Second._ Moneyed men not having their capital engaged in active business, if they are so constituted that their consciences permit them to evade their share of monetary sacrifice, can put their funds into tax-exempt securities. In reference to the foregoing points, I have written two letters in answer to correspondents. These letters contain an elaboration of certain arguments and viewpoints set forth in the original article on War Taxation and also refer to some additional phases of the subject. Those who have done me the honor of perusing that article may possibly be interested in reading these letters. In order that they may be presented as a part of the argument as a whole, the original article with a few additions and slight revisions is printed in the first part of this pamphlet, followed by the letters. O. H. K. 52 William Street, New York, July 5, 1917. SOME COMMENTS ON WAR TAXATION _This is a reprint, somewhat amplified, of an article printed recently in the New York Times. The original article was written before the recommendations of the Ways and Means Committee of the House of Representatives were reported._ In a time of patriotic exaltation and of universal obligation and readiness to make great sacrifices to bring a most just and righteous war to a successful conclusion, the voice of sober argument and matter of fact considerations is apt to grate upon the ears of the people. That voice is all the less likely to be popular when the arguments it puts forth may easily lend themselves to the interpretation of being actuated by solicitous care for selfish interests. I am fully aware that by publishing the following observations I am exposing myself to that interpretation and to criticism of, and attack upon, my motives. Yet, seeing that certain measures now under consideration threaten to take shape in a way which, from my practical business experience and after mature deliberation, I am bound to regard as faulty and as indeed harmful to the country, I believe it to be right and proper to contribute my views to the public discussion of the subject, for whatever they may be worth. I can only hope, then, that in what I am going to say I shall be given credit for endeavoring to speak conscientiously and to the best of my knowledge and judgment from the point of view of the welfare of the entire country and not of the welfare merely of the well-to-do. I shall address myself to the practical aspect and to a few phases only of the question and shall not attempt to enter into the economic theories and the broader and deeper considerations involved. I shall assume in my argument that what Congress is seeking to accomplish is to impose taxes justly, effectively and scientifically with the desire to disturb the country's trade and commerce as little as possible and to avoid as much as may be the evils of financial dislocation. I shall take it for granted that at a time when more than ever the unity of the country should be emphasized, sectional selfishness will find no place in the taxation program, and that, should it be attempted nevertheless, the congressional delegations of the States which would be unjustly affected, would resist, regardless of party affiliations, harmful discrimination against their constituents and their States. I shall assume that it is not the purpose and intent of Congress, under the guise of the necessities of the war situation, to embrace the doctrines of Socialism. Our present economic system, our present method of wealth distribution may or may not stand in need of change; the fact remains that Congress has no mandate to effect a fundamental change. The consequence of such a change would be so immensely far-reaching that no government has the right to sanction steps to bring it about until the subject has been fully discussed before the people in all its bearings and the people have pronounced judgment through a Presidential or other election. I will first state what in my opinion ought not to be done: I I take it that not many words need be used to expose the fallacy of the argument, heard even in the Halls of Congress: "If men are to be conscripted, wealth also must be conscripted." _Men will be conscripted to the extent that it is wise and just and needful. So, and no other, should wealth and the country's resources in general be conscripted._ And, are not the children of the well-to-do conscripted equally with the children of the poor? Indeed, the proportion of the sons of the well-to-do on the actual fighting line is bound to be a predominating one, because vast numbers of wage workers in the industries and on the farms will necessarily have to be retained at their accustomed vocations in order to maintain the output of our factories and farms. Have the children of the well-to-do been backward in volunteering? Were they not, on the contrary, amongst the very first to offer to serve and to fight? II _There appears to prevail amongst not a few people the strange delusion that America's entrance into the war was fomented by moneyed men, in part, at least, from the motive and for the purpose of gain._ _Were there any such men, no public condemnation of them could be too severe, no punishment would be adequate. I am absolutely certain that no such hideous and dastardly calculation found lodgment in the brain of any American, rich or poor._ Moreover, is it not perfectly manifest that any rich man in his senses must have known that his selfish interest was best promoted by the continuance of the conditions of the last three years in which America furnished funds and supplies to Europe at huge profits, whilst our entering the war was bound to diminish those profits very largely (indeed, to entirely eliminate some of them), to interfere with business activity in many lines and to compel the imposition of heavy taxes on wealth? It is to the credit of our rich men that, though fully realizing the extent of the monetary loss and sacrifices which war between this country and Germany must necessarily bring to them, there were but very few of them who supported the Peace-at-any-Price Party or favored the avoidance of America entering into the war when it had become plain that our participation in that war could not be avoided with honor and with due regard for our duty to our own country, or to the cause of right and liberty throughout the world. Yet, somehow, the pacifists seem to have singled out the rich as mainly responsible for the war. It may be due, consciously or unconsciously, to a resulting feeling of resentment that _the proposal to confiscate during the war all incomes beyond a certain figure is actively promoted by leading pacifists_--a proposal based upon ignorance of, or disregard for, the laws of economics, teachings of history and practical considerations. If any such scheme were to be adopted, the consequences to the country at large would be far more serious than to the victims of the proposed action. If such a measure of outright confiscation were seriously apprehended, at a time moreover and under conditions which are far as yet from calling for extreme measures, capital would cease to flow in its accustomed currents and some of it would seek other channels legitimately open to it. It would certainly cease flowing into constructive use and would instead confine itself, to an extent at least, to municipal, state and federal tax-exempt securities. Enterprise would be seriously hampered and in some respects brought to a standstill entirely. Many thousands of workmen would be thrown out of employment. Many businesses and shops would close. There would ensue, as a natural consequence and without any conscious determination, a nation-wide strike of constructive activity and enterprise in commerce and finance, because men will not look upon it as a "square deal" if they are to take all the risk and responsibility, all the hard work and ceaseless strain and care of business effort, whilst the Government would _needlessly_ take from them an unduly large share of the fruit of their labor, let alone all of it except an arbitrarily fixed sum. I say "needlessly" because, _were it really needed, business men would willingly sacrifice their entire income for the country's cause._ They would work for patriotism, without any recompense whatever, just as hard and harder than they do for gain or for ambition, if the occasion required it. But, of course, everyone knows that nothing remotely approaching such drastic taxation is required in this country at this time. It is absolutely right to proclaim and to enforce by legislation that no man, as far as it is possible to prevent it, shall make money _out of a war_ in which his country is engaged, but there is all the difference in the world between that just and moral doctrine and between the doctrine that no man shall be permitted to have more than an arbitrarily fixed income _during_ a war. If $100,000 or any fixed sum is the limit of what may be permissible income during war time, why not by and by a lesser sum? If the principle is once admitted, where will its application stop, even in time of peace? Why is not the proposed plan, or anything in the nature of that plan, simply license for the materially unsuccessful to despoil the materially successful? History shows more than one instance where this road inevitably leads to when once entered upon. And who are our successful men? The vast majority of them are self-made men who started at the bottom of the ladder. It is trite to say that inequality of endowment and therefore inequality of results in human beings, as well as in inanimate things, is a law of nature. The capacity for creating, organizing, leading, etc., in short, the possession of those qualities of brain and disposition which beget success, is rare. It is in the interest of the community, whilst carefully guarding and fostering the rights, the opportunities and the well-being of all of its members, to give liberal incentives to men possessing those gifts to put them to active and intensive use. It is hardly open to doubt that, generally speaking, the work of able men, engaged in serious and legitimate business (I am not speaking of gamblers and parasites), whilst naturally benefiting them, benefits the community a great deal more. The income of hospitals, orphan asylums, institutions of learning and of art and many other altruistic enterprises depends largely upon the voluntary taxation, aggregating a great many millions annually, to which those men in America who have attained financial success have always willingly submitted themselves--more so, probably than in any other country. Who is to take care of all of those institutions if extreme taxation compels the rich to cease their contributions? III The arguments above set forth apply likewise, though naturally not quite in the same degree, to the proposal of levying an income tax rising to an excessively high level, as, for instance, the suggested tax of fifty per cent. on incomes over $500,000. There, again, the test should be whether so radical a tax is wise and required by the necessities of the country. The nations in Europe have been fighting for nearly three years and have been under an infinitely greater financial strain than our country is or will be, yet none of these nations have resorted to extreme taxation of income. _Even in Great Britain_, whose financial burden is the heaviest of all, whose debt is many times the total of ours and who has loaned about $5,000,000,000 to her Allies, the highest income tax rate, the maximum percentage in the graduated scale of taxation, is to-day no more than approximately forty per cent. In the last budget, introduced a couple of weeks ago, the British Chancellor of the Exchequer declined, so I am informed, to consider an increase in the income tax rate, because of the damaging effect which such increase would be apt to have on the country's business and prosperity. In France and Germany the burden laid on incomes is much lower than in England. _In Canada_ where war loans have been raised equivalent on the basis of comparative population to what would be more than $10,000,000,000 for America, _no Federal Income Tax exists at all_. I doubt whether this latter fact is generally known in this country and whether its significance is receiving the measure of serious consideration which it deserves. I understand that it is the deliberate policy of the Dominion Government to endeavor to avoid resort to an income tax in order to attract capital to Canada. There can be little question that if our income taxation is fixed at unduly and unnecessarily high rates, whilst Canada has no or only a very moderate income tax, men of enterprise will seek that country and there will be a large outflow to it of capital in course of time--a development which cannot be without effect upon our own prosperity, resources and economic power. The financial dislocation, the discouragement and the apprehension caused by unduly heavy taxation of incomes will not only act as a drag on enterprise and constructive activity, but will make it exceedingly difficult, if not impossible, for corporations to sell securities in sufficient volume and thus to obtain adequate funds to conduct their business--especially also as investors will be fearful that high rates of taxation once established will not easily be reduced to normal levels, even when the present emergency is passed. Extravagance, log-rolling, the unwise and inefficient expenditure of money by governmental bodies are amongst the besetting sins of democracy. The formula once found, the machinery once employed for the raising of huge revenues, are apt to make the way of wasteful governmental spending all too temptingly easy. It must not be forgotten that taxation must necessarily by that much diminish the surplus income fund of the individual and that both theoretically and actually the spending of money by the government cannot and does not have the same effect upon the country's prosperity and enterprise as productive use of his surplus funds by the individual. The sentimental, and thereby the actual, effect of extreme taxation will not be confined to the relatively small number of people in possession of very large incomes. The disturbance and fear caused by the contemplation of an excessively high ratio of taxation, even when applied to a relatively few, is bound to spread to those also of more moderate incomes. Capital is proverbially timid. It will not take risks, except in the expectation of commensurate reward, and if it sees the danger of its reward being unduly infringed upon by excessively rigorous income taxation, it will anticipate that menace by withdrawing from the field of constructive investment to the greatest extent possible. So much is this the case that I incline to the belief that _taxation so graded as to result in a maximum average of say 33-1/3 per cent. would produce at least as great a revenue as a maximum average of 50 per cent_. It is one of the oldest principles of taxation that an excessive impost destroys its own productivity. The flood of securities which would be coming for sale in order to escape extreme income taxation would create a grave condition of demoralization in the investment markets of the country, with the resulting inevitable effect upon the country's general business, and upon its capacity to absorb Government loans. IV The tax recently enacted by Congress imposing a burden of 8 per cent. on business profits over and above 8 per cent. on the capital employed, regardless of whether such profits have any relation to war conditions or not, is unscientific and unsound. (Incidentally, it is a strange provision of that law that it applies only to co-partnerships and corporations, whilst an individual engaged in business, however profitable, is not taxed.) It is unquestionably right and in accordance with both good morals and good economics, to prevent, as far as possible, the enrichment of business and business men through the calamity of war. But the recently enacted so-called excess profit tax which it is now proposed to augment largely does not accomplish that. It taxes not merely the exceptional profit, _i.e._, the war profit. It lays a burden not on business due to war, but on all business. It does this at a time when it is more than ever necessary that energy, enterprise, efficiency, the commercial and financial brain and work-power of the nation, be stimulated to their utmost in order to make good, as far as possible, the waste and destruction which go with war. Any scheme of taxation which imposes an unnecessary burden upon commercial enterprise and thereby handicaps the nation in its business activities--especially in world competition with other nations--is unsound and bound to be gravely detrimental, both to the business men and still more to the wage-worker; in fact, to every element of the population. It is worth noting that England, the conduct of whose finances, based upon the experience of many generations as the leading financial power, has always been a model for other nations to follow, has imposed an excess profit tax on business during the war _merely_ to the extent that such profits are attributable to the war, _i.e._, to the extent that they exceed the profits of normal years. In principle, direct taxation of business activities should be avoided as much as possible, apart from a _war profit excess_ tax. Care should be taken lest the wealthy man least entitled to preferential consideration, _i.e._, he who neither works nor takes business risks or business responsibilities, be favored as against the man who puts his brains, his capacities and his money to constructive use in active business. The idle man possessing capital, much or little, if he is so constituted that his conscience permits him to evade his share of monetary sacrifice, can put his money into tax-exempt securities. The man of means who toils in business or a profession must pay a heavy income tax, an excess profit tax, etc. To an extent this undesirable differentiation is probably unavoidable, but it is neither fair nor in the interest of the community that it be accentuated. V It seems to me so manifest as to hardly require argument that a retroactive income tax, such as has been suggested, is wrong both in morals and in economics. If the foregoing reasoning is correct, these conclusions would seem to follow: 1. There ought to be a substantial and progressive increase in the rate of income taxation during the war, together probably with a lowering of the existing limit of income tax exemption. I believe that in practice the best result would be obtained if the rates of taxation were not to exceed a scale producing from maximum incomes an average tax of 33-1/3 per cent., at any rate for the first year of the war. A materially higher rate would not, in my opinion, yield a substantially higher aggregate of revenue to the Government (if as high an aggregate), while at the same time, if only for sentimental reasons, and even though only applied to very large incomes, it would be apt to cause financial dislocation and retard business activity and enterprise. It would seem advisable that such portion of a person's income as is devoted to charitable and kindred purposes should be, if not entirely free from income tax, at least subject to a reduced tax only, so as to counteract the tendency which experience has shown to follow in the wake of heavy taxation, of greatly diminishing charitable contributions. 2. There _ought to be an excess profit tax which might well be at a considerably higher rate than the present 8 per cent., or even the proposed 16 per cent._, but it should only be applicable to the extent that business profits exceed the profits of say a certain average period before the war and thus may justly be held to be attributable to war conditions. In determining the basis for calculating excess profits, an offset which might be fixed at say 10 per cent. per annum, due consideration being given to the question of depreciation and to special circumstances, ought to be allowed on all new capital invested in business since the beginning of the war. I think for the purpose of figuring the excess profit tax the five, four or three years _before America's entrance into the war_ would probably form the most appropriate basis. The aggregate industrial plant of this country, the entire scale and scope of our commerce and its concomitants, have been so completely modified in the course of the European war that a comparison which leaves out of account the years 1915 and 1916 does not seem to me to fit the case. I believe, both from the point of view of economics and of public opinion, a tax of say 32 per cent. or even 40 per cent., or eventually, if needed, a still higher percentage, calculated on a reasonably high average of earnings (that is, an average including 1916) is preferable to a tax of 16 per cent. or 20 per cent. on an inordinately low average. I believe that as between the proposed 16 per cent. profit tax and an _excess_ profit tax on the British model, at the rate of say twice that figure--to begin with--the general consensus of opinion would consider the latter as much the fairer, much the less cumbersome to handle and collect, and much the less hampering upon business activities. Yet, statistics seem to show that such an _excess_ profit tax would bring in a far larger return than the proposed 16 per cent. profit tax. From figures which were shown to me it would appear that a 40 per cent. tax on excess profits over and above the average earnings for the past three years would yield for the present year the amazing total of at least $800,000,000 (in addition to the yield from the corporate income tax taken at the rate of 4 per cent.). These figures are based on the assumption that the aggregate profits for 1917 will approximately equal those of 1916--a not unreasonable assumption provided always that unscientific taxation or other unwise measures do not destroy prosperity. (As a matter of fact, the profits for the first half of 1917 are likely to exceed those for the same period of 1916.) The three-year average was selected on the theory that 1914 was an exceedingly poor business year, 1915 was a year of fair prosperity and in 1916 the full effect of our stupendous war business had come to raise profits to an exceedingly high level. 3. There are very numerous forms of taxes, stamp-taxes, etc. (such as, for instance, a 2 cent tax on checks), which, whilst they would mainly fall on the well-to-do, would be in no way burdensome, and would produce a very large aggregate of revenue. What seems to me in principle a very sensible tax, has been suggested, namely, _a tax on purchases_ (_i.e._, each single purchase) of all kinds of merchandise (excepting foodstuffs, and probably raw material) of one cent for each dollar or greater part thereof, exempting single purchases of less than say five dollars. This tax, _which should be paid by the purchaser_, would produce a very large revenue. It would be borne mainly by the well-to-do, would be more widely distributed than almost any other form of taxation and would be felt but very little. It would be easily and cheaply collected and would begin to accrue much sooner than most other taxes. 4. I am not convinced that the total amount which needs to be spent or which as a matter of fact can be spent in the course of the year requires so huge a sum to be raised by taxation as our legislators appear to contemplate. The policy of raising a large portion of war expenditures by taxation is wise and sound. But to be iconoclastic in applying that policy, to make that portion so large as to chill the spirit and lame the enterprise of the country is neither good politics nor good economics. The present has its rights as well as the future. Sacrifices should be reasonably averaged. An annual sinking fund of 5 per cent. would extinguish the war debt in fifteen years. 5. Democratic England under two Prime Ministers belonging to the Liberal party has shown how huge amounts of increased revenue--much greater relatively and greater even absolutely than are required in this country during the first year of the war--can be obtained by taxation without undue dislocation of the existing economic structure and without banefully affecting the country's prosperity. While it would not do for us to follow the English method of taxation in all respects, it would seem the part of wisdom for us to profit from her successful experience. And I hope it will not be deemed presumptuous if I venture to suggest that it might not be amiss for our Government in this connection to permit to the practical experience and judgment of business men some recognized scope in the deliberations, as I understand was freely done in England. I am entirely certain that the spokesmen for the business community would give their time, their best thought and their disinterested service to the task of co-operating in devising a wise and fair scheme of taxation as fully, readily and patriotically as they have done and are doing to the task of placing the Liberty Loan. 6. In determining upon the scheme and detail of taxation, it should be borne in mind that the intent of the proceedings is not punitive, neither is it to apply practical Socialism under the guise of war finance. Taxation is a problem in mathematics and national economics. It cannot be tackled successfully by hit or miss methods, or upon the impulse of the moment. It needs to be approached "_sine ira et studio_" if the best results are to be obtained for the country at large. Congress and public opinion might well ponder the advice recently cabled here by one of the leading financial writers in England: "You should go slow in your tax plans. Too violent a financial dislocation would be caused, unless taxation is most judiciously and scientifically apportioned." The desire to place the financial burden incident to war preponderantly upon the wealthy is just and right, but even in doing things from entirely praiseworthy motives, it is well to remember the old French saying, that virtue is apt to be more dangerous than vice, because it is not subject to the restraint of conscience. * * * * * Since this article was published, I have received several letters stating that, owing to the excessively high cost of living and for other reasons, men of small means could not afford and should not be asked to bear additional taxation to any appreciable extent and that therefore the proposed vast increase in the income tax is a necessity. I fully agree with the premise, but not with the conclusion. Economics are stubborn things and cannot be successfully dealt with emotionally. I yield to no one in my sympathy for those who have to struggle to make both ends meet and in my desire to see their difficulties lightened. I quite agree that the financial burden of the war should be made to weigh as little as possible upon the shoulders of the poor and those of small means. Will a two-cent tax on checks be a burden upon the poor and those of small means? Will a five-cent tax on single purchases (excepting foodstuffs) of $5? Will an excess-profit tax on the lines which I propose? The list of similar queries could easily be continued. The present cost of living is undoubtedly alarmingly high. I believe this condition of affairs, to a certain extent at least, could be alleviated by appropriate measures and that every effort should be made to that end. But a huge increase in the income tax and unwise business taxation will not accomplish this. It will, in fact, rather accomplish the opposite, apart from lessening employment. LETTERS I The Income Tax Dear Sir: I fully agree with you in the principle of your conceptions of the duties of moneyed men towards the country. They must be willing not only to surrender such part of their income, indeed of their fortune, as the necessities of the country require, they must be ready not only to relinquish their affairs and to put their time, their energies, capacities and experience at the disposal of the Government in time of war, but they must be prepared to offer their very lives if the country calls for them. Those are the duties, of course, of every citizen, but they are doubly the duties of those who have won success. I am firmly convinced that capitalists as a class will not fail in them during the war. My article on war taxation was not written with any idea of questioning these manifest and uncontrovertible truths, but solely with the purpose of contributing to the discussion of the taxation proposals certain considerations which I believe to be well founded in economics and history no less than in experience and reason, and the disregard of which would be apt, I think, to lead to consequences gravely detrimental to the commonwealth. The question to which my article addressed itself was not what sacrifices capital should and would be willing to bear if called upon, but what taxes it was fair, reasonable and, above all, to the public advantage to impose on capital, seeing that there is a point at which the country's economic equilibrium would be thrown out of gear and at which the incentive to use capital constructively and productively and to take those business risks which are incident to all business activity, would be killed. I greatly regret if what I said on the subject of Canada being free from income tax gave the impression of being a suggestion for the evasion by wealthy men of taxation during the war. The fact that capital is not subject to income tax in Canada was, of course, well known to men of wealth. I thought it a point and a fact of sufficient importance as bearing upon our own taxation program to deserve to be made generally known. That this might be considered as either a suggestion or a threat of what capital might do during the war, never, I confess, entered my mind, _for it would, of course, be little short of treason for capital and capitalists to take advantage of Canada's propinquity while the war is on._ You speak of the possibility of legislation to prevent this. If capital meant to leave the country to evade taxation, there would have been ample time and opportunity for it to do so during the past six weeks. The price of exchange would indicate if that had been done to any appreciable extent, and proves, as a matter of fact, that it is not being done. If it were being done, I quite agree with you that legislation should be sought to prevent it and to punish the attempt. But I am entirely certain that moneyed men will not think of evading whatever sacrifice may be required of them by their country under war conditions. What I meant to intimate in saying that capital and men of enterprise would seek Canada if there was no income tax, or only a moderate one, in that country, whilst America at this time imposed excessive and practically punitive income taxation, was this: Capital has a long memory. Capital is proverbially timid. I am not referring only to large aggregations of capital but to all capital. I am not referring only to the capital and capitalists of to-day, but to those who accumulate capital by practising thrift and to those who by invention, by conspicuous organizing or other ability, by originality of method, etc., are instruments in the creation of capital and will be, presumably, amongst the future owners of capital. The possessors of capital, present and future, would not easily forget if, in the very first year of the war capital in this country were to be taxed at far higher rates than prevail in any European country after three years of war. Even if such extraordinary taxation was removed at once, after the termination of the war, capital would remain disquieted by the fear that the machinery of excessively high income taxation, once used and found easy of motion, might be used again for purposes of a less serious emergency than now exists. Those seeking capital for other countries--_and there is bound to be a very keen contest for capital after the war_--would not fail to make use of these arguments. Moreover, experience has proved that very high rates of income taxation once adopted, are not easily reduced to the level from which they started. Therefore, in the case to which my argument was addressed, _i.e._, unduly high income taxation in this country and no, or only very moderate, income taxation in Canada, there can be little doubt that _after the war_ there would be an outflow of capital to Canada, and that--which is still more important--men of enterprise, especially young men, will be apt to seek in that and other countries, fields for their activities if the reward of enterprise is too greatly diminished in America as compared to what it is elsewhere. Such men would be doing nothing else than what many thousands of American-born farmers have done within recent years in transferring themselves, their capital and their working capacity to Canada. _Not a single one of the leading European nations, after three years of the most exhausting war, has an income taxation schedule as high as that adopted by the House of Representatives; neither Republican France, nor Democratic England, nor Autocratic Germany._ Of these three countries, England has imposed the highest income taxation; yet, _the maximum rate in England is almost fifty per cent. less than the maximum rate in the House Bill. The Cabinets in these countries have undergone many changes in the course of the war. They include Socialists and Representatives of Labor._ In the determination of their taxation program, they have had the assistance of the best economic brains in Europe. Those nations have had far longer experience than we in the science of government financing. Yet not one of them has deemed it wise and advantageous to the state to impose rates of income taxation as high as those fixed by the House of Representatives. Surely, this fact and the economic considerations underlying it, are deserving to be seriously weighed by our legislators. Does not the attitude of all the leading countries plainly indicate their recognition of the fact that the action and reaction of excessive income taxation create a vicious circle from which the governments of all belligerent nations even in their extremity have shrunk? And is it not a manifest dictate of reason that such burden of taxation as must be borne should be imposed gradually, as was in fact done everywhere in Europe, so as to give to all concerned a chance to adjust themselves to the new conditions, and not with one violent jerk? England imposed her present rate of income and excess profit taxes not in the first year of the war, but started on a much lower scale and by successive steps, in the course of nearly three years, attained the figures now prevailing. We know that man and beast are capable of carrying far heavier weights if the strain is gradually increased than if the whole of the burden is dumped on their backs at once. The same holds good of economic strain. Is it not plain that if the unprecedentedly high income taxation of the House Bill--exceeding as it does any rates ever imposed by any of the leading nations of the world--is enacted into law, the Government will find itself crippled in respect of taxable resources during the second year of the war; the very year which, if the war does last beyond the present one, will presumably be the crucial period. Of course, the cost of the war must be laid according to the capacity to bear it. It would be fatuous folly and crass selfishness to wish it laid or endeavor to have it laid otherwise. All I am advocating in effect is that in the public interest not too much be exacted at once, but that by dividing the burden over a reasonable number of years, capital in no one year and especially not during the first year of the war, should be so excessively taxed as to produce an unscientific and dangerous strain. In addition to the concrete factors, there enter into this question certain psychological elements of a somewhat subtle character, but sufficiently definite and potent to be plainly discernible to those who are experienced in dealing with business affairs and with men of business, large and small. I believe an income tax greatly increased over the rates heretofore prevailing, yet keeping within the bounds of moderation, would produce at least as large a total revenue as an exceedingly high one. And the consequences of the economic error of placing too vast a burden direct upon incomes would be more serious, I think, to the people in general than to the individuals directly concerned. The question of the individual is not the principal one. The essential thing is that no undue strain be placed upon that great fund of capital as a whole which is derived from incomes of all kinds. It is this fund which in its turn is one of the vital forces necessary for the normal activities and progress of industry. If that fund is suddenly and too greatly reduced, the effect upon commerce and industry is liable to be abrupt and withering. I yield to no one in my desire to see the burden upon the poor and those of moderate means lightened to the utmost extent possible. I realize but too well that the load weighing at this time upon wage earners and still more perhaps upon men and women with moderate salaries is almost too great to be borne and certainly much greater than it should be. I wish a commission might be appointed, consisting of those best qualified in the entire country, to apply themselves to this most serious, difficult and complex problem, indeed to the entire problem of excessively high prices. I hope they would discover means, if not to remedy the situation entirely, at least to alleviate it. But I am convinced that relief cannot be found in taxation of incomes at rates without a parallel anywhere, and in unduly burdensome imposts upon business activities. I am convinced that certain theories being urged upon Congress and the people and to which the House War Revenue measure is in part responsive, while doubtless meant to tend and seemingly tending to a desirable consummation, are in fact bound, in their longer effect, to bring about results harmful to the community at large, rich and poor alike. It is only that conviction which has emboldened me to state my views publicly. In doing so I fully realized that I was running the risk of having my action misunderstood or misconstrued, and to be charged with selfishness and lack of patriotism. Yet, I feel certain that in the end just recognition of their motives will not be withheld from those who, in defiance of the fleeting popularity of the plausible, venture to point out the dangers of impetuous action, however well intentioned, in the present emergency, and to urge that moderation and that regard for the lessons of history and of economics which can be left aside only at the peril of the general welfare. Very faithfully yours, (_Signed_) OTTO H. KAHN P.S.--That you or any one else should even for a moment attach credence to the monstrous suggestion that capitalists fomented America's entrance into the war because they feared that otherwise the amounts loaned by them to the Allies might be jeopardized or lost, is a truly distressing manifestation of the willingness of some of our people--I trust not many--to believe evil of men simply because they have been materially successful. Leaving aside the cruel injustice of such an imputation, it attributes to moneyed men a degree of stupidity and of ignorance as to their own interests, of which they are not usually held guilty. America loaned to the Allied nations, prior to our entrance into the war, roughly speaking, $2,000,000,000, of which sum all but a small fraction was loaned to England and France. These loans were made almost entirely in the shape of bond issues which were widely distributed amongst individuals and institutions throughout this country. Therefore, no very large portion of the aggregate is in the hands of any one person or institution. To any one acquainted with financial affairs it is absolutely inconceivable that England or France would have defaulted on the relatively moderate amount of their foreign debt, whatever might have been the outcome of the war, if America had not joined. Let us grant, for argument's sake, the wildly far-fetched supposition that in one way or another their internal debt might have become affected; it would still be utterly inconceivable that they would have permitted a default in their foreign debt, because it is, of course, suicidal for any nation to jeopardize its world credit. But let us go still a step further and assume, in defiance of all reason, that even this totally inconceivable thing were to have happened. It would have meant, of course, not a total and irrecoverable loss to the holders of obligations of the Allied countries, but merely a more or less temporary shrinkage of the value of such holdings. _A single year's war taxation will take out of the pockets of capitalists a great deal more than they could possibly have lost through depreciation in value of such amount of Allied bonds or loans as they may hold._ If you add to these considerations the circumstance that, owing to the intervention of our Government in financing and otherwise providing for the Allies, the commissions and profits of those who have heretofore dealt with the Allies will be largely cut off; that business will, quite rightly, be subjected to a large excess profits tax; that capital for years to come will have to pay increased taxes to provide for the debt incurred through the war, for pensions, etc.; if you will reflect on these and various other patent considerations, you will realize that any rich man, fomenting for selfish reasons our entrance into the war, would be a fit subject for the immediate appointment of a guardian to take care of him and of his affairs. II _The Actual Return Upon Taxable and Tax-Exempt Securities_ Dear Sir: Your letter indicates that you do not sufficiently realize the enormous advantage in interest yield which under the income tax schedule as fixed in the House Bill is possessed by tax-exempt securities as compared to taxable securities, especially, of course, in respect of large incomes. Permit me to call your attention to the following eloquent facts: The yield of tax-exempt securities at prevailing prices ranges from 3-1/2% to nearly 4-1/2%. _Under the rates fixed in the War Revenue Bill as it passed the House of Representatives, a taxable 6% investment_ would yield: PER ANNUM 2.28% on incomes over $2,000,000 2.34% " " " 1,500,000 2.40% " " " 1,000,000 2.69% " " " 500,000 2.97% " " " 300,000 3.26% " " " 250,000 3.54% " " " 200,000 3.90% " " " 150,000 4.20% " " " 100,000 Or, to put it in another way, the investment in 3-1/2% "Liberty Bonds" is thus equivalent to investing in a taxable security yielding: PER ANNUM 9.21% in respect of incomes over $2,000,000 8.97% " " " " " 1,500,000 8.75% " " " " " 1,000,000 7.82% " " " " " 500,000 7.07% " " " " " 300,000 6.45% " " " " " 250,000 5.93% " " " " " 200,000 5.38% " " " " " 150,000 5.02% " " " " " 100,000 The investment in, say, New York City Bonds, being tax-exempt, at their present yield of 4.20%, would represent the following rates of income as compared to investments in taxable securities: PER ANNUM 11.05% in respect of incomes over $2,000,000 10.76% " " " " " 1,500,000 10.50% " " " " " 1,000,000 9.38% " " " " " 500,000 8.48% " " " " " 300,000 7.74% " " " " " 250,000 7.12% " " " " " 200,000 6.46% " " " " " 150,000 6.02% " " " " " 100,000 Of course, all these figures hold good only for the period during which the proposed rates of income taxation would prevail. As the income tax rate decreases, the yield from tax-exempt securities diminishes proportionately. The volume of tax-exempt securities at present outstanding, including the new "Liberty Loan," is estimated at not less than $8,000,000,000. The ability of corporations to find a ready market for their securities is a prerequisite for the continuance of business prosperity or, indeed, of adequate business activity. I need not elaborate the effect which the comparison of the income yield from tax-exempt securities as against taxable securities under an excessively high income tax schedule--even if confined to larger incomes--must necessarily have upon the eligibility of corporate securities for investment purposes. The conclusion seems unescapable that the resulting degree of disinclination to invest in such securities coupled with the impulse to dispose of existing holdings would bring about liquidation, severe shrinkage of values and more or less pronounced demoralization in the investment market--a condition of things which could not fail in a measure to affect adversely the country's business in general, and which could only partially be counteracted by Government expenditures, however large. As to your observations concerning the principle of tax-exempt issues, I believe the Government acted wisely, considering all the elements of the situation, in making its first great war issue, the Liberty Loan, tax free. But in the face of the figures above quoted, the question naturally presents itself whether our traditional policy of making Government issues tax-exempt should not be discontinued, which, of course, would mean that a materially higher rate of interest than 3-1/2% would have to be paid for Government borrowing. In theory, it seems to me, there can be little doubt that the balance of arguments is against the tax-exemption of Government loans. As an abstract proposition little can be said, I think, in favor of a policy the effect of which gives an advantage to the rich and well-to-do, militates against the widest possible distribution of Government issues amongst the people, tends to facilitate Governmental extravagance by concealing the true cost and establishes a fictitious basis of national credit. Thus, for instance, on the $1,000,000,000, or thereabouts, which our Government has loaned to the Allies at 3-1/2% interest, it is losing money, because, whilst it nominally borrows this money through the Liberty Loan at 3-1/2%, the cost to it is actually considerably higher because it loses the revenue which would accrue to it from the income tax if the bonds were not tax-exempt. Let me add that I do not wish to be understood as suggesting that our Government should charge to the Allied Nations more than the nominal rate at which it is borrowing. They have been fighting these three years and bringing unheard of sacrifices for a cause which we have recognized to be ours no less than theirs, and if we loan them money somewhat below its actual cost to us that item weighs but very lightly in the scale, especially also if we consider the immense monetary profits which our country has reaped from the sale to them of munitions, material and supplies. However, as against the theoretical objections, some of which I have mentioned, to the tax-exemption of Government loans, there are certain "imponderabilia"--things which cannot be exactly weighed--in favor of a low rate of interest for Government borrowing, even if the lowness of the rate is to an extent fictitious. There are also certain practical reasons for the maintenance of our traditional policy, and various concrete facts which must be taken into account. For instance, there is the problem of how to deal with the situation that might result from the withdrawal of deposits from savings banks and similar institutions, which probably would be liable to occur in case the Government offered a bond issue at the higher rate it would have to fix if the inducement of tax-exemption were removed. There is the problem of the existence of billions of municipal and state securities which offer to the holder the privilege of freedom from municipal, state _and Federal_ taxes. I understand that it is the consensus of opinion of our leading lawyers that under the legal theory which treats such issues as "instrumentalities of government" that privilege cannot be abridged and that Congress has no constitutional power to tax state and municipal issues. If state and municipal issues to be made during war time retain the feature of being free from taxation, can the Federal Government afford to make its war loans taxable, and thereby place itself in a position where it would have to borrow under conditions which would put it and its credit at a disadvantage as compared to state and municipal issues? The problem is a complex one altogether and, like all economic questions, requires to be approached in a dispassionate spirit, giving due consideration to the reasons for and against. The temper of the stump speaker is not appropriate for dealing with taxation problems. Let me add, in conclusion, that I fully agree that it is "sheer fiscal stupidity" and "socially inexpedient as well" to permit "mushroom fortunes" to be built out of war profits. I believe there ought to be imposed a large excess war profits tax on the English model upon a fair and well conceived average basis of earnings so calculated as to take account of the vast difference in the country's industrial plant to-day and before the European war. Such a tax may not be entirely free from objections in theory, but from the social and moral point of view it is, I am convinced, thoroughly sound and proper and called for. Appropriate taxation of excess profits, together with an adequately though not exorbitantly heavy income tax would go a long way to prevent the enrichment of a class through the calamity of war, without at the same time affecting wages or laming the enterprise and business activities of the country. Yours very truly, (_Signed_) OTTO H. KAHN 
40531	----	[Transcriber's Note: Every effort has been made to replicate this text as faithfully as possible, including obsolete and variant spellings and other inconsistencies. Text that has been changed to correct an obvious error is noted at the end of this ebook.] 1797 A Century in the TO Comptroller's 1897 Office State of New York BY JAMES A. ROBERTS COMPTROLLER ALBANY JAMES B. LYON, PRINTER 1897 [Illustration: _STATE HALL_] A CENTURY IN THE COMPTROLLER'S OFFICE. On the 17th of February, 1897, occurred the one hundredth anniversary of the establishment of the office of Comptroller of the State of New York. The present incumbent of the office trusts it will not be considered unwarranted pride which has led him to collect and transcribe, in honor of its one hundredth birthday, such general facts relating more or less directly to the office, or to the former incumbents thereof, as he has gathered from unsystematic reading and in the performance of his duties. An office which has without scandal managed the financial affairs of this great State, and has otherwise borne a conspicuous part in its government for a century; an office from the thirty incumbents of which have been chosen a Vice-President and a President of the United States, two United States Senators, four Governors of the State, one Chief Justice and one Chief Judge of its Court of Appeals--to say nothing of others who have achieved distinction in less conspicuous civil positions--would seem entitled to something more than a passing notice on its centennial anniversary. The office, as created, and from time to time enlarged, is a unique feature in our State government. There are Auditors in nearly all of the States of the Union; but the duties of Comptroller are far broader, comprehending largely the ordinary duties of a State Treasurer as well as many others. There had been Auditors in the Colony of New York from 1680 down to the time of its organization as an independent State, and that office was continued in the State until it was merged in the office of Comptroller. There have been Treasurers of New York with varying duties from 1706 down to the present time. From the time of the organization of the State government the offices of Treasurer and Auditor had not been found to work harmoniously or satisfactorily. Bills might be audited which the Treasurer did not wish to pay, and the Treasurer might wish to pay bills which the Auditor would not pass, so in a tentative, experimental way in 1797 the office of Comptroller was created to combine the power to audit and the power to pay. The act creating it was framed by Samuel Jones, a man of note in his time (for whom Samuel Jones Tilden, the distinguished Governor of this State, was named), and on the 17th of February, 1797, it became law by the signature of that distinguished patriot, Governor John Jay. [Illustration: Samuel Jones (signature) _1st COMPTROLLER_] The appointment of Comptroller upon the creation of the office fell to the "Council of Appointment," as was the case at that time with all State, county and municipal officers, except the Governor, Lieutenant-Governor and members of the Legislature. The "Council of Appointment" was an anomaly in government. The article (XXIII of the Constitution of 1777) establishing this "Council" was framed by three as pure, patriotic and disinterested statesmen as New York has ever produced, John Jay, Robert R. Livingston and Gouverneur Morris, and was designed to prevent a dangerous centralization of power in the hands of the Governor. It provided "that all officers, other than those who by this Constitution are directed to be otherwise appointed, shall be appointed in the manner following, to wit: The Assembly shall once in every year openly nominate and appoint one of the Senators from each great district" (then four in number), "which Senators shall form a council for the appointment of officers, of which the Governor, for the time being, or the Lieutenant-Governor, or the President of the Senate (when they shall respectively administer the government), shall be president, and have a casting vote, but no other vote." Under the power thus conferred this council appointed the heads of the various State departments; all Judges, as well as Justices of the Peace, District Attorneys, Sheriffs, County Clerks, Mayors, and other officers throughout the entire State. The cautious and anxious gentlemen who framed this provision in 1777 could by no means have foreseen the disastrous and disgraceful spoils system that grew up under it. It remained in full effect until a disgusted people abolished it by an amendment to the Constitution in 1821. At that time its power had so grown that there were 6,663 civil and 8,287 military offices which it controlled. The modern political boss must experience a feeling of profound regret as he realizes that this rich harvest can no longer be garnered by his sickle. Chapter 21 of the Laws of 1797, which created the office of State Comptroller, provided, among other things, that "all matters and things theretofore required to be done by the Auditor of the State should be done by the Comptroller, and that the salary and wages of all legislative, executive, judicial and ministerial officers of the government of this State, and all moneys directed by law to be paid to any other person, should be paid by the Treasurer on the warrant of the Comptroller;" that the Comptroller should keep an account between the State and the Treasurer; that he might lend out moneys in the treasury not otherwise appropriated, and that when money was directed to be paid, and not sufficient money in the treasury to satisfy the same, he might "in the name, and on behalf of the People of this State, borrow a sum sufficient for that purpose of a bank of New York, or bank of Albany." Thus the important powers which have distinguished the Comptroller's office--the power of audit; to draw warrants for all payments from the treasury; to keep its books of financial transactions; to invest its funds, and to borrow money--were embodied in the first act. The powers thus granted infringed so largely upon the ordinary rights and duties of a Treasurer, and so largely upon those which had been theretofore exercised by the Treasurer of this State, that it is not strange the then Treasurer, Gerardus Bancker, who had held the office from April 1, 1778, resigned in disgust. His feeling was, as Lossing has stated in his "Empire State," that the Comptroller was made "the highest financial officer of the State, and the Treasurer merely a clerk to him." [Illustration: John V. Henry (signature) _2d COMPTROLLER_] The early history of the office is an illustration of the cautious and doubtful temper of the Legislatures of the time--so unlike those of the present day. It is a well-known fact that while the Legislature of the State met for the first time at Albany, in the same year, 1797, in which the office of Comptroller was created, it was not then made a permanent location for the Capitol; and that city was maintained for upwards of twenty years as the Capitol simply by the adjournment of the Legislature at the end of each session to meet again at the city of Albany. The original act creating the Comptroller's office provided that it should continue in force for a period of three years. On the 28th day of February, 1800, eleven days after the office had expired by limitation, chapter 11 of that year went into effect, which re-established the office for another period of three years. Chapter 22 of the Laws of 1803 extended the office, with the powers and duties then prescribed by law, to February 28, 1805. By chapter 60 of the Laws of 1805, passed March 30th, the office was continued to February 28, 1808, and the acts of the then Comptroller, between the 28th day of February, 1805, and the day when this act went into effect, were ratified and confirmed. On March 11, 1808, chapter 34 of that year was passed, which continued the office to February 28, 1812, with a like confirmatory clause. The act of February 28, 1812, at last made permanent the Comptroller's office, with the powers theretofore conferred upon it. By chapter 31 of the Laws of 1797 the office of Comptroller was to be located either in Albany or Watervliet. The Council of Appointment chose for the first Comptroller Samuel Jones, of Oyster Bay, Queens county. This was done by the casting vote of Governor John Jay, the four senatorial members of the council being a tie. He was a lawyer of high standing at the time of his appointment, a Federalist in politics, and had held with credit a number of civil positions. In 1775 he had been a member of the Provisional War Committee, and had performed arduous services on that committee. He was a member of the convention that adopted the Federal Constitution, and voted for it. He was a delegate to the Continental Congress in 1778; a Member of Assembly from Queens county in 1786, 1787, 1788, 1789 and 1790; a State Senator from the southern district from 1791 to 1799. The honors which he had won and worthily worn were supplemented in his son who, as the Chancellor of this State (succeeding Nathan Sanford and succeeded by Reuben H. Walworth), and as Chief Judge of the New York Superior Court, won for himself enviable renown in our legal annals. Comptroller Jones was the author of the "Act for the amendment of law and better advancement of Justice," passed in 1789, which was a valuable contribution and addition to our law. He was also the author of many other of the best statutes placed upon our books in those early years. He was distinguished throughout his career as an upright and useful man, though he was sometimes accused of a little uncertainty in politics. He is said to have replied to a question from Judge Spencer as to how he managed to secure his elections from Queens county whatever party might be in the ascendant, that "If my troops will not follow me, I follow my troops." The Comptroller's salary was fixed by the act at $3,000, and this was to include all clerk hire and ordinary expenses connected with the office. In 1800 the compensation was reduced to $2,500, and in consequence of this action Mr. Jones resigned the office. He had faithfully performed its duties, and his resignation terminated his public career. [Illustration: Elisha Jenkins (signature) _3d COMPTROLLER_] During his term, in 1799, the Legislature prohibited the payment of any money from the treasury except upon the warrant of the Comptroller, and required all receipts to be countersigned by him, and this has remained a part of the duties of the Comptroller from that time to this. On March 12, 1800, John V. Henry, an eminent Albany lawyer and a Federalist, was chosen Comptroller. There are some still living who know, at least by oral tradition, his great influence at the bar, and Albanians have a just pride in his high reputation. He was a member of the convention called in 1801 principally to settle the question whether the Governor alone could nominate persons for appointment, or whether that power also lay in the Senators composing the Council of Appointment. He was a Member of Assembly from Albany county in 1800, 1801 and 1802. During his term, by chapter 61 of the Laws of 1801, the Comptroller was made _ex-officio_ a member of the State Board of Canvassers, and by chapter 69 of the same year he was made one of the Commissioners of the Land Office. In 1801 the Legislature also directed the Comptroller to sell lands for the payment of taxes due to the State, and this power, variously modified and enlarged, still remains in him. Under it sales were held in 1808, 1811, 1812, 1814, 1815, 1821, 1826, 1830, 1834, 1839, 1843, 1848, 1853, 1859, 1866, 1871, 1877, 1881, 1885, 1890 and 1895. In 1800 the Legislature authorized the Comptroller to settle the credits of the State with the Secretary of the Treasury of the United States. The moneys derived from this source formed the basis of the general fund. The Comptroller was made the custodian of this fund with power to invest it. The fund was augmented from sales of land and other sources until, in 1814, it had reached the sum of $4,396,943.97. The income of the fund together with the salt and auction duties, it was believed, in the early part of the century, would be sufficient to maintain the government. And from 1814 to 1842 no money was raised in this State by direct taxation except during the years in which the Erie and Champlain canals were in process of construction. To avoid a direct tax, however, it had been found necessary from time to time, to draw on the principal of the fund, and in 1834 it disappeared altogether and with it the bright dream of our forefathers of a commonwealth without taxation. Before the adoption of the Constitution of 1846 the fund had been succeeded by a general fund debt of $5,992,840.82. This was increased before the breaking out of the Civil War to a total of $6,505,684.37. This was the high-water mark of the general fund debt if we do not include in it the bounty debt of 1865. The Constitution of 1846 made provision for a sinking fund to meet this debt and its management and investment were intrusted to the Comptroller. In this way the last of the debt was paid in 1878. [Illustration: Arch. McIntyre (signature) _4th COMPTROLLER_] Mr. Henry was removed from his office August 10, 1801, by reason of political changes in the Council of Appointment, and he then and there renounced politics forever. At the time of his death, in 1829, the leading Albany paper of the period spoke of Mr. Henry as "the idol of his friends; the ornament of his native city; the pride of the bar; the eloquent defender of the oppressed." Henry's successor in office was Elisha Jenkins, a merchant and a Democrat (or Republican as the party was then called) of Hudson, who held the office from August 10, 1801, to March 26, 1806. Previous to his appointment as Comptroller he had served as Member of Assembly from Columbia county for the years 1795 to 1798. After his service as Comptroller he served three different periods as Secretary of State, to wit: From March 16, 1806, to February 16, 1807; from February 1, 1808, to February 1, 1810, and from February 1, 1811, to February 23, 1813. During his term as Comptroller there was a defalcation in the office of Treasurer, then held by Robert McClellan, and a more rigid system of testing the correctness of accounts was adopted, many features of which still survive. There was not much legislation affecting the office passed during the period of his incumbency; but the work of the office would seem to have been done in a systematic and business-like manner. [Illustration: John Savage (signature) _5th COMPTROLLER_] Mr. Jenkins was succeeded by Archibald McIntyre, a Democrat of the Clintonian order, of Albany, who, besides the reputation of a most excellent officer, has left behind him the record of a term of service in the office longer than that of any person who has filled it. He was appointed on March 26, 1806, and continued in office until February 12, 1821. He had previously served as Member of Assembly from Montgomery county for the years 1798, 1799, 1800, 1801, 1802 and 1804. The duties of the office had so far increased in 1811 as to render necessary the services of a deputy, and by chapter 78 his appointment was authorized, with substantially the same limitations which now exist. He cannot sign warrants so long as the Comptroller is within the State; nor can he act on the various boards. Comptroller McIntyre in 1817, under legislative authority, procured the aggregate valuation of the real estate in the several towns and wards of the State. By chapter 262 of the Laws of 1817 the Board of Commissioners of the Canal Fund was created, and the Comptroller made, _ex-officio_, a member of that board. This act contained a curious provision to the effect that a majority of the Commissioners, with the Comptroller, constitutes a quorum. No quorum of that board has ever been possible without the presence of the Comptroller. This board, from that time to 1848, received and disbursed all canal moneys, audited the canal accounts, and in general transacted the financial business of the canal department. In 1848 the canal funds were turned over to the Treasurer and made subject to the warrant of the Canal Auditor. By his audit and warrant all accounts against the canals were paid; the management of the canal debt and sinking fund remaining, as before, in the Commissioners of the Canal Fund. In 1883 the duties devolving upon the Canal Auditor were transferred to the Comptroller's office. The majority of the Commissioners of the Canal Fund signed all checks on canal account prior to 1848. Since 1883, the Commissioners of the Canal Fund have had no duties to perform except to designate banks for the deposit of canal funds, and, ordinarily, to supervise the issuing of canal bonds. The first canal debt bonds were issued in 1817 under legislative authority, and their disposition and the management of the sinking fund which was provided for their payment were put in the hands of the Commissioners of the Canal Fund. The amount of the debt that year was $200,000. As the canal system was extended, and later when the canals were enlarged, this debt was from time to time increased until in 1860 it reached the sum of $27,107,321.28. From that time it continuously decreased through the payments to, and the application of, the sinking fund, until on the 1st day of October, 1893, the last of this, the last bonded debt of the State, was paid. Something of financial history may be learned from a study of the rates of interest paid on these loans to the State. On the loan of 1817 the rate of interest was six per cent. From 1820 to 1830 the highest rate was six per cent and the lowest, five. From 1830 to 1840 a rate of five was sufficient. From 1840 to 1850 the rate advanced, the lowest being six and the highest seven per cent, the latter rate being in about 1842, the period of uncertainty as to the State's financial policy. From 1850 to 1860 the rate again fell to five and six per cent. In 1861 a small loan was made at seven. From 1870 to 1880 the rate was six per cent. This was the last of the old canal loan. By vote of the people in 1895 a loan of $9,000,000 was authorized to be used in the enlargement of the canals. The amounts thus far borrowed under that authority have been at the rate of three per cent. [Illustration: W. L. Marcy (signature) _6th COMPTROLLER_] Perhaps the most notable circumstance of Comptroller McIntyre's term, and certainly one of the most notable in the whole history of the office, was his controversy with Daniel D. Tompkins. During the War of 1812 Governor Tompkins had been the agent both of the State and of the National Government, and in this dual capacity he had received and disbursed very large sums of money. For much of this money he had taken, or could produce, no vouchers, and, consequently, in 1819 he stood upon the Comptroller's books a debtor, if not a defaulter, to the State in the large amount of $120,000. He claimed, and his friends claimed for him, that he had honestly disbursed all the money that he had received, and that the apparent deficit was due to his acknowledged unbusiness-like methods, and in his failure to keep books of account, and to take vouchers. He was then Vice-President of the United States, and it was thought by the "Bucktail" Republicans that he was the only man who, in the State election of 1820, could beat Governor Clinton for re-election. This unsettled balance, which had been standing for several years on the books of the Comptroller, was a serious obstacle to the execution of their plan. Accordingly, the Legislature of 1819 passed an act requiring the Comptroller to settle the residue of the accounts of Governor Tompkins, and in the settlement to allow him the same premium on the amount of money borrowed by him "on his own responsibility" as was allowed others for like service; and further requiring the Comptroller to credit the Governor with sums paid by him, legally, to any person, and to call upon such persons to account for the money. Contrary, it was said, to what had been understood by those who had been instrumental in passing the act of 1819, Vice-President Tompkins, instead of presenting a claim for premium merely sufficient to offset the claim of the State against him, presented one for $250,000, and supported this claim by opinions both of experts and lawyers. This bill furnishes a commentary on the credit of the State in the perilous times of the War of 1812, or perhaps upon the value of the services of financial agents at that time. The brokerage charged by Governor Tompkins was at the rate of twenty-five per cent. The Comptroller, feeling that this was not the legislative intent, and ever watchful as he was of the State's interests, declined to allow the claim, on the ground that the Governor had not borrowed the money "on his own responsibility," but on the joint responsibility of the State and himself. The Comptroller offered to submit the soundness of his position to the Judges of the Supreme Court, and to join with the Judges, if it was desired, the Chancellor or the Attorney-General. But this Mr. Tompkins declined on the ground that all of these proposed referees were politically hostile to him. Correspondence relating to the matter, and marked by great bitterness of tone, took place between these eminent officials; and in this the Comptroller showed not only a familiarity with accounts, but a facility with the pen, which was a surprise to those who had not known him intimately. This matter occupied much of the attention of the Legislature for two years, and gave rise to protracted and animated debates, and there is no doubt that it entered largely into the defeat of Governor Tompkins by Clinton in 1820. The controversy was finally settled under an act of the Legislature of 1820, which directed the Comptroller to balance the accounts upon the filing of a release from Governor Tompkins of all his claims against the State. It had required no small amount of courage for Comptroller McIntyre to engage in a trial of strength with this idol of the State. Daniel D. Tompkins was four times elected Governor of the State, and twice elected Vice-President. He was a man of great personal magnetism; with large abilities, and he held a place in the affections of the people of this State which has scarcely been equaled by any of our citizens since his time. [Illustration: Silas Wright Jr (signature) _7th COMPTROLLER_] [Illustration: A. C. Flagg (signature) _8th COMPTROLLER_] At no time in the history of the State has the Comptroller's office been more ably filled, and occupied a more prominent position, than during the administration of Archibald McIntyre. He had the unbounded confidence of all, and although there were several Councils of Appointment during his term of service which were hostile to him, no one seems to have thought of removing him. He was regarded as a public servant whose services could not well be spared to the State. He was held in a measure responsible for the defeat of Governor Tompkins, and, although Clinton was elected, the Legislature and the Council of Appointment were decidedly hostile both to Clinton and to him, and on February 12, 1821, Mr. McIntyre was removed, and John Savage appointed in his place. His removal would have created far greater dissatisfaction than it did, although the dissatisfaction was considerable, had not his successor been a man of concededly great ability. Mr. McIntyre was, the year of his removal, nominated as the Clintonian candidate for Senator from the middle district, and, although strenuous efforts were made to defeat him, he was elected by a substantial majority. In 1822 he was, with John B. Yates, appointed agent for the State lotteries. The Constitution of 1821 had forbidden any further lotteries within the State, and authorized the Legislature to pass laws preventing the sale of tickets except in the lotteries already established by law. These were mostly instituted under the law of 1814 for the purpose of aiding literary institutions. By the act appointing him, the agents were invested with sole authority to issue and sell all lottery tickets which, for the future, were to be issued to pay some hundreds of thousands of dollars due various institutions. The legislative intent was carried out by the agents to the satisfaction of the beneficiaries, and also with satisfactory pecuniary results to the agents themselves. Upon his retirement from his agency Mr. McIntyre was able to withdraw both from politics and business. One would hardly expect to find in the books of account in the Comptroller's office anything in the nature of a history of morals, but the receipts from various lotteries forms a no inconsiderable part of the receipts of the State for a number of years. This opens up a view which almost shocks modern sensibility. Lotteries were not only authorized by the State, but they were in the main devoted to beneficent purposes. Union College owes no inconsiderable part of her early usefulness to money derived from State lotteries. Indeed, the institution of State lotteries in New York may almost be attributed to the efforts of that truly great and good man, the Rev. Dr. Eliphalet Nott. The first moneys ever appropriated by New York for the purposes of free schools were raised by lottery. John Savage, of Salem, a lawyer, and a Democrat of the "Bucktail" stamp, was the fifth Comptroller, and at the time of his appointment he was not new to public life. He had been district attorney of the fourth district from 1806 to 1811, and again from 1812 to 1813; Member of Assembly from Washington county in 1814, and Member of the Fourteenth and Fifteenth Congresses. He rounded out his official career with eight years (from 1823 to 1831) of honored service as Chief Justice of the Supreme Court. As a public official it has been said that "he exhibited candor, industry, caution and excellent judgment." No higher qualities can be given to any official. Later in life the positions of Chancellor and Treasurer of the United States were offered to him but declined. During his term of office there was no substantial change or enlargement of the powers and duties of the office, aside from the power given to invest money belonging to the common school fund. The common school fund had its origin in 1805, and was, as the determination for free schools became more manifest, an application to a school system of the Utopian vision of the makers of the State, who sought to pay all the expenses of maintaining the government by interest from its invested funds. The common school fund has, unlike the general fund, steadily increased. By the act of 1805 the proceeds of the first 500,000 acres of vacant and unappropriated land sold by the Surveyor-General were appropriated as a permanent fund for the support of common schools. Other sources of revenue were from time to time turned into this fund, until from its small beginning of $58,757.24 in 1805, it has now productive investments aggregating $4,448,140.77. It is a noteworthy fact that no direct tax for school purposes was laid by the State until 1853, the interest of the fund alone being appropriated. How small a portion the income plays in maintaining the schools of the State to-day can be seen in the fact that the State for the year 1896 appropriated for educational purposes $4,970,134.53, and this is not a quarter of the amount expended in the State for the purpose of free schools, when the local contributions are taken into account. Judge Savage was the last Comptroller who owed his selection to the Council of Appointment. [Illustration: Bates Cooke (signature) _9th COMPTROLLER_] The Constitutional Convention of 1821, in deference to strong public demand, had abolished that disgraceful anomaly, and by section 6 of article 4 had provided that "the Secretary of State, Comptroller, Treasurer, Attorney-General, Surveyor-General and Commissioner-General shall be appointed as follows: The Senate and Assembly shall each openly nominate one person for the said offices respectively; after which they shall meet again, and if they shall agree in their nominations the person so nominated shall be appointed to the office for which he shall be nominated. If they shall disagree, the appointment shall be made by the joint ballot of the Senators and Members of Assembly. The Secretary of State, Comptroller, Treasurer, Attorney-General, Surveyor-General and Commissioner-General shall hold their office for three years, unless sooner removed by concurrent resolution of the Senate and Assembly." [Illustration: John A. Collier (signature) _10th COMPTROLLER_] The Legislature, on the 13th day of February, 1823, elected, in the manner provided by law, William L. Marcy, a lawyer and a Democrat, of Albany, to succeed Savage. There was a contest in the caucus over his nomination, his opponent being Genl. James Tallmadge, a man of conspicuous ability and influence in the Senate. The power of Mr. Van Buren, however, turned the scale in Mr. Marcy's favor. The only public position which he had previously held was Adjutant-General, but from that time on his name is closely linked with the history of the State and Union. He was Comptroller for six years, Judge of the Supreme Court for two years, and United States Senator for two years. He was three times elected Governor, and defeated in his fourth run for that office by William H. Seward. He was appointed Secretary of War by President Polk in 1845, and Secretary of State by President Pierce in 1853. He had for years, under Mr. Van Buren, been a leader of that most influential political body which has become known to history as the "Albany Regency." The remaining members are understood to have been at that time Silas Wright, Azariah C. Flagg, Edwin Croswell, John A. Dix, James Porter and Benjamin Knower. The records of the State show that these men, while building up a compact and powerful political organization, did not neglect their own personal and political advancement. One of the vouchers in the Comptroller's office played a prominent part in the last of Mr. Marcy's gubernatorial campaigns--a circumstance which, Thurlow Weed says, Mr. Marcy pronounced the most disagreeable of his entire public career. While serving as Supreme Court Judge, and on Circuit in Niagara county, he included in his bill of expenses an item as follows: "For mending my pantaloons, 50c." In the Seward campaign Thurlow Weed, then the editor of the Albany _Evening Journal_, learned of this fact and published the story. It was taken up by the press generally throughout the State, and Mr. Marcy, with all his fine organization and numberless friends, found himself for the time being, like Spain's chivalry, "laughed away." [Illustration: Millard Fillmore (signature) _11th COMPTROLLER_] The item, however, exhibits the scrupulous exactness of the man. Instead of presenting the bill with an indefinite amount of incidentals, he itemized it thus particularly to his own disadvantage; but, as Mr. Weed afterward admitted, it was a credit to his honesty. It was during Mr. Marcy's term that much of the work on the Erie canal was done, and the careful scrutiny which the bills for this work received was largely instrumental in keeping the cost within the estimates. He took ground as chief financial officer of the State against the construction of the Chenango and Genesee Valley canals, for the reason that these canals would not, in his judgment, pay the expenses of maintenance and the interest on the debt which would be incurred in their construction. While friends of the measures endeavored to convince the Legislature that the Comptroller was wrong in his calculation, the result, when these works were finally completed, fully justified the Comptroller's view. As Governor he made some friends, and more enemies, by adhering to the same careful course he had maintained as Comptroller. In 1826 the Legislature created the Canal Board, and the Comptroller was made _ex-officio_ a member of it, and he has continued to act as such member down to the present. On the 27th day of January, 1829, the Legislature elected as the successor of Mr. Marcy a man who, in his time, made a great impression upon State and National politics--Silas Wright, of Canton, a lawyer and a Regency Democrat. He had previously been Surrogate of St. Lawrence county, State Senator from the fourth district for the years 1824, 1825, 1826 and 1827, and a Member of the Twentieth and Twenty-first Congresses. In the latter position he had achieved considerable reputation. After his five years' service as Comptroller he held with high honor, for nearly twelve years, the position of United States Senator. During the term of Mr. Van Buren as President he was considered to voice the administration in his public utterances. He served faithfully and intelligently upon some of the most important committees. He resigned to take the office of Governor, which office he held in 1845 and 1846, and was defeated for re-election by John Young in November, 1846. Mr. Wright continued the careful and conservative policy of his predecessor as to expenditures. He took strong ground against the numerous and extensive raids on the treasury which were then organized. His reports were always plain, business-like papers, which set out in intelligible language the consequences of the rapidly-increasing expenses. Mr. Wright in many ways was a remarkable man. The public positions which he held were varied, and it was a great test of his adaptability to be able to fill the duties of these various positions with much more than ordinary success. In 1831 the financial law of the State was revised, and the provisions relating to the powers and duties of the Comptroller were codified and arranged. [Illustration: W. Hunt (signature) _12th COMPTROLLER_] Upon his election as United States Senator Mr. Wright resigned and was succeeded by Azariah C. Flagg, of Plattsburgh, a lawyer and a Regency Democrat, who was elected on January 11, 1834. He had been a Member of Assembly from Clinton county in 1823 and 1824, and held the office of Secretary of State from 1826 to 1833. He had run counter to public opinion in 1823 as the leader of the Assembly opposition to the Electoral law--a law designed to give to the people directly the power of chosing the presidential electors, instead of leaving that power vested in the Legislature, as had been the law theretofore. The Albany Regency had determined to prevent any change, and succeeded in warding off legislative action. The measure, however, met the cordial approval of the people, and that fact, together with the removal of Governor Clinton as Canal Commissioner--a position in which his uncompensated services had been of the greatest value--swept Clinton, whose political fortunes then seemed at their lowest ebb, triumphantly into the gubernatorial chair. But it was a principle of the Albany Regency, and of Martin Van Buren, then at its head, never to forget a man who had fallen or suffered in their service; and it was in reward for Mr. Flagg's unpopular opposition to the Electoral bill that in 1826 he was chosen Secretary of State. Mr. Flagg has the distinction of having served longer as Comptroller than any other incumbent of the office, with the exception of Archibald McIntyre. He held the office from January 11, 1834, to February 4, 1839, and again from February 7, 1842, to November 7, 1847. During his first term he was a member of the commission for the erection of the State Hall, and that building still stands as a monument to the Commission's good judgment in architecture, and in the adaptation of means to an end. Upon the completion of the State Hall the old State Hall, corner of Lodge and State streets, was sold by the Commission. By chapters 2 and 150 of the Laws of 1837 the Comptroller was made the custodian of moneys received from the United States, since known as the United States Deposit Fund. Theoretically this money was not given to the several States, but was to be subject to repayment whenever called for. The National Government will hardly, at this late day, call for these moneys. If it did not feel compelled to do so in the trying financial straits of the war it is not likely that it will do so in times of peace. But these moneys have always been kept as a separate fund, substantially as required by the act of 1837, and the principal, through all changes of, and losses from, investment, has been kept intact. [Illustration: P C Fuller (signature) _13th COMPTROLLER_] By chapter 260 of the Laws of 1838 the Comptroller, to guard against counterfeiting, was authorized and required to have engraved and printed in the best manner, circulating notes to be issued to the incorporated banks of the State, and to countersign the same; and a system was inaugurated for the deposit of securities in the Comptroller's office which should be a guaranty for the notes issued by the banks--a system very similar to that later adopted by the United States for National banks. One feature which would be regarded as a most unwise one to-day formed a part of this plan; the banks were authorized to deposit one-half the security in bonds and mortgages. The bill also provided that banking associations should file with the Comptroller a semi-annual report of the transactions of the bank. This was practically the inauguration of the supervision of the banks, which was later transferred to the Banking Department. The Legislature had, in 1829, at the time of the creation of the safety fund, authorized the appointment of three Bank Commissioners, whose duty it was to visit the banks, examine their condition, and report to the Legislature. The office of Bank Commissioner was abolished in 1843, and the power of supervision possessed by them was then transferred to the Comptroller, and he continued to retain that power until 1851, when the Banking Department was created. It was during Mr. Flagg's first term that the great financial panic of 1837 took place, and the State's financial condition at that time was not all that might be desired. There was a large debt, mostly incurred in the construction of canals. The revenues had very much decreased, and a new way of raising funds must be used to meet the liabilities of the State and maintain her credit. Matters financial in the State went from bad to worse. In 1842, after long debate, the Legislature passed an act authorizing the laying of a tax of one mill upon every dollar of real and personal property in the State, and pledging the revenues of the State for the payment of its liabilities, and suspending all public work, except where great loss would come to the State by such suspension. In this manner the credit of the State was made secure and its obligations met. This act was prepared and advocated by Mr. Flagg. The significance of this legislation is found largely in the fact that from 1826 to 1842 no State tax for general purposes had been required. [Illustration: J. C. Wright (signature) _14th COMPTROLLER_] The long lease of power which the Democrats had held in this State was broken in the fall of 1838 by the combined efforts of the Whigs and Anti-Masons, and, accordingly, on the 4th of January, 1839, Mr. Flagg was removed, and Bates Cook, of Lewiston, a lawyer and an Anti-Mason was chosen by the Legislature in his place. Mr. Cook's only previous official service of note had been as Member of the Twenty-second Congress. His appointment was largely due to the influence and representations of William H. Seward, then the Governor, and Thurlow Weed. He had been associated with these gentlemen in the prosecution of the abductors of William Morgan, and, like Mr. Seward and Mr. Fillmore, received his political start from Anti-Masonic influence. Mr. Cook soon had an opportunity to show Mr. Weed his appreciation of the favor done him. Chapter 1 of the Laws of 1840 authorized the Comptroller and Secretary of State to enter into a contract with Thurlow Weed to do the printing for the Legislature, executive offices and various boards, at prices not exceeding ordinary prices in Albany. This seems to have been the first time these officers were intrusted with this responsibility, and it was not until 1846 that the general power was definitely conferred upon them. Subsequent legislation has added to the printing board then created the Attorney-General, so far as legislative printing is concerned; but as to department printing, the Secretary of State and the Comptroller are still clothed with the authority of letting the contract. By chapter 295 of the Laws of 1840 the Comptroller was assigned quarters in the State Hall, together with the other State officers, and that building was made the headquarters of the Canal Board, and there both still remain, although the Comptroller, from time to time, as the needs have compelled, has taken to himself more rooms, so that his offices now occupy the entire first floor of the building. [Illustration: J M Cook (signature) _15th COMPTROLLER_] On January 27, 1841, the Legislature elected John A. Collier, of Binghamton, a leading lawyer and an Anti-Mason, to succeed Bates Cook. He had previously served as District Attorney of Broome county from June 11, 1818, to February 22, 1822, and had served his district in the Twenty-second Congress. After his retirement from the office of Comptroller he was appointed, with Chancellor Walworth, to codify the laws, but declined to serve. This was a high tribute to his ability. During 1841 the Comptroller's office was examined by a legislative committee, to ascertain if warrants had been drawn in conformity with the law, and the funds properly disbursed. The office was found able to stand the fire of a rigid investigation. Mr. Collier had been a Federalist and a Clintonian, but it was as an Anti-Mason that he was elected both to Congress and as Comptroller. He, too, was largely indebted for his appointment as Comptroller to the potent influence of Thurlow Weed. The administration was a short but efficient one, and Mr. Collier proved himself through life an able and discreet man. The Legislature, which for several years had been Whig, in 1842 became Democratic, so that by concurrent resolution, on February seventh they were enabled to remove John A. Collier and re-appoint Azariah C. Flagg. During his second term Mr. Flagg performed the multiplying duties of the office with his usual fidelity, and to the satisfaction of the people of the State. There seems to have been no important enlargement of the duties of the office during this period. By various statutes, passed prior to the Constitution of 1846, the State had loaned its credit to a number of corporations, mostly railroad, until, in 1845, the State debt thus incurred, called the "contingent debt," amounted to $5,235,700. Provision was made for a sinking fund, and the management of this fund was placed with the Comptroller. Corporations have no souls, and, consequently, we find that of the credit thus loaned the State lost $3,665,700. From the additions to and accumulations of the sinking fund, the last of the contingent debt was extinguished in 1877. [Illustration: L. Burrows (signature) _16th COMPTROLLER_] By chapter 350 of the Laws of 1847, passed during his term, the Comptroller was required to make a report of the fiscal year before the close of the calendar year, and to present the same to the Legislature shortly after the commencement of its session. But at this point a new method of chosing a Comptroller was introduced in the organic law. Section 1 of article 5 of the Constitution of 1846 provides that "The Secretary of State, Comptroller, Treasurer and Attorney-General shall be chosen at a general election, and shall hold their offices for two years." The constitutional provision was supplemented by chapter 240 of the Laws of 1846. The first man elected by the people to the office was Millard Fillmore, of Buffalo, an able lawyer and a Whig. He had been a Member of Assembly from Buffalo in 1829, 1830 and 1831, and a Member from his district to the Twenty-third, Twenty-fifth, Twenty-sixth and Twenty-seventh Congresses. During his term as Comptroller he was nominated and elected Vice-President on the ticket with Zachary Taylor, and upon the latter's death, on July 9, 1850, he succeeded to the Presidency. As President he is, perhaps, more distinguished as the signer of the "Fugitive Slave Law" than for any other one thing. He was elected Comptroller and Vice-President as a Whig, but by the signing of that obnoxious measure he alienated very many of his old Whig associates. He was, however, a clean, able man. In politics he was thought by many to have been a favorite of fortune. Some one of his acquaintances is said to have remarked, at the time of his election as Vice-President, that he felt sorry for General Taylor, because the General never could live out his term against Fillmore's luck. Mr. Fillmore resigned the office of Comptroller on the 17th of February, 1849, to assume the duties of Vice-President. The Legislature appointed Washington Hunt, a lawyer of prominence and a Whig, of Lockport, to succeed him. Mr. Hunt had been County Judge of Niagara county from 1836 to 1841, and had been a member of the Twenty-eighth, Twenty-ninth and Thirtieth Congresses. He was nominated and elected Comptroller in the fall of 1849. In 1850 he was elected Governor over Horatio Seymour, but in 1852 he was in turn defeated in his run for the second term by Seymour. He made an excellent record as Governor during the years 1851 and 1852. It was upon Mr. Hunt's recommendation that the duties of supervising and superintending the banking business of the State was transferred to the Banking Department, specially created for the purpose. He felt that a greater burden of responsibility was being imposed upon the office of Comptroller than could be satisfactorily sustained. This is one of the rare illustrations of a desire to surrender power. But what relief was gained by the transfer of the supervision of the banks was replaced by the duty which was imposed of superintending the business of insurance in this State. All insurance companies, prior to 1846, had been incorporated by special acts, but the Constitution of that year prohibited the creation of such corporations, except under general laws. In 1849 the Legislature passed a general law for the incorporation of insurance companies. By the terms of the act the duty of organizing and regulating insurance companies in this State, both domestic and foreign, was conferred upon the Comptroller. This was the first State supervision of insurance. The duty remained with the Comptroller until January 1, 1860, when the act creating the Department of Insurance went into effect. The Comptroller's office feels proud of its two healthy and useful children--the Banking Department and the Insurance Department, which have been efficiently serving the State and protecting the interests of its citizens for many years, and it ventures to believe that the early tuition that they received from the parent department helped to form their habits and prepare them for their career. [Illustration: S E Church (signature) _17th COMPTROLLER_] Mr. Hunt resigned the Comptrollership December 18, 1850, two weeks before he was to enter upon his duties as Governor, and Philo C. Fuller, a Whig, of Geneseo, was appointed in his place. Mr. Fuller had, in early life, been a clerk in the land office of Mr. James Wadsworth. Thurlow Weed met him at that time and recognized in him abilities of a high order. It was probably at Mr. Weed's suggestion that he first entered public life; it was certainly upon Mr. Weed's recommendation that he was appointed Comptroller. It was one of the great secrets of Thurlow Weed's long retention of political power that whenever he saw capability he sought, and, to use a ranchman's expression, "corralled it." Mr. Fuller was Member of Assembly from Livingston county in 1829 and 1830, State Senator in 1831 and 1832, and Member of the Twenty-third and Twenty-fourth Congresses. Later he moved to Michigan, and, being elected to the Legislature, he was chosen Speaker. He was appointed Assistant Postmaster-General in the Harrison administration, but, being unwilling to follow President Tyler into the Democratic camp, he resigned, and returned to New York. He performed the duties of his office of Comptroller with ability, although doubt of his capacity was felt at the time of his appointment. For the forty years from 1840 to 1880 the Comptroller's office was one of difficulty. During the first half of that period there was seldom a year when the expenditures did not exceed the appropriations, and when the Comptroller was not obliged to report a deficit at the end of the year. There was also during that same period a rapidly-increasing canal debt, and the Comptroller was in duty bound to find a market for bonds and the means to meet the interest when it became due. In the latter half of this period it was the Comptroller's duty to see that the means were at hand to pay the principal of this and other bonded debts, and the increased expenditures caused by the war. [Illustration: Robert Denniston (signature) _18th COMPTROLLER_] Mr. Fuller was succeeded January 1, 1852, by John C. Wright, a Democrat and lawyer, of Schenectady. He had been County Judge of Schoharie county from 1833 to 1838, and State Senator from the third district in 1843, 1844, 1845 and 1846. He was an opponent of the Albany Regency during his senatorial career. He was a ready debater but of impulsive temper, and at one time engaged in a personal rencounter with Colonel Young on the floor of the Senate chamber. His administration was unmarked by any peculiar enlargement of the official power, or by distinguished executive ability. That things run so smoothly that no attention is attracted is oftentimes strong evidence of a successful working machinery. By an act of the Legislature of 1851 the Comptroller was authorized to borrow three millions per year for three years for the completion of the canal enlargement. Mr. Wright served one term, and was succeeded, January 1, 1854, by James M. Cook, a lawyer and a Whig, of Ballston. Mr. Cook was a member of the Constitutional Convention of 1846, Senator from the thirteenth district for 1848, 1849, 1850 and 1851, and from the fifteenth district in 1864 and 1865. He served as State Treasurer during the years 1852 and 1853, and was Bank Superintendent from January 30, 1856, to January 11, 1861. He was thus continuously in the service of the State from 1848 to 1861, a period of thirteen years. In 1854 the Comptroller was authorized to appoint three commissioners to investigate the State prisons and report on their financial condition, and also upon such laws as they deemed proper for their better regulation. Under this abuses were corrected, and the Comptroller was given closer supervision of the prisons. For a short time in 1858 the Whig leaders had under favorable consideration the nomination of Mr. Cook for Governor, but circumstances forced a change, and E. D. Morgan was nominated and elected. [Illustration: L. Robinson (signature) _19th COMPTROLLER_] On January 1, 1856, Lorenzo Burrows, a banker and an "American" or "Know Nothing," of Albion, became Comptroller. He had been a member of the Thirty-first and Thirty-second Congresses. He later served as Regent of the University by appointment made February 17, 1858, and in November, 1858, was one of the candidates of the "American party" for Governor against E. D. Morgan. To the time of his death, many years afterward, he never failed to make at least one visit yearly to the Comptroller's office, and always maintained a lively interest in its affairs. After one term of service Mr. Burrows was succeeded by Sanford E. Church, a lawyer and a Democrat, also of Albion. Mr. Church had been a Member of Assembly from Orleans county in 1842; District Attorney of the same county from 1846 to 1850; Lieutenant-Governor from 1850 to 1854. He ran for re-election as Comptroller in 1859 and was defeated, and again in 1863 and was also defeated. He was elected one of the Delegates-at-Large to the Constitutional Convention in 1867, and was Chief Judge of the Court of Appeals from May, 1870, to May 20, 1880, when he died. In all these various positions Mr. Church showed a broad, liberal spirit, and great mental force. His reports as Comptroller are valuable State papers, expressed in clear, strong and forcible language. It is sufficient to say of Judge Church, that, as Comptroller, he brought the same care, attention and strong mental grasp to his duties that afterward won for him eminence and fame as Chief Judge of our highest court. Robert Denniston, a gentleman farmer and Republican, of Salisbury's Mills, became Comptroller January 1, 1860, having been elected at the November election of 1859 over Sanford E. Church. He had been Assemblyman from Orange county in 1845, and Senator from the second district in 1841, 1842, 1843, 1844, 1845, 1846 and 1847, and had been an unsuccessful candidate against Mr. Church for the office of Comptroller in November, 1857. He was thus Comptroller in the first year of the war, at the inauguration of high taxes and the large expenditures of that period. His administration was wise and conservative. On January 1, 1862, Lucius Robinson, an able lawyer of Elmira, assumed the duties of the office. Mr. Robinson was a Democrat, but at the breaking out of the war he was strongly for the Union cause, and it was on the Union ticket that he was elected Comptroller, and he was re-elected on the same ticket in 1863. At the close of the war, he resumed his place in the Democratic party, from which he had never been fully estranged. He ran as a Democrat against Thomas Hillhouse, in 1865, and was beaten. He had been District Attorney of Greene county from 1837 to 1839, and Member of Assembly from Chemung county in 1860 and 1861. He was re-elected Comptroller in November, 1863, and again in November, 1875. He was a member of the Constitutional Commission of 1872, Governor of this State for the years 1877, 1878 and 1879, and defeated for re-election in November, 1879, by Alonzo B. Cornell. He was Comptroller during the dark days of our Civil War. At no period, however, of its history was the work of the office more carefully managed. For the six years from 1860 to 1866, the canal and general fund debts were reduced $8,000,000. In the four years of the war, the State expenditures for arms, bounties, clothing, equipments and various military purposes were upwards of $20,000,000. To meet these large and abnormal expenses, required of the Comptroller resourceful ability. When specie was at a high premium in 1863 and 1864, Mr. Robinson earnestly recommended the payment of the State's bonded debt, both principal and interest, in specie. The Legislature, however, disregarded the recommendation. There was precedent in the office for such a course. Comptroller Flagg, upon the suspension of specie payment in 1837, made good the difference between the depreciated currency and coin. Comptroller Allen followed the lead of Mr. Robinson, and urged the payment of these debts in coin. This was not done, however, until 1870, when the State went into the open market and bought coin to pay the interest on its bonds, and continued this policy until the resumption of specie payment in 1879. This course, however, was not pursued with reference to the bounty debt. In 1865, against the advice and almost protest of the Comptroller, the Legislature assumed the bounty debt of the various counties of the State, and for that purpose it became necessary for the State to issue its bonds to the amount of $27,644,000. The act authorizing the creation of the debt provided for a sinking fund, and the managing of this fund and the issuing of the bonds was given to the Comptroller. This debt was extinguished year by year until it disappeared from the Comptroller's books in 1877. It was during Mr. Robinson's term, in 1863, that $66,000 were appropriated to purchase the lands adjoining the then Capitol, and bounded by State, Hawk and Congress streets. This was probably the first money expended on "That lofty pile where senates dictate laws." [Illustration: Tho Hillhouse (signature) _20th COMPTROLLER_] In 1862, the Legislature placed an item in the appropriation bill which still remains law. It provides that the Comptroller shall not draw his warrant, except for salaries and regular expenses, until the person entitled to the money shall present a detailed account, verified by affidavit as to services; and if for traveling expenses, a detailed account specifying the distance and places from and to which, and receipted vouchers for all disbursements. By chapter 419 of the Laws of 1864, the officers of all hospitals, orphan asylums, benevolent associations, educational and charitable institutions were required to report to the Comptroller their financial condition, with their receipts and disbursements. The Comptroller was, by concurrent resolution of the Legislature, the same year appointed, with the Governor and the Secretary of State, to take action properly to receive the returning veterans, and for the health of the recruits. Mr. Robinson was a man of great executive force, strict honesty, and with the courage of his convictions. He was succeeded by Thomas Hillhouse on the 1st of January, 1866, Mr. Hillhouse having been elected in November, 1865. He was a gentleman farmer and a Republican from Geneva, and had been Senator from the twenty-sixth district in 1860 and 1861, and Adjutant-General of the State from August 19, 1861, to January 1, 1863. He still survives as the honored president of the Metropolitan Trust Company, of New York. Thurlow Weed in his autobiography says: "For my direct responsibility in the selection of Bates Cook, John A. Collier, Millard Fillmore, Washington Hunt, Philo C. Fuller, James M. Cook, Robert Denniston and Thomas Hillhouse, I look back with pardonable pride, for in few ways could better service have been rendered to the State and people." Mr. Hillhouse certainly deserved the confidence reposed in him. He was careful, conservative and able. On January 1, 1868, Mr. Hillhouse gave way to William F. Allen, a distinguished lawyer and a Democrat, of Oswego. Mr. Allen served as Member of Assembly from Oswego in 1843 and 1844, and was appointed United States District Attorney in 1845, and was appointed Judge of the Supreme Court in the fifth district in 1847, and elected to the same position in the fall election of 1855. He was re-elected Comptroller in November, 1869, but resigned June 14, 1870, to accept an appointment as Judge of the Court of Appeals. This latter place he held with great distinction until his death, in June, 1878. In 1864 he was the slated Democratic candidate for Governor. Horatio Seymour was then Governor, and Mr. Allen's friends at least understood that Mr. Seymour wished a renomination as a compliment, but would decline. To their consternation, however, Mr. Seymour came before the convention, thanked its members for the honor done him, and accepted. It was during Mr. Allen's administration that the Comptroller was authorized to appoint an agent to examine into the reports submitted to him by the various charitable institutions. By chapter 281 of the Laws of 1870, the Comptroller was made, _ex-officio_, a member of the State Commission of Public Charities. Judge Allen was distinguished by talents of the highest order, and his long public career was a useful one to the State. [Illustration: W F Allen (signature) _21st COMPTROLLER_] It is an interesting political fact that in the campaign of 1869 Judge Allen had as his opponent in the run for Comptroller Horace Greeley. Mr. Greeley's election was earnestly opposed by many of the leading Republicans of the State. A letter of Thurlow Weed was made public, in which he appealed very strongly to the people of the State to vote against Mr. Greeley. He based his opposition quite largely upon the fact that Mr. Greeley's time would have to be divided between his editorial duties in New York and the Comptroller's office in Albany. He then went on to say: "The office of Comptroller is most laborious and responsible. I have known its incumbents for considerably more than half a century. Among them were Archibald McIntyre, John Savage, William L. Marcy, Silas Wright, Jr., Azariah C. Flagg, John A. Collier, Washington Hunt, Philo A. Fuller, James M. Cook, Thos. Hillhouse and others, distinguished for ability and industry, not one of whom have attempted to attend to any other business, and all of whom found constant and full occupation, physical and mental, in the discharge of their public duties. Without regard to other reasons for withholding my vote from Mr. Greeley, I consider those which I have stated sufficient. In his opponent, William F. Allen, I found a capable and enlightened man, with some experience, much industry and peculiar fitness for the duties of the office. I have known him first, as an able and useful member of our Legislature, and next as an eminently upright judge." Upon the resignation of Judge Allen, Asher P. Nichols, a lawyer and Democrat, of Buffalo, was appointed, and, in the fall of the same year, 1870, he was elected to fill the unexpired term. He had been previously a State Senator from the thirty-first district in 1868 and 1869. He ran for the office of Comptroller in 1871 and again in 1873, and was defeated both times by Nelson K. Hopkins. Mr. Nichols was a man of ability, who commanded the highest respect of those who knew him. He was distinguished somewhat for an old-time formal courtesy of manner. It is fair to Mr. Nichols to say that the deficiency in the treasury which Mr. Hopkins found upon his advent was not due to him, or to lack of recommendations on his part, but rather to the attempt of the Tweed _regime_ in the Legislature to make a tax rate that would continue them in power. "Among the faithless, faithful only he." [Illustration: A. P. Nichols (signature) _22d COMPTROLLER_] Mr. Hopkins was a lawyer and a Republican from Buffalo, and he entered upon the discharge of the duties of the office on January 1, 1872, and continued therein for four years. This was the beginning and the end of his career in State politics, but in those four years he left a record of splendid and faithful work. He found upon his entry into office that there had been for several years a growing deficiency in the general fund. In 1869 the excess of appropriations over receipts was $1,493,181.28; in 1870, $2,355,927.40; in 1871, $2,748,595.56; in 1872, $1,785,762.97; in 1873, $254,253.53; making for the five years an aggregate deficiency of $8,637,720.74. The money to the extent of this deficiency had been supplied to the treasury by using the moneys from the bounty debt sinking fund. Heroic treatment was necessary, so disregarding political effect Mr. Hopkins advocated and secured the adoption of the highest tax rate in the history of the State, to wit, nine and three-eighths mills on the dollar, and three and one-half mills of this amount went to make up the deficiency. In this way the bounty debt sinking fund was again made good. In 1873 the Comptroller was given power to examine into the affairs of the prisons, with the power of a court of record to subpoena witnesses, etc., and the same year he was authorized in person, or by agent, to visit the various State institutions and examine their books, papers and vouchers, both of which powers are still inherent in the Comptroller's office. The same year he was authorized to set aside cancellations of tax titles made by him whenever it appeared that fraud, misrepresentation or the suppression of a fact, or a mistake of fact, had induced the cancellation. This power, with slight modification, still remains. [Illustration: N K Hopkins (signature) _23d COMPTROLLER_] During Mr. Hopkins' four years of service the bounty debt was reduced $14,401,700, and he was able to congratulate the Legislature and the people of the State at the close of his term on the prospect of a substantial reduction of tax. On the 1st of January, 1876, Lucius Robinson again assumed the office of Comptroller, which he held one year. He had defeated in the election the November preceding Francis E. Spinner, whose services and signature are so well known as to make comment unnecessary. His second administration of the office was distinguished by the same care-taking ability which was manifest in the first. The reduction of the bounty debt and other indebtedness of the State continued. He was elected Governor in 1876. The first official act of Governor Robinson was the appointment of Frederic P. Olcott, of Albany, as Comptroller. It is a matter of secret political history that Governor Tilden had desired to appoint Daniel Magone to the office, and that for that reason Mr. Robinson would not resign until it was too late for Governor Tilden to act. But he had to act promptly, because, if no appointment were made before the Legislature convened, the power to fill the vacancy would then be in that body. Governor Robinson improved the fleeting moment. Mr. Olcott, as the head of the firm of F. P. Olcott & Co., had been the State's agent in transactions relating to the bounty debt, and, to Mr. Robinson's mind, he had exhibited abilities which would make of him a valuable Comptroller. That the Governor was not mistaken, Mr. Olcott's career, both as Comptroller, and since his retirement from that office, as president of the Central Trust Company, abundantly proves. He served out Mr. Robinson's unexpired term, and was elected in November, 1877, over C. V. R. Ludington, but was defeated for re-election in 1879 by James W. Wadsworth. This was the only political office which he ever held. Early in his term his attention was attracted to the abnormal quantities of soft soap which one of the small State charitable institutions was using, and he became satisfied that "soft soap," like Pickwick's "warming pan," was a cover for something hidden. Among the vouchers for May and June, 1875, were vouchers for seventy-eight barrels of soft soap at a cost of $350, which, at the same rate, would make an aggregate of $2,100 per year. The aggregate expenditure for soft soap for the institution during the six years ending June 30, 1876, had been $3,963.60. An investigation was instituted at the Comptroller's request by the State Board of Charities, and it was found that "soft soap" in that instance meant the laying out of roads and beautifying grounds to an extent that the Comptroller's office would not have paid. The designing institution learned to its surprise that the Comptroller could not stand too much "soft soap." These revelations led the Comptroller to ask the Legislature for power to investigate thoroughly all the charitable institutions. This work was ably done by Edgar K. Apgar, who made an admirable report, and this report was the means of establishing a more thorough and systematic supervision of these institutions by the Comptroller's department. In his report, transmitted to the Legislature on the 1st of January, 1878, Mr. Olcott said: "Each of these institutions is now separate and distinct from its fellows, and each is governed by a local board of trustees. It is evident, therefore, that there is no general system governing all, but each is a law unto itself. There is no department of government which exercises any supervision over their affairs or that has more than a superficial knowledge of the manner in which they are conducted. * * * I would recommend for your consideration the policy of abolishing all local boards of trustees and the erection of a system by which the different institutions shall be managed by one controlling power. As it is, the responsibility for losses and expensive management is not centred in any one." [Illustration: F P Olcott (signature) _24th COMPTROLLER_] [Illustration: James Wadsworth (signature) _25th COMPTROLLER_] On the 2d of May, 1878 (the good faith of Olcott's work in handling the bounty bonds having been called in question), he sent a communication to the Legislature which more than proved the faithful and able manner in which he had performed his duties in respect to these bonds. The report was called out by a resolution of the Senate. Some strongly partisan members believed that they could unearth thereby, if not crookedness, at least large compensation for services performed. The attempt failed signally. Mr. Olcott's administration of the office ranks with the ablest. James W. Wadsworth, a gentleman farmer and Republican, from Geneseo, became Comptroller January, 1, 1880, and was one of the youngest men who have held the office. He had as a boy served with his father, the gallant and lamented General James S. Wadsworth in the Civil War. He was Member of Assembly from Livingston county in 1878 and 1879, and was distinguished in the latter year as the only Republican in the Legislature who would not vote for the return of Roscoe Conkling to the United States Senate, and that, too, notwithstanding the fact that Mr. Conkling had been duly nominated by a Republican caucus. Mr. Conkling and he afterwards forgot differences and became quite warmly attached. He ran again for Comptroller in 1885 but was defeated. He has faithfully represented a discriminating constituency in the Forty-seventh, Forty-eighth, Fifty-second, Fifty-third and Fifty-fourth Congresses, and has been re-elected to the Fifty-fifth. Mr. Wadsworth took great interest in the affairs of the office during his term, and his sterling integrity and good judgment made him a most excellent officer. In 1880, by chapter 100, the Comptroller was authorized to issue bonds in anticipation of the State tax, payable on or before the fifteenth day of May following, such bonds not to exceed in amount one-half of such tax. It was necessary for Mr. Wadsworth to inaugurate the system of collecting taxes on corporations. The original bill for that purpose was passed in 1880. It has been amended from time to time, but the whole duty of enforcing it has remained in the Comptroller. The number of corporations taxed in 1881 was 954, and the amount collected $1,539,864.27; the number in 1886 was 1,249, and the amount collected $1,239,864.16. In 1892 there were 1,780 corporations paying, and the amount collected was $1,430,719.86. In 1896 the number of corporations was 4,401, and the amount collected was $2,165,610.12. The amount of capital represented by these 4,401 corporations is believed to be fully $766,000,000. Mr. Wadsworth gave place on January 1, 1882, to Ira Davenport, a capitalist and a Republican of Bath. Mr. Davenport had represented the twenty-seventh district in the State Senate in 1878, 1879, 1880 and 1881, and was elected Comptroller over G. H. Lapham. He was defeated for re-election as Comptroller by Alfred C. Chapin, November 6, 1883. In 1885, he received the Republican nomination for Governor, but was defeated by David B. Hill. He was a member of the Forty-ninth and Fiftieth Congresses. On March 1, 1883, the duty of auditing the canal accounts, after having been performed for thirty-five years by a separate officer--the Canal Auditor--was placed in the Comptroller's office, where it still remains. The confidence which the Republican party had shown in Comptroller Davenport was not misplaced. He was a man of high character and attainments, and performed the duties of the office of Comptroller with success. [Illustration: M Davenport (signature) _26th COMPTROLLER_] Alfred C. Chapin, a lawyer and a Democrat, of Brooklyn, entered upon the discharge of his duties January 1, 1884. He was Member of Assembly from the eleventh Kings county district in 1882 and 1883, and in the latter year was chosen Speaker of that body. He was re-elected Comptroller in 1885 over Mr. Wadsworth. He has, since his service as Comptroller, served four years as Mayor of Brooklyn, from January 1, 1888, to January 1, 1892, and is now about ending a term as State Railroad Commissioner. In 1891, he was a prominent candidate for Governor before the Democratic convention, but was beaten by Roswell P. Flower. Mr. Chapin is an educated and cultivated gentleman, and as Comptroller was not afraid to run counter to established ideas. He strongly recommended, in a special message to the Legislature in 1885, and subsequently in his annual reports, the abolition of the common school fund, and its transfer to the treasury. By chapter 483 of the Laws of 1885, the Legislature laid a tax of five per cent upon collateral inheritances. This inaugurated a system of taxing transfers at death, which has come now to yield annually about $2,000,000. The Comptroller was largely intrusted with the duties of enforcing this law. It was amended in 1891 by making a tax of one per cent upon all direct inheritances. In 1886, the Comptroller was authorized to approve the bonds of banks designated as depositories of the funds of State institutions. The same year, the Comptroller was directed to make assessments on the various companies liable therefor to meet the expenses of the Subway Commissions in the cities of New York and Brooklyn--a duty which still rests on the office. In 1887, he was authorized to sell or exchange detached lands in certain counties of the Forest Preserve, upon the recommendation of the Forest Commission and the Attorney-General, the purpose being to consolidate the State's holding of lands in the Adirondack Park. The same year a tax was laid on racing associations for the benefit of agricultural societies to improve the breed of horses, etc., and the collection of this tax has since remained a part of the duty of the Comptroller, notwithstanding the various vicissitudes through which racing and pool bills have passed. At the November election, in 1887, Edward Wemple was elected Comptroller over Jesse S. L'Amoreaux. Mr. Wemple was a manufacturer and Democrat, residing at Fultonville. He was a Member of Assembly from Montgomery county in 1877 and 1878, and a Member of the Forty-eighth Congress, but was defeated for re-election to that office by George West. He served in the State Senate from the eighteenth district in 1886 and 1887. He was re-elected Comptroller in 1889 over Martin W. Cooke. In 1888 the Legislature passed an act requiring the agent and warden of each of the State prisons to file with the Comptroller a bond, approved by the Superintendent of State Prisons and Comptroller, in a penalty of not less than $50,000, to be fixed by the Comptroller. The same year the Legislature declared that the Board of Claims should have no jurisdiction over private claims required to be presented to the Comptroller for audit, until after his action on the claim. It further required all public officials and other persons receiving or disbursing moneys of the people of the State to deposit the same in some solvent bank or banking institution, to be designated by the Comptroller, and that every bank receiving such moneys should execute a bond to the people, to be filed with and approved by the Comptroller. By chapter 586 of the Laws of the same year the Comptroller, the Superintendent of State Prisons, and the President of the State Board of Charities, were constituted a board to fix the prices of all goods manufactured in the penal institutions of the State for the use of other State institutions. All these provisions of law are still in force, except that the board to fix prices has been changed by the addition of the State Prison Commission and Lunacy Commission, and by omitting the President of the State Board of Charities. In 1889 the right of the Comptroller to supervise the financial affairs of the prisons was enlarged, and the agent and warden required to make monthly reports of receipts and expenditures to him. He was also allowed to revise and readjust the accounts theretofore settled under the Corporation Tax Law. In 1890 he was made a member of the "Board for the Establishment of State Insane Asylum Districts and other purposes," together with the State Commission in Lunacy and President of the State Board of Charities. In 1891 an act was passed requiring all institutions receiving moneys from the State treasury for maintenance, in full or in part, to deposit their funds in some responsible bank or banking house, to be designated by the Comptroller. He was also authorized to appoint commissioners to hear evidence and take proofs on applications for cancellation of title or redemption of lands. [Illustration: Alfred C. Chapin (signature) _27th COMPTROLLER_] On January 1, 1892, Frank Campbell, a banker and Democrat, of Bath, became Comptroller. He had been chosen in the previous election over Arthur C. Wade. He had held no office previous to that time. He served one term, ran for re-election in 1893 and was defeated. He has held no office since. By chapter 651 of the Laws of 1892 the supervision of the funds deposited in court was transferred from the General Term of the Supreme Court to the Comptroller, and this work the Comptroller's office has since performed; and by chapter 681 of the Laws of the same year he was required to approve all official undertakings. In 1892 the authority was given to the Comptroller to license common carriers. He was relieved from this duty by the new Excise Law of 1896. By chapter 248 of the Laws of 1893 he, with the Secretary of State and Treasurer, was directed, before the first day of January of each year, to designate the State paper. The largest amount thus far collected in any one year under the Inheritance Tax Law was $3,071,687.09, in 1893, during Mr. Campbell's term. The amount collected under the Corporation Tax Law was increased during his term. [Illustration: Edward Wemple (signature) _28th COMPTROLLER_] On January 1, 1894, James A. Roberts, a lawyer and Republican, of Buffalo, became Comptroller. He had served as Member of Assembly from the third district of Erie county in 1879, and from the fourth district of the same county in 1880. He was unanimously renominated from the fourth district in 1891, but declined. He was re-elected Comptroller in 1895 over John B. Judson. In 1894 the Comptroller was given power to appoint appraisers in cases of tuberculosis and glanders. In the same year the chancery fund, so called, which had been managed by the Clerk of the Court of Appeals after the abolition of the Court of Chancery, was turned over to the Comptroller. This fund, amounting to $169,935.52 in securities and cash, besides real estate of the possible value of $10,000, was the residue and remainder of moneys that had been deposited in the old Court of Chancery and never called for. By a rider on the appropriation bill of that year the superintendent or other managing officer of each State charitable institution or reformatory in the State was required to estimate monthly, in detail, the articles required by his institution for the ensuing month. The expenditures were to be limited to the estimates, and the treasurers were required to make monthly reports of their expenditures. This inaugurated substantially the same system, with reference to the expenditures of other charitable institutions, that was then used by the Lunacy Commission with reference to the hospitals. In 1895 this last provision was made more definite and explicit. The Comptroller was authorized the same year to appoint a second deputy, who was to have the same powers as the Deputy Comptroller. Twice before in the history of the office there had been a second deputy, but, after the continuance of the office for a few years, in each case it had been abolished. Chapter 79 of the Laws of 1895 provided for the issuing of canal bonds and created a sinking fund for their redemption. The issuing of the bonds and the care of the sinking fund were intrusted to the Comptroller. The same year the trustees of the Saratoga monument were authorized to transfer the property held by them to the State, and the Comptroller was made custodian of the monument. [Illustration: Frank Campbell (signature) _29th COMPTROLLER_] While in the hundred years there have been thirty Comptrollers, there have been but eleven Deputy Comptrollers. Upon the passage of the act authorizing the appointment of a deputy, in 1811, Comptroller McIntyre appointed John Ely, Jr., and he held the position until 1822. He was succeeded by Ephraim Starr, who continued in the position until 1828. In 1828 Mr. Marcy appointed as deputy Philip Phelps, and, with the exception of two years, from February 28, 1840, to February 28, 1842, this being substantially the administration of Bates Cook, when the office was filled by W. W. Tredwell, Mr. Phelps held the place until 1876, or in all for forty-six years. It was long felt that his services were indispensable, and while Comptrollers might come and Comptrollers did go, the deputy seemed likely to go on forever. It is related that late in his official career he found himself growing footsore and lame, and no longer able to stand at his desk, as had been his custom, and scarcely able to reach the office, and there was talk of his resignation, and grave fears for the future finances of the State were expressed. In this emergency an attentive clerk found that the floor where the deputy had so long stood had been worn away so that an obdurate nail protruded, and it was standing upon this nail which had worked the woe. One blow of the hammer saved the State. Mr. Phelps was an able man, and his services in the office made him invaluable to the frequently-changing Comptrollers. At his death high testimonies to his worth and character were given by Sanford E. Church, Thomas Hillhouse, Wm. F. Allen, Robert H. Pruyn, John V. L. Pruyn, and many others. A meeting of State officers was held, at which Wm. Dorsheimer, then Lieutenant-Governor, presided, and resolutions expressing his great worth and service were adopted. It was well said that "no prospect of pecuniary advantage could swerve him from the strictest line of truth and justice." Mr. Phelps was succeeded by Henry Gallien, who worthily filled the office from 1876 to 1884, when he died. Thomas E. Benedict held the office from 1884 to 1886. He has since been Deputy Secretary of State and Public Printer at Washington, and in all positions has acquitted himself as an able and upright man. Charles R. Hall succeeded to the office for a little more than a year, and was himself succeeded by Zerah S. Westbrook, who had the office for four years, from January 1, 1888, to January 1, 1892. Calvin J. Huson was Deputy Comptroller during Mr. Campbell's term. At the end of his term he was succeeded by Colonel William J. Morgan, who still holds the office. The custom seems to have grown up in these degenerate times to make the term of the deputy co-terminous with that of Comptroller. This is of doubtful propriety. Too many men of tried integrity, familiar with their duties, cannot be retained in such an office. But the danger which would naturally be expected from a frequent change in both Comptroller and deputy has thus far been avoided by the retention, through succeeding administrations, of some of the most important clerks. Willis E. Merriman has now been in service in the Comptroller's office for thirty-one years, and, having worked up from the lowest to the highest service in the department, is familiar with all its details, and his services have thus become indispensable. Upon the creation of the office of Second Deputy Comptroller, in 1895, he was appointed to that position, and he has since discharged its duties with the fidelity and intelligence with which every Comptroller for many years has found him fortunately endowed. No sketch of the office is complete without mention of George H. Birchall. He came into the office in 1883, at the time of the abolition of the Canal Auditor's office. He had served seventeen years in the last-named office. He has had charge of the canal accounts since their transfer to the Comptroller's office, and has rendered most efficient service. Messrs. Williams and Bliss came into the office in 1877, and Mr. Graham in 1882. Several employees have been in the department's service for six or eight years or more, and no department of the State government is better equipped with honest, faithful, public servants than is the Comptroller's office. [Illustration: James A. Roberts (signature) _30th COMPTROLLER_] It can be seen from the foregoing that the duties of the Comptroller's office are varied and important. The boards of which he is a member give some indication of this fact. He is _ex-officio_ a member of the State Board of Canvassers; of the Board of the Commissioners of the Land Office; of the Board of the Commissioners of the Canal Fund; of the Canal Board; of the State Commissioners of Charities; of the board to fix prices for prison made products; of the board for the establishment of State insane asylum districts, etc.; of the legislative printing board; of the department printing board, and one of the officers to designate the State paper. He manages the finances of the State so far even as to supervise the expenditures of the State institutions. He designates the banks in which funds of all institutions shall be deposited. He levies and collects the tax on corporations; supervises the collection of the transfer tax, and sells the lands of delinquent taxpayers in the counties in which are included a part of the Forest Preserve. He audits all accounts against the State; acts as a court in applications for cancellations of tax deeds or sales, and in disputed corporation tax matters; examines the court and trust funds deposited with the treasurer of every county in the State, and regulates the form of accounts and the manner of their investment, and performs many other less important duties too numerous for mention. Of the men who have held the office of Comptroller nineteen were lawyers; three were gentlemen farmers; three bankers; one a merchant; one a manufacturer; one a capitalist, and two were business men. In politics two were Federalists; fifteen Democrats (including under the word Democrats original Republicans, whether Clintonians or otherwise); four Whigs; two Anti-Masons; six Republicans, and one American or Know Nothing. [Illustration: Philip Phelps (signature) _Deputy Comptroller, 46 Years._] The total expenditures of the State for each tenth year since the establishment of the office were as follows: 1797 $322,831 37 1807 425,689 69 1817 1,296,590 88 1827 1,908,346 73 1837 4,926,449 04 1847 5,275,164 09 1857 10,176,939 70 1867 20,496,050 59 1877 [1]26,186,744 70 1887 16,771,448 98 1897 26,510,425 77 ================ [1] Includes $10,453,805.95 bounty debt. Each of these would very nearly represent the average annual expenditures for the decade which it ends. The total expenditures of the National Government for the year 1797 were $8,625,877.37, and if we deduct from this the amounts paid for interest, and payments upon the public debt, it leaves the amount of ordinary expenditure but $2,836,110.52. The ordinary expenditures of the National Government did not reach the amount expended in this State for the year 1896 until the year 1847, if we except the years 1813, 1814 and 1815, when the expenditures were abnormal by reason of the War of 1812, and if we except also the years 1837 and 1838, and in none of those excepted years did the annual ordinary expenditures very greatly exceed this State's expenditure for 1896. During the century, the State has expended for lands, construction, enlargement or permanent improvement: Of its five canals $74,347,000 00 Of its new Capitol 22,254,023 60 Of the twelve hospitals erected by it $15,204,099 59 Of its seventeen other charitable institutions 6,369,110 70 Of its forty-five armories and arsenals 3,349,543 73 Of its three State prisons 4,528,058 65 Of its twelve normal schools 1,826,350 06 -------------- Making a total expenditure for those various purposes of $127,878,186 33 =============== [Illustration: Willis E. Merriman. (signature) _2d Deputy Comptroller_ _Connected with the office 31 years_ ] Far the greater part of this money has been handled by, and drawn on the warrant of, the Comptroller, and no suspicion has ever arisen that this duty was not honestly performed. Nearly all of the sinking funds of the various bonded debts of the State have been managed by the Comptrollers, who, in these 100 years, have never been the occasion of the loss of a single dollar. Jenkins, in his political history of New York, says that the Comptroller bears the same relation to the State that the Secretary of the Treasury does to the National Government, and this is largely true. I cannot do better in closing this brief sketch of the Comptroller's office than by quoting from Thurlow Weed's autobiography. His opportunities for, and keenness of, observation make his statement of peculiar value. He says: "It seems proper to say, amid all the mutations of party, and the liability under our form of popular government to occasionally find unworthy men elevated to high places, our State has ever been singularly fortunate in its highest financial officer. We have had unfaithful men in almost every other department of the State Government. We have had, in two or three instances, comparatively weak men in the office of Comptroller, but as a rule its incumbents have been capable, firm and incorruptible." * * * * * [Transcriber's Notes: The transcriber made these changes to the text to correct obvious errors: 1. p. 19 Fom --> From 2. p. 41 place, Mr. Cook's --> place. Mr. Cook's 3. p. 70 James W. Wadworth --> James W. Wadsworth 4. p. 82 protuded, --> protruded, End of Transcriber's Notes] 
40008	----	Transcriber's Note: Every effort has been made to replicate this text as faithfully as possible. The Cornish dialect written by Captain Carter includes inconsistencies in spelling and capitalisation. Some changes have been made. They are listed at the end of the text. Blank spaces, representing missing words in the original MS., have been replaced by "[...]". Italic text has been marked with _underscores_. Text marked ^{thus} was superscripted. [Illustration] A CORNISH SMUGGLER [Illustration: LANDING THE CARGO. _F. BRANGWYN._] THE AUTOBIOGRAPHY OF A CORNISH SMUGGLER (CAPTAIN HARRY CARTER, OF PRUSSIA COVE) 1749-1809 _WITH AN INTRODUCTION AND NOTES_ BY JOHN B. CORNISH SECOND EDITION. London: GIBBINGS & CO., LTD., 18 BURY STREET, W.C. J. POLLARD, TRURO, PENZANCE, & FALMOUTH. 1900. WILLIAM BYLES AND SONS, PRINTERS, 129 FLEET STREET, LONDON, AND BRADFORD. INTRODUCTION. The existence of the Autobiography which is published in the following pages came to my knowledge in the course of a chance conversation with a distant relative of the writer's family. The original manuscript has been carefully preserved, and has been for many years in the possession of Mr. G. H. Carter, of Helston. He received it from his father, the G. Carter mentioned on page 1, who was a nephew of Harry Carter himself. The memoir of the writer, which will be found in the "Wesleyan Methodist Magazine" for October, 1831, was based upon information supplied by G. Carter, partly from the manuscript and partly from his own knowledge. It is now printed from the manuscript which was kindly lent to me for the purpose by Mr. G. H. Carter. The part of Cornwall to which the autobiography chiefly relates is the district lying between the two small towns of Marazion and Helston, a distance of about ten miles on the north-eastern shores of Mounts Bay, comprising the parishes of Breage, Germoe, St. Hilary, and Perranuthnoe. The bay is practically divided into two parts by Cuddan Point, a sharp small headland about two miles east from St. Michael's Mount. The western part runs into the land in a roughly semicircular shape, and is so well sheltered that it has almost the appearance of a lake, in fact, the extreme north-western corner is called Gwavas Lake. From the hills which surround it the land everywhere slopes gently to the sea, and is thickly inhabited. The towns of Penzance and Marazion and the important fishing village of Newlyn occupy a large portion of the shore, and around them are woody valleys and well cultivated fields. To the eastward of Cuddan is a marked contrast. There, steep and rocky cliffs are only broken by two long stretches of beach, Pra Sand and the Looe Bar, on which the great seas which come always from the Atlantic make landing impossible except on a few rare summer days. With the exception of the little fishing station of Porthleven there is not a place all along the coast from Cuddan Point to the Lizard large enough to be called a village. Inland the country is in keeping with the character of the coast. Trees are very scarce, and the stone hedges, so characteristic of all the wild parts of West Cornwall, the patches of moorland, and the scattered cottages, make the whole appearance bare and exposed. Porth Leah, or the King's Cove, now more usually known as Prussia Cove,[1] around which so much of the interest of the narrative centres, lies a little to the eastward of Cuddan Point. There are really two coves divided from one another by a point and a small island called the "Enez." The western cove, generally called "Bessie's Cove," is a most sheltered and secluded place. It is so well hidden from the land that it is impossible to see what boats are lying in the little harbour until one comes down to the very edge of the cliff. The eastern side of the point, where there is another small harbour called the "King's Cove," is more open, but the whole place is thoroughly out of the world even now. The high road from Helston through Marazion to Penzance now passes about a mile from the sea, but at the time of which Harry Carter was writing this district must have been unknown and almost inaccessible. From all accounts West Cornwall at that time was very little more than half civilised. The mother of Sir Humphry Davy (born at Penzance, 1778) has left us a record that when she was a girl "West Cornwall was without roads, there was only one cart in the town of Penzance, and packhorses were in use in all the country districts" (Bottrell, iii. 150). This is confirmed by a writer in the "Gentleman's Magazine," who says that in 1754 there were no roads in this district, the ways that served the purpose were merely bridle paths "remaining as the deluge left them and dangerous to travel over" ("Gentleman's Magazine," October, 1754); and by the official records of the town of Penzance, which show that in 1760 the Corporation went to some expense in opposing the extension of the turnpike beyond Marazion, to which place it was then first carried from Penryn (Millett's "Penzance, Past and Present"). The places of which the names are mentioned in the autobiography, but which are not shown in the map, such as Rudgeon, Trevean, Caerlean, Pengersick, Kenneggey, and Rinsey, are all in the immediate neighbourhood of Prussia Cove. They are merely little hamlets of four or five cottages each, and there is no reason to suppose that they were any larger one hundred years ago. Helston, the market town of the district, is about six miles off, and had then a population of some two thousand people. The chief interest in the autobiography is probably that which it attracts as the most authentic account of the smuggling which was carried on in the neighbourhood in the latter portion of the last century. Cornwall has long enjoyed a certain reputation for pre-eminence in this particular form of trade, and apparently not without some reason. A series of letters of the years 1750-1753 were published some years ago in the journal of the Royal Institution of Cornwall (vol. vi. pt. xxii. p. 374, "The Lanisley Letters") to a Lieutenant-General Onslow, from George Borlase, his agent at Penzance, asking that soldiers might be stationed in the district, because "the coasts here swarm with smugglers," and mentioning that a detachment ought to be stationed at Helston, as "just on that neighbourhood lye the smugglers and wreckers more than about us, tho' there are too many in all parts of this country." In his "Natural History of Cornwall," published in 1758, Dr. Borlase regrets (p. 312) that "the people of the sea coast are, it must be owned, too much addicted to carry off our bullion to France and to bring back nothing but brandy, tea, and other luxuries." This is delicate, but there can be no doubt of his meaning; and he goes on to complain that "there is not the poorest family in any parish which has not its tea, its snuff, and tobacco, and (when they have money or credit) brandy," all, we may presume, duty free. The will of Philip Hawkins, M.P. for Grampound, who died on September 6, 1738, is perhaps the most striking record, for he actually bequeathed £600 to the king to compensate for the amount of which his tenants had defrauded the Customs. That the smuggling prevailed to such an extent is not to be wondered at, for the law must have had but a very slight hold on such a rough and scattered population, living so far away from any of the large centres of England. In such a narrow country too, where no one lives very far from the sea, the miners took to smuggling as readily as the fishermen. A trip to Roscoff or Guernsey formed a pleasant change after a spell on tribute underground or working stamps. A rough, reckless, and drunken lot were these tinners, and if riots and bloodshed were more scarce in West Cornwall than in some parts, it must have been due to the judicious absence of the Custom House officials, and not to any qualities in the smugglers. George Borlase says ("Lanisley Letters") that in December 1750 a Dutch ship laden with claret was wrecked near Helston, and "in twenty-four hours the tinners cleared all," the authorities apparently not daring to interfere; and that just before this date a man who went to the assistance of the revenue officers had been killed near the same place. Beyond these I have mentioned, the literary records are very meagre, but the whole county, and especially the western part, abounds with legends. The smuggling was so universal, that every cove, and fishing village on the coast has its own stories, and everywhere the curious visitor is still shown the place where the smugglers landed their cargoes, the secret caves where they stored them, and sometimes, but not often, the places where the "officers" found them. Prussia Cove, beyond all others, has the richest store of such history. Here are little harbours cut out of the solid rock, which are now occupied by innocent fishing boats. The visitor can see a roadway partly cut and partly worn crossing the rocks below high water mark, and caves of which the mouths have been built up, and which are reputed to be connected with the house on the cliff above by secret passages. In the legends of the Cove the personality of John Carter looms so large that his associates are almost if not entirely forgotten, and everything centres around him alone. It was he who cut the harbours and the road, it was he who adapted the caves, and he is the hero of most of the tales which are told of the good old days. One of these stories is worth recording. On one occasion, during his absence from home, the excise officers from Penzance came around in their boats and took a cargo, which had lately arrived from France, to Penzance, where it was secured in the Custom House store. In due course John Carter returned to the Cove, and learned the news. What was he to do? He explained to his comrades that he had agreed to deliver that cargo to the customers by a certain day, and his reputation as an honest man was at stake. He must keep his word. That night a number of armed men broke open the stores at Penzance, and the "King of Prussia" took his own again, returning to the Cove without being discovered. In the morning the officers found that the place had been broken open during the night. They examined the contents, and when they noted what particular things were gone, they said to one another that John Carter had been there, and they knew it, because he was an honest man who would not take anything that did not belong to him. And John Carter kept his word to his customers. The story that he once opened fire on a revenue cutter from a small battery which he had made at the Cove is well known along the coast. It is characteristic of the history of the smugglers everywhere that they enjoyed the support of popular sympathy. This was certainly the case in West Cornwall, where the farmers, the merchants, and, it is rumoured, the local magistrates, used to find the money with which the business was carried on, investing small sums in each voyage. Harry Carter finding shelter at Marazion when the Government were offering a reward for his capture (p. 26), and the action of the unnamed "great man of the neighbourhood" on his return from America (p. 90), are perhaps the reverse of the picture which George Borlase drew for General Onslow ("Lanisley Letters"); "the countenance given to the smugglers by those whose business it is to restrain these pernicious practices, hath bro't 'em so bold and daring that nobody can venture to come near them with safety whilst they are at their work." It is difficult to avoid the conclusion that there must have been some powerful influence exerted in his favour to obtain his exchange from prison in France in 1778, and what else can we make of the commission to go privateering against the Americans. The Government had then recently passed a measure[2] to encourage privateering by authorising the Admiralty to grant commissions, and apparently English sailors were everywhere readily taking advantage of the opportunity so afforded for their enterprise.[3] But to obtain such a commission the applicant had to find the security of sureties, of whose "sufficiency" the commissioners were to satisfy themselves, and also to send in a written application specifying the ship for which the commission was asked, with full details as to the number of her guns and other matters. He surely could not have ventured to place himself in the hands of the Government in this way without a friend at Court. It certainly seems a fair inference from their popularity, their fame, and from the fact that they both rose to leading positions amongst the smugglers while still comparatively young, that Harry Carter and his brother John were superior men to the rough material of which their crews were probably composed. The accounts of the actual smuggling in the following pages are not very elaborate, but we must remember that at the time when Harry Carter was writing (1809), John Carter and the "Cove boys" were still at it, and Prussia Cove had not yet ceased to be a great centre of smugglers. This would also explain the absence of any more particular reference to any of his companions. This reticence, which we must respect, although we may regret it, is quite compensated by the variety of his later experiences. To have been a prisoner in France during the Reign of Terror, and at a time when the Convention had decreed that no quarter should be given to an Englishman,[4] is of itself no small claim on the attention of his countrymen. From his account, which is, I believe, unique in English literature, and especially when it is compared with those of French writers, it would seem that the English, who were, of course, prisoners of war, were placed on the same footing as the "aristocrats" and "suspects," the great number of whom made it necessary to utilise the convents and even private houses as prisons. Alexandrine des Echerolles tells us ("Private life in Public Calamities") that "Bread was distributed daily to the prisoners, and their pitchers were filled every morning with fresh water. Those who could not pay the turnkeys for their trouble got none, so the rich used to bestow alms upon the poor in this form.... Once a fortnight, I think, they were supplied with fresh straw, or what was called such, each person receiving an armful." She mentions that by degrees the prisoners managed to make themselves more comfortable by introducing tables, and chairs, and mattresses, which they were compelled to leave behind on their removal to other prisons. All this coincides very closely with Harry Carter's account, and he seems to have shared their anxiety as to the fate of his friends and the common anticipation of the guillotine. Even this does not exhaust the interest of his life. The very first lines of his writing show the object with which he wrote. In no part of England did the teaching and influence of John Wesley obtain such a hold as in Cornwall. At the time of his first visit he speaks of the natives of this distant country as "those who neither feared God nor regarded man" ("Diary," May 17, 1743); he accuses them of wrecking and of murdering those who were washed ashore, and describes their pastimes as "hurling, at which limbs were often broken, fighting, drinking, and all other manner of wickedness." The "Lanisley Letters" contain similar charges of wrecking and murder, and Dr. Borlase confirms the statement as to their drunken habits. In 1750 Wesley mentions how greatly all these things were changed. They were, perhaps, not as much changed as he thought, but undoubtedly they were greatly improved, for it is plain fact that the whole of the moral reformation of the Cornish folk is due to him. He gained followers so rapidly in the west that at the first Methodist Conference in 1744, St. Ives is classed with London, Bristol, and Newcastle; "from this it is evident," says Dr. Smith ("Hist. of Methodism," i. 213), "that London, Bristol, St. Ives, and Newcastle were regarded as the great centres of Methodism in England at this period." At the third Conference (1746) Cornwall forms one district out of seven, while the others included in some cases four and in one case six English counties. In 1750 John Wesley ("Diary," August 18) says of St. Just, "There is still the largest society in Cornwall, and so great a proportion of believers I have not found in all the nation beside." Similar societies or classes sprang up in the most remote places, such as Rugan, or Rudgeon as it is more usually spelt now, where the society met at which Charles Carter was converted; at Trevean and Caerlean, where Harry Carter preached. That especial characteristic of Wesley's organisation, "the local preacher," took root firmly in Cornwall from the very first. To those who are not acquainted with the county it may be necessary to explain that these laymen, earnest men of all classes, who preach, are so common in every village that they constitute a distinguishing feature in the local life. The services in the small wayside chapels which are so numerous are usually conducted by a local preacher in the intervals between the visits of the regular ministers. Those who do know Cornwall also know the importance of the local preacher in the history of the Methodist movement. John Wesley's preaching was received by the poor and uneducated, the miner, the fisherman, and the labourer, and the persecution of the clergy and the magistrates only strengthened the enthusiasm of the people for their great teacher. From such men sprang the first local preachers; preaching and exhorting not with the dull formality of men who had to do it, but with the earnestness of men who really felt that they had a message to deliver, and labouring under uncontrollable excitement they greatly impressed their hearers: while the familiarity of their persons led their audience to look upon this new teaching as a thing of their own to which they could all attain. It is impossible to doubt that the hold which the movement gained was greatly due to these men, and Harry Carter was one of them. John Wesley had set himself from the first against the smuggling which he found so prevalent; he had preached against it at several places, and had even published a pamphlet against it. We may therefore fairly suppose that Harry Carter, the great smuggler, was regarded as a most important accession to the ranks of his followers. The autobiography ends abruptly in the year 1795, but the writer lived until April 19, 1829. The last thirty years of his life he spent at Rinsey. He lived quietly, keeping himself occupied with a small farm, and occasionally preaching in the neighbourhood. From the memoir of him in the "Wesleyan Methodist Magazine," to which I have already referred, I cull the two further facts that he retained the intensity of his religious feelings up to his death, and that he never failed in grateful recollections of James Macculloch--the Mr. M. of his French prison experiences. Of his family I can learn but little. It is said that originally they came from Shropshire, and certainly the name does not show a Cornish origin. His father, who was called Francis, was born in 1712, and died on February 28, 1774; his mother, Agnes, was born in 1714, and died in 1784. Of the eight sons and two daughters of whom he speaks, I can only trace four of the sons besides himself. Thomas, whom he does not mention, was born in 1737, and died in 1818; and John, whom he refers to as the eldest, Francis, born in 1745, and Charles, born in 1757, and died in 1803, are all mentioned in the autobiography. His daughter, Elizabeth, as far as I can learn, died while young. In preparing the manuscript for publication I have taken the liberty of omitting some passages here and there which were simply repetitions, and which did not throw any additional light either on the narrative or his character. I have corrected all the wrong spellings which could be classed as simple mistakes, but I have carefully preserved all spellings which appeared of interest, as showing the pronunciation of the words, and especially those which illustrate the local dialect. For instance, the general preference for "a" over the other vowels, and especially in final syllables, is distinctly characteristic of West Cornwall. In some places, particularly towards the end, the manuscript is somewhat damaged, and many of the pages have lost a portion of the lower corner. The gaps so caused I have endeavoured to fill with the words which he probably used, and such words are printed in italics. Where I have been unable to suggest the missing words, I have left blanks. JOHN B. CORNISH. PENZANCE, 1900. AUTOBIOGRAPHY OF A CORNISH SMUGGLER. As it have been imprest upon my mind for sevral years to take a memorandum of the kind dealings of God to my soul, in particular these laste two or three years, I have been persuaded by sevral of my friends, in particular Mr. Wormsley and Geo. Carter. I have thought in general it would be so weak that no person of sense would ever publish it to the world, notwithstanding, this morning being 20 of Dec^{r.} 1809, I have taken up my pen, and may the Lord bring past things to my remembrance just[5] as they are, and if published to the world, may the Lord make it a blessing to every soul that read and hear it for Christ's sake, amen, amen. I have made sevral remarks at difrante times in years past of sume particular things of my experience for my own amusement, then thinking for no person ever to see it but myself only; and as I have made a general rule more or less for sevral years to have had fixed times to sit in silence to trace my whole life from 8 or 9 years of age, in particular more so since I have tasted the goodness of God, moste particular things that _I have_ past through seems to be tolerable famil_iar_ to me. I was born in the year of 1749 in Pengersick, in the parish of Breage, in the County of Cornwall. My mother had ten children, eight sons and two daghturs, eight of whom lived to maturity. My father was a miner--likewayse rented a little farm of about 12_l._ p^r year--who was a hard labring man, and brought up his family in what we caled[6] decent poverty. My oldest and youngest brothers were brought up to good country scolars, but the rest of my brothers with myself, as soon as we was able, obliged to work in order to contribute a little to help to support a large family, so that I never was keept to scool but only to read in what we caled then the great Book. As for our Religion, we were brought up like the rest of our neighbours, to say some prayers after we were in the bed, and to go to Church on particular times as occasion sarv'd us. When I was aboute 8 or 9 years old, my brother Francis was aboute four years older than me. He joined the methodist society in Rudgeon,[7] soon after found peace with God, and as him and me was moste times sleeping and waking together he revealed himself unto me, told me the place and time he received the Comfarter. I seeing such very great chainge upon him, as before time he was a very active boy, I farmely believed the report. From that time I farmley believed that except I was born again I should in no case see the kingdom of God, so that convictions followed me sharp and often, sumetimes constrained to weep bitterly. But alas! as I grew up they went fewer[8] and fainter. Aboute 9 or 10 years old went to work to stamps, and continued there until 15 or 16. I worked to bal,[9] as I think, until I was aboute 17, and from thence went with my two oldest brothers to Porthleah[10] or the King's Cove afishing and smuggling, and I think aboute 18 or 19 went at times, with Folston[11] people and sumetimes with Irish, as supercargo, whom we freighted. Before this time I larned to write, and so far so, that I would keep my own accounts. I think I might have been aboute 25 when I went in a small sloop, about 16 or 18[12] tons, with two men beside myself, asmuggling, where I had very great success; and after a while I had a new sloop built for me, about 32 tons.[13] My success was rather beyond common, and after a time we bought a small cuttar of aboute 50 tons[14] and aboute ten men. I saild in her one year, and I suppose made more safe voyages then have been ever made since or before with any single person. So by this time I begun to think some thing of myself, convictions still following sharply at times. I allwayse had a dislike to swearing, and made a law on board, if any of the sailors should swear, was poneshed. Nevertheless my intention was not pure; I had sume byends in it, the bottom of it was only pride, etc. I wanted to be noted to be sumething out of the common way of others, still I allwayse had a dislike to hear others swearing. Well, then, I think I was counted what the world cales a good sort of man, good humoured, not proude, etc. But man is short sighted, who can disarn spirets when the heart is deceitful above all thing and desparately wicked, oftentimes burning and boiling within in a blaze of passion, though not to be seen without. Nevertheless in the meantime was capable to be guilty of outward sins the same as others of my companions, and often[15] times, when went out on a party, crying and praying to keep me from a particular sin, was often the first that was guilty of committing it. Then conchance,[16] after staring me in the face, oh what a torment within I feelt.[17] So I went on for many years sinning and repenting. Well, then, in the cource of these few years, as we card[18] a large trade with other vessels allso, we gained a large sum of money, and being a speculating family was not satisfied with small things. Built a new cuttar, aboute 197[19] tons, then one of the first in England; expecting to make all our fortunes in a hurry. I was in her at sea in Dec^{r.} 1777, made one voyage about Christmas. Returning to Guarnsey light, sprung the bowspreat; was recommended from Guarnsey to St. Malos for a bowspreat, and for the want of Customhouse papars and proper despatchis was seized upon by the admiralty of the above place, where they unbent the sails, took them onshore, and confined us all on board with a gard of soldars as presoners, allowing two men to be on deck only at a time; likenwayse their orders was for no person to come alongside, no letters to pass or repass. But the comanding officer I soon got in his favour, that I conveyed letters onshore, and sent an express to Guernsey, likewayse to Roscoff, when there was soon certificates sent them to certify what I was, as they stopped me under the pretence of being a pirate; their pretence nevertheless was not altogether unreasonable, I having sixteen carriage guns on board and thirty-six men without any maritime pass, or anything to show for them. Notwithstanding they certainly knew what I was. I think it was on the 30 Jan. 1778, and I think the latter end of March[20] there was an embargo laid on all English bottams. They keept me on-board with all the people until I think the 1 May, when they took me onshore in order to examine me, and about four o'clock sent with a strong gard unto the Castle. This was a strange seeing unto me, the first prison I ever saw the inside of, the hearing of so many iron doors opening, etc. So I was put up to the last floor in the top of that very high Castle, in a criminal jail, where there were a little short dirty straw, etc. So after looking round a little to see my new habitation, I asked of the jailor to send me a chair to sit on, and sumething to eat, as I took nothing for the day, then seeming to be in tolarable spirits; but as the jailor left me, hearing the rattling of the doors and the noise of the keys, I begun to reflect, where am I now? I shall shorley never come out of this place whilst the war lasts, shorley I shall die here, etc. I suppose in the course of an half hour heard the doors and keys as before for a long time before I saw any person, so in came a man with a chair, my bed, and a little soup, etc. Well, then, I sat myself down in the chair, looked at my dinner, etc., but then begun to weep bitterly. I had not loste only my liberty but the cuttar also, which was my God. My liberty was gone, my honour, my property, my life, and my God, all was gone; and all the ten thousand pounds I expected to get privateering was gone, as there was a commission sent for me against the Americans before I left home. There I walked the dismal place bewailing my sad case. But in the space of aboute two hours two or three of my people were sent to join me, and before night I think about eighteen of us, small room full. Then we begun to sing and make a noise, so that sume of my fears vanished away; hope of life sprung up, and as the Franch was such flatterers in general, a very little hope for the cuttar, etc. The remainder of the ship's company put in the town criminal jail. We was all keept in prison until aboute the 20 or 21 day of the same month, when early in the morning were took out by a strong gard of soldars, sent to Dinan prison of war, where we had then plenty of room, etc. I suppose we were aboute six or seven of us that every evening joined to sing psalms in parts, etc. But this would not satisfy me, I know there was no Religion in this at all, but one night as I was asleep, as we lay on the floor side by side, I dreamed that I heard like the voice of an angel saying unto me, "Except thou reform thy life, thou must totally be lost for ever." There was something more that he said, but I cannot now remember it. When I awaked I was in a lake, sweat from head to foot, and all my body in a tremble. Nothing but fear and horror upon my mind. The next day I passed much to myself, very serious and sad, not one smile on my countenance, but keept[21] it all to myself. Took great care to lett no person know anything of the mattar. Well, then, as Cain went to build a city in order to divert his mind, I begun to larn navigation, and so loosed my convictions little and little, that in the course of aboute a fortnight I could do the same as I formely uste to do. I think I was in prison aboute five or six weeks until my oldest brother John[22] was brought to join me, as he come to St. Malas just after I was stopped, from Guarnsey, with certificates from the Governor, etc., in order to try to liberate the cuttar and me. Well, then, this allmoste so great tryal as any, he being the head of the family, and thought the business muste come to an end at home. We was keept both in preson until, as I think, sume time in August, and was sent on parol about forty miles in a town called Josselin. However, we was keeped in difrante places in the country until I think the latter end of Nov^{r.} in 1779, when we were private exchanged by the order of the Lords of the Admiralty in the room of two French gentlemen sent to France in our room. And then to come by the way of Ostend, being, as well I can remember, aboute five hundred miles. From thence came by the way of London, and arrived at home the 24 Dec^{r.} in the same year. We found the family all alive and well, but with the loss of the cuttar, and the business not managed well at home, as my brother was then a presoner, and wanting from home aboute two years, the family in a low state. Nevertheless, he being well respected with the Guarnsey marchants, was offered credit with many of them. So went on again in freighting of large vessels, and had very good speed for sume time. I went again in the little cutter I had before, aboute 50 tuns.[23] And after making two or three voyages to the King's Cove, went with a cargo on the coast of Wales. In order to smuggle it, went onshore to sell it. Left the cuttar to anchor near the Mumbles, where an information was given to an armship called the "Three Brothers," that lay sume distance from there. And aboute that time there had been some large privateers' cuttars on that coast from Dunkirk, and had taken many prizes, manned and commanded chiefly with Irishmen. My cutter was represented to be one of them, namely, the "Black Prince," mounting sixteen guns and sixty men. I had then in the cutter about six men and three beside myself onshore. When they saw the armship coming upon them, cut the cable and went to sea; and when the ship gave up the chase from the cuttar, sent his boats onshore, took up the cutter's cable and anchor, and found me onshore. I having left my commission on board, and had nothing to show who or what I was, took me on board the ship as a pirate, and after examining me in the cabin for two or three hours, detained me as a prisoner for twelve weeks until I was cleared by my friends at home through the Lords of the Admiralty. So after I was at home some time, riding about the country getting freights, collecting money for the company, etc., etc., we bought a cuttar aboute 160 tons,[24] nineteen guns. I went in her sumetime asmuggling, and had great success. We had a new luggar built, which mounted twenty guns, and both went in company together from Guarnsey, smuggling along the coast, so that by this time I begun to think sumething of myself again. Nevertheless convictions never left me long together. But in the course of this time, being exposed to more company and sailors of all descriptions, larned to swear at times. And once, after discharging our cargo, brought the both vessels to an anchor in Newlyn[25] Road, when we had an express sent us from St. Ives of a large cuttar privateer from Dunkirk, called the "Black Prince," had been on that coast and had taken many prizes to go out in pursuit of her. It was not a very agreeable business, notwithstanding for fear to offend the collector,[26] we put round the both vessels to St. Ives Roade, and after staying there two or three days, the same cutter hove in sight Christmas day in the morning. We not having our proper crews on board, colected a few[27] men together, and went to sea in pursuit of him. Soon come up with him, so that after a running fight for three or four hours, as we, not being half manned, and the sea very big, the shots so uncertain, the luggar received a shot that was obliged to bear up, and in the course of less then an hour after I received a shot that card of my jib, and another in the hull, that we could hardly keep her free. So that we bore up after the luggar, not knowing what was the matter of her running away. We came up with her aboute five in the evning. Desired the Captain to quitt her, but he, in hope to put her into Padstow, continued pumping and bailing until aboute six, when he hail'd me, saying, stand by him, he was going to quitt her. So that they hoisted out their boate, but the sea being so bigg and the men being confused, filled her with water, so that they could not free her nomore. I got my boat out in the meantime, sent her alongside the luggar, so that some of the men jumpt over board, and my boate pickt them up, and immediately the luggar went down. I hove to the cuttar and laid her to, that she drifted right over the place that the luggar went down, so that some of the men got on board by virtue of ropes hove from the cuttar, sume got hold of the jib tack, and sume pickt up by the cuttar's boate, so that we saved alive seventeen men and fourteen drowned. As Providence would have it was aboute the full of the moon, or certainly all must be lost. This was scene indeed. What cries! what screeches! what confusion was there! We stayed some little time there cruising aboute the place, but soon obliged to get the cuttar under a double reefed trysail, a heavy gale of wind ensuing, and bore up for the Mumbles. Now I am going to inform you of a little more of my pride and vanity, the spirit of truth had not as yet forgot to strive with me. Before we come up with the privateer, in expecting to come to an engagement, oh, what horror was upon my mind for fear of death, as I know I must come to judgment sure and sartin. If I died, I should be lost for ever. Notwithstanding all this I made the greatest outward show of bravery, and, through pride and presumption, exposed myself to the greatest danger. I stood on the companion until the wad of the enemies' shot flew in fire aboute me, and I suppose the wind of the shot struck me down on the deck as the shot took in the mainsail right in a line with me. One of my officers helpt me up, thought I was wounded, and he would not suffer me to go there nomore. This was a great salvation, and that of God, and not the only one; for all so many hundreds of shot have flyed around me, I never received somuch as a blemish in one of my fingers; but I can remember for many years before this, whenever I expected to come to an engagement, I was allwayse struck with horror of mind, knowing I was not fit to die; and since I have tasted of the goodness of God, I have thought that the greatest hero in the Army or Navy, as long as the spirit of Truth continue to strive with them, even Anson, is struck with the like feelings; and if ever I hear of a coward, I know this is the cause of it. In the year of 19th April, 1786, I was married to Elizabeth Flindel, of Helford, in the parish of Manaccan, and in April 19, 1787, she bore me a daughter, who was called after her mother's name, and I think it was aboute midle of Nov^{r.} I went in a luggar, asmuggling, about 140[28] tons, mounting sixteen carriage guns. After making one voyage at home to the King's Cove I got a freight for Costan,[29] and as I depended on them people to look out if there were any danger, according to their promise, came into the Bay, and after sume time spoke with a boate from the above place, saying it was a clear coast, there was no danger to bring the vessel up to anchor, and we should have boats enough out to discharge all the cargo immediately. So that I brought the vessel to anchor, leaving the jib with the trysail and mizen set, and begun to make ready, opening the hatches, etc., when I saw two boats rowing up from the shore. I said to the pilot, "There is two boats acoming." He answered, "They are our boats coming to take the goods out," etc. Soon after a boat come alongside. "Do you know these is two man-o'war's boats?" We immediately cutt the cable, and before the luggar gathered headway were right under the starn. They immediately cutt off the mizen sheet, and with a musket-shot shot off the trysal tack and boarded us over the starn. My people having sume muskets, dropt them down and went below. I knowing nothing of that, thought that all would stand by me. I begun to engage them as well as I could without anything in my hands, as they took us in surprise so suddenly, I having my great coat on buttoned aboute me, I seeing none of my people, only one man at the helm; and when they saw no person to oppose them, turned upon me with their broad swords, and begun to beat away upon my head. I found the blows very heavey--crushed me down to the deck--and as I never loosed my senses, rambled forward. They still pursued me, beating and pushing me, so that I fell down on the deck on a small raft just out of their way. I suppose I might have been there aboute a quarter of an hour, until they had secured my people below, and after found me laying on the deck. One of them said, "Here is one of the poor fellows dead." Another made answer, "Put the man below." He answered again, saying, "What use is it to put a dead man below?" and so past on. Aboute this time the vessel struck aground, the wind being about East S.E. very hard, right on the shore. So their I laid very quiet for near the space of two hours, hearing their discourse as they walked by me, the night being very dark on the 30 Jan^{y.} 1788. When some of them saw me lying there, said, "Here lays one of the fellows dead," one of them answered as before, "Put him below." Another said, "The man is dead." The commanding officer gave orders for a lantern and candle to be brought, so they took up one of my legs, as I was lying upon my belly; he let it go, and it fell as dead down on the deck. He likewayse put his hand up under my clothes, between my shirt and my skin, and then examined my head, and so concluded, saying, "The man is so warm now as he was two hours back, but his head is all to atoms." I have thought hundreds of times since what a miracle it was I neither sneezed, coughed, nor drew breath that they perceived in all this time, I suppose not less than ten or fifteen minutes. The water being ebbing, the vessel making a great heel towards the shore, so that in the course of a very little time after, as their two boats was made fast alongside, one of them broke adrift. Immediately there was orders given to man the other boat in order to fetch her; so that when I saw them in the state of confusion, their gard broken, I thought it was my time to make my escape, so I crept on my belly on the deck, and got over a large raft just before the main mast, close by one of the men's heels, as he was standing there handing the trysail. When I got over the lee-side I thought I should be able to swim on shore in a stroke or two. I took hold of the burtins[30] of the mast, and as I was lifting myself over the side, I was taken with the cramp in one of my thighs. So then I thought I should be drowned, but still willing to risk it, so that I let myself over the side very easily by a rope into the water, fearing my enemies would hear me and then let go. As I was very near the shore, I thought to swim onshore in the course of a stroke or two, as I used to swim so well, but soon found out my mistake. I was sinking almost like a stone, and hauling astarn in deeper water, when I gave up all hopes of life, and begun to swallow some water. I found arope under my breast, so that I had not lost all my senses. I hauled upon it, and soon found one end fast to the side just where I went overboard, which gave me a little hope of life. So that when I got there, could not tell which was best, to call to the man-of-war's men to take me in, or to stay there and die, for my life and strength was allmoste exhausted; but whilst I was thinking of this, touched bottam with my feet. Hope then sprung up, and I soon found another rope, leading towards the head of the vessel in shoaler water, so that I veered upon one and hauled upon the other that brought me under the bowsprit, and then at times, upon the send of a sea, my feete was allmoste dry. I thought then I would soon be out of their way. Left go the rope, but as soon as I attempted to run, fell down, and as I fell, looking round aboute me, saw three men standing close by me. I know they were the man-of-war's men seeing for the boat, so I lyed there quiet for some little time, and then creeped upon my belly I suppose aboute the distance of fifty yards; and as the ground was scuddy, some flat rock mixt with channels of sand, I saw before me a channel of white sand, and for fear to be seen creeping over it, which would take some time, not knowing there was anything the matter with me, made the second attempt to run, and fell in the same manner as before. My brother Charles being there, looking out for the vessel, desired some of Cawsand men to go down to see if they could pick up any of the men dead or alive, not expecting ever to see me any more, allmoste sure I was ither shot or drowned. One of them saw me fall, ran to my assistance, and taking hold of me under the arm says, "Who are you?" So as I thought him to be an enemy, made no answer. He said, "Fear not, I am a friend; come with me." And by that time forth was two more come, which took me under both arms, and the other pushed me in the back, and so dragged me up to the town. I suppose it might have been about the distance of the fifth part of a mile. My strength was allmoste exhausted; my breath, nay, my life, was allmoste gone. They took me into a room where there were seven or eight of Cawsand men and my brother Charles, and when he saw me, knew me by my great coat, and cryed with joy, "This is my brother!" So then they immediately stript off my wet clothes, and one of them pulled off his shirt from off him and put on me, sent for a doctor, and put me to bed. Well, then, I have thought many a time since what a wonder it was. The bone of my nose cut right in two, nothing but a bit of skin holding it, and two very large cuts in my head, that two or three pieces of my skull worked out afterwards; and after so long laying on the deck with that very cold weather, and being not alltogether drowned, but allmoste, I think, I did not know I was wounded or loste any blood. And now, my dear reader, I am going to show you the hardening nature of sin. When I was struggling in the water for life I gave up all hope, I was dead in my own mind; nevertheless my conscience was so dead asleep I thought nothing aboute Heaven or hell or judgment; and if I had died then I am sure I should have awaked amongst devils and damned spirits. See here this greate salvation and that of the Lord. I have been very near drowned, I think, twice before this, and have been exposed to many dangers many a time in the course of time betwen the five years the lugger was loste in the North Channel and this time, privateering, smuggling, etc., but I think conscience never so dead as now. I stayed there that night and the next evening took chaise. My brother and me, and the docter came with us so far as Lostwithiel, and arrived at home the night after to brother Charles house. I stayed there about six or seven days, until it was advertised in the papers, I think three hundred pounds for apprehending the Captain for three months from the date thereof, which set us all of alarm. So I moved from there to a gentleman's house at Marazion. I think I stayed there about two or three weeks, and from thence moved to Acton Castle,[31] as my brother John rented the farm, the famely not being there then, so that the keys and care of the house were left to his charge, and after a few days removed to Marazion again, then afraid of the shaking of a leaf. I think I might have stayed at Marazion for the course of a fortnight, and then went to the Castle again.[32] I used to half burn my coals by night in order that there should be no smoke seen in the daytime. In the course of about three months, after my wounds were nearly healed, I used to go at night to the King's Cove and there to drink grog, etc., with the Cove boys until the gray of the morning, convictions following me very sharp still at times. In my way home to my dreary lodgings, the larks flying up in the fields around me, warbling out their little beautiful notes, used to move me with envy, saying, "These dear little birds answer the end they were sent in the world for, but me, the worst of all creatures that ever was made." So that I have wished many a time I had been a toad, a serpent, or anything, so that I had no soul, for I know I must give an account for my conduct in this world. Likewayse there was a gray thrush that sang to me night and morning close to the house, which have preached to me many a sermon. In the daytime I chiefly spent my time improving my learning on navigation, etc. I remember one Sabbath day, when I was at Marazion, I heard some people singing of hymns. I think they were Lady Huntingdon's people, when sincerely wished I had been one of them. I often[33] thought there was very great beauty in religion, and when I have been with others laughing and ridiculing the methodists, wished I had been one of them, whom I thought best of them. See what hypocrite was here. I remember aboute a year before this I went with my wife to Caerlean preaching, on the Sunday afternoon, where I stood as near as I could by the door. When the word fastened upon my mind, saying, "Thou art the man." So that I was constrained to turn my face to the wall and weep bitterly, with promises to mend my life, etc. But, alas! I had not gone perhaps an hundred yards from the house until I joined my old companions, so lost all my convictions. That was not the only time by many when I have set up resolutions in my own strength to serve the Lord, etc. Well, then, in the course of this time, whilst at this place, my wife would come to see me, and sometimes bring the child with her, and spend a day or two, so that I passed my time pleasantly whilst she was with me. I think it was in the latter end of August my wife was taken very poorly in consumption, being before of a delicate constitution, and was allwayse obliged to come and go at night. I think it was in the beginning of Oct^{r.} in 1788 when I went to Helford to see her, in company with a servant man to brother John, one night, as she removed from her own house to be with her mother. I found her in a very weak state, and as I expected then soon to quit the country, I stayed with her about two or three hours, when we took our final farewell of each other, never expecting to see each other no more in time. Oh, what a trying scene it was, to leave her in flood of tears. So I arrived home to my dreary solitude a little before day. I, before then, was greatly distressed for her soul, and through friends desired Uncle James Thomas to visit her, so he did often. I think it was about the 10 or 12 of the same month, when I was sitting upon a bench in one of the ground floors, bemoaning my sad estate, I began to say to myself, "I have loste my liberty, my property; I have loste my wife also"--as she was the same as dead to me then--so I thought that if her life were spared, it mattered little to me if I was to go to the West or East Indies, so that I could only hear from her by letters, would leave me some comfart. But that was taken away allso; so that when I was cutt off from every comfart in this life, that I had not the least straw to lay hold of, I begun to see the emptiness and vanity of everything here below, and set up the resolution, God being my Helper, I will serve Him the remnant of my days, so that I immediately fell to my knees and begun to say, "Lord have mercy upon me. Christe, have mercey upon me," etc.; and at that time I could not say the Lord's Prayer without form, if any man would give me my liberty, being so long living without prayer. So, then, as before time I used to divert myself in the daytime in looking at the ships and boats in the bay, the men and cattle working in the fields, etc., but now shut my eyes against them all; and if I had business in the daytime to go to the top of the house, was with my eyes shut. So I went on with the above prayer, sometimes in hope of mercy, othertimes lost allmoste all hope. Oct^{r.} 24, in 1788, sailed from Mounts Bay for Leghorn in the ship "George," Capt^{n.} Dewen, master. Was put on board with a boate from the King's Cove, accompanied by brother John, and I think I was allmoste like a dead man; thought little or nothing consarning my wife or child, or anything in this world, but was earnestely crying for mercy. I had a little cabin to myself to lodge in, where there was only a single partition between me and the men. At first it was a great pain to me to hear them swearing, but after a little while took very little notice of it. I had sume very good books to read with me, but they seem to be all locked up to me, as the natural man cannot desarn the things of the Spirit of God, for they are to be spiritualy desarned. I remember sumetimes reading, when I could not understand, I should be so peevish and fretfull that I could heave the book overboard. Then, oh, what a torment in my poor soul I feeled. Then to think, surely the mercy of God is clean gone from me. Oh, what burthen my life was unto me. At them times I seldom prayed then less in secret than twelve times a day and night, and when I could pray with a little liberty, I should be in hope of mercy, and at other times kneel down and groan without one word brought to my remembrance, then allmoste ready to give up all, saying, "Surely there is no mercy for me; all my prayers is no use at all, God pays no respect unto them"; but still I dare not give up praying. I could look back afterwards and see I was all prayer. So I think I arrived at Leghorn in the latter end of December, where I passed my Christmas. I think the first Sabbath after I came there the Capt^{n.} asked me to go on shore to church with him, as there was an English church and clergyman there. I gladly went. The minister being a good reader, I saw in his countenance much gravity and solemnity. I said to myself, "Surely this is the man of God," and thought I was highly favoured to hear him. The next Sunday I gladly went again, but on coming on board after the service was over, I was told that sacrament days he did not scruple to go to the plays, and play cards, etc., which poisoned my mind so with prejudice, I never went nomore. In the course of all this time I never meet with one person to give me one word of advice consarning my soul, but I laboured to keep myself to myself so much as posable, still reading and praying with all diligence. Well, then, the Capt^{n.} got a freight there to go to Barcelona, to load with brandy for New York in America. I was very glad when I heard of it, as I heard that there was methodists there, in hope I should fall in with sume of them to give me a word of instruction. So I think we sailed from Leghorn in the latter end of Jan^{y.} 1789. The Lord still continued to strive with me, sumetimes in hope of salvation, other times allmoste ready to give up all hope; but I still was diligent in reading and prayer, but I was so ignorant of the ways of salvation as I was at the first time I began to pray. I remember on my passage there one day, scudding before the wind, very cold weather, and a very big sea, looking over the starn. I thought I should be very glad to be tyed in a rope and towed after the ship for a fortnight, if that would get me into the favour of God. But alas! I know all such works would not merit anything from God as salvation. I arived at New York on the 19 April in '89, and aboute ten or twelve days before I arived there, I was taken with a violent inflammation in one of my eyes, so I could see very little on that eye and the other was much afected allso. So after two or three days being there, there came a glasar[34] on board to put in a pane of glass in the cabin windows. And as the Capt^{n.} and mate was not presant, I thought it was my time to enquire out the methodists, and as shame allways hunted me much, I begun to ask him aboute the defrante persuasions of people there; at laste I asked, "Is there any of Mr. Wesly's methodists here?" He answerd, "There is many." I asked him, "Do you know any of them?" He answered, "Yes, many of them." I asked, "What sort of people are they?" thinking, if he gave them a bad carakter, to say no further. His answer, "They are a good sorte of people," so then I asked him, "Do you know the precher?" He said, "I do, and I go to hear him sometimes." I said, "Then I shall be obliged to you if you will send your little boy with me to show me the precher's house." So after he stared a little at me, said, "If you will stay a little until I have done this job, I will ither go with you myself or git sume person that shall." So that encouraged me very much, set me in high spirits, and after a little further discourse, he told me his wife was a methodist, and soon after took me to his house, where the dear woman received me very kindly. And when she know I wanted to speak to the precher, she asked me if I did belong to the connection in _England_. I answered, "No, but I wants to speak to the precher." She said, "To-night is publick meeting night. I will go with you a half hour sooner, when we shall find Mr. Dickinson home." So accordingly we went together, where I found the dear man and his wife in the kitchen. As soon as I looked at him, I said to myself, "This is the man I wants to see; this is the man of God." I said, "Sir, I should be glad to speak a few words with you." So as there was no persons presant but his wife and the good woman that come with me, said, "Say on." I said, "To yourself, if you please, sir." So he took me into a small parlour and said, "What do you want of me?" I said, "Sir, I am an Englishman, and belong to a ship in the harbour. I know I am a great sinner, and as I am informed you belongs to Mr. Weseley's people, I want to know what I must do." He looked at me and said, "Do you think God would be just to send you to hell?" I was surprised at such a question, did not know what answer to make. Then he begun to say to this purpose, that Christe come to seek and to save that which was lost, etc. He likewayse asked me, "Do you pray?" I said, "Yes, a little." "Do you fast too?" said he. I said, "No, sir." So, after asking me a few more questions he said, "There is a publick prayer meeting here this evning, you may stay if you please." So I thought he paid me a very great compliment. I thanked him, and when the time come, that dear woman took me to the _meeting_ house and put me in a place to sit down. So after they had sung and prayed, the precher gave an exhortation, and I thought all to me, so that I was a little comfarted; and after the meeting was ended, the dear woman took me by the hand, as I was half blind, and lead me home to her own house; and the good glasar, her husband, lead me on board, with a strict charge not to fail coming to see them to-morrow. So I gladly accepted of the invitation, and when I came there she had brought one of the class leaders and a good old woman to meet me, who gave me great encouragement to seek the Lord. My eye still getting worse, and as I could not get leeches as I used to do at home, applyed to a doctor, and he cutt the small blood-vessels of the apple of my eye, and so lett the blood out. So as the ship was going to Baltimore to load, I thought if I went in her I should be in danger to lose the sight of one eye if not both, as both was much afected. So, then, I concluded to stay there, where I attended all the ordinance; some place to go to every night. And I think it was aboute the 1 of May when I was asked if I would have a note of admittance to meet in class. I thought it to be the greatest compliment I ever received in all my life, and gladly accepted it; so that when the leader asked my name, as he took me in surprize, I said "Harry." He said, "Is that your sir name?" I said, "Yes." Then he asked, "What is your Christian name?" I said, "Henry." So the people called me, sume Mr. Harry and sume Capt^{n.} Harry, as the sailors I come with me _caled me_ Capt^{n.} Harry; so that in the course of a very little time I got more acquaintance with them dear people. I could see afterwards I was hungering and thirsting after righteousness, but sometimes in hope of mercy, othertimes allmoste ready to give up all. I used to walk out of town every morning in sume solitary place to myself to read and pray; and I know since that time if I wanted to know when the clock struck twelve in order to go home, that the family should not wait for me for dinner--I did hardely know much better when the clock had done striking no more than when it begun--I had not the time to count two, for all my soul was in a blaze of prayer. I think in the beginning of May, Doctor Cook[35] come there to hold confarence. I wished to make myself known unto him, but was afraid, as at that time I know very little aboute the methodists--afraid of the shaking of a leaf. And for all[36] I was so highly favoured with so much helps and means I could form no idea of justifying faith. Sometimes I thought I should here as a man's voice to speak unto me, other times think to see something with my bodily eyes, other times think as if my body should be changed. I have thought many times that there never was one so ignorant as I was in the ways of salvation. Sometimes, if I could weep a little under a sarmon, or in a prayer meeting, I should have some hope I was in the way, and sumetimes feel the drawings of the Father, which would give me sume encouragement and hope; other times, if I saw any persons weeping by me, should complain of the hardness of my heart, and be allmoste ready to give up all. Nevertheless I still continued praying--I supose seldom less than twelve times in aday--and sometimes think whether the hindrance was because I missed naming myself. Well, then, I have thought many a time since of my unwillingness to belief, for all I was blessed with so many helps and means. The prechers, and aboute six or seven people in particular, took me by the hand and was like fathers, mothers, brothers, and sistars, so that I often in the afternoon amongst sume of them dear women and the prechers, drinking tea, &c.; and if I should sit with them more than an half hour without sume of them should ask me something of the state of my mind, I should be so much dejected, and say to myself, "Surely I am beneath the least of their notice; how can I expect the least of their notice?" and I remember one day went to the hospital to preching. When the preching was over, the two prechers, Mr. Morld and Mr. Cloude, in their way home, I drew nigh to them; thought to have some conversation with them, and as they used to make so free with me, then only spoke as I thought coldly. I was so much dejected in my own mind, I thought I was the worst creature that ever was born, and that allmoste all things cryed vengance against me. Another time I remember I went to the precher's house to inquire after Mr. Cooper, he not being there that presant, and as I went out to one door he came in to the other, I not seeing him. Mr. Morld said to him, "Brother Carter was here inquiring after you." I heard him, and was immediately struck with wonder to think a such man as he should be so humble as to call a such poor creature as me, brother. So these was some of the ways I was tryed. Some times up, sume times down, sume times in hope and sume times allmoste ready to give up. Notwithstanding all this I continued still in prayer, and I remember when walked the streets I was like one with his eyes shut, crying for salvation, and likewayse crying to the Lord that there might nothing take my attention or the least of my afection from Him in this world. I think I was there aboute three or four weeks, when I was asked why I did not go to sacrament. I answered, "I am unworthy." The person answered, "You are the very person that is worthy." So as he could not prevail upon me to go, he told the preachers of it, and after class meeting on the Sabbath morning, as they was going to a friend's house to breakfast, asked me to go with them. They soon opened their commission, and asked me to come to the sacrement to-day. I answered, I could not. They asked my reason. I said, "Him that eateth and drinketh unworthy, eateth and drinketh his own damnation," and immediately I burst out in a flood of tears, and desired the company to pray for me. The whole large company kneeled down, and prayed for me with great powar, so that I had not the only wet face by many in the company, and after prayer took me to reason, so I consented to go. And I went with much fear and trembling. I feeled nothing particular in the ordinance, but ever after continued to go. I think it was in the beginning of June I begun to abstain from eating, and as I eate to the full before, I slackoned a little every meal. I was afraid to fast for fear the family should take notice of me; and aboute this time I sent home for sume money, then thinking to set on a shop in C^{o.} with Rob^{t.} Snow, then thinking to leave my bones there. So I still went on sume times thinking I was getting into lukewarm state, other times a little hope of mercy, and sume times allmoste despair of all mercy. But I remember 19 July I went to preaching as usual, when, as the preacher was pointing out the odiousness of sin, and the hartfeelt sorrow that a true penitent soul feeled for it, he mentoned of a woman that had a cancer cutt out of her breast a few days before, and when she was asked if the pain was not very great, her answer was, "Not so great as when I was under convictions for sin." I immediately concluded I was out of the way. I had hardley the least hope left of Christ, Heaven, or happyness. So in my way home in company with Mr. Cooper, a little before we parted he said, "Capt^{n.}, what is the matter? You seem to be lowspirited to-night." I answered, "Yes, and well I may." He said, "What then is the matter?" I said "Did you not hear Mr. Morel saying aboute the woman that had the cancer cutt out of her breast, and I am sure I am not in the way, I never feeled such pain at all," etc. He said, "I am sure you are in the way," and then begun to repeat the promises, etc. I thought I had heard the same promises repeated hundreds of times before, but never in such manner as at presant. Hope sprung up that the blessing was very near to me. I went home to my lodgings, and after prayer opened the Hymbook to-- Salvation, oh the joyfull sound, What music to our ears; A sovereign Balm for every wound, A cordial for our fears. Glory, honour, etc. etc.[37] I was allmoste ready to fly away. I went to bed, but did hardly sleep all the night, praying and praising God. Never the less in all this I did not believe that my sins was pardoned, but I hope God would do it, and that soon. In the morning went to the man of God, told him how I feeled, to which he gave me great encouragement. The next night went to preaching aboute two miles out of town. I was still very comfartable, but could not believe. The next day being 21, aboute two or three o'clock in the afternoon, I went to pray that God would show me the hindrance that stood between him and my soul, and that he would show me by that man of God, or by some other means. After I rose up from my knees I went to the man of God. He saw me coming, and asked me with a smile, "Well, Captain, how is it with you now?" I answered, "I have been just now praying that God would show me the hindrance that stands between him and my soul, and take it away from me." He answered in his usual pleasant way, "Nothing at all, Captain, only unbelief; but I would advise you to spend moste of this afternoon in prayer, that God would show you under the sarmon, or by some other means, before you go to bed," etc. So I did according to his direction, and in the evning went to preching in great expectation. And when Mr. Morel delivered his text from the 15 chapter St. John, "Abide in me and I in you," and as he went on a little, I thought, surely this is for me. Hope sprung up; but after a little further I thought Mr. Cooper had been telling the precher of what I had told him, which set me in doubting. But after he went on a little further, I said to myself, "Whether he have told him or not, it is for me," and I believed in that moment, so that I rejoiced with joy unspeakable and full of glory. As soon as the sarvice was ended, lest Satan should get an advantage over me, I told the preacher what the Lord had done for me, and immediately Mr. Cooper, so that we rejoiced greately together, to which the latter told me, "You must go in the morning to such and such a ones" (mentioned six or seven houses), "and tell them what the Lord have done for you, and forget not to sing and pray with them." So I went according to his order, and told them that I had received the comforter, so that we had a happy morning together. Well, then, I went on my way rejoicing, no doubts, no fears, nither hardly a temptation, until the end of ten or twelve days. So then I went on, sume times on the mount with Peter and John, some times in doubts and fears; and if I did not allwayse find my mind in a blaze of prayer unto God, I frequent used to say to myself, "Now I am surely getting into a lukewarm state," and so write bitter things against myself. Aboute this time I begun to fast once a week, until aboute four o'clock in the afternoon, and abstain to nearly half my fill. I think it was in the later end of Augst when I received a letter from my mother-in-law consarning my wife's death. I soon begun to reason if she was gone happy or not, so that in the course of a few days after I used to go out by night, and looking up towards heaven, wishing and praying to see her vision, or to know by some means whether she was gone happy or not. And one night, before I went to bed, I prayed earnestely to the Lord if he would show me by dream or by vision. So that night I dreamed I was amongst serpents and vipars, and the worst of venemest beasts, that I had the hardest struggels to get clear of them, so when I awaked I was in a lake of sweat from head to foot. Then I thought I had not done according to the will of God. I continued in that state, with my harp hanged upon the willows, could not sing one note for a thousand worlds for all so much delight I took in it in times past, keep it all this time to myself, so that I got myself into such wilderness state that I could hardly tell if I was in the favour of God or not. But I think it was to the end aboute fourteen days I opened my mind to Mrs. Snow, who said, "By your own account your wife had good morals, and she _had_ also the preachers and people to pray and instruct her; I have a good hope she is gone happy. Nevertheless, whether or not, you must leave that to God, it is a business you must have nothing at all to do with; and if you continue to go on in this way, I am in doubt as you are in danger to lose all your Religion." So we kneeled down and she prayed for me, and immediately I went to a prayer meeting. The first hymn was, My God, the spring of all my joy, The life of my delights, etc. I sung with a loud voice but with a wet face, so that the temptation left me. Glory be to God for dear friends, etc. So I went on as before, some times happy and other times in doubts and fears, but still getting a little strength. I think it was aboute this time that I left of drinking water, and I think it was in the beginning of September I concluded in my mind to quit the town and go to Baltimore; and as there was a ship bound there I spoke for a passage, and got most things ready for the voyage. But oh! what a tryal it was to me to think of leaving of my New York friends, where the Lord had helped me in such abundant manner, and then to go 700 miles from there to a place and people I knew nothing of. I begun to reason as before with the enemy of my soul, "Surely at last I shall become a castaway, surely I shall be stripped of all my Religion!" I suppose no man can conceive the misery I feeled in my own mind for the course of aboute ten or twelve days; I have thought since that I never had a greater tryal. But to the end of this time one night I went to preching, where Mr. Asbery,[38] with his great loud voice, gave out this hymn-- Tho' troubles assail and dangers afright, If friends all should fail and foes all unite, Yet one thing assures us, what ever betide, I trust in all dangers the Lord will provide, etc., etc.[39] I never heard that hymn before, and as he went on I was filled with such faith and love I could trust and not be afraid; it mattered nothing to me where I went, as I believed that God would be with me. I never opened my mind to no person in the course of all this time, but I was thinking to the same day I sailed, or the day before, and that only to desire one of my friends when my money came from England to remitt it unto me. But at that time, as I was so happy in God, and could trust him with both soul and body, I thought I could trust his servant allso. So I begun and opened all my mind to my Father Cooper, told him who and what I was, and how I came there, and all my reason I had to quit the town, which was, as my right name was H. Carter, and as I hailed as H. Harry, I thought if I entered into business I must at times have business upon the wharves,[40] amongst the shipping; and if I ever meet any person that know me I should be branded as a hypocrite, and hurt my partner and sadly wound the cause of God. He answered and said, "Capt^{n.}, as that is the cause, I think you need not leave the place. If you think proppar, I'll speak to the prechers and your leader, and appoint to meet to one of your friends' houses one afternoon, where, I think, we shall be able to settle all the business, but you must not be presant." Accordingly they meet all together, those I was moste particular acquainted with, so he opened the business. They all joined together, and said, "He did this when in a natural state, not meaning to wrong or defraud any man, for personal safety, and when we hear anyone call him 'Captain Harry' or 'Mr. Harry,' we must say his surname is Carter, as it is the custom in England where there is two Captains of one family, the one is called after his Christian name." So my old friend delayed no time, but soon come with this full account to me where I rejoiced in my great deliverer. I could not then doubt but this was the Lord's doings, and it was marvellous in my eyes, so that the report soon spread aboute the town. But moste of them, as they begun with "Captain Harry," so continued; and I thought tho' their love was so great to me before, it was increased if possible tenfold more so; so then I concluded in my mind to stay, and thought to live and die there, and went on as before, watching and praying, frequaintely complaining of my littleness of love, weakeness of Faith, etc., until aboute the 19 of December, when I went to class meeting on the Sabbath morning. Providence sent one there from the County of Durham, in England, whose name was Hodgson. He lately come to town in company with two excellent men from the same place, and as he being a stranger, the leader desired him to speake to the people. So he begun, saying how and when he was convinced of sin, when he was converted, and when he was sanctified unto God; and after, exhorted all that believed to only believe and see the salvation of God, and with this language, "all things in Christe is now ready, all the fitness he requires is to feel the need of him." So he preached a presant and full salvation unto us. Such language I never heard before with no man. Now in the course of this time I had been there Religion was not in a very prospras state, few[41] convinsed and very few converted unto God, but the people going on still in a steady state, so that we never heard sanctification preached, or seldom prayed for, in publick, and amongst the whole of the methodists that was there at that time, aboute, as well as I can remember, 260 in all, and only two persons out of the whole number that did perfess and enjoy the blessing of sanctification--my Father Cooper was one, and an old woman the other. So that I thought if I could receive that blessing to the end of three or four years, I thought it would be a blessing indeed, etc. So then, after the meeting was ended, as Mr. Hodgson and me lodged in the same part of the town, went in company together. He begun to ask me who I was, etc., so that I gave him a true description of how long I had been in town, and what the Lord had done for me since I had been there. When I had done speaking, he said, "Well, my brother, be thankfull for what the Lord have done for you, and ask for more"; and some thing in this way, "Go on to perfection, it is the will of God, even your sanctification. Do you believe these things?" I answered, "I believe in the doctrine of sanctification, but I cannot believe the promise is to me." He asked for what reason, I said, "I am a poor egnarant person, and it is not more than five months since I am justified, and there is a great number of excellent men and women in this town that is usefull to their fellow creatures in praying in publick, visiting the sick, instructing the ignorant, etc., they do not perfess this blessing at all, and how can I expect it, who am good for nothing, and so unworthy and unfit for it." He answered, "All the fitness he requires is to feel the need of him. The promise is for you; only believe, and see the salvation of God," etc. So the discourse I had with him set my soul all of a flame, the blessing seemed to be nigh me. I went home and fell to my knees in prayer. I thought I was just ready to laye hold of it, but unbelief hindered me; but the hope of the blessing being so very nigh, made me rejoice in abundant manner. I was very happy all that day and the next day allso, still in earnest expectation to receive the blessing. But the day following went to a prayer meeting, being on 21 December, where I meet Mr. Hodgson providentely, and after the meeting he asked me to go home to his house with him. I gladly embraced the opportunity, and after a little conversation by his fireside the Lord enabled me to believe in him for full salvation. I immediately told him, saying, "Glory be to God, I do believe." So after we sung and prayed, he said, "You must go in the morning and tell your friends of what the Lord have done for you; this blessing may not be given for your sake only, but for others also." So I parted with him, and went home, jumping,[42] and leaping, and praising of God. And the next morning, according to his order, I went from house to house, and told the six or seven familes that I was moste particular acquainted with what the Lord had done for my soul, so that we rejoiced greately together, they farmely believed the report. And I have thought many times since, as if I hard them say, "Now we see God have no respect of persons. This poor ignorant Englishman have been here with us only a few months, have been justified and sanctified, and surely if this blessing is to be attained too, we will never rest until we receive it." So that the preachers and people were all in alarm. In the course of a few days there were new prayer meetings set up upon allmoste every quarter of the town, so that in a very little time the Chapel would scarcely hold half of the people, and the Lord begun to pour a lot of his spirit upon the people in a wonderful manner--some crying for mercy, others standing up rejoicing and praising of God that they know their sins was forgiven them; likewayse others rejoicing, saying that God spake the second time, "Be clean," and cast out all their inbred sin; and oh, what a glorious work was there. I know one of my friends going home from a prayer meeting one night, aboute two or three o'clock in the morning, called to another friend's house, knocked him out of bed, and told him that God cleansed him from all unrighteousness. They both joined in prayer, and they wrasled with God until the other experienced the same blessing allso. So that with the noise and brusel[43] of the people the world seemed as it were turned upside down. The Calvinests, Baptists, Universalists, Quakers, with the people of the Establish Church, all seemed to rise up in arms against it. Sume said the devel was amongst the methodists, sume one thing, sume another; but the work continued to go on in a glorious manner, so that in the course of aboute two or three months the society increased from aboute 260 to more than 500. It was then good times indeed, praise be to God. I have had the pleasure to see many revivals since, but I think I never saw greater heroes for the work then my dear friends in New York; and I think the people there then was sumething like the primitive Christians, going from house to house in fellowship one with another, declaring the wonderfull works of God. Well, then, I am now going to return to myself. I think it was in the beginning of January, in 1790, when there was a meeting set up caled the "Select Bands," meant for those that was sanctified, and those believers that was pressing hard after it might join if they pleased. So I think there was aboute twenty that perfess sanctification joined, and aboute ten more that was crying after it. I think that was a scool indeed, to hear so many sensible men and women to stand up to tell of their experience from the beginning to the presant, and I never was a greater wonder to myself than to be permitted amongst such people, as I was the youngest in the way and the moste ignorant of them all. So I still continued in all the ordinesses,[44] using not less secreat prayer than when I begun to seek the Lord, my soul moste times in a blaze of prayer. I think it was in aboute the middle of Jan^{y.} when I went one morning to the preachar's house in C^{o.} with Mr. Coopar, where there was sevrall of the leaders, consulting where they should hold prayer meetings, and how they should car[45] them on. I went home to my lodgings, and seating by the fire I begun first to reason, saying, "Everyone is imployed, all have sume thing to do exepting me, and I am good for nothing, no use to society, but as a dead dog in the way." Well, then, as I was a long time in expectation to have remittance from home, my money being done, and being in debt about 38 shillings for my board, I said to my creditor, "I have gave up all hope of having any money from home, I muste begin to work aboute sumething, but what or where I know not. If I work in town the people will brand me for a decever, as I have said I have sume property and sent home for sume, so I fear it would much hurt the cause of Christ. I should be glad to have your advice in the case." He answered, "What you owes me is but a trifal, you need not go anywhere to work on my account. You are welcome to stay a month or two longer, perhaps your money will come; and if not, do not make yourself uneasy aboute it." But, however, my friend Hodgson aboute that time went upon Long Island to live, so that I spoke to him for lodgings and went with him, thinking I should be out of the way of censure. So the 12 of June I car'd my little sea bed there, and laid it in one corner of his room as he had nither steed[46] for me; so the next morning, being 13, went to work to a farmer aboute a mile and a half from the little town where I lived, and was sent to the field to hoe Indian corn in company with a negro. The work was very strange unto me, but soon after begun fell into discourse with him, and I rejoiced to hear he belonged to New York society. We worked the forenoon in the field together, where I was pleased and profited with his conversation; the afternoon being hard rain, we worked shifting of straw, etc., in the barn, when come the farmer, as I could not mow hay, etc., paid me my wages, and directed me in my way home to a cousin of his, whom I caled upon, and he told me to come the next morning. Accordingly I did so, who sent me in a field to do the same work, when aboute seven or eight o'clock I was joined with a man to work with me, who was part owner of the field. I worked until breakfast time, when I was caled in to breakfast. I could eate nothing, but drink a little milk, the same to dinner. The man that worked with me, as he could do much more work than me, desired me not to work to hard, but by three or four o'clock the blood was running between my fingers, and my body so weak, all moste ready to drop down. The man that was with me asked me no questions consarning who or what was, but a little before we left work went to a publick house and brought me a little rum and water, and desired me to drink again and again. I gladly took a very little of it, and should have taken more, but I thought, as he know me to be a methodist, he did it in order to trap me; but I saw after the man had no such desire, so I gladly received it with thankfullness both to God and him. So I went home rambling, with a tired body, as one that was much intoxicated. The next morning went to the same place again, but wore gloves to hide my bleeding hands; and as their hours was from aboute sun rising, and stop a little to breakfast and dinner, and work until sun set, and as my body was wasted and weakened before with much fasting and abstinence, and had hardly dirted my finger scarcely for nearley twenty years before, my body was allmoste ready to crush under the burden. Oh, what a change was this indeed! And as I used before to pray not less than twelve times in a day in secreat, I had no opertunity at that time but a few minuts before I went to work, and find a little house or sume bye corner to breackfast and dinner; and when I got home in the evning, where the family was allmoste ready to go to bed. But I can realy say, to the glory of God, I never was so happy in all my life as I was at that _time_. So I staid there two or three days to finish that _job_, and after put in a field to work to myself some _distance_ from the house, and furder[47] from my home, where my employer told me, "You may lodge here if you will." I gladly accepted the offer, and the first night I was took into a room in one end of the farm house and showed my bed, where there was an old negro woman, and a little black boy with her. I looked at my bed, the room, and my company, and I think I never saw a meaner bed in all the course of my life. Stripped of my clothes and turned in, in full expectation that they was going to sleep with me, as I saw no other bed or place else for them. But whilst I was thinking of this, I saw there in one cornar of the room a little ladder, where they both went up together. I was there, I think, three or four days in that field to myself, and I think it was the second day, aboute eleven o'clock, I stood in the field and leaned upon my hoe, and could not tell whether I should drop down under my burthen or stand any longer, the sun allmoste over my head, the wind very little, and took hardely anything to sustain nature. And I worked harder than perhaps I was required to, and that for two reasons--the one for fear that they should know I was a broken _gen_telman, and if known, I should not have work to _do_. _The_ other, I must do justice unto my employer. Wilst I was thus at a stand, calling to the L_ord_ for help, I saw a light shone brighter then the light of the sun, that filled me with such faith and love, I went on again like a giant refreshed with new wine, praising and blessing of God. Oh, what happy times I had every moment. After I had done the field, he had no work more for me, so I returned home and got work a day or two in a place. I keept all what I feeled to myself, no murmuring, no complaining; but when my dear friends in New York come to hear of it, they agreed together to contribute to my maintenance, and take me off from there, and sent me word to be home one day, as they were coming to see me. Accordingly the day came, when six or seven women come according to promise, and after sume conversation opened their business, but in a very feeling manner. I thanked them, and said "I surely am not too good to work; I have read of sume that have worked for their own bread that I am unworthy to wipe their shoes or snuff their candle." So we passed the afternoon together in singing and praying. I saw them to the boate, where they made me promise not to fail to come to see them every Sunday, and, if possible, Saturday night. After three or four days, working a day in a place, I went to work with a farmer near the place I worked before, where I went to hoe Indian corn with five or six negero slaves. They behaved unto me very civil indeed, desired me not to work too hard; and as the poorest workman amongst them could far out do me and do my best, but one or other allwayse helped me on, so that I kept _close_ up with them. I was, as well as I can remem_ber_, with them six or seven days, and that time sleeped in a hay loft.[48] My suffering was not all over, as yet; I could eate very little, and in the morning, when I went to work, allmoste so sore and so tired as in the evning; and I could hardly say I could sleep at all, at times just forget myself only. All this time nither master nor any man ever asked me who or what I was, they only know I was an English man. They all treated me very civily, and when they had done with me they would ask me my demands. My answer was, "What you please"; so they allwayse gave me the same as another common labourer. Aboute this time I was asked to go with a mason to repair a mill dam; it was to be repaired with turf, and I had a small flatt bottam boat to carry the turf across the pool. So I went with him upon this conditions, if I could do the work, to give me what he pleased. I expected at first he was to be allwayse with me, but just showed me my work and left me to myself, only sume times come to see me, once in the course of two or three days. I then lodged and boarded myself to freind Hodgson's. The place was in a bottam,[49] in mirey ground, and the weather very hot, that the sweat would run over me in large drops, as if any person was heaving water upon me. I think I went to work about sun rising in the morning, I supose aboute five o'clock, stop aboute half hour to breakfast, _only_ an hour to dinner, and then work until sun set, I supose aboute seven. My breakfast and dinner was a piece of bread I card with me, and I went to a farm house for a little milk. When my employer come to see me, he would moste times bring with him a little rum and a cup, and as there was a will[50] close by, "Come," said he, "rest yourself a little; let us go and have a drink together." What a change indeed was workd upon me; before time, when I was, as it were, a gentelman, I could not tuch a dram before dinner upon any account. But then how glad and how thankfull I was to receive it. But after the first fortnight or three weeks my bones was become a little more hardened, my sufferings was not alltogether so much, and I have thought many a times when my sufferings was to the greatest, that if it was the will of Providence I would gladly continue in the same all the days of my life. So every Sabbath day I went to New York to see my friends in the morning and return back again in the evning. I think it was in the later end of July when Mr. Dawson, one of them English men I before mentioned that came from the County of Durham, came over to inform me that if I would go home there was a vessel that would be ready in the course _of_ a week's time, and he was going to England. I th_anked_ him and went to New York, and asked the advice of my friends. They all, as the voice of one man, said, "Surely this is the Lord's doing; go, the Lord will be with you. We believe that it will not be in the power of man to hurt you, but you must not think it strange if you receive strong tryals from the Captain." The Captain was an English man that come there from the West Indies, and had been in town for, I suppose, six or seven weeks; a man that did profess Religion, and did at times stand up in publick as a preacher, but of Calvinist principles. And as I know him before, I went and asked him for a passage, then fully believing it was my duty, and I thought I could trust the Lord with my both soul and body. So he was quite agreeable, and then, as I was not acquainted with the man, opened all my mind unto him, notwithstanding for all the hints I had concarning him before. So he asked me if I was a navigator, and if I could work, etc. I answered I had my quadrant and books with me. So I agreed with him to be landed in Mounts Bay, or close to the East of the Lizard Point, and then returned back to Long Island, and told my employer I was going at home. He desired me to stay a few days longer with him to finish the job, to which I consented. And I think aboute the 3 or 4 of august, when we settled our accounts, he paid me very handsomely. I returned to New York. I paid off all my debts and bought myself sevrall little _seafar_ing clothes for the voyage, and I think I had four pence in _coppe_rs left. Well, then, here was a change in deed--from _such_ hard labour to ease again. So I staid there with my dear friends, going from house to house as before. I think I was allwayse rejoicing and praysing of God, and still using the same self-denial by abstaining from food as before time, and not only then, but allso when I was to my hardest labour. I staid there until the 13 August, when took breakfast with my old and first friend the glasar, and after breakfast he took a dollar out of his pocket and said, "I insist on you to accept of it." I thanked him, and I took it, so went on board, and that day got to an anchor in Sandyhook, and the next morn sailed for England with a fair wind and fair weather. The vessel was a small sloop aboute 40 tons,[51] bought by the Captain then in New York, but the papars draw'd in the mate's name, under cover him being an American. The cargo was coopers' timber, and the whole crew was the Captain, mate, two boys, Mr. Dawson, and myself. I keept one watch with the biggest boy, I suppose aboute 16 or 17 years old; and the mate keept the other watch with the other boy, I suppose aboute 13 or 14 year old. We was not more then a day or two at sea until Satan begun to rage and roar. The Captain set his face against me. Try my best I could do nothing to please him. He pretended to know all things, but did hardly know anything of the sea or business. Then I thought of what I was told by my friends in New York, so that I was not the leaste disappointed. I acted in the capacity of steward and as cabin boy, to bring all things to his hand as a gentelman, and if there were anything short I stayed without it; so that I had plenty to do to try to please him, besides keep my regular watch on deck night and day. We had a fair wind until we came upon the banks of Newfoundland. Then the wind took us ahead and blow fresh; for a little time the vessel made some water upon one tack. He said, "We will bear up for Boston." I think, for all he was a professor of Religion, I never saw a man more afraid of his life in all my life. I thought that if we put in to Boston I never should fetch home in that vessel. I opposed him, and said, "There is no danger, I will engage to keep the pump in my watch." Mr. Dawson said, "I will keep it in the other," tho' he know nothing of the sea. The mate then joined us, and amongst us all gained our point, so that soon after we had a fair wind again. We had moste times publick prayers in the morning, sume times Mr. Dawson and sume times him, but still continued with his face set against me, and poor Mr. Dawson dare not speak one word in my favour, as he was full so much afraid of him as I was. And the two poor boys, I think in the hardness of my times it never was in my power to treat two dogs as he treated them. So one day, after we come into soundings, I said, "The Land's End bears so and so, it is time for you to alter your course if you land me there." So as he pretended to keep a reckning he said to the contrary, but never let us see his journal, the mate and me, within two or three miles of each other,[52] so that I thought he had no mind to land me in the Mounts Bay, according to promise, the weather being fair. Saw a sail, and as it was not the first time by many, said to me, as I had the helm, "Bear down to speak with him." I did so. He said, "Keep her so and so." I said, "Sir, if you keep her so, you never will speak with him." He begun to belch out, "What is that to thee? I say keep her so." So as I had given up all hope of being landed there, I thought it was time to take a little courage. I left go the helm, and said, "Keep her so your self, if you please," and I immediately went below and turned in in my cabin. In the course of a little time he came down and said sume thing to me in a very surly manner. I answered, "Sir, you have not behaved unto me as a man since I have been with you. I have answered every end I engaged with you for, and much more so, and now I see you are entirely off your word with me, as you know you was to land me in the Mounts Bay, or a little to the East of the Lizard." He begun to bale out, "Thou doste profess the spirit of Christe, but thou haste the spirit of the devil," and so on in a great rage, my poor friend Dawson presant fearing and trembling but dare not speak one word; and I have thought that good man suffered during the voyage much more on my account than I did myself. So I did not render railing for railing, said nothing, or very little more. This was in the evning, and in the course of aboute half hour after, when he come to himself, he came to me and said in a very good humour, "I should be glad if you would turn out and come on deck, I wants to speak with you." So he took me forward on the bow out of the sight and hearing of any person, and said sumething to this purpose: "I hope you'll think nothing of all that is past, and I am going to tell you why I cannot be to my word with you to land you in the Mounts Bay. I sarved my time to a hatter in London, and as there was a brig there loaden with hats and other goods, I took her away under the pretence of being supercargo, etc., unknown to the owners. I sold the vessel and cargo in the West Indies, bought the sloop you see me come to New York in, sold that sloop there, and bought what we are in at present. I told you and others I was bound to London, but I meant to go to Dunkerk and send for my wife to London. I mean to sell my cargo and then to return to New York again, for if I am known in any part of England I shall be apprehended and hanged. So now lett me beg you to keep it a secret. And I have the favour likewayse, as you know there is no draft for the Channel on board, I knows nothing of the Channel, and the mate quite unacquainted, let me beg you to do your best to car the vessel to Dunkerk." I answered, "I will do everything in my powar," etc. These was the tener of our discourse, etc. So that when he had finished, I thought I was allmoste lost in wonder and astonishement. I thought my case was bad, but his tenthousands times worse. So I turned to work again with a willing mind, knowing nothing should happen unto me against the knowledge of God, nither without his permision, and I believed all things should work together for my good, and so went on my way, rejoicing and praising of God. The weather still very fair and a fair wind. The next morning saw the Start Point, and so made the best of our way up Channel. When came a little to the west of Folston,[53] Mr. Dawson was put onshore, to go to London in order to fetch the Capt^{ns.} wife to him to Dunkerk, and soon after fell in with a fleet of West Indiamen, with sevral cutters and frigats, with their boats out, bring them to to press their men, as at that time there was a little quarrel between the Spanyards and English. We passed through them all with our American coulers set, expecting to be brought to every moment; and as I was the only Englishman onboard, the Capt^{n.} advised me to hide myself in the bread locker. But I thought, if they had come on board and found me, I must be gone; so I thought if it was the will of Providence that I should be pressed, let his will be done; and I thought if they should come on board and ask me if I was an Englishman, I should say nothing to the contrary. That if I was stationed on the tops, or anywhere else, God would be with me, and all things should work together for my good. The same day, aboute three or four o'clock, got close in to Calais, where we took a pilot for Dunkerk the same evning, on the 16 September in '90. And as we went up the harbar I saw in a brig's starn, I think, the "Bettsey, Truro." I thought if there was any place caled by that name out of Cornwal, but the next day, as the Capt^{n.} and I was so great he could then not go onshore without me, neither eate nor drink without me, I was then with him as it were all and in all. It was a great chainge indeed, whether through fear or love I know not. So the next day I, as a complement, asked him to go on board with me to see what the brig was. So it proved to be from Truro, from Petersborg, loaden with hemp and iron, there wind bound, and bound to Daniel's Point[54] the first fair wind; and as I did not want to make myself known unto him as an Englishman, I thought I would lett him know that I know some jentelmen at Falmouth, and after a little discourse sume in Penzance; so after a while, he naming of one and another until he come home to our family, and added, "Poor felows, they have had a great many and very great misfortings of late years. Harry, poor felow, lost a valuable lugger, with a valuable cargo, and was obliged to leave his Country, being taken with sume manawar's boat. I saw him in Leghorn, dined and supped with him, and from there he went to America. I have not heard anything concarning him since; whether he is dead or alive, I know not, poor felow." So at laste I said, "I am the man, and I desire the favour of you to give me a passage home." He stared like a man frightened, and said, "I never saw such chainge on any man in my life, and I had no more knoledge of you no more then if I never saw you. Anything in my powar I will gladly do for you. Do you want money, or anything else? You'l make free with me. I am sorry I cannot take you to sleep with me, as the cabin is full of hemp, etc. Be not afraid of being pressed, as all my men is protected, but you shall not be pressed unless they press me also." Here I was loste in wonder, love, and praise, seeing how I was presarved the day before from a manofwar, and I looked upon this as if the Lord had worked a merical to send the brig there as if it was on purpose for me. The Capt^{n.} used that trade for sume time, but never put into any harbour in France before, but now struck upon a sand bank, and put in there to be repeared, as he had receved sume damage, etc. Well, then I could but only wonder and adore the goodness of God, shorley his paths is in the deep and his ways past finding out. So then I returned again to my little sloop. I staid in Dunkerk eleven days, then sailed for England, arrived at Daniel's Point the 1 Oct^{r.} The same night, aboute nine o'clock, arrived home to Kenneggy,[55] to B^{r.} Charles's. So I was received as one rison from the dead, as they know nothing of my coming home, nither had heard from me for aboute twelve months. So after a little I related what cause I had to come, and after I had settled my business I was minding[56] to return to New York again. He said, "I will send for our brothers in the morning, and praps we may find sumething other wayse." So earley in the morning they come, and said, "If you go to America again we shall never see you more; we think you may stay at home in safety, there is no person will meddle with you, but we advise you first to go aboute this neighberhood as publick as you please, where you are well known, but shun the towns, and after a few days there will no person take notice of you." I very gladly consented to what they said, this being on saturday. First went to the King's Cove to see the Cove boys, and for all I was not more than aboute two years from them, not one of them know me until they heard me speak. The next morning being the sabbath, went to Trevean[57] to preaching, where I had a blessed time indeed. After preching I was surounded with allmoste all the congregation. Every one glad to see me, but in particular the methodists, as they heard before that there was a chainge of mind passed upon me. This made me to wonder and adore the goodness of God unto me, as I did not expect to see any person when I came home but only my own family. This was a wonder indeed to think I was once more returned to my native country, amongse my own family, friends, and the people of God. Well, then, after atending the preaching and meetings a few times was desired to give out a hymn and speak in prayer, but at first I refused, as I did not exercise in that way before I come home, only at times I was sent to visit the sick with Father Cooper when he could not attend himself. So I refused, but after suffered great pain of mind, so that at laste I took up the cross with much fear and trembling, and immediately went aboute like a town crier, telling the people what the Lord had done for my soul. See what a chainge was here taken place; a little while before labouring in the fields with the poor negroes, and used like a slave, and looked upon with contempt on the greatest part of my passage home; so now I had nothing to do with the world, all things was provided for me, so that in a little time the congregation begin to increase greately, and prayer meetings set on in many defrant places; so, as far as I can remember, in the course of eight or nine weeks there was a great number of men, women, and children converted. Our meeting seem to be all in confusion, sume praying, sume singing, sume crying, sume praising and blessing of God. We have staid in the house sume times from twelve until three o'clock in the morning. My heart at that time, with every powar of my soul, was fully engaged in the work; one time in particular, I trust I shall never for get it, in prayer in the after meeting, I think Mr. Wacktings was the preacher, whether in the body or out of the body I could harely tell. It was just the same as it was in New York, and car'd on in the same manner. At the first sume of the old members would not owned it to be of God, as it was so much out of the comman way, wilst many others put their shoulders to the work, and, praise be to God, aboute this time I do remember my soul through mercy was got just in the same tune as it was in New York. I declard at that time to sevral old members consarning my thoughts. Sume would give me great incoregement, wilst other would try to drive me back. I mentioned this, if ever this should be published, which in all probability it will not, for thou, my young Reader, to take care who to declare thy mind to, for it is not evry old prefessor that knoweth moste of the things of God, but in the genral him who's soul is most alive to God. So as I was but as a babe in the way, I still wanted to be teached in the ways of God, and I fell in company with John Bettens, to whom I opened my mind freely. I have thought many times since I never found such faith, no, not in all the men I ever talked with. Well, then, I was not confined to Trevean house only, but I went aboute all through the country. But no place where I was asked where the housen was not full of people, and sume would not contain all the people. Shorley I was a wonder to myself, and in genral I found great freedom to speak to the people in my simple way. I remember once I went about eight or nine miles from home, and as I came to the door where I was expected, a young man came out and said, "Are you Captain Harry Carter?" I answered, "My name is Henry Carter." He said, "We have been expecting of you, for it is given out for you to preach to-night." When I heard of the name preach, I was struck with such fear and trembling, I could not tel whether it was best to return home again or stay there. So I went in, and the good man received me very kindly, and when the time came took me to the chaple, where it was so full the people could harley stand. Sume that know nothing of preaching caled it preaching, but I never presumed to take a text, but laid a little foundation as a text in disguise, so that I had room to ramble. But it was not for what I could say only that the housen was so full of people, but it was like the Jews of old, came not to see Jesus only, but Lazreth[58] also. Where I was not known before, they heard of me, and they believed that there was a great chainge upon me. I think the people believed I was really what I professed to be, but many times after I had been speaking, so dejected in my own mind, wishing that I may stand up no more, for it was seldam a day passed but what I had doubts whether I was cal'd or not, and I was much afraid to run before I was sent. And likewayse the cross was so great, I have often[59] thought if the people knew what I suffered, they never would ask me to exercise in that way at all. Oh, how I did tremble and sweat just as the time were come. Well, then, still the work of God continued to go on in Trevean society, and lively meetings all through this neighberhood. I think it was in Febury, in 1791, or a little before, when the work in Trevean begun in sume degree to sease, but still blessed times; and I think it was in the later end of March or the begining of April I was sent for by a great man of this neighberhood, he wanted to speak with me. Accordingly I went, and the business was as follows--saying, "I was in Helston a such a day in company with three jentelmen" (mentioned their names); "they all ware black coats. Looking out through the window, a methodist preacher went up street. One said, 'There is a methodist prechar.' Another answerd, 'I wonder how Harry Carter goes aboute so publick apreching and Law[60] against him; I wonder how he is not aprended and taken.' So I sent for you, as I fear they are brewing of mischief against you." "Well, sir," said I, "what do you think I am best to do?" He said, "I know they cannot hurt you no further then if you are taken you may suffer a long time in prison, and it may cost you a good deal of money, etc. I think you are better, to prevent danger, to return to America again." This was the tenar of his advice, and added, "If you go there I will give you, as I _think_ he called it, a lett of recomedation from Lord ----, which, I think, may be very usefull to you, or anything else in my powar shall not be wanting." And as the jent was well acquainted with our family, I dined with him, and he brought me aboute a mile in my way home, so I parted with him, fully determning in my own mind to soon see my dear friends in New York again. So I told my brothers what the news was, and that I was meaning to take the jent's advice. They answered, "If you go to America we never shall see you no more. We are meaning to car on a little trade in Roscoff in the brandy and gin way, and if you will go there you'l be as safe there as in America; likewayse, we shall pay you for your comision, and you car on a little business for your self, if you please." So that with prayer and supplication I made my request known unto God. I still continued to walk in the same rigrous self _denial as before_, abstaining _fro_m food, etc. Well, then, with much fear and trembling I concluded to go. The greatest tryal I had aboute going, I know there was no religious people there, and sume times in fears I should be lead away into the world again. I know I was going un slepry ground, but, glory be to God, I know his grace was sufficient for me. So at the 19 of April, in '91, I saild in an open boat from the King's Cove, in company with a merchant that had business there, so that after fifteen hours' passage arived there very safe, still in the same frame of mind. I lodged at a publick house, I think, two days, and as the merchant had business to Morlaix, desired me to go with him, where I staid there aboute ten or twelve days, and returned again back to Roscoff. I keept myself to myself as much as posable. Well, then, I went to privat lodgings and eate and drunk to myself; and as I had no business to do, I was allmoste all the time to myself day and night, still walking in the same _self deni_al as first. I _would not_ allow myself but four hours in bed, so continued, as well as I think, for six or seven days, but I found I had not sleep enough, as aboute noon I have fallen asleep upon the book, so I added a little longer time. I have often times since thought how dead I was then to all below. There was a house burned under the same roof where I lodged little before, and I had to go in and out right before the same house; and after I was there aboute a furtnight I hard sume people talking aboute the dredfull fire, and what great loste sume had sustained. I asked, "What fire?" They said, "Next door." I made no other answer, for I was really ashamed; what they thought of me I know not. So after I looked, and saw moste of the walls standin, but without windows and door, and the walls smoked quite black. Well, then, I did not pray in secret less than I did before, I suppose never less than ten times in a day, and in fore and afternoon walked a little out of town in so solitary place as I could find, out of sight of all men. In genral I went on the cleavs,[61] wher no eye saw me, and there sing, that I may be heard for I supose a mile distance, and pass, I think, aboute two hours and half fore noon and after noon in reading, praying, singing, and then return home. Aboute this time I made a linen girdle to go aboute my loins inside my shirt. _Tied it_ tite--I thought I might be able to live upon _less food_ and my sp_irit_ would be more vigorous in the wayse of good. I continued on for, as I think, aboute two days, found it quite disagrable, and so left it off. I passed allmoste all my time to myself; in my going out and coming in I went the byest roads, because I wanted to see no person; and if I meet any person in the way, it was a great cross to me to enter in to any conversation more than just the time of the day, for fear to obstroct my communan with God. I think then I watched over all my thoughts as well as words and acktens.[62] I think there did not the least thought pass my mind unperseved; my mind then was like a fisherman's net, I sav'd the good but heaved away the bad. Well, then, I went on still in this way until I think aboute the beginning of August, when I went on with a little business in the shop way, and aboute the same time Captain B. came there, an old acquaintance of mine, being the first Captain I sailed with, a man of what we calls good morels. I meet him one Sabbath morning as I was walking out, and after a little conversation I said, "This is a poor place for the publick worship of God; if I was at home now I should be at Trevean preaching." He answered, "Why don't you stand up here and say something to the people?" So as I thought he was making game of me, I answered, "Who will hear me?" He said, "I will hear you, and I suppose most of the English men in town." So the next Sabbath morning meet with him again on nearly the same ground. He repeated unto me nearley the same thing again, saying, "All the English in town will gladly hear you," or to that purpose. So then I thought he was in earnest, and I left him with much fear and trembling, and immediately went to ask counsel from the mouth of the Lord, so that spent the remainder of that fore noon in pray and supplication, and for fear I should run before I was sent, I set this as a mark, that after diner I would go on the pier, and if I meet first a such a man, who was master of one of the vessels that was there, I should perpose the matter unto him, and if agreable, I should shorly think it to be the will of God consarning me. So aboute one o'clock I roase up from my knees and went on the pier, and the first man I meet with was the very same man, so with much fear and trembling I opened the business unto him of what Captain B. and I was talking of. He readily replyed, "I'll come, and I will tell all the people of it, I suppose they will all come." So him and me perposed the time of meeting, I think it was four o'clock. So he, like a town cryar, beat the alarm, and after I left him, oh, how my poor _head was_ destracted, a s_uch_ p_o_or i_gnorant_ _sou_l as I was to take such a thing upon me; shorley I shall be a by word and reproach with the French, and a mocking and lafing stock to all the English. And another was, what can I say to the people? as when I was at home there was mornars to comfart, weak belevers to build up, sanctification to impress upon the people's minds, and now only _sinners_, etc., to talk to. So that my poor mind was so full of distraction I could harly tell what to do; but as I had gone so far as to perpose it, I could not go from it. Well, then, according to the time perposed, the same afternoon, in came Captain B. with I suppose about twenty or thirty, I suppose nearly all the Inglish men in the town, took off their hats, and seat themselves down, so that I begun to tremble and sweat, I could scarcely hold the hymn book in both hands. Gave out a verse, and begun to sing myself, and praise be to God, before I sung the second verse I found life coming, and before I went to prayer the cross was all gone, so that I found very great liberty in prayer; so that when I roase from my knees I was surprised to see so many hard harts to their knees, so that I found much curage to go on in my poor simple way. I found uncoman degree of liberty, and the people all listoned with the greatest attention, and after I dismised the people with singing and prayer. So after they were gone, I was still jealous that they would turn what I said into ridicule, and as I had a back window that I could see the greatest part of the pier, watched them, and they all went on board as quiat as Christians of the first magnitude might be expected. The Lord doth only know if there was any good done or not. So I continued for eight or nine months every night when there was Englishmen there. I think it was in the beginning of the month of may '92, when three of my brother's children come to life with me, Fra^{s.}, Henry, and Joanna Carter, and staid with me until the beginning of Sept^{r.}, when I was like a hermit to myself as before. I think it was in the beginning of Oct^{r.} when three large cuttars, Captain Scott one of them, came in here wind bound from Guarnsey; and as I went into the house on sume buisiness where they put up to, saw one of their sailors that did formely sail with me. I asked him to come to my house, sayin I could treate him with a glass of grogg, and if them three or four men that was presant would come with him, I should be glad to see them also. That was in the evning. I was not home as I think more than fifteen or twenty minits until he came in with four or five with him, and in a few minits after allmoste the house full with their three Captains. Then I thought what they come for, and as they took me in surprise, as I had not the least thoughts to say anything, I begun to tremble and run upstairs to call for help from the Lord. I suppose I might have been there eight or ten minits, and as I was coming down I meet one in the stairs, saying, "If you don't come down the people will all be gone." So with much trembling and sweating I took the Hymn Book and begun to sing to myself, as I did the first time. I found great liberty in prayer, and after thundred out the tretnings, cryed aloude, spar'd not. They all behaved very well, seemed to listen with great atention. So after we concluded the meeting, I asked the Captains and sume of the men to seat down, so they stayed with sume more of their people, I suppose more than an hour, all very seryous, no laffing, no trifling conversation. They took sume thing to drink, shook hands, and wished good night. Prayse be to God, I was shorly a wonder to myself in deed. So the next morning him that had sailed with me before come in laffing, saying one of his shepmates told him that how could that ould man know his thoughts, for he told him allmoste all that ever he did in his life. I think they sailed the next day, and two of them being in company in a gale of wind, one of them disapeared, and have never been heard of since. Captain Scott showed me great kindness ever after; he sent a luggar there after to be laid up, with, I think, six or eight men on board, who ordered them to take all what they wanted of me, and likewayse recemended all his friends unto me for what they wanted. Well, then, aboute the later end of Nov^{r.} I got a passage to come home not only to see my family friends, but my spiritual friends also. I can still see, glory be to God, I was still hungring and thirsting after him. I thought before I come home, if I could be permitted to come into preaching housen dors, I should be very happy, but praise be to God, I had rather the right hand of felowship given me, the preaching houses full of people where I was expected, as before. I staid at home until 24 Dec^{r.}, and as the war seemed to be near at hand between the Franch and Inglish, inbarked at Coverack, on board Captain R. John's. I had a blessed time in company with my dear freinds there, two or three day wind bound. Arived at Roscoff, Christmas day in the morning, 1 Jan^{y.} 1793, oh, how short I comes in all things of what I would wish or ought[63] to have been. There was no talk of war when I arived there, all was quiat as when I left the place. I found my house, etc., just as I left it. I was then to myself as before, I went home like a hermat or a king blessing and praising of God. I continued to walk in the same self-denial. I sent off moste of my goods to Gurnsey, sold sume there, and keept sume, what the law would alow me to bring home, as I was promised that a vessel should be sent to bring me home. So I think Feb^{y.} 2[64] there was an embargo lade on all English vessels, and war declard between the boath Kingdoms. I think it was in the latter end of March when I was sent to Morlaix as a prisnor, not close confined, but to apear every morning to the town house to sine my name. I was there nine or ten days, when I was ordered back to Roscoff again. Things at that time looked very gloomey, but glory be to God, I was not the lease afraid of all the lyons in France. I could trust boath soul and body in the hands of my Redemer, no mormring, no complaining, the language of my heart was continualy, "Good is the will of the Lord, may thy will be done." I staid in Roscoff nine or ten days, when I was ordered again to Morlaix in company with Mr. and Mrs. _McCullock_ and Mr. _Clansie_. I think in the beginning of May was sent back again to Roscoff, Mr. M. and Mr. C. in Roscoff the same time, where we was all obliged to go to the town house every day to sine our names. So continued untel the beginning of August, when we got a passport in order to come home. In the course of this time, wilst in Morlaix, the same as at Roscoff, went to privat lodgings. Walking still in the same rigrous selfdenial, etc. So as there was no other way for us to come home, M. Macculloh bought a small vessel, aboute 40 tons, and boute the seven or eight hauled the vessel out in the Sadie Rock Road, and got all things on board ready for sea, when there was orders from the town house with a corvet's armed boat, ordered us in to the pier again. And this was Provedence indeed. Our whole crew consist as follows: Mr. Macculloh was a jentleman marchant, lived in that town many years before, a man of good property, etc.; Mrs. Macculloh, two sons, one a man, the other aboute twelve years old, one daughter, a young lady aboute eighteen or twenty years old, one sarvant man, two sarvant maidens, Mr. Clansice, and myself, ten in number in all. And we concluded before, that the old jentlman and me was all the sailors, there was not one of the other eight that in no case could help themselves. The four females was sent onshore to Mr. M.'s house, all the rest of us keept on board with a gard of soldars for three days and three nights, the wind blowing very hard tho' fair. This vessel was condemed for sea for sume time before, so that in the cource of three days we had time to overhaul her, and I think I may safely say that there was scores of graving pieces in her not bigger then a man's hand; sume of the timbrs so rotton, that one might pick them off with one's fingers, the sails, masts, etc., in the like state. We had hard rain sume part of that three days, where we was so wett below nearley as upon deck. The old jentleman have told me many times since, saying it was Providence prevented us from sailing, had we sailed then we should all be no more. You may be ready to ask, Why did we expose ourselves to so much dainger? I answer, "This was the third pasport, and all conterdicted, and glad to git out of the mouths of the lyons, as there was no other way." So we was all sent on shore to Mr. M.'s house with a gard of soldars to be keept at the dore, and the 15 of August, 1793, all march'd to St. Paul's with a gard of soldars. I lodged and boarded in the house with Mr. and Mrs. M., where I had a good room and bed to sleep in, and a large garden to walk in. Now, I am going to inform you of sume of the devices of Satan. One evning, whilst at suppar, seating by the side of Mr. M., when it was sugested to my mind the same as if _one_ was to speak to my outward ear blasfamys thoughts against my dear friend Mr. M. At first it struck me all of alarm. Upon reflection I was shore they were not my thoughts, for at that time, and before then, I know I never loved my own father bettar, and after, when the gulenteen[65] begun to work, I have thought many a times, should him be condemned, I would gladely die in his steed. So after suppar took a walk in the gardon as usual, where I begun to reason, saying, "Shorley if I was saved from inbred sin, I should not feel such ugley thoughts as these and then begin to doubt." But praise be unto God, he did not leve me to doubt for harley a moment, but sent me down the Comfartar, so that all doubts vanished away in a moment. So I went to seat in the summar house, and begun to sing, that I suppose that I might be heard all over the town. I suppose I shall never forgett that evning wilst in time, how my poor _sou_l was delighted in God my Savour. Still went on in the same rigrous selfdenial, but I could not fast then for fear to be taken notice of with the family. I staid there until the 12 or 13 September, 1793, when sume officers came, sent by the town house; so after they examined us for money and papars, took us to the Town House, and after they measured our height, and asked us many foolish questions, took us to a prison caled the "Retreat," in the same town. We arived there a little after night, were all of us showed our apartment to lodge in. I had a nice little room to myself like a king. Here was another chainge, but a happy one, the language of my heart was, "Good is the will of the Lord, may Thy will be done." Nor could I help singing that night alowd when I went into bed. We all had our pervision sent from the House we lodged before, and after four or five days past, we was joined by sevral French gent. and lades, and in aboute fourteen or fifteen days there was two armed horsemen sent in the preson to take Mr. and Mrs. M. from us, no person knowing where they were to be sent, but supposed they were to be sent to a small uninhabited island, a little off Brest harbar, and there to be starved to death. Oh, what tears and cries was there with their little famely and many others. It was seldom I could shed tears, th_en I_ did plenty, and after dried up my tears and cheard myself up, and then went in to his room, where I found him alone packing up his clothes, etc. I sat myself down in silance I supose for aboute ten minutes without one word; whether him or me spoak first, I know not, but he said in his usual plesant way to this purpas, "I fear not what man can do unto me. I can trust in Providence and not be afraid," which set my heart all on fire with love; I could give them both up unto God, shorley beleving I should see them again. The remainder of the day was a solam day unto me in deed, but a day of mourning through the whole house; after this there did seldam a day pass but what sume Jentmen and Ladis was brought to join us, and in the beginning of Nov. 1793 the lady I boarded with and sume of her famely was brought to us. I used sett times for reading, praying, walking, and thinking, as I did before when I was at liberty, and keept allmoste all the time to myself, I went to bed aboute ten or half past, and got up as soon as I could see daylight in the morning; and as the weather begun to alter, juste to run in the garden aboute half hour in the fore noon, and the same in the after noon. At first the people thought I was ither a natural fool or else mad, but my friend Clansie gave them an account of what kind of being I was. Aboute this time I had word brought me, that all my goods _I left_ in Roscoff was condemed and sold, I suppose they might have been to the amount of £40. I rejoiced with great joy when I heard of it, saying the Lord's will be done, knowing all things should work twogether for good. It apears clearley to me since that my will was wholy swallowed up in the will of God; I think I was then shorley so dead to this world as ever I shall be. Well, then, as the people begin to increase more and more evry day, Mr. Clansice came with me in my little room. At first it was a great cross to me, but soon after, the oftener I saw him the better, far bettar I likt him, he ackted like a father, a brother, my tuter, my sarvant. Glory be to God for such dear frends. He was a young jentelman merchant, a man of great natural abilities, and I suppose brought up in the first scools in Christendom. I knew his father and him from a child before, but was little acquainted with him before we became prisonars together, and I have thought many times since that there was not in the whole world two such men as Mr. M. and he. About the 3 or 4 of Dec^{r.} 1793 a gard of soldars came into the prison and took with them my dear friend C., Mr. T. Maccull, with a great number of French gintelemen and ladis, so there was none of my family left, but Miss M. her dear little brother, and the two sarvant maidens. I think such a scene as that I never saw in all my life. I suppose there was not one dry face in all the house, _either_ with men or whimin. There was not one _person_ that know where they were to be sent to, but supposed they were all to be sent upon the same Island with Mr. and Mrs. M., and there to be starved to death. This was a day of mourning and lamentation indeed. I do not know that I shed one tear, tho' it was a solamn day with me, still the language of my heart was, "Good is the will of the Lord, may the Lord's will be done." But the tryal was so great, the same as tearing the flesh from the bones. Aboute the 6 Dec^{r.} 1793, when a gard of soldars came to the preson, and took away I suppose between thirty and forty prisnors, and me one of them, where to go we knew not; but Provedence enterfered, and worked upon a French jintelman's mind, so that he took Miss Maccu^{h.} and her little brother, with the two maidens, to his own house, so that they had all liberty to walk the town when they pleased. This was the cause of great joy and gladness unto me. There was a few horses brought for the old and infarm to ride--two, which one was put in my hands, and ordered to ride it, with a charge to keep it to myself. We had aboute twelve French miles to go, so we arived to Morlaex just after night, where, to my agreable surprise, found dear C., Mr. T. M., and sume jint^{n.} of Roscow, whome I know before. We rejoiced greately together, and then they g_ave_ an account of Mr. and Mrs. Maccu^{h.}; they was put _from_ St. Paul's to a town caled Landernau, aboute twenty miles from S^{t.} Paul's, in to a crimnal gaol, where the first night had nothing to lye on but a little short dirty straw, and without one farding[66] of money with them, and not one person in the town that they were acquainted with, but in the morning was visited with sume jint^{n.} and lades, who suplyed them with a bed, and brought them pervisian. So we rejoiced greately together in telling and hearing. Here was a blessed chainge again to me, to once more to be with my dear family at home again. This place we was now in was a jentleman's house, all the family thrust out and put into other prisons, and this house made a prison of. The house was not large, but it was full of people below and aloft. I sleept in one room, where there was fourteen beds, and there could not find the least cornar to retire to myself but a little house. At that time it was very cold, but I did not mind that. I could not stay there long to a time, distorbed with one or other, as there was sixty or seventy presoners there. I had not one farding of money, nor nither of our family, but the law or rule was, by the order of the Convention, for the rich to maintain the poor. So I think I was maintained by the publick for two days, when my friend C. got credit for himself and me, from a tavarn close by. What a great chainge this was again, all the day long in nothing but a discord and noise. What a mercy it was I was not d_raw_ed away by the multitude to do evil. I can see now at this moment how I improved my time, how prechas every moment was, I had allwayse my book in my pocket ready to hand if I could find any place to seat, and sume times, when I could find no place to seat, stand to read. All the people very civil to me, and in the beginning many of them introduced their conversation; but I did not find it profatable, it sarved to block the mind from prayer. Tho' I could understand and speak French on moste common subjects, I soon gave them to think I know little or nothing, so by that means I saved myself from a great deal of empty chatchat, so by that means pass allmoste whole days, sume times without speaking very little. I have often heard sume of the French gentlemen speaking very high thing in my favour one to another, not knowing I could understand them, and I think it had allwayse this efect to humble me as in to the dust before God and before man. I was still watching over all my thoughts with all my words and actions. I do realy now beleve that there did not one thought pass through my mind unperseved in all my waking moments, still living as under the immediate eye of God, walking in the broad light of his countanance from moment to moment. I had left of drinking of water from the year of '89 in America, but there was a well close by the backdoor. I had _a_ tumblar glass where I went sume times, and _filled a_ glass with water, and look at it again and again. Oh, how my heart would burn with love and thankfulness to God. Aboute a week after I was there, I had a book given me by a French gent that spoak English, caled "The Sinner's Guide," pen'd by a Spanyard, but translated in English. The name of the gen^{t.} that gave it me was Mr. Lereu, which proved a great blessing to me indeed. 25 Dec^{r.}, or Christmas day, 1793, Mr. T. M. and Mr. S. was taken from us, and put to a town caled Carhay,[67] aboute thirty miles from Morlaix, and there they joined Mr. and Mrs. Maccu^{h.}; all the rest of us was moved to another Jen^{t.} house, a few dors off, where we had more room, etc., Mr. C. and me still left together. The first thing I allwayse lookt for first was a place to go in secret, and my friend C. would allwayse look out for a place for himself and me to sleep in. I found a nice _little_ place in the garat, with sume old mats and other things I so inclosed, that it would just hold me to my knees, with my feet out of sight, where I might stay so long as I pleased, and no person distorb me. This was a blessed chainge again. I sleept in a room with ten or twelve gent^{m.}, went to bed at ten o'clock, got up in the morning at five, _spent an_ hour to myself, and at six went down stairs, _and sat by_ the fire with the old men that garded _the house_. To read, etc., until about half past seven or eight, when I should retire to my little garat until nine, when I should come down, make my bed, and run or walk in a large room until ten, and then retire again to my garat until one o'clock, when I was caled to dinnar. After dinnar, aboute two, I retired to my garat and stay there until half past three, come down and run in the room until four, then retire, and stay there until aboute seven or eight, stay down aboute half hour, and then pass in the garat until ten, bed time. There was a small window in the garat aboute a foot square, without glass, but a leef to shut and open, so that in the daytime could see to read by it, but at night I seat without any light, the days nearley the same length as they are in England. At that time I begun to, what I call, to examen myself, which time was from half past six until aboute nearley eight in the evning--about the same time that the many thousands of methodists offered up their evning sacrifise in England--and begin first to see the many wonderfull delivrances the Lord had wrought for me--how I have been presarved so many times from drowning and other dangars, then how I was convinced of sin, how I cal'd for mercy, what tryals and temptations when I was seeking the Lord, how and when I receved the Comfarter, what tryals, temptations, when I was in a justified state, what [...], what fears, what joys and delights in all plases I have [...] since I know the goodness of God; how many times I prayed in secret in evry place, what self denial I walked in, and to conclude, sume up the whole, saying, Lord, how is it with me now; am I growing in grace or loosing of ground? This garat was very cold indeed to the body, so that my hands was swollen very large with chilblins, sitting so many hours in the cold without fire. Jan^{y.} 1794, aboute the beginning of the year, Mr. C. got me to sleep with him in his little room and one French jen^{t.} This was again a comfartable chainge; there we was together again, like to great k_ings_. Aboute the latar end of this month, I was desired by C. to speak to aboute twenty whemen caled nuns, being presnars in the same house. I went with fear and trembling. They received me in a very _pleasant_ manner, drew a chear,[68] asked me to seat down. _One of them, an_ old Lady, the mother Confessor, asked _me, was_ I ever baptised. I answerd, "Yes." "In what manner?" I answerd, "I was marked with the sign of the Cross in the name of the Father, and of the Son, and of the Holy Gost." I saw sume thing very plasant upon all their countnance, as it was the same way they themselvs was baptised. They asked me a number of many fullish questions, that I was obliged to mustar all the little French I could rise, as I could understand and speak any thing aboute the coman things of this life far better than the spiritual things, having no person to converce with aboute spiritual things. However, they keept me with them I suppose aboute half hour, still asking me questions, but at laste asked me to kiss the Cross. I refused. They tried me again and again. I told them I could not, I dare not do it. So at laste took my leave of them, and so came off rejoicing like a king. They are a loving people, and the nicest whemen I ever saw in France. I doubt not but many of them lives according to the light that is given them. They petted me very much, and told my friend afterward that if he could prevail upon me to turn to their Religion, I should be a good man. They thought I was earnestly crying for mercy, but was an entire strainger to the way of mercy. They allwayse looked upon me afterward with the love of pity, _and some_ of them was fond to converse with me, [...] found it profitable, they after caled [...] the soletude, I spent so much time to myself. I think it was the 11 or 12 of Feb^{y.} '94, I seat apart to prayer and fasting on a particular occasion for thirty hours without eating or drinking. At the 19 and 20 of the same month, I seat apart in prayer and fasting to ask of the Lord sevral favours for self and friends, with thanks for past mercys, forty-eight hours without eating or drinkin. Oh, what a blessed time I had. The 19 and 20 of April, 1794, I seat apart in prayer and fasting for forty-eight hours without eating or drinking. I trust I shall ever remember these times wilst I am in time. Oh, how my poor soul was delighted in God my Saviour. To the end of this time I went to run in the room as usual, willing to know whether I was weaker or not, so that I found I could run strong as ever I could; and it was shorley to me _a great_ wonder, as I took no breakfast for aboute six months _before_ then, and I took suppar sume times two, and sume times _three times_ a week, and my suppar I supose did not exceed two ounces of bread, without tea, water, or anything to drink, and my dinnar very little. I was still suplied with dinnar from the tavern. Mr. C., and aboute six or eight French gen^{t.}, dined together. I could not keep all this a secret from my friend, so he took me to reason sevral times, saying, "You'l destroy the body," and would intice me like a child to eate, and allways took the pains to call me to dinnar. So _I thought_ it was reason what he said, and I thought I was _going to_ too great extremes, so I thought for the time to _come I would_ go without breakfast and suppar as usual, _and fast_ for thirty hours once month, for the time to come. I did not know then at that time I was thankfull or humble, but even now, I know I was as less then nothing in the sight of God and all men. I know I was unworthy of the floor I walked on, and vilest of the vile in my own eyes. I never saw my short comings more clearer than I did in them days. Oh, how often I was crying out against my dryness and lasiness of soul, my littleness of love, etc. Sume times, when I heard the clock strike, I uste to rejoice, saying, "Lord, one hour nearer to Eternety," the same time mourn before God I did not spend it more to his glory. I think every moment of time was far more preshas then fine gold. Aboute this time there was numbers of gen^{t.} and lades _taken_ away to Brest that I parsnally know, and their _heads_ chopt off with the gulenteen[69] with a very little notice. I don't know I ever had a doubt of my own life, but I have had many of Mr. M., and thought many times, should he be condemed to die, I would gladly die in his steed if Providence would have it. I knew he had much enimies, and why, because he was a libral man and a man of powar, and did do much good, and them he did do most good to was his greatest enimyes, and it was _such men_ as him in genral sufferd moste. Ag_ain_ [...] if he was spared, he was worth his _place in_ creation, be helpful to others as well as his own famely. As for me, I thought I should never be found wanting with any person in the world. I know my child at home would be taken care of, so it was a mattar of very little defrance to me where the body was left, knowing I had a house not made with hands, eternal in the Heavens. I staid there until the 15 June, 1794, when the house was cleared of all the presnors, and then put to a convent a little out of Town, that was made a prison, caled the Calemaleets,[70] where there was aboute 270 men and whimen, the house very full of people. We arived there aboute nine in the morning, and as Mr. C. and me was shifting aboute the house seeing for a place, standing in the _room_ talking together, he was taken with a fit and fell _as_ dead in my arms. Soon others came to my assistance, _and took_ him out in the yard as dead. It was very seldem _that I_ shed tears, but then I did plentefully, as I was in m_ind_ he was no more; but the language of my heart was _still_ [...] _may_ thy will be done, come life or death, take life _and all_ away, good is the will of the Lord. But praised _be the Lord for_ ever, in the course of an hour he revived, and _was put to_ bed, so that in the course of sume time after _he recovered_. In the garden I seat myself under a tree and _thought of H_agar's words, "Thou, God, seest me." I had a sweet time there until _I was disturbed_ by two young _men_ that came to seat by _me_ [...] with a great m_errime_nt and ladies, and _soon after_ the Lord provided a place for me under the stairs. It was a large stone stairs going down to a under-ground seller. In the daytime I could see a small glimring light, but never so light as to see to read. This was a blessed place again, indeed, where I was out of sight and hearing of all men. Mr. C. got part of a room in the garat, with a young jen^{t.}, whose name was Morrow. The first night I made my bed in the passage close by his door. Friend C. could not bear to see me there. The next morning him, with sume young jen^{t.}, got carpentar's tools and timber, turned to and divided the room in two, so took me in with him again, and there we was again together like two great kings. We could no longer have our food from the tavarn, the distance being too far [...] The good lady that I lodged and boarded with in St. _Paul's_ was brought to the same preson, and a young _gentleman_ with her, her brother son, to which she _had_ d^{r.} C. and me with her to eate. She had her per_vision_ sent from her own house. Blessed be God [...] for such dear Friends. In the course of two _or three_ days I found my strength much failed me. _I had_ more room to walk in than I had before, _and_ long _stairs_ to go up and down over. Mr. C. _discovered_ it, and took me again to reason, saying, "_You are_ of the earth, and the body must be _helped with things_ of the earth; if you continue so, you'll _hurt yourself_, and if you do not _feel_ any ill efects _now_ [...] _you_ shorley will if _you_ lives untel you are old." I thought it was quite reason that he preached to me. I thought I was going too far with it, and that Satan had some hand in it; so after he watched me like a child, and if I was not presant at the time of meals, he would come and fetch me, and I must go with him, he would not be denied. Praise be to God that I ever saw his face, he was allwayse more mindfull of me than he was of himself; so I continued to take breakfast for eight or nine days and then left it off again, and I unely staid without suppar twice a week. This place was again a blessed chainge indeed. We had a large garden to walk in, from six in the morning untel seven in the evning, I suppose not less than three acres of ground, with fine gravel walks in it and sume apple trees, etc., so I was like a bird left out of a cage. I suppose I had not sung aloud to be heard with[71] man for many months before. I _was_ allways surounded with[71] man, but then I _used to go_ out with my book in my pocket, seat mys_elf under_ a tree, and if I could not see any person, sing _so loud_, I suppose I might be heard for a mile off. Oh, _how my_ soul would be delighted in the God of my sa_lvation_. I remember one day, as I was seating under _a tree_, three or four ladies came to me, and asked me _to sing. I begged_ to be excused. They asked me again and again, so _as I was afraid_ to give an ofence I sung two or three versis [...] _with_ a loud voice. They thanked me in a very p_leasant manner_, and went away quite pleased. I think I spent my time _to myself much_ the same as I did in Roscoff, before _I was taken_ as a presonar. _I was_ allwayse mindfull of my little cornar under the stears. I went to bed at ten o'clock, and got up in the morning at four. All the people still full of friendship to me; but I keept myself still to myself as much as posable, without giving an ofence. There was there amongst the whole number aboute sixty nuns, one of whom I conversed with more then all the rest; seldom miss a day, if she saw me, but what she would have sume thing to say unto me. But I had not French enough to enter into any depth of Religion, but I never heard one sound of persuasion from her to turn to her Religion. Once I remembered she asked me, saying, "Carter, did not you feel your self very sorry when you was first convinced of sin?" or sume thing to the same purpas. I was struck with wondar where she got that from. I think I may safely say she was a burning and a shining light. She had small suplys often from _her_ [...] _fat_her's house, and well she had it often as it was _possible. It was al_wayse in her powar to govern her own mind. _Every day_ she would give allmoste all she had to the poor, _or to any_ person she thought that wanted; lived allmoste _entirely on_ bread and water herself. She have often told friend _C._, "Do not leave Carter want any thing, but speak _to me_." I have often thought that she would allmoste _tear ou_t her eyes to do me good, and I have often thought _that she ha_d not the least doubt but what I was built _for a Catholi_ck. I have thought then, the same as I think _now, that if I_ am faithfull untel death, and she cont_inued in the sa_me way, that she and me, with many _more that_ I saw there, shall meet at God's right hand, where we shall sing louder and sweeter that ever I sung in that gardon. May the Lord grant it. She was so nice, butifull a young lady as I think the sun could shine on; I suppose aboute 26 or 27 years old. Her father was a nobleman of a large income, her mother, a sistar to the great, rich Bishop of St. Paul's, and him, as I have heard, for all his incom, could scarsely keep a goode sute of clothes aboute him--it was busy all[72] for the poor. I think she was the pictar of humility in all her deportment. I could not help to admire her, as I was in the same house, or housas, for, as I think, nearly six months. Well, then, I continued to go on in the same manner as did before, minding the same things, and using the same language as I did in every chainge or place; this is the right place that God _would_ have me be in, without one mormoring _thought_, or the leaste desire to be anywhere else, _good_ is the will of the Lord, happy still from _moment_ to moment. It was aboute the later end [...] it was imprest upon my mind to make [...], as there was sume country men there tha_t was doing_ it, and after, with prayer and suplication, _I made my_ request known unto God, I begun to wo_rk. I went_ to bed still at ten, roase at three in the m_orning, at_ four went to work until nine, pass a h_our in prayer under_ the stairs, work until half past eleven, _and then dinner_; after dinner pass a half hour u_nder the stairs_, and work untel four, pass a half h_our again in prayer_, work until half past six; at seven _we had supper_. The remainder of the evning spend in praying, walking, reading, thinking, &c. So as the days shortend I could read but very little, nither walk in the garden, but only on the Lord's day. But praise be unto God, he was ever with me in a powarfull manner, sume times when the walks was allmoste full of jent and lades, pass through them all, as if allmoste there was no soul there but God and me only. That gardon was as the gardon of Edon to my soul. Then, in the morning, I spent nearely one hour to my self, and gitt at work as soon as I could see, minding [...] the same stops under the stairs, and work as _long as_ I could see in the evning. So as the weather _got_ coulder, I got myself to work in a large _Room_, I suppose not less than 50 feet one way, and _I supos_e aboute 30 the other; it was not finished, _neither p_lastard nor floored; what was under foot was _the ground_, the top of the window just to the level of _the roof_; and after suppar, evry evning, I passed my _time there_ until bed time. I had a stool to seat un at _meals_, and in the evnings seat on my stool, then _to_ pray, &c.; sume times, without[73] it was _moonlight, stu_mble up again[74] the walls, as I had _no light; but_ praise be to God for ever, for all it was so cold, a solatry place, it was a paradice to my soul, it was sume thing like a hermitage indeed. I was out of sight and hearing of all men and things. So just aboute that the clock struck ten, my dear friend C. and me used to meet just at the same time in our little, dark cornar of our lodging room as cheerfull as two kings. I think it was in the medle of Dec^{r.} 1794, the good ladey and her brother's son was removed from us and put to St. Paul's, into the prison that I was first put in. It was a day of mourning and lamentation with her, indeed, to leave her two children behind her, and it was a time of tryal to me likewayse, as she was nearly so natural as a mother. But still the language of my heart was as usual--good is the will of the Lord. She t_ook_ care to send us our provisan from her _own_ house, so still dear C. and me was together li_ke_ [...]. Aboute this time I had an account that Mr. and Mrs. _Maccullock_ was labrated out of preson,[75] and they and all their _family were_ then at Mr. Diott's, in Morlaix. It was a day of rejoicing _to_ me, indeed, to think that the Lord was so graicous _to bring_ us so near together again. And in the course _of a few_ weeks they had liberty to come to see dear C. and _me in prison. We_ shorley had a happy meeting together, as w_e had not seen_ each other for aboute fifteen months, they receved _me as their_ own child, and I them as my father and mother. _Praise God_ for so many dear friends. Aboute the 10 _Jan_^{y.} 1795, Mr. Diott _sent for_ me to come to dine with him. I went with much fear and trembling, as it was ever a great cross to me to be with my great superiers, and so in every place I moved at a solam awe of the presance of God resting upon me with a fear to ofend him. There I meet with Mr. and Mrs. M., with all their loving famely, and through the tender mercy of God, after all our tryals and sufferings, being separated to nearley sixteen months from each other, escaped, through mercy, all the lyons in France, not one hair of our heads diminished. We staid there until evning, when Mr. Diot said, "I will in the course of a few days gitt you out of preson and you shall boath come to live at my house." We thanked him, wished good night, and arived at home with our gard aboute seven. So the 23 Jany. 1795, in the morning, we was boath librated. I went to Mr. Diot's, Mr. C. went with Mr. Morrow in the same town. Still pervision at that time _ver_y scarce to be had, the inhabitants of the town had all their _provisions_ sarved out every day according to their famely. _Without_ we had money we should not be able to gett board _on any_ account. I was received _into t_hat famely as a king, treated as if I had been a noble_man, and_ being the laste strainger was placed at the head of _the table_, where I begged to be excused again and again, but _could not_ prevail. But to the end of six or seven days I shifted _to the other_ end, where I thought I was more in my place. _I thought_ it then, as I have many times since, a piece of _bread be_hind the kitchen door was more suitable for me. _Praise be_ to God, here was a chainge again indeed. _From_ a stable to a parlar, and from a parlar to a [...]. _I eat_ mostimes my three meals, _the_n for fear to be not_iced, I always eat_ sparingly. I think I can say I allwayse _rose up with a_ sharper apetite then I had when I sat down. I lodged in a large house to myself next dore to Mr. Diot's, where I had no person to desturb me day nor night. This was a blessed chainge again, it was just the place I would wish to be in. I was there aboute two or three weeks, when I saw sume things wanting to be done aboute two vessels that was laid up before my door, belonging to Mr. Diot. I spoak of it to Mr. Peter Diot, and went to work, and when the season sarved, I washed the decks morning and evening; and as I had a chest of carpentar's tools in the same room with me, made boats' oars, ruddars, painted names in the starn of the small boats, etc.; that I was mostly imployed all the week. But my wark not hard, as I was my own master, and I did it all volentary. And on the Sabbath day I went out of town evry morning and afternoon when the weather was _fair_ in sume solatry place to read, pray, sing, and _think_, as I did in other places. I think it was aboute _the_ midle of March 1795, Mr. M. was taken sick with _fever_ and agas, and in the beginning of May 1795 went _away_ with all his famely, leaving only the two ma_idens and_ me behind him. It was the 10 or 12 of Ju_ne that_ I went to S^{t.} Paul's and Roscoff to see my old f_riends, where_ I was received like a king, and with[76] sum_e people_ I never had but very little acquaintance _with. I had_ my time to my self as usual, only at [...] meals. I found the same solatry place _as before_, where I was brought to examine _myself_ whether I was growing in grace or _not_ [...] so I had a bl_essed_ t_ime_. I returned back again to Morlaix aboute the 26 or 27 June, 1795, like a jiant refreshed with new wine. There I was received again with that loving family with the greatest afection. Praise be unto God for so many dear friends. It was nearley aboute this time I went with aboute a half a score men to put a boat of Mr. Diot's in a large building that was before a tobacko manefactry in the shade, and after I had got the boat to the place I wanted, I went from the people to gett a cornar to myself to pray, and looking aboute I saw a large scales and weights close by me. I thought as no person saw me I would way myself, and all the weight my weight was 6 score and 15 pound.[77] I was set to _won_der where all my weight was gone, as I did for _many_ years before way 10 score, and when I came _home_ I tried un a waistcoat that I had not worn for _several_ years before, and I found it too big for me, _may_ be upon the round nine inches, and I never know in all these years no not _one single day_ of sickness. I think it was the 10 July, 1795, Capt^{n.} [...] _the_ Capt^{n.} of a frigat that was taken, and Mr. Moress [...] _of_ the "Elazander" man-of-mar, came _to Morlaix in_ order to gett a passage to England in a _vessel_, who dined and supped at Mr. Diot's. _They_ made very free with me all _the same as if I_ was their equal, and one day, by a friend, desired me to call at their lodging, they wanted to speak with me. I went with fear and trembling, and the business was as follows. They said, "Mr. C., we have been talking about you, as you have been here so long a prisnor, wearing your old clothes out, your time passing away, earning nothing. We think you may go with us in safety. Put your clothes on board the evning before we sail, gett on board in the night, you'l never be inquired after, nither found wanting." I answerd to this purpas: "Jen^{t.}, I thank you kindly, but first you'l give me leave to inform you I was brought out of prison upon Mr. Diot's interest, tho' he never sined any paper, nither gave his word that I should continue in the country. Notwithstanding that, in these critical times, if I was to go without his leave, he might be caled to an account for it after ward. If you will be so good as to ask Mr. Diot, and with his leave, I will gladly go with you." They commended me very much, and said _the_ first opertunity they would ask him, and I should know of them again. In the course of two or three days _I_ waited on them again. Mr. Morress said to me, "_Well_, Mr. C., we have opend your case to Mr. Diot. Mrs. [...], him long with you; he is a great fool to sto_p here_ so long as he have, I wounder how he have _not gone_ long before now. But Mr. D. said you was _best to_ stay a little longer," and added, "Mr. C., proveden_ce has_ presarved and provided for you in a mer_ciful manner_, so I would advise you to wait with p_atience, and you_ will be deliverd in God's due time." I th_anked them and_ took my l_eave of_ them, wondring w_here that_ should come from, for it was the _words of a spir_itual man. I went in one of my solatry cornars and there sung, and blessed and praised God. I can almoste feel at this moment how happy and thankfull I was, so well and contented equaly to stay as to go; and if it was the will of God, I should stay there all my lifetime, still, good is the will of the Lord, may His will be done. So I continued to my work aboute the boats and vessels as before, walking in the same self-denial, until the 6 or 7 of Augst, 1795, when, unexpected, on Saturday received a letter from Mr. M----h to meet him at St. Paul's next monday, that he had obtained a pasport for himself, famely, and me to go to England, and Mr. Clansee was then at Brest, who had then got a nutral ship to take us home. Well, then, _this_ was a great as well as unexpected news, and many _times_ before then thought that I should be very glad and thank_ful_ if I ever lived to see such chainge. But it answered the same efect as every other change I passed through, a fear I should meet with anything that should obstruct my communan with the Lord, and this is my mening when you read of any case before, when I said I went in fear and trembling. So that on Munday morn_ing I set out_ for S^{t.} Paul's _in_ C^{o.} with Mrs. Diot and her two little _children and t_wo sarvants riding in a coach, and me on horseback, where we arrived at S^{t.} Paul's at ten in the morning, and there joind Mr. and Mrs. M. and their loving famely. Staid there untel Tuesday morning with my dear old friend and Mother, Madam Esel le Pleary, and set out for Landernau in C^{o.} with the two maidens. We arrived at Landernau aboute three in the after noon. Wensday morning breakfast with my two old friends, Mr. and Mad^{m.} Elel Renard, and old jen^{t.} and young lady, who was his daughter. We was many months prisonars togither, but then all librated, and they in their own house. Same morning took a boat, and at four in the afternoon arrived on board the ship _in_ Brest harbar, where we met all the fam_ily_ together, the same ten of us that was stop_ped to_gether through a merical of mercy in d_eed, and_ not one hair of our heads diminished. _Praise be_ to God, here was another chainge. This ship was form_erly an Engl_ish frigate, then under Danish coulars, _and_ the Capt^{n.} an English man. The _first night_ I sleept on the cabin flooar covered _with a_ great coat, then got a hammack [...] amongst the sailors. And when more _people came_ on board, I went between decks, being [...] more quiat. I supose the whole numbar of pasengars was aboute fifty offesars in the army and navy, where I never was in such hurry and noise yet, in all the course of my life, nither to sea nor land. I was allwayse imploid in reading, in cooking, tending my famely to the table, etc. And there was a black boy, the sarvant to one of the officers, very ill moste of the time, and no person to do the leaste thing for him but myself onely. I had a quiat place between decks to lodge in and pray, so that no person desturbed me. I used the same self-denial as before. I have been often led to wonder many times since of the goodness of God, for all they _were_ such wild, distracted, disapated souls, I never _had the_ least tryal from one of them, nither one _of the_ ship's company during the whole time. I could _always_ bring any dish of meat from the cook to the _cabin to_ my famely, and no person set the least hand _on me; or_ if one of the others did, they was ready allmoste _to kill_ one the other; and the Captain would trust me _with the_ tea and shugar canestar, but not one person _else_ on board. I have thought many times _since abou_te it, more than at that time through [...] d favour with God and man. _We lay in Brest_ Roade nine days _wind_ bound, and then _got a fair_ wind to the Nor_thwa_rd and westward [...] etc., arived at Falmouth 22 August, 1795. Arived onshore aboute three o'clock in the afternoon with much fear and trembling, where I meet with my dear little Bettsy, there staying with her aunt, Mrs. Smythe, then between 8 and 9 years old. In the evning went to prayer meeting in the great Chaple. I said sumething to the people, but found but little liberty. I thought the cause might have been after aboute three weeks exposed to so much noise and company, and for want of composure of mind, and likewayse so long a time out of the habit of exercising in that way. I have thought many times since, if I was ever dead to the world and to myself, I was then in them days. It matterd but little where my lott was cast, whether in prosperity or adversity, whether sickness or health, take life or all my friends away, I could trust boath soul and body, with every thing _that_ I had, in to the hands of my great Creator with_out the_ leaste resarve. I have thought many times since _in them_ days, tho' I did not know it then, that I had no will, or rather, of my own, but my will w_as_ loste in the will of God. It is now brought _into my_ remembrance as the ship lyed to of _Falmouth_ harbar, there was not boats enuf to c_arry all the_ pasangers and bagage at once, and I _waited to_ the laste with two more, staid untel _another_ boat should come, the wind blowing _fresh from_ the westward. The Captain grew v_ery impatient, looking_ out for a boat, and at laste said, "_I shall not wait_ only a few minuts longer, and ta_ke you with me_." One of these p_as_a_ngers was ma_king _such a_ noise, allmoste ready to jump overboard, for fear to be card up Channel. I said to him, "Have a little patience, we shall have a boat in a little time now." He turned unto me in a very sulky manner, and said, "Who is like you, you are allwayse at home, you don't care where you are car'd." I smiled, said nothing, but rejoiced within, and said to myself, "You are saying the truth." And I thought if it was the will of the Lord that I should be car'd to Copenhagen, that good is the will of the Lord. So in the course of a few minits after saw a boate coming, and so all was well again. I have thought since them days, I mean, since the day that my soul was sanctified, that there did harley one thought pass through me unperseeved in all my waking moments when I was in company talking aboute the things of the world, or the things of God, when in private by myself, or acting of business, my _spirit_, as it were, was in a continual blaze of inward prayer. Well, then, I staid that night at Falmouth, the next morning went to Penryn with my dear little Bettsey in my hand, to see Mr. M----h and his loving family, who was then at Mrs. Scot. The next morning, on Sunday, took a horse and arived at Breage Church town[78] aboute eleven o'clock, where I meet my dear brother Frank, then in his way to Church. As I first took him in surprise, at first I could harley make him sensable I was his brother, being nearley two years without hearing whether I was dead or alife. But when he come to himself as it were, we rejoiced together with exceeding great joy indeed. We went to his house in Rinsey, and after dinner went to see brother John.[79] We sent him word before I was coming. But he could harley believe it, with the voice of, "How can these things be?" But f_irst_ looking out with his glass saw me yet a long way off. Ran to meet me, fell upon my neck, and said in language like this, "This is my brother that was dead, but is alive again; he was loste, but is found." We passed the afternoon with him, and in the evning went to Keneggy to see brother Charles, wh_ere we_ meet with many tears of joy, _and afterwards_ returned again to Rinsey in _the evening_, where we had all our conversation _about_ Hevenly things, _which_ was a treat indeed, _after being_ so long _silent_ on the subject. WILLIAM BYLES AND SONS, PRINTERS, 129 FLEET STREET, LONDON, AND BRADFORD. FOOTNOTES: [1] It is said that this name is derived from the fact that John Carter, a brother of Harry Carter, and the most famous of the smugglers, lived there. He was nicknamed the "King of Prussia," and the house in which he lived is still known as the "King of Prussia's House." The origin of this nickname is explained by a story that when they were all boys together, they used to play at soldiers, and John would always claim to be the King of Prussia. Clearly an echo of the fame of Frederick the Great had reached these boys about the time of the Seven Years' War. [2] 17 Geo. III. c. 7. [3] See Lecky. _History of Eighteenth Century_, vol. iv. ch. xiv. [4] Carlyle. _French Revolution_, bk. iii. ch. iv. [5] Spelt "yest" in the manuscript throughout. [6] "Called." The spelling is the dialect pronunciation. [7] A small village about half a mile from Prussia Cove. [8] Spelt "fever" in the manuscript. The Cornish people do not distinguish "v" and "w." [9] "Bal" is a mine, tin or copper. [10] This name is now lost. [11] ? Folkestone, see p. 80. [12] The sizes of all his vessels are given in old measurement. Before 1835 ships were measured by the following elaborate rule. Subtract three-fifths of the greatest breadth from the length of the keel, multiply this by the breadth, and the result by half of the breadth; divide the result so obtained by 94, and the answer is the size of the ship in tons (see 13 Geo. III. c. 26, § 74). They are now measured by the cubical contents. It is difficult to render these figures in modern measurement, but this sloop was probably about the size which would be now called 10 tons. [13] About 18 tons in modern measurement. [14] About 30 tons in modern measurement. [15] Spelt "oughten" in the manuscript. Daughter is still pronounced "dafter" in West Cornwall. [16] Conscience. [17] "Felt," dialect pronunciation. [18] "Carried," dialect pronunciation. [19] About 60 tons in modern measurement. [20] The treaty between France and the Americans was made on February 6, 1778. [21] "Kept," dialect pronunciation. [22] The "King of Prussia." [23] Cf. note 12. [24] About 50 tons in modern measurement. [25] Newlyn, near Penzance. [26] The collector of the Customs, presumably at Penzance. [27] Spelt "feve" in the manuscript. Cf. note 8. [28] About 45 tons in modern measurement. [29] ? Cawsand near Plymouth. [30] Burtons, a small tackle of two pulleys to be fastened anywhere at pleasure (Phillips' _Dictionary_, 1706). Now obsolete. [31] Near Cuddan Point. It was built about 1775 by Mr. John Stackhouse, of Pendarves. [32] It is said that the doctor who attended him at this time was always met on the road about a mile away by two men, who blindfolded him; and in this way he was brought to the Castle, and so led back to the road again. A precaution to prevent him from giving information as to Harry Carter's hiding place. [33] Spelt "oughten" in the manuscript. See note 15. [34] Glazier. [35] Thomas Coke, LL.D.; he was ordained Bishop or Superintendent of the American Methodist Societies by John Wesley in 1784. [36] This expression, which occurs several times in the following pages, is common in West Cornwall in the sense of "although." [37] This is one of Dr. Watts' hymns. It was not included by John Wesley in the Hymn-book which he published in 1790. [38] Francis Asbury. He was sent to America by John Wesley in 1771, and was elected Joint Superintendent with Dr. Coke at the Conference held at Baltimore in 1784. He was the only English preacher who remained in America during the War of Independence. [39] This is one of the "Olney" hymns by Cowper and Newton. [40] Spelt "worps" in the manuscript, which is dialect pronunciation. Cf. "sharps" for "shafts" (of a cart), and "vycicle" for "bycicle," which are both common. [41] Spelt "feve" in the manuscript. Cf. note 8. [42] Spelt "youmping" in the manuscript. Cf. "yest" for "just," note 5. [43] ? "Bustle." [44] Ordinances. [45] "Carry"; dialect. [46] 'Bedstead.' 'Stead' would be pronounced 'steed' in West Cornish dialect. [47] "Further"; dialect. [48] Spelt "laght" in the manuscript. Cf. note 8. [49] The ordinary word for "a valley" in West Cornwall. [50] A well; dialect pronunciation. [51] Old measurement. [52] _I.e._, in their reckoning as to the position of the vessel. [53] ? Folkestone (see p. 4). [54] On the Fal. [55] Near Prussia Cove. [56] Intending; dialect. [57] A small village about a mile from Prussia Cove. [58] Lazarus. [59] Spelt 'oughten' in the manuscript. See note 15. [60] Referring to the Government reward for his capture. [61] Cliffs; dialect. [62] Actions. [63] Spelt "oft" in the manuscript. See note 15. [64] War was declared on the 1st February, 1793. [65] Guillotine. [66] Farthing; dialect. [67] Carhaix. [68] "Chair"; dialect. [69] Guillotine. [70] ? Carmelites. [71] Meaning "by"; dialect. [72] A common expression in West Cornwall. It is a forcible way of saying that his means were fully occupied. [73] Meaning "unless"; dialect. [74] Meaning "against"; dialect. [75] Robespierre was executed on 28th July, 1794. Soon after his death the Convention decreed that "Prisoners and other persons under accusation should have a right to demand some 'Writ of accusation' and see clearly what they were accused of."--Carlyle: _French Revolution_, Book vii. ch. i. This decree was followed by the release of great numbers of "Suspect" and other prisoners. [76] Meaning "by"; dialect. [77] The Cornish people always measure weight in scores (20 lbs). The stone (14 lbs) is unknown. [78] In West Cornwall every collection of houses is called a town. The village in which the parish church stands is called "Church town." [79] He lived at Prussia Cove. Transcriber's notes: The following is a list of changes made to the original. The first line is the original line, the second the corrected one. "from this it is evident," says Dr, "from this it is evident," says Dr. 19, 1829, The last thirty years of his life 19, 1829. The last thirty years of his life may prizes, manned and commanded chiefly many prizes, manned and commanded chiefly same part of the the town, went in company same part of the town, went in company so happy in all my life as I was at that _time_, so happy in all my life as I was at that _time_. in God my Saviour, To the end of this in God my Saviour. To the end of this must go with him, he would not be denied, must go with him, he would not be denied. 
13045	----	Team from images provided by the Million Book Project WAR-TIME FINANCIAL PROBLEMS by HARTLEY WITHERS Works by Hartley Withers THE BUSINESS OF FINANCE. 6s. net. Second Impression. "He treats of the subject mainly in its relation to industry, and smooths the path for those who find the way rather thorny. Timely and instructive."--_Financial Times_. OUR MONEY AND THE STATE. 3s. 64 net. Second Impression. "It should be read at once by every taxpayer. Mr. Withers' latest book can be most heartily commended,"--_Morning Post_. STOCKS AND SHARES. 6s. net. Fifth Impression. "It is a good book, it is sure of its public."--_Morning Post_. THE MEANING OF MONEY. 6s. net. Eighteenth Impression. "Will supersede all other introductions to monetary science; a safe and indispensable guide through the mazes of the Money Market."--_Financial News_. MONEY CHANGING. 5s. net. Second Impression. "Mr. Withers makes the topic interesting in spite of its obvious and irrepressible technicality. Occasionally he renders it really amusing."--_Financial News_. POVERTY AND WASTE. 6s. net. Third Impression. "Views its subject from the advantageous position of an impartial observer, the respective cases for capital and labour, rich and poor, being brought to the reader's attention in a convincingly logical manner."--_Financial Times_. WAR AND LOMBARD STREET. 6s. net. Fourth Impression. "Nothing could be clearer or more enlightening for the general reader."--_The Times_. INTERNATIONAL FINANCE. 6s. net. Third Impression. "We heartily commend a timely work dealt with in popular and simple style, a standard financial work."--_Morning Post_. LOMBARD STREET, 6s. net. Third Impression. A Description of the Money Market, by WALTER BAGEHOT. Edited with a new Preface by HARTLEY WITHERS. "There is no city man, however ripe his experience, who could not add to his knowledge from its pages."--_Financial News_. "Blest paper credit! last and best supply! That lends Corruption lighter wings to fly: Gold imp'd by thee, can compass hardest things, Can pocket States, can fetch or carry Kings; A single leaf shall waft an Army o'er, Or ship off Senates to a distant Shore; A leaf, like Sibyl's, scatter to and fro Our fates and fortunes, as the winds shall blow; Pregnant with thousands flits the Scrap unseen, And silent sells a King, or buys a Queen." POPE, _Moral Essays_. PREFACE At a time when Finance is of greater importance than ever before, it is hoped that this small volume may be of interest and value to the public, and help the application of war's lessons to the problems that face us in peace. The contents, with the exception of the last article on "Money or Goods?" (which appeared in the Trade Supplement of the _Times_ for December, 1918), have already been published in _Sperling's Journal_, from September, 1917, to March, 1919; they have been left as they were written, except for a few verbal corrections. I desire to express my thanks to the Editors of _Sperling's Journal_ and of the _Times_ for their kind permission to reprint the articles. H. WITHERS. June, 1919. CONTENTS I THE OUTLOOK FOR CAPITAL The Creation of Capital--The Inducement--War and Capital II LONDON'S FINANCIAL POSITION London after the War--A German View--The Rocks Ahead--Our Relative Position secure--Faulty Finance--The Strength we have shown--The Nature and Limits of American Competition--No other likely Rivals III WAR FINANCE AS IT MIGHT HAVE BEEN--I Financial Conditions in August, 1914--No Scheme prepared to meet the Possibility of War--A Short Struggle expected--The Importance of Finance as a Weapon--Labour's Example--The Economic Problem of War--The Advantages of Direct Taxation--The Government follows the Path of Least Resistance--The Effect of Currency Inflation IV WAR FINANCE AS IT MIGHT HAVE BEEN--II The Changed Spirit of the Country--A Great Opportunely thrown away--What Taxation might have done--The Perils of Inflation--Drifting stupidly along the Line of Least Resistance--It is we who pay, not "Posterity" V A LEVY ON CAPITAL The Objects of the Levy--Its Origin and History--How it would work in Practice--The Attitude of the Chancellor--The Effects of the Scheme in discouraging Thrift--Its Fallacies and Injustices--The Insuperable Obstacles to its Application--Its Influence on Production--One of the Tests of a Tax--Judged by this Test the Proposed Levy is doomed VI OUR BANKING MACHINERY The Recent Amalgamations--Will the Provinces suffer?--Consolidation not a New Movement--The Figures of the Past Three Decades--Reduction of Competion not yet a Danger--The Alleged Neglect of Local Interests--Shall we ultimately have One Huge Banking Monopoly?--The Suggested Repeal of the Bank Act--Sir E. Holden's Proposal VII THE COMPANIES ACTS Another Government Committee--The Fallacy of imitating Germany--Prussianising British Commerce--The Inquiry into the Companies Acts--Will Labour Influence dominate the Report?--Increased Production the Great Need--Will it be met by tightening up the Companies Acts?--The Dangers of too much Strictness--Some Reforms necessary--Publicity, Education, Higher Ideals the only Lasting Solution--The Importance of Foreign Investments--Industry cannot take all Risks and no Profits VIII THE YEAR'S BALANCE-SHEET The Figures of the National Budget--A Large Increase in Revenue and a Larger in Expenditure--Comparison with Last Year and with the Estimates--The Proportion borne by Taxation still too Low--The Folly of our Policy of Incessant Borrowing--Its Injustice to the Fighting Men IX COMPARATIVE WAR FINANCE The New Budget--Our own and Germany's Balance-sheets--The Enemy's Difficulties--Mr Bonar Law's Optimism--Special Advantages which Peace will bring to Germany--A Comparison with American Finance--How much have we raised from Revenue?--The Value of the Pound To-day--The 1918 Budget an Improvement on its Predecessors--But Direct Taxation still too Low--Deductions from the Chancellor's Estimates X INTERNATIONAL CURRENCY An Inopportune Proposal--What is Currency?--The Primitive System of Barter--The Advantages possessed by the Precious Metals--Gold as a Standard of Value--Its Failure to remain Constant--Currency and Prices--The Complication of other Instruments of Credit--No Substitute for Gold in Sight--Its Acceptability not shaken by the War--A Fluctuating Standard not wholly Disadvantageous--An International Currency fatal to the Task of Reconstruction--Stability and Certainty the Great Needs XI BONUS SHARES A Deluge of Bonus Shares--The Effect on the Market--A Problem in Financial Psychology--The Capitalisation of Reserves--The Stock Exchange View--The Issue of Bonus-carrying Shares--The Case of the A.B.C.--A Wiser Variation from Canada--Bonus Shares on Flotation--An American Device--Midwife or Doctor?--The Good and Bad Points of both Systems XII STATE MONOPOLY IN BANKING Bank Fusions and the State--Their Effects on the Bank of England--Mr Sidney Webb's Forecast--His Views of the Benefits of a Bank Monopoly--The Contrast between German Experts and British Amateurs--Bankers' Charges as affected by Fusions--The Effects of Monopoly without the Fact--The "Disinterested Management" Fallacy--The Proposal to split Banking Functions--A Picture of the State in Control XIII FOREIGN CAPITAL The Difference between Aims and Acts--Should Foreign Capital be allowed in British Industry?--The Supremacy of London and National Trade--No need to fear German Capital--We shall need all we can get--Foreign Shares in British Companies--Can and should the Disclosure of Foreign Ownership be forced?--The Difficulties of the Problem--Aliens and British Shipping--The Position of "Key" Industries--Freedom to Import and Export Capital our Best Policy XIV NATIONAL GUILDS The Present Economic Structure--Its Weaknesses and Injustices--Were things ever better?--The Aim of State Socialism--A Rival Theory--The New Movement of Guild Socialism--Its Doctrines and Assumptions--Payment "as Human Beings"--The "Degradation" of earning Wages--Production irrespective of Demand--Is that the Real Meaning of Freedom?--The Old Evils under a New Name--A Conceivably Practical Scheme for some other World XV POST-WAR FINANCE Taxation after the War--Mr. Hoare's Scheme described and analysed--The Position of the Rentier--Estimates of the Post-War Debt--The Compulsory Loan Proposal--What Advantages has it over a Levy on Capital?--The Argument from Social Justice--Questions still to be answered--The Choice between a Levy and Stiff Taxation--Are we still a Creditor Nation?--Our Debt not a Hopeless Problem--Suggestions for solving it XVI THE CURRENCY REPORT Currency Policy during the War--Its Disastrous Medievalism--The Report of the Cunliffe Committee--A Blast of Common Sense--The Condemnation of our War Finance--Inflation and the Rise in Prices--The Figures of the Present Position--The Break in the Old Relation between Legal Tender and Gold--How to restore it--Stop Borrowing and reduce the Floating Debt--Return to the Old System--The Committee's Sane Conservatism--A Sound Currency vital to National Recovery XVII MEETING THE WAR BILL The Total War Debt--What are our Loans to the Allies worth?--Other Uncertain Items--The Prospects of making Germany pay--The Right Way to regard the Debt--Our Capital largely intact--A Reform of the Income Tax--The Debt to America--The Levy on Capital and other Schemes--The only Real Aids to Recovery XVIII THE REGULATION OF THE CURRENCY Macaulay on Depreciated Currency--Its Evils To-day--The Plight of the Rentier--Mr Goodenough's Suggestion--Sir Edward Holden's Criticisms of the Currency Committee--His Scheme of Reform--Two Departments or One in the Bank of England?--Not a Vital Question--The Ratio of Notes to Gold--Objections to a Hard-and-fast Ratio--The Limit on Note Issues--The Federal Reserve Act and American Optimism--Currency and Commercial Paper--A Central Gold Reserve with Central Control XIX TIGHTENING THE FETTERS OF FINANCE The New Meaning of Licence--The Question of Capital Issues--Text of the Treasury Regulations--Their Scope and Effect--The Position of the Stock Exchange--Wider Issues at Stake--Should Capital be set Free?--The Arguments for and against--Perils of an Excessive Caution--The New Committee and its Terms of Reference--The Absurdity of prohibiting Share-splitting--The Storm in the House of Commons--Disappearance of the Retrospective Clause--A Sample of Bureaucratic Stupidity XX MONEY OR GOODS? "Boundless Wealth"--Money and the Volume of Trade--The Quantity Theory--The Gold Standard--How is the Volume of Paper to be regulated?--Mr Kitson's Ideal INDEX WAR-TIME FINANCIAL PROBLEMS I THE OUTLOOK FOR CAPITAL _September_, 1917 The Creation of Capital--The Inducement--War and Capital One of the questions that are now most keenly agitating the minds of the investing public and of financiers who cater for its wants, and also of employers and organisers of industry who are trying to see their way into after-the-war conditions, is that of the supply of capital. On this subject there are two contradictory theories: one considers that owing to the destruction of capital during the war, capital will be for many years at a famine price; the other, that owing to the exhaustion of all the warring powers, that is, of the greater part of the civilised world, the spirit of enterprise will be almost dead, the demand for capital will be extremely limited, and consequently the supply of it on offer will go begging to find a user. It seems likely that, as usual, the truth lies somewhere between these two extreme views; but we shall best answer the question if we first get a clear idea of what we mean by capital. On the subject of the definition of capital, economists differ with all the consistency that they only show in differing. One of the earliest descriptions of capital was given by Turgot, who thought that capital meant "valeurs accumulées." In this wide sense the word covers all goods which have value, that is, can be exchanged into other goods. From this point of view, the schoolboy who invests sixpence in marbles is a capitalist, because he has bought an asset which is not immediately consumed, but can, later on, if his fancy urges him, be exchanged into white mice or any other object of his desire. On the other hand, the schoolfellow who at the same time spends sixpence on cherries and eats them has put his money into immediate consumption, his asset is digested, and he has no capital in any sense of the word. Later, the definition was narrowed by John Stuart Mill, for instance, into the sense of wealth set aside to increase production. From this point of view capital practically means the equipment and tools of industry in the widest sense of the word, including agriculture and transport. Lately economists have shown a tendency to go back to the wider application of the word, and an American economist, Dr Anderson, who has just published a book on the Value of Money, goes so far therein as to state that a "dollar is capital." The language of the City generally uses the word in the narrow sense adopted by Mill, and there is very much to be said for this view of the real meaning of capital. Marbles to play with, houses to live in, motor-cars to go joy-riding in--all these are assets which can be disposed of, and so, in a sense, may be called capital. But the businesslike meaning of the word is the tools and equipment of industry, because it is only by their possession that the wealth of mankind not only increases man's present enjoyment, but enhances his future output of the goods necessary for his existence. If we take the word in this sense it becomes at once apparent that the theory is exaggerated which maintains that war is destroying capital, so that capital will long be at a famine price. The extent to which war is actually destroying the tools and equipment of industry is quite limited. On the actual battlefield that sort of destruction proceeds apace when factories are shelled into shapeless lumps of bricks, and when the surface of the earth, that man's skill had developed into great productive fertility, is torn into craters and covered with rubbish. There is also rapid destruction of a very important part of the equipment of industry owing to the submarine campaign, which is sinking so many fine ships that were meant to carry goods from one country to another. But, apart from this actual destruction on the battlefield and on the sea, the tools and equipment of industry over the greater part of the earth remain untouched. It is true that, owing to the preoccupations of the war, not so much work as usual is being put into the upkeep and repair of our railways, factories and other industrial tools. But at the same time an enormous amount of new machinery is being created for the manufacture of munitions and other stuff needed for the war, and a large part of this new machinery ought to be available as industrial capital when the war is over. Those people who talk so glibly of the enormous destruction of capital by the war are surely making a mistake common to minds which look at economic questions through a financial telescope, mistaking money for capital. They see that an enormous amount of money is being spent on the war, and they jump to the conclusion that this money, if not spent upon the war, would have been put into capital investments and so have increased the tools and equipment of industry. In fact, a great deal of the money now spent upon the war would have been spent, if there had been no war, not upon increasing the equipment of production, but upon purely frivolous and extravagant consumption. There is no need to dwell on the effect of war in reducing many kinds of expenditure on which hundreds of millions must have gone in peace time, and this restriction of extravagant consumption has to be deducted before we even admit, not that all money spent upon the war is destroyed capital, but even that all the money spent upon the war is destroying what might otherwise have become capital. If, then, it is true that the war is not making a very terribly substantial inroad upon the mass of existing capital, how is it going to affect the supply of capital in the future? To answer this question we have to see how capital is created. The answer to this question is very simple, very obvious, and very dull. Capital can only be created by saving. Saving is such an entirely unpopular virtue that it seems at first sight a disastrous conclusion to arrive at, that if we want to increase the supply of capital it can only be done by stimulating this unattractive habit; and there is a further question to be asked--whether it will be necessary or desirable to have a great increase in the supply of capital. As was pointed out above, one theory of after-war needs maintains that the world will be so exhausted by this great struggle that it will have no enterprise and no energy left, and that capital will go begging. If this be so, we need not trouble to inquire as to whether the supply of capital can be made plentiful. But I venture to think that this view is very probably wrong, though it is very dangerous to prophesy concerning the purely psychological question of the state of mind in which the citizens of the warring Powers will end the war. It is, however, at least probable that the prices which are then likely to rule will stimulate enterprise all over the world; that every one will see that there is a great work to be done in getting industry back on to a peace basis, and a great profit to be made by those who do this work most successfully, and that the demand for capital is likely, for some years at least, to clamour for all that can be produced. To go back, then, to the statement that only by saving can capital be created. The man who saves, instead of spending money on his own enjoyment, hands it over to some company or Government to be spent on some industrial or national purpose. When it is put into industry it builds a factory or a ship or a railway or a canal, or clears a wilderness for cultivation, or does one of the innumerable other things which are necessary for the production and transport of the goods which mankind enjoys. And it is only by this process of handing over buying power, instead of using it for our own amusement and enjoyment, to others who will use it for furthering production that the tools and equipment of industry can be multiplied. Something can be done by banks and financiers in supplying credit in the form of advances and acceptances; but this method is only like oiling the wheel of industry, the real driving power of which has to be saved capital. Creating credits simply means that a certain amount of buying power is manufactured and handed over to those to whom the credit is given. It does not set free any labour or goods to be put into industry. That is only done by the man who abstains from consumption and saves money by restraining his desire to spend it on himself, and puts it at the disposal of industry. The man who saves money, who has always hitherto been rather despised by his companions and resented by a certain class of social reformer and many other uneducated people as a capitalist bloodsucker, is thus, in fact, the person who leaves the world richer than he found it, having put his money, the product of his own work, into increasing the world's output, instead of spending it on such forms of enjoyment as heavy lunches and cinema shows. The man who does this beneficent work, increasing mankind's output of goods, and providing employment as long as the factory or railway that he helps to build is running, is induced to do so, as a rule, by the purely selfish motive of providing for his old age or for those who come after him by earning the rate of interest that is paid to him for his capital. What is this rate of interest going to be, and how much effect does it have upon the creation of capital? Some people argue that a low rate of interest makes people save more because it is necessary for them to save more in order to acquire independence. Others maintain that a high rate of interest induces people to save because they can see the direct advantage of doing so. Both these arguments are probably true in some cases. But, as a rule, people who have the instinct of saving will save, within certain limits, whatever the rate of interest may be. When the rate of interest is low they will certainly not reduce their saving because each hundred pounds that they put away brings them in comparatively little, and when the rate of interest is high the attraction of the high rate will also deter them from diminishing the amount that they put aside. Moreover, we have to consider, not only the money payment involved by the rate of interest, but its buying power in goods. In 1896 trustee securities could only be bought to return a yield of 2-1/2 per cent. for the buyer; now the investor can get 5-1/4 per cent. and more from the British Government. And yet the power that this 5-1/4 gives him over the goods and services that he wants for his comfort Is probably not greater, and very likely rather less, than the power which he got in 1896 from his 2-1/2 per cent. One of the few facts which seem to stand out clearly from a study of the movement of the prices of securities, and consequently of the rate of interest to be derived from them, is that the rate of interest is high when the price of commodities is high, and vice versa. So that the answer to the question: What is the rate of interest likely to be after the war? may be given, in Quaker fashion, by another question: What will happen to the index number of the prices of commodities? It seems fairly probable that both these questions may be answered, very tentatively and diffidently, by the expression of a hope that after a time, when peace conditions have settled down and all the merchant ships of the world have been restored to their peaceful occupations, the general level of the price of commodities will be materially lower than it is now, though probably considerably higher than it was before the war. If this be so, then it is fairly safe to expect that the rate of interest, as expressed in money, will follow the movement of prices of goods. But it must be remembered that by rate of interest I mean the pure rate of interest, that is to say, the rate earned on perpetual fixed-charge securities of the highest class. It may be that, owing to the very large amount of gilt-edged securities created in the course of the war by the various warring Governments, the rate of profit to be earned by the man who takes the risks of industry from dividends on ordinary shares and stocks will have to be made relatively more attractive than it was before the war. If, then, capital can only be created by saving, how far will the war have helped towards its more plentiful production? Here, again, we are faced with a psychological question which can only be answered by those who are bold enough to forecast the state of mind in which the majority of people will find themselves when the war is over. If there is a great reaction, and everybody's one desire is to throw this nightmare of war off their chests and go back to the times as they were before it happened, then all that the war has taught us about the production of capital will have been wasted. But I rather doubt whether this will be so. Saving merely means the diversion of a certain proportion of the output of industry into the further equipment of industry. The war has taught us lessons which, if we use them aright, will help us to increase enormously the output of industry. So that if these lessons are used aright, and industry does not waste its time in squabbles over the sharing of its product, its output may be so great that a comparatively smaller amount of saving in relation to the total output may produce a larger amount of capital than was made available in days before the war. There is a further point, that the war has taught a great many people who never saved at all to save a good deal. It was estimated before the war that we in this country were saving about four hundred millions a year. This figure was necessarily a guess, and must be taken for what it is worth. There can be no doubt that the amount of real saving now in progress, voluntary, owing to the patriotic effort of people who think they ought to restrict their own consumption so that the needs of our fighters may be provided, and enforced through the action of the Government in taking taxes and inflating the currency, is very much greater than it was before the war; probably at least twice as much when all allowance has been made for depreciation of the currency. Some people think that this saving lesson will have been learned, will have become a habit, will continue and will grow. If so, if people save a larger proportion of their income than they did before, and if the total output of goods is increased, as it easily may be, it becomes at once evident that there is a possibility of a freer supply of capital for industry than has ever been seen. But in looking at this hopeful and optimistic picture, we must never forget that it can only be painted by those who are prepared to leave out of the canvas all the danger of industrial strife and dislocation, and all the danger of reaction to the old habits of luxurious spending which are so strong a possibility in the other direction. The war has shown us how we can, if we like, increase production, reduce consumption, and so have a larger margin than ever before to be put into providing capital for industry. Whether we really have learned these lessons and will apply them remains to be seen. There is also a possibility that some people may recognise that saving money and applying it to the re-equipment of the world for peace industry is a patriotically praiseworthy object not less than saving in time of war for the equipment of the Army. It may be that the benefit conferred by those who save, in increasing the output of mankind, will be more generally recognised, and that the supply of capital may, when the war is over, be increased on patriotic grounds, or on grounds even wider than mere patriotism--a desire to help a great stride forward in the material welfare of mankind. Capital is a very tender plant, and it will be very easy, if mistakes are made, to frighten those who see the benefits of accumulation for themselves and others. Labour troubles and industrial unrest are extremely likely to have the effect of destroying capital by preventing it coming into existence. If we remember that capital can only be created by being saved, it becomes evident that if those who save are threatened with too deep an inroad into their reward for so doing, on the part of labour, they will hesitate to save; and if the action of labour has this effect, labour will be sawing off the bough on which it sits. For it is new capital that sets new industry going, and it is only by a continual supply of new industry that a continual demand for fresh labour can be maintained. There is also at present much mischievous talk about a great tax on capital for the purpose of redeeming, or hastening the redemption of, war debt. It is clear at once that it is not possible to tax capital if we remember that capital consists of the tools and equipment of industry, or even, in the wider sense of the word, of accumulated assets which have not been consumed. Unless the Government is prepared to take payment in factory chimneys, railway sleepers, houses and fields, or the securities and mortgages that are claims on their product, it is not possible to tax capital. The only thing that the Government can tax is the output, that is to say, the annual income of the people. In other words, a tax on capital is simply a form of income tax assessed, not according to a man's income, but according to the assets of which he is possessed. The effect of such a tax would be that he who has spent everything that he has earned on his own enjoyment would go scot free in the matter of the capital tax, and would be rewarded for his improvidence by being asked to make no sacrifice; while his thrifty brother who, out of a smaller income, has set aside a certain proportion during the last twenty or thirty years, would have to hand over a portion of his current income assessed upon the value of the assets into which he has put his savings. Incidentally, it may be remarked that it would take years to make this necessary valuation, and that it would probably be done in a very inequitable manner by untrained and incompetent officials. But the important point is this, that if the Government shows a tendency to take the possession of assets as a basis for taxation it will be directly encouraging those who spend their whole income in riotous living and frivolous amusement, and discouraging those who help to increase mankind's output by adding to the capital available. Finally, it may be added that the shyness of the saver will be greatly diminished if he can feel that there is a trustworthy machinery of company promotion, so that he can rely on any savings that he puts into industry having at least a fair chance of yielding him a fair reward. This subject is too vast to enter into at present, but it is one to which those who are responsible for the management of our financial affairs cannot give too much attention. Every time the real investor is swindled out of his money there is more than a chance that he will look upon all forms of saving as a folly to be left to the credulous. It is easy to say that it was his own fault, that he ought to have been more careful, or consulted a better broker; but he will, with equal ease, retort that If honest financiers knew their business better, they would have long ago made things easier for the ignorant investor to know whether he was putting his money into genuine enterprise or throwing it down a sink. Like all other divagations on the subject of what may happen in the future, this attempt to forecast has necessarily consisted of "dim glimpses into the obvious," as the undergraduate said of Jowett's sermon. All that we can be sure of is this: that if the great opportunities that will lie open to mankind at the end of the war are rightly used, if we use its lessons to increase our production, restrict our frivolous consumption, and put a larger proportion of our larger production into stimulating production still further, there ought to be a great increase in the amount of capital available to supply the great increase which may be expected in the amount of capital demanded. The fact that the chief nations of the world will have enormous debts on which to pay interest is not one that need necessarily terrify us from this point of view. The arranging and imposition of the taxation necessary for meeting the interest on these debts will involve very serious political and social questions; but the payment of this interest need not necessarily diminish production, and it may probably help in checking consumption. It will not impair the total wealth of the world as a whole; it will merely affect its distribution. And since it will mean that a considerable part of the world's output will, for this reason, be handed over to the holders of the various Government debts, who, _ex hypothesi_, will be people who have saved money in the past, it is at least possible that they may devote a considerable amount of the spin so received to further saving or increasing the supply of capital available. II LONDON'S FINANCIAL POSITION _October_, 1917 London after the War--A German View--The Rocks Ahead--Our Relative Position secure--Faulty Finance--The Strength we have shown--The Nature and Limits of American Competition--No other likely Rivals. Will the prestige of the London money market be maintained when the war is over? This is a question of enormous importance, not only to every one who works in and about the City, but to all who are interested in the maintenance and increase of England's wealth. Like all other questions about what is going to happen some day, the answer to it will depend to a very great extent on what happens between the present moment and the return of peace. To arrive at an answer we have first to consider on what London's financial prestige has been based in the past, and on this subject we are able to cite in evidence the opinion of an enemy. Our own views about the reasons which gave us financial eminence may well be coloured by national and patriotic prejudice, but when we take the opinion of a German we may be pretty sure that it is not warped by any predisposition in favour of English character and achievement. A little book published this year by Messrs. Macmillan and Co., entitled "England's Financial Supremacy," contains a translation of a series of articles from the _Frankfurter Zeitung_, and from this witness we are able to get some information which may be valuable, and is certainly interesting. The basis of England's financial supremacy is recapitulated as follows by this devil's advocate:-- "The influence of history, a mighty empire, a cosmopolitan Stock Exchange, intimate business connections throughout the whole world, cheap money, a free gold market, steady exchanges, an almost unlimited market for capital and an excellent credit system, an elastic system of company legislation, a model Insurance organisation and the help of Germans, these are the factors that have created England's financial supremacy. Perhaps we have omitted one other factor, the errors and omissions of other nations." Coming closer to detail, our critic says, with regard to the international nature of the business done on the London Stock Exchange:-- "In recent years London had almost lost its place as the busiest stock market in the world. New York, as a rule, Berlin on many occasions, could show more dealings than London. But there was no denying the international character of its business. This was due to England's position of company promoter and money lender to the world; to the way in which new capital was issued there; to its Stock Exchange rules, so independent of legislative and Treasury interference; to the international character of its Stock Exchange members, and to the cosmopolitan character of its clients," On the subject of our Insurance business and the fair-mindedness and quickness of settlement with which it was conducted, we can cite the same witness as follows:-- "Insurance, again, represented by the well-known organisation of Lloyds, which in form is something between a stock exchange and a co-operative partnership, is nowhere more elastic and adaptable than in London. It must be said, to the credit of Lloyds, that anyone asking to be insured there was never hindered by bureaucratic restrictions, and always found his wishes met to the furthest possible extent. The agencies of Lloyds abroad are also so arranged that both the insured and the insurer can have their claims settled quickly and equitably." But one of the most remarkable tributes to a quality with which Englishmen are seldom credited, and one of the frankest confessions of a complete absence of this quality in our German rivals, is contained in the following passage:-- "A further bad habit, harmful to our economic development, is narrow-mindedness. This, too, is very prevalent in Germany--and elsewhere as well. And this is not surprising. Even among the generation which is active to-day, the older members grew up at a time when possibilities of development were restricted and environment was narrow. With commendable foresight many of these older men have freed themselves from this petty spirit, and are second to none in enterprise and energy. Germany can be as proud of its 'captains of industry' as America itself. But many commercial circles in Germany are still unable to free themselves from these shackles. The relations between buyer and seller are still often disturbed by petty quibbling. In those industries where cartels and syndicates have not yet been formed, too great a rôle is played by dubious practices of many kinds, by infringements of payment stipulations, by unjustifiable deductions, etc., while, on the other hand, the cartels are often too ruthless in their action. In this field we have very much to learn from the English business man. Long commercial tradition and international business experience have taught him long ago that broad-mindedness is the best business principle. Look at the English form of contract, the methods of insurance companies, the settlement of business disputes! You will find no narrow-mindedness there. Tolerance, another quality which the German lacks, has been of great practical advantage to the Englishman. Until recently the City has never resented the settlement of foreigners, who were soon able to win positions of importance there. Can one imagine that in Berlin an Italian or a South American, with very little knowledge of the German language, would be not only entrusted with the management of leading banks and companies, but would be allowed in German clubs to lay down--in their faulty German--the law as to the way in which Germany should be developed? Impossible! Yet this could be seen again and again in England, and the country gained greatly by it. If the English have now developed a hatred of the foreigner, it only means that the end of England's supremacy is all the nearer." According to our German critic the great fabric that has been built up on these characteristics and qualities is threatened with ruin by the war; and the heritage which we are supposed to be losing is to fall, by some process which is not made very clear, largely into the hands of Berlin. In order that we may not be accused of taking the laudatory plums out of this German pudding and leaving out all criticisms and accusations, let us quote in full the passage in which he dances in anticipation on London's corpse:-- "Let us sum up. England's reputation for honest business dealing and for trustworthy administration has suffered. Her insular inviolability has been put in question. The ravages of war have undermined the achievements of many generations. Her free gold market has broken down. The flow of capital towards London will fall off, for those who cannot borrow there will no longer send deposits. The surplus shown in her balance-sheet will contract. Foreign trade will also decrease. Hand in hand with this fall, free trade, that mighty agent in the development of England's supremacy, will, in all probability, give place to protection. Stock Exchange business will grow less. Rates of interest will be permanently higher." How much truth is there in all this? Has our reputation for honest dealing and for trustworthy administration suffered? Surely not in the eyes of any reasonable and unprejudiced observer. In the course of the greatest war in history, fought by Germany with weapons which have involved the violation of the most sacred laws of humanity and civilisation, England has acted with a respect for the interests of neutrals which has been severely criticised by impatient observers at home. As for our "insular inviolability" having been put in question, it certainly has not, so far, suffered any serious damage. Our Fleet has defended us from invasion with complete success, and the damage done by marine and aerial raiders to our property on shore is negligible. Our free gold market is said to have broken down. The proof of the pudding is in the eating. Germany, when the war began, immediately relieved the Reichsbank from any obligation of meeting its notes in gold, and frankly went on to a paper basis. England has already shipped well over 200 millions in gold to America to finance her purchases there and those of her Allies. It may be true that capital will not flow to London if London is not in a position to lend, but we see no reason why London should not be able to resume her position as an international money lender, not perhaps immediately on the declaration of peace, but as soon as the aftermath of war has been cleared away and the first few months of difficulty and danger have been passed. The prophecy that foreign trade will decrease may also be true for a time owing to the destruction of merchant shipping that the war is causing. This possibility, however, may be remedied between now and the end of the war if the great programmes of merchant shipbuilding which have been undertaken by the British and American Governments are duly carried out. In any case, even if foreign trade decreases, there is no reason whatever to expect that England's will decrease faster than that of other nations. In all these problems we have to look for the relative answer and to consider not whether England has suffered by the war, for it is most obvious that she has, but whether she will have been found to have suffered more than any competitor who may threaten her after-war position. "Free trade," says our German Jeremiah, "that mighty agent in the development of England's supremacy, will, in all probability, give place to protection." We venture to think that it will be recognised that the Free Trade policy of the past gave us a well-distributed wealth which was an invaluable weapon in time of war, and that any attempt to impose import duties when peace comes will be admitted, even by the most ardent Tariff Reformers, as untimely when there is likely to be a world-wide scramble for food and raw materials, and the one object of every nation will be to get them wherever they can and as cheaply as they can. If Stock Exchange business will be less, though this does not by any means follow, there is no reason why it should be relatively less here than in other centres. As to rates of interest being permanently higher, the same answer applies. It may be true, but there is no reason why they should be relatively higher in London than elsewhere; and, if they are high, it will be because there will be a great demand for capital, which will mean a great trade expansion; both in the provision of capital and in meeting the demands of trade expansion England will be doing what she has done with marked success in the past and can, if she works in the right way now and after the war, do again with equal and still greater success. There is, however, a danger that threatens our financial position after the war, on the subject of which our German critic is discreetly silent, because that danger threatens the position of Germany very much more emphatically. It consists in the way in which our Government is at present meeting the needs of war finance, not by compelling economy on the civilian population through taxation and borrowing direct from investors, but by manufacturing currency for the purposes of the war by means of the printing press and the banking machinery. The effect of this policy is seen in the enormous mass of Treasury notes with which the country has been flooded. Their total is now nearly 180 millions or perhaps 100 millions more than the gold which they were originally designed to replace. It is also to be seen in the great increase in banking deposits which has been a feature of our financial history since the war began. Some people regard this feature as a phenomenal proof of the growth of our wealth during the war. I am afraid there is little foundation for this pleasant assumption, for these new deposits have been called into being by the banks subscribing to Government securities, whether War Loan, Treasury Bills, Exchequer Bonds or Ways and Means advances or lending their customers the wherewithal to do so. By this process the balance-sheets of the banks are swollen on both sides, by the Government securities and advances to customers among the assets, against which the banks create new deposits, so giving the community as a whole the right to draw more cheques. Every time the bank makes an advance it gives the borrower a credit in its books, that is to say, the right to draw cheques to that amount; the borrower draws on the credit and hands it to any one to whom he owes money; but as long as the advance is outstanding there will be a deposit out against it in the books of some bank or another. It is an easy way for the Government to finance the war by getting the banks to manufacture money for it. Nobody feels any poorer for the process, in fact, those who have new money in their pockets or in their bank balance feel richer, but the result of thus multiplying currency without any increase in the supply of goods and services to be bought inevitably helps the rise in prices which makes the war costly, puts the burden of it on to the wrong shoulders, and likewise cheapens the value of the English pound as measured in other currencies. This is why the evils involved by this process become so relevant to the question now at issue. If the Government is allowed to go on financing the war by increasing the currency with the very reluctant help of the bankers, the difficulties of maintaining our gold standard and keeping the exchanges in favour of London will be very greatly magnified when the war is over and our gold reserves are no longer protected by the submarines and the high cost of shipping gold that they produce. It therefore follows that all who have the true interests of the City at heart should use all the influence they can to force the Government to adopt a sounder financial policy before it is too late. It is true that our war finance has hitherto been sounder than that of any other warring Power, but it has fallen very short if we apply the rough test of the proportion of the cost of war borne out of taxation and compare our performance with the results achieved by our ancestors in the Napoleonic and Crimean wars. If we have done better than France, Italy, Russia and Germany in this respect, it must also be remembered that the financial prestige which these countries had to maintain was not nearly so great and well established as ours, with the possible exception of France; and France, being exposed to the ravages of a ruthless invader, was in a position which put special obstacles in the way of the canons of sound finance. If, then, there are certain dangers that threaten our financial position when the war is over, we must remember, on the other hand, that the war has already done a great deal to maintain our financial prestige and raise it to a height at which it never stood before. When the war began we were expected to finance the Allies, to keep the seas clear and put a small Expeditionary Force to support the left flank of the French Army, and to do these things during a contest which was expected by the consensus of expert opinion to last not more than a few months. All these things we accomplished, and we were the only Power at war which did actually accomplish all that it was expected and asked to do. More than that, we also undertook a great task which was not in our programme; we created a great army on a Continental scale, and, at the same time, continued to carry out the other tasks which had been assigned to us. All these things we did, and that we should have done them was evidence of economic strength and adaptability which have astonished the world. To have financed the Allies and ourselves as long as we did would have been comparatively easy if our population could have been left at work to turn out the stuff and services, the provision of which are implied by financing; but for us to have been able to do it and at the same time to improvise an army which is now consistently and regularly beating the Germans is an achievement which will inevitably raise the world's opinion of our economic strength, on which financial prestige is ultimately based. But, as it has been said, in discussing this question we have to look at it all the time from the relative point of view. How will our prestige be when the war is over, not as compared with what it was before the war, but as compared with what any other rival in any other part of the world can show? Here we have to acknowledge at once, freely and frankly, that, as compared with New York, we shall have gone backward. America will have been enormously enriched by the war, which we shall certainly have not. America will have been opening up channels of international trade and international finance, and so New York will have been gaining at the expense of London. It is certain that when the war is over America's dependence upon London for credits against the shipments of goods to and from her shores will have been very greatly lessened, if not altogether a thing of the past. This change would have happened any way, war or no war, but it has been greatly quickened by the war. Before the war America was already making arrangements, under her new banking system, to promote the machinery for acceptance and discount, in order that goods sent to her from foreign countries should be financed by bills drawn on American banks and houses in dollars instead of on English banks and houses in sterling. Apart from this development, which would have happened in any case, it remains to be seen how far New York will be in a position to act as a rival of London as the world's financial centre. The internal resources and potentialities of America are so enormous, and there is such a vast amount of work to be done in developing them and bringing them to full fruition, that it does not at all follow that America will yet be inclined to take the position in international trade and finance which will one day surely be hers, when she has done all the work that is waiting to be done in her own back premises. America has a new banking and monetary system on trial which has met the difficult problems of the war with great success. These problems, however, are not nearly as complicated and various as those which are likely to arise in time of peace. When a nation is turning out an enormous amount of goods for which the rest of the world is prepared to pay any price, her finance is a comparatively simple business. Even now, when America has assumed the duty of financing a large number of Allies impoverished by three years of war which have been enriching her, she is still simplifying the problem by restricting her advances to the payment for goods bought in America. That New York will be greatly strengthened by the war, which has brought masses of American securities back to the country of origin and has put into the hands of American bankers and investors large blocks of European promises to pay, is as clear as noonday; but whether when the war is over New York will care to be bothered much with problems of international finance remains to be seen. In the first place, the claims of her own country upon her financial resources will be insatiable and imperative, In the second place, the business of international finance is carried out on very finely cut terms; and the Americans being accustomed to the fat rates of profit which business at home has given them may not care to devote much attention to the international market, in which the risks are big, the turnover is enormous and the profits very finely cut. It has been remarked by a shrewd observer that the Americans will never do business for a thirty-second. In the third place, it must be remembered that the geographical position of London is more favourable than that of New York as a world centre, as the world is at present constituted. England, anchored off the coast of Europe, is clearly marked as the depôt for the entrepôt trade of the Old and New Worlds. New York is clearly marked as the centre for the trade of the Western hemisphere, and it is likely enough that New York and London, acting together as the financial chiefs of the two hemispheres, may be gradually united into what is practically one market by the growing ties of mutual interest. With regard to the position of other possible rivals to London's position, it need only be said that they have certainly been weakened much more rapidly than has London during the course of the war. Paris, threatened by the near approach of an invading foe, has inevitably suffered much more severely than London, and is likely to take longer in recovering the great position as a provider of capital which was given to her by the thrift of the average French citizen. Every one expects with confidence to see, when the war is over, a miraculous recovery in France produced by the same spirit which worked miracles after the war of 1871, aided and abetted by the subsequent improvement in man's control over the forces of nature, and also by the deep and world-wide sympathy which all will feel for France as the champion of freedom who has suffered most severely in its cause during the war. But it is impossible to expect, after what France has suffered, that she will be, for some time, in a position seriously to challenge London as a financial rival. All Englishmen will hope that the day when she will be in a position to challenge us again will come quickly. As to Berlin, the only other possible rival to London in Europe, very little need be said. The German authority quoted above has already shown some of the difficulties with which Berlin has to struggle. He spoke of the narrow-mindedness of German finance, of the "petty quibbling" which often disturbs the relations between buyer and seller, of the "dubious practices of many kinds, infringements of payment stipulations, unjustifiable deductions," etc., and the "ruthless" action of the cartels. He acknowledges that though Germany had a gold standard "too much anxiety used to be shown when the gold export point was reached," and that "it was also feared that to export gold would incur the wrath of the Reichsbank." With these disadvantages to struggle against, quoted from the mouth of a German observer, Germany has also succeeded by her ruthless policy during the war in earning the deep hostility of the greater part of mankind. Sentiment probably enters into business relations a good deal more than most business men admit, and for any country to set out to gain the leadership in trade and finance by outraging the feelings of most of its possible customers is an extraordinary piece of stupidity. It seems, then, that apart from the relative weakening of London as compared with New York, there is very little need for us to fear any serious change in England's financial position after the war as long as the Government's faulty finance is not allowed too seriously to endanger the position of our gold standard. It is true that we shall not benefit, as much as we undoubtedly have in the past, from the "help of Germans" in developing our finance. But indirectly the Germans will still be helping us by the great stimulus that the war will have given us towards efficiency and hard work. What we have to do in order to secure London's position after the war is to restore as soon as we can the system that had established it in the century before the war. We have to show the world that, far from any intention to abandon Free Trade, we mean to take a long step forward along the line of international activity which has been the source of our greatness in the past. We want, as soon as possible, to get back that freedom from Government control which has given us such elasticity and adaptability to our money market, our Stock Exchange and our Insurance business. A certain amount of Government control will inevitably have to continue for a time after the war, but the sooner we rid ourselves of it the sooner we shall restore to the London money market those qualities which, after the reputation that it has for honesty, soundness and straight dealing, were most helpful in building up its eminence. Above all, we have to work hard both in finance and industry and commerce. Finance, which is the machinery for handling claims for goods and services, can only be active and effective if industry and commerce are active and effective behind it, turning out the goods and services to meet the claims that finance creates. A great industrial and commercial output, with severe restriction of unnecessary consumption so that a great margin may go into capital equipment, will soon repair the ravages of war, bring down the price of credit and of capital and make London once more the place in which these things are most cheaply and freely to be bought. Finally, if we want to restore London as a place in which all the financial transactions of the world were centred, we must remember that we cannot do so if we restrict the facilities given to foreigners to come here and settle and do business. It is not possible to be an international centre with an insular sentiment. III WAR FINANCE AS IT MIGHT HAVE BEEN--I _November_, 1917 Financial Conditions in August, 1914--No Scheme prepared to meet the Possibility of War--A Short Struggle expected--The Importance of Finance as a Weapon--Labour's Example--The Economic Problem of War--The Advantages of Direct Taxation--The Government follows the Path of Least Resistance--The Effect of Currency Inflation. A legend current in the City says that the Imperial War Committee, or whatever was the august body entrusted with the task of thinking out war problems beforehand, had done its work with regard to the Army and Navy, transport and provision, and everything else that we should want for the war, and were going on to the question of finance next week, when the war intervened. Whatever may be the truth of this story, the events of the war confirm the opinion that if it was not true it ought to have been. We are continually accused of not having been ready for the war; but, in fact, we were quite ready to do everything that we had promised to do with regard to military and naval operations. Our Navy was ready in its place in the fighting line, and the dispatch with which our Expeditionary Force was collected from all parts of the kingdom, and shipped across to France, was a miracle of efficiency and practical organisation. It is true that we had not got an Army on a Continental scale, but it was no part of our contract that we should have one. The fighting on land was in those days expected to be done by our Allies, assisted by a small British force on the left flank of the French Army. That British force was duly there, and circumstances which were quite unforeseen made it necessary for us to undertake a task which was no part of our original programme and create an Army on a Continental scale, in addition to doing everything that we had promised beforehand to a much greater extent than was in the bargain. But in finance there was no evidence that any thought-out policy had been arrived at in order to make the best possible use of the nation's economic resources for the war when it came. The acute crisis in the City which occurred in August, 1914, was a minor matter which hardly affected the subsequent history of our war finance except by giving dangerous evidence of the ease by which financial problems can be apparently surmounted by the simple method of creating banking credits. That crisis merely arose from the fact that we were so strong financially, and had so great a hold upon the finance of other countries in the world, that when we decided, owing to stress of war, to leave off lending to foreigners and to call in loans that we had made by way of accepting and bill-discounting arrangements, the whole machinery of exchange broke down because from all over the world the market in exchange went one way. Everybody wanted to buy bills on London, and there were no bills to be had. There was also the internal problem which arose because some of the public and some of the banks took to the evil practice of hoarding gold just at the wrong moment, and consequently there was no available supply of legal tender currency except in the shape of Bank of England notes, the smallest denomination of which is £5. It is known that our bankers had long before pointed out to the Treasury that if ever a banking crisis arose there would, or might be, this demand for a paper currency of smaller denominations than £5; this suggestion got into a pigeon-hole at the Treasury and was deep under the dust of Whitehall by the time experience proved how big a gap in our financial armour had been made by its neglect. If the £1 notes, with which we are now so familiar, had been ready when the war broke out, or, still better, if the Bank of England had been empowered and instructed to have an issue of its own £1 notes ready, it may at least be contended that the moratorium, which was so bad a financial beginning of the war, might have been avoided. But this opening crisis was a short-lived matter, and was promptly dealt with, thanks to the energy and courage of Mr Lloyd George, who was then Chancellor of the Exchequer, and saw that things had to be done quickly, and took the advice of the City as to what had to be done. The measures then employed erred, if at all, on the side of doing too much, which was certainly a mistake in the right direction if in any. What is much more evident is the fact that not only had there been no attempt to provide against just such a jolt to our financial machine as took place when the war began, but that, quite apart from the financial machinery of the City, no reasoned and thought-out attention had been given to the great problems of governmental finance which war on such a scale brought with it. There is, of course, the excuse that nobody expected the war to be on this scale, or to last so long. The general view was that the struggle would be over in a few months, and must certainly be so if for no other reason because the economic strain would be so great that the nations of Europe could not stand it for a long time. On the other hand, we must remember that Lord Kitchener, whom most men then regarded as representing all that was most trustworthy in military opinion, made arrangements from the beginning on the assumption that the war might last for three years. So, while some excuse may be made for our lack of financial foresight, it does seem to have been the duty of those whose business it is to manage our finances to have thought out a complete scheme to be adopted in case of war if at any time we should be involved in one on a European scale. Instead of which, not only would it appear that no such endeavour had been made by our Treasury experts before the war, but that no such endeavour has ever been made by them since the war began. All through the war's history many of the country's mistakes have been based on the encouraging conviction that the war would be over in the next six months. This conviction is still cherished to this day, and there can be no doubt that if those who cherish it hold on to it long enough they will come right some day. But if delusions of this kind may be fairly excused in the man in the street, they do not seem to be any excuse for those who are responsible for our finance for their total lack of a thought-out scheme at the beginning of the war, and their total failure to produce one as the war went on. We have financed the war by haphazard methods, limping along the line of least resistance. We are continuing to do so, and we may do so to the end, though there are now growing signs of an impatience both among the property-owning classes and others of the system by which we are financing the war by piling up debt and manufacturing banking credits. The objections to the policy on the part of the "haves" and the "have nots" are, of course, different, but as they both converge to the same point, namely, to the reform of our system of war finance, it is possible that they may in time have the effect of shaking even the confidence of our politicians and officials in the haphazard and slipshod methods which would long ago have produced financial disaster if it had not been for the great financial strength of the country. Finance is an enormously important weapon in the hands of our rulers for gliding the economic activities of the people. This is so even in peace time to a certain extent, though the revenue then collected is so small an item in the total national income that it counts for much less than in war, when the power that the Government can wield by its policy in taxation and borrowing might have been all-powerful in keeping the nation on the right lines in the matter of spending and keeping down the cost of the war, and in maintaining our financial staying power to a far greater extent than has actually been done. It is easy, as they say on the Stock Exchange, to job backwards, and it is also easy, and perhaps rather unprofitable, to hazard opinions about what would have happened if things had been otherwise. Nevertheless, when we look back on the spirit of the country as it was in those early days of the war, when the violation of Belgium had sent a chivalrous thrill through the hearts of all classes in the country, when we all recognised that we were faced with the greatest crisis in our history, that our country and the future of civilisation were about to be tested by the severest strain ever applied to them, that the life and fortune of the individual did not count, but that the war and victory were the only interests that any one had a right to consider--when one remembers all these things, and the use that a wise financial policy might have made of them, it is impossible to avoid the conclusion that the history of the war in this country and its social and political effects might have been something much finer, much cleaner and more noble if only the weapons of finance had been more boldly and wisely used. It is not a good thing to indulge in high-falutin' on this subject. It is absurd to suppose that the war suddenly turned us all into plaster saints at the beginning, and that we might have continued so to the end if the State had dealt with our money in a proper way. But without setting up any such idealistic arguments as these, looking back on those early days of the war, one can still remember the thrill of earnestness and of eagerness for self-sacrifice which has since then given way lamentably to war profiteering, war strikes, and a general struggle among many classes of the community to make as much as possible out of the war, merely because our financial leaders have never really put the country's financial problem properly before the country. We were not plaster saints, but we were either Idealistic and perhaps foolish people who attached great importance to the freedom and security of small nations and all those items in the programme of idealistic Radicalism, or else we were good, red-hot, true-blue Jingoes with a hearty hatred for Germany, and enjoyed the thought that the big fight which we had long foreseen between the two countries was at last going to be fought out. Or, again, we were just commonplace people who did not much believe in idealistic Radicalism or anti-German bitterness, but saw that the whole future of our country was at stake, and were prepared to do anything for it. A fine example was set us in those days by the Trade Union leaders. The industrial world was seething with discontent. The Suffragettes in London and the Carsonites in Ireland had shown us how much could be done by appeals to physical force in a lazy-minded community; and hints of industrial revolution, with great organised strikes, which were going to tie up the transport industry of the country were in the air. And then, when the war came, the Labour leaders said, "No strikes until the war is over. Our country comes first." This was the lead given to the country by those down at the bottom, who had the least to lose, and whose patriotism during the course of the war has frequently been questioned. At the top the financial and property-owning classes, having been saved by Mr Lloyd George's able adroitness from a bad crisis in the City, were entirely tame, and would have suffered anything in the way of taxation or financial conscription if the need for it had been properly put before them. It is almost amusing to remember now that in those early days of the war the shareholders in Home Railway companies were thought lucky. The Government were taking the railways over, and were guaranteeing that their proprietors should receive the same dividends as they had had before the war. Such was the view in financial and property-owning circles of results of war that, so far from any expectation of the huge profits which war has put into the pockets of certain classes, they were only too thankful if they could be assured that their gross incomes were not going to be reduced. Such was the spirit with which the Government of that day had to deal. A spirit in all classes earnestly patriotic, and so thoroughly frightened of the economic consequences of the war that it would have been ready to face any sacrifices that the Government had asked of it. How, then, would the Government have dealt with this spirit if it had taken the trouble really to think out the problem of war finance on a long view instead of proceeding along a haphazard line, adjusting peace methods to war without any consideration as to their adequacy? If the problem had been really thought out beforehand the Government must have seen clearly that the real economic problem in war-time is not merely a question of raising money, since that can at any time be done easily by means of a printing-press, but of diverting the industrial energy of the nation from peace to war purposes, that is to say, transferring from the enjoyment of the individual citizen the goods and services that used to contribute to his comfort and amusement, and turning them over to the provision of the things needed for the war. War's needs can only be met out of the current production of the world as it is at present. All the warring powers begin a war with certain accumulated war stores consisting of battleships, ammunition, guns and all other forms of war material. Apart from these stores with which they begin, the whole work of providing the armies with the fighting materials that they require, and the food and clothes that they consume, has to be done during the course of the war, that is to say, out of the current production of the moment. Therefore the real economic problem that any Government has to face in war-time is that of inducing its citizens to reduce their purchase of goods and services, that is to say, to spend less, so that all the things required for the Army and Navy may be obtained by the Government. It is true that some of the goods and services required for carrying on war can be obtained from foreign countries by any belligerent which is able to communicate with them freely. In that case the current production of the foreigner can be called in to help. But this can only be done if the warring country is able to ship goods to the foreigner in payment for what it buys, or if it is able to obtain a loan from the foreigner, or some other foreign country, in order to pay for its purchases abroad, or again, if, as in our case, it holds a large accumulation of securities which foreign countries are prepared to take in exchange for goods that they send for the purposes of the war. By these two last-named processes, raising money abroad, and selling securities to foreign nations, the warring country impoverishes itself for the future. When it borrows abroad it pledges itself to export goods and services in future to meet interest and sinking fund on the money so raised, so getting no goods and services in return. When it ships its accumulated wealth in the form of securities it gives up for the future any claim to goods and services from the debtor country which used to come to it to meet interest and redemption. It is only by shipping goods in return for goods imported for the war that a country can keep its financial staying-power on an even keel. Thus the problem which a statesman who had thought out the economics of war beforehand would have recognised as the keystone of his policy, would have been that of diverting the activities of the country from providing itself with comforts and amusements to turning out goods required for war, and of doing so with the least possible friction, the least possible alteration in the economic equilibrium of the country, and, above all, with the least possible cost to the national finances. We arrive at the true aspect of this problem more easily if we leave out the question of money altogether and think of it in units of energy. When a nation goes to war it means to say that it has to apply so many units of energy to the business of fighting, and to provide the fighters with all that they need. If at the beginning of the war its utmost capacity of output was, to mention merely a fanciful figure, a thousand million units of energy, and if it was clear that the fighting forces of the country would need for their proper maintenance five hundred million units of energy, then it is clear that the nation's ordinary consumption of goods and services would have to be reduced to the extent of five hundred millions of units of energy, which would have to be applied to the war, that is, assuming that its possible output remained the same. In other words, the spending power of the citizens of the country had to be reduced so that the industrial energy that used to go into meeting their wants might be made available for the purposes of fighting forces. Now what was the straightest, simplest and cleanest way of bringing about this reduction in buying power on the part of the ordinary citizen which has been shown to be necessary for the purposes of war finance? Clearly the best way of doing it is by taxation equitably imposed. When the State taxes, it says in effect to the citizens, "Your country needs certain goods and services, you therefore will have to go without those goods and services, and the simplest way to make you do this is to take away your money and so ration your buying power. Whatever is needed for the Army and Navy will be taken away from you by taxation, and the result of this will be that, instead of your indulging in comforts and luxuries, to the extent of the war's needs the Government will use your money for paying for what is needed for the Army and Navy." If such a policy had been carried out the cost of the war to the community would have been enormously cheapened. There need have been no general rise in prices because there would have been no increase in demand for goods and services. Anything that the Government spent would have been counter-balanced by decreased spending by the individual; any work that the Government needed for the war would have been counter-balanced by a reduction in demand for work on the part of individual citizens. There would have been no multiplication of currency owing to enormous credits raised by the Government; there would have been merely a transfer of buying power from individuals to the State. The process would have been gradual, there need have been no acute dislocation, but as the cost of the war increased, that is to say, as the Government needed more and more goods and services for its prosecution, the community would gradually have shed one after another the extravagances on which it spent so many hundreds of millions in days before the war. As it shed these extravagances the labour and energy needed to produce them would have been automatically transferred to the service of the war, or to the production of necessaries of life. By this simple process of monetary rationing all the frantic appeals for economy, and most of the complicated, tangled problems raised by such matters as Food Control or National Service would have been avoided. But, it may be contended, this is setting up an ideal so absurdly too high that you cannot expect any modern nation to rise up to it. Perhaps this is true, though I am not at all sure that if we had had a really bold and far-sighted Finance Minister at the beginning of the war he might not have persuaded the nation to tackle its war problem on this exalted line. At least it can be claimed that our financial rulers might have looked into the history of the matter and seen what our ancestors had done in big wars in this matter of paying for war costs out of taxation, with the determination to do at least as well as they did, and perhaps rather better, owing to the overwhelming scale of modern financial problems. If they had done so they would have found that both in the Napoleonic and the Crimean wars we paid for nearly half the cost of the war out of revenue as they went on, whereas in the present war the proportion that we are paying by taxation, instead of being 47 per cent., as it was when our sturdy ancestors fought against Napoleon, is less than 20 per cent.[1] Why has this been so? Partly, no doubt, owing to the slackness and cowardice of our politicians, and the apathy of the overworked officials, who have been too busy with the details of finance to think the problem out on a large scale. But it is chiefly, I think, because our system of taxation, though probably the best in the world, involves so many inequities that it cannot be applied on a really large scale without producing a discontent which might have had serious consequences on our conduct of the war. [Footnote 1: See _Economist_, August 4, 1917, p. 151.] It is not possible nowadays, now that the working classes are conscious of their strength, to apply taxation to ordinary articles of general consumption with anything like the ruthlessness which in former days produced such widespread misery. Indirect taxation of this kind carries with it this inherent weakness that its burden falls most heavily on those who are least able to bear it, consequently it is bound to break in the hand of those who attempt to apply it with anything like vigour to a community which is prepared to stand up for fair treatment. A tax on bread or salt obviously hits the wage-earner at 30s. a week infinitely harder than it hits the millionaire, and so the country would not tolerate taxes on bread or salt. Direct taxes, such as Income Tax and Death Duties, have this enormous advantage, that they can really be regulated so as to press with continually increasing severity upon those who are best able to bear them. Unfortunately our Income Tax is still so unjustly imposed that it was clearly impossible to make full use of it without its being first reformed. That two men, each earning £1000 a year, should pay the same Income Tax, in spite of one having a wife and five children, while the other is a careless bachelor, is such a blot upon this otherwise excellent tax that it is generally agreed that the present rate of 5s. is as high as it can be made to go unless some reform is introduced into its incidence. The need for its reform is made the excuse for a sparing use of the tax, and we have been on several occasions assured that, as soon as the war is over, this reform will be set about. In the meantime the Government falls back on funding about 80 per cent. of its requirements of the war on a system of borrowing. In so far as the money subscribed to its loans is money that is being genuinely saved by investors this process has exactly the same effect as taxation, that is to say, somebody goes without goods and services and hands over his power to buy them to the State to be used for the war. Borrowing of this kind consequently does everything that is needed for the solution of the immediate war problem, and the only objection to it is that it leaves later on the difficulties involved by raising taxes when the war is over, and economic problems are much more complicated in times of peace than in war, for meeting the interest and redemption of debt. But, in fact, it is well known that by no means all that the Government has borrowed for war purposes has been provided in this way. Much of the money that the Government has obtained for war purposes has been got not out of genuine savings of investors, but by arrangements of various kinds with the banking machinery of the country, or by the simple use of the printing-press, with the result that the Government has provided itself with an enormous mass of new currency which has not been taken out of anybody else's pocket, but has been manufactured by or for the Government. The consequence of the profligate use of this dishonest process is that general rise in prices, which is in effect an indirect tax on the necessaries of life, involving all the injustice and ill-feeling which arises from such a measure. It is inevitable that the working classes, finding themselves subjected to a rise in prices, the cause of which they do not understand, but the result of which they see to be a great decrease in the buying power of their wages, should believe that they are being exploited by profiteers, that the rich classes are growing richer at their expense out of the war, and that they and the country are being bled by a set of unpatriotic capitalist blood-suckers. It is also natural that the property-owning classes, who find themselves paying an Income Tax which they regard as extortionate, should consider that the working classes by their continuous demands for higher wages to meet higher cost of living, are trying to exploit the country in their own interests in a time of national crisis, and displaying a most unedifying spirit. The social result of this evil policy of inflation, in embittering class against class, is a matter which it is difficult to exaggerate. Some people think that it was inevitable. This is too wide a question to be entered into now, but at least it must be contended that if it is inevitable the extent to which it is being practised might have been very greatly diminished. Do we mean to go on to the end of the war with this muddling policy of bad finance? If we still insist on believing that the war cannot last another six months, and there is therefore no need to pull ourselves up short financially and put things in order, then we certainly shall do so. But we should surely recognise that there is at least a chance that the war may go on for years, that if so our present financial methods will leave us with a burden of debt which is appalling to consider, and that in any case, whether the war lasts another six months or another six years, a reform of our financial methods is long overdue, is inevitable some time, and will pay us better the sooner it is set about. IV WAR FINANCE AS IT MIGHT HAVE BEEN--II _December_, 1917 The Changed Spirit of the Country--A Great Opportunity thrown away--What Taxation might have done--The Perils of Inflation--Drifting stupidly along the Line of Least Resistance--It is we who pay, not "Posterity." In the November number of _Sperling's Journal_ I dealt with the question of how our war finance might have been improved if a longer view had been taken from the beginning concerning the length of the war and the measures that would be necessary for raising the money. The subject was too big to be fully covered in the course of one article, and I have been given this opportunity of continuing its examination. Before doing so I wish to remind my readers once more of the great difference in the spirit of the country with regard to financial self-sacrifice in the early days of the war and at the present time, after three years of high profits, public and private extravagance, and successful demands for higher wages have demoralised the public temper into a belief that war is a time for making big profits and earning big wages at the expense of the community. In the early days the spirit of the country was very different, and it might have remained so if it had been trained by the use made of public finance along the right line. In the early days the Labour leaders announced that there were to be no strikes during the war, and the property-owning classes, with their hearts full of gratitude for the promptitude with which Mr Lloyd George had met the early war crisis, were ready to do anything that the country asked from them in the matter of monetary sacrifice. Mr Asquith's grandiloquent phrase, "No price is too high when Honour is at stake," might then have been taken literally by all classes of the community as a call to them to do their financial duty. Now it has been largely translated into a belief that no price is too high to exact from the Government by those who have goods to sell to it, or work to place at its disposal. In considering what might have been in matters of finance we have to be very careful to remember this evil change which has taken place in the public spirit owing to the short-sighted financial measures which have been taken by our rulers. Thus, when we consider how our war finance might have been improved, we imply all along that the improvements suggested should have been begun when the war was in its early stages, and when public opinion was still ready to do its duty in finance. The conclusion at which we arrived a month ago was that by taxation rather than by borrowing and inflation much more satisfactory results could have been got out of the country. If, instead of manufacturing currency for the prosecution of the war, the Government had taken money from the citizens either by taxation or by loans raised exclusively out of real savings, the rise in prices which has made the war so terribly costly, and has raised so great a danger through the unrest and dissatisfaction of the working classes, might have been to a great extent avoided, and the higher the rate of taxation had been, and the less the amount provided by loans, the less would have been the seriousness of the problem that now awaits us when the war is over and we have to face the question of the redemption of the debt. In this matter of taxation we have certainly done much more than any of the countries who are fighting either with us or against us. Germany set the example at the beginning of the war of raising no money at all by taxation, puffed up with the vain belief that the cost of the war, and a good deal more, was going to be handed over to her in the shape of indemnities by her vanquished enemies. This terrible miscalculation on her part led her to set a very bad example to the warring Powers, and when protests are made in this country concerning the low proportion of the war's costs that is being met out of taxation it is easy for the official apologist to answer, "See how much more we are doing than Germany." It is easy, but it is not a good answer. Germany had no financial prestige to maintain; the money that Germany is raising for financing the war is raised almost entirely at home, and she rejoices in a population so entirely tame under a dominant caste that it would very likely be quite easy for her, when, the war is over, to cancel a large part of the debt by some process of financial jugglery, and to induce her tame and deluded creditors to believe that they have been quite handsomely treated. Here, however, in England, we have a financial prestige which is based upon financial leadership of more than a century. We have also raised a large part of the money we have used for the prosecution of the war by borrowing abroad, and so we have to be specially careful in husbanding that credit, which is so strong a weapon on the side of liberty and justice. And, further, we have a public which thinks for itself, and will be highly sceptical, and is already inclined to be sceptical, concerning the manner in which the Government may treat the national creditors. Its tendency to think for itself in matters of finance is accompanied by very gross ignorance, which very often induces it to think quite wrongly; and when we find it necessary for the Chancellor of the Exchequer to make it clear at a succession of public meetings that those who subscribe to War Loans need have no fear that their property in them will be treated worse than any other kinds of property, we see what evil results the process of too much borrowing and too little taxation can have in a community which is acutely suspicious and distrustful of its Government, and very liable to ignorant blundering on financial subjects. What, then, might have been done if, at the beginning of the war, a really courageous Government, with some power of foreseeing the needs of finance for several years ahead if the war lasted, had made a right appeal to a people which was at that time ready to do all that was asked from it for the cause of justice against the common foe? The problem by which the Government was faced was this, that it had to acquire for the war an enormous and growing amount of goods and services required by our fighting forces, some of which could only be got from abroad, and some could only be produced at home, while at the same time it had to maintain the civilian population with such a supply of the necessaries of life as would maintain them in efficiency for doing the work at home which was required to support the effort of our fighters at the Front. With regard to the goods which came from abroad, either for war purposes or for the maintenance of the civilian population, the Government obviously had no choice about the manner in which payment had to be made. It had no power to tax the suppliers in foreign countries of the goods and services that we needed during the war period. It consequently could only induce them to supply these goods and services by selling them either commodities produced by our own industry, or securities held by our capitalists, or its own promises to pay. With regard to the goods that we might have available for export, these were likely to be curtailed owing to the diversion of a large number of our industrial population into the ranks of the Army and into munition factories. This curtailment, on the other hand, might to a certain extent be made good by a reduction in consumption on the part of the civilian population, so setting free a larger proportion of our manufacturing energy for the production of goods for export. Otherwise the problem of paying for goods purchased from abroad could only be solved by the export of securities, and by borrowing from foreign countries, so that the shells and other war material that were required, for example, from America, might be paid for by American investors in consideration of receiving from us a promise to pay them back some day, and to pay them interest in the meantime. In other words, we could only pay for what we needed from abroad by shipping goods or securities. As is well known, we have financed the war by these methods to an enormous extent; the actual extent to which we have done so is not known, but it is believed that we have roughly balanced by this process the sums that we have lent to our Allies and Dominions, which now amount to well over 1300 millions. If this is so, we have, in fact, financed the whole of the real cost of the war to ourselves at home, and we have done so by taxation, by borrowing saved money, and by inflation--that is to say, by the manufacture of new currency, with the inevitable result of depreciating the buying power of our existing currency as a whole. How much better could the thing have been done? In other words, how much of the war's cost in so far as it was raised at home could have been raised by taxation? In theory the answer is very simple, for in theory the whole cost of the war, in so far as it is raised at home, could have been raised by taxation if it could have been raised at all. It is not possible to raise more by any other method than it is theoretically possible to raise by taxation. It is often said, "All this preaching about taxation is all very well, but you couldn't possibly get anything like the amount that is needed for the war by taxation, or even by borrowing of saved money. This inflation against which economic theorists are continually railing is inevitable in time of war because there isn't enough money in the country to provide all that is needed." This argument is simply the embodiment of the old delusion, so common among people who handle the machinery of finance, that you can really increase the supply of necessary goods by increasing the supply of money, which is nothing else than claims to goods expressed either in pieces of metal or pieces of paper. As we have seen, all that we have been able to raise abroad has been required for advances to our Allies and Dominions, consequently we have had to fall back upon our own home production for everything needed for our own war costs. Either we have turned out the goods at home or we have turned out goods to sell to foreigners in exchange for goods that we require from them. But since we thus had to rely on home production for the whole of the war's needs as far as we were concerned, it is clear that the Government could, if it had been gifted with ideal courage and devotion, and if it had a people behind it ready to do all that was needed for victory, have taken the whole of the home production, except what was wanted for maintaining the civilian population in efficiency, for the purposes of the war. It is a commonplace of political theory that the Government has a right to take the whole of the property and the whole of the labour of its citizens. But it would not, of course, have been possible for the Government immediately to inaugurate a policy of setting everybody to work on things required for the war and paying them all a maintenance wage. This might have been done in theory, but in practice it would have involved questions of industrial conscription, which would probably have raised a storm of difficulty. What the Government might have done would have been by commandeering the buying power of the citizen to have set free the whole industrial energy of the community for supplying the war's needs and the necessaries of life. At present the national output, which is only another way of expressing the national income, is produced from certain channels of production in response to the expectation of demand from those whose possession of claims to goods, that is to say, money, gives them the right to say what kind of goods they will consume, and consequently the industrial part of the population will produce. Had the Government laid down that the whole cost of the war was to be borne by taxation, the effect of this measure would have been that everything which was needed for the war would have been placed at the disposal of the Government by a reduction in spending on the part of those who have the spending power. In other words, the only process required would have been the readjustment of industrial output from the production of goods needed (or thought to be needed) for ordinary individuals to those required for war purposes. This readjustment would have gone on gradually as the war's cost increased. There would have been no competition between the Government and private individuals for a limited amount of goods in a restricted market, which has had such a disastrous effect on prices during the course of the war; there would have been no manufacture of new currency, which means the creation of new buying power at a time when there are less goods to buy, which has had an equally fatal effect on prices; there would have had to be a very drastic reform in our system of taxation, by which the income tax, the only really equitable engine by which the Government can get much money out of us, would have been reformed so as to have borne less hardly upon those with families to bring up. Mr Sidney Webb and the Fabians have advocated a system by which the basis of assessment for income tax should be the income divided by the number of members of a family, rather than the mere income without any consideration for the number of people that have to be provided for out of it. With some such scheme as this adopted there is no reason why the Government should not have taken, for example, the whole of all incomes above £1000 a year for each individual, due allowance being made for obligations, such as rent, which involve long contracts. For any single individual to want to spend more than £1000 a year on himself or herself at such a crisis would have been recognised, in the early days of the war, as an absurdity; any surplus above that line might readily have been handed over to the Government, half of it perhaps in taxation and the other half in the form of a forced loan. So sweeping a change would not have been necessary at first, perhaps not at all, because the war's cost would not have grown nearly so rapidly. All surplus income above a certain line would have been taken for the time being, but with the promise to repay half the amount taken, so that it should not be made a disadvantage to be rich, and no discouragement to accumulation would have been brought about. By this means the whole of the nation's buying power among the richer classes would have been concentrated upon the war, with the result that the private extravagance, which is still disgracing us in the fourth year of the war, would not have been allowed to produce its evil effects. With the rich thus drastically taxed, the working classes would have been much less restive under the application of income tax to their own wages. We should have a much more freely supplied labour market, and since the rise in prices would not have been nearly so severe, labour's claim to higher wages would have been much less equitable, and labour's power to enforce the claim would have been much less irresistible. What the Government has actually done has been to do a little bit of taxation, much more than anybody else, but still a little bit when compared with the total cost of the war; a great deal of borrowing, and a great deal of inflation. By this last-named method it produces the result required, that of diverting to itself a large part of the industrial output of the country, by the very worst possible means. It still, by its failure to tax, leaves buying power in the hands of a large number of people who see no reason why they should not live very much as usual; that is to say, why they should not demand for their own purposes a proportion of the nation's energy which they have no real right to require at such a time of crisis. But in order to check their demands, and to provide its own needs, the Government, by setting the bankers to work to provide it with book credits, gives itself an enormous amount of new buying power with which, by the process of competition, it secures for itself what is needed for the war. There is thus throughout the country this unwholesome process of competition between the Government on one hand and unpatriotic spenders on the other, who, between them, put up prices against the Government and against all those unfortunate, defenceless people who, being in possession of fixed salaries, or of fixed incomes, have no remedy against rising prices and rising taxation. All that could possibly have been spent on the war in this country was the total income of the people, less what was required for maintaining the people in health and efficiency. That total income Government might, in theory, have taken. If it had done so it could and would have paid for the whole of the war out of taxation. All this, I shall be told, is much too theoretical and idealistic; these things could not have been done in practice. Perhaps not, though it is by no means certain, when we look back on the very different temper that ruled In the country in the early months of the war. If anything of the kind could have been done it would certainly have been a practical proof of determination for the war which would have shown more clearly than anything else that "no price was too high when Honour was at stake." It would also have been an extraordinary demonstration to the working classes of the sacrifices that property owners were ready to make, the result of which might have been that the fine spirit shown at the beginning of the war might have been maintained until the end, instead of degenerating into a series of demands for higher wages, each one of which, as conceded to one set of workmen, only stimulates another to demand the same. But even if we grant that it is only theoretically possible to have performed such a feat as is outlined above, there is surely no question that much more might have been done than has been done in the matter of paying for the war by taxation. If we are reminded once more that our ancestors paid nearly half the cost of the Napoleonic war out of revenue, while we are paying about a fifth of the cost of the present war from the same source, it is easy to see that a much greater effort might have been made in view of the very much greater wealth of the country at the present time. I was going to have added, in view also of its greater economic enlightenment, but I feel that after the experience of the present war, and its financing by currency debasement, the less about economic enlightenment the better. What, then, stood in the way of measures of finance which would have obviously had results so much more desirable than those which will face us at the end of the war? As it is, the nation, with all classes embittered owing to suspicions of profiteering on the part of the employers and of unpatriotic strikes on the part of the workers, will have to face a load of debt, the service of which is already roughly equivalent to our total pre-war revenue; while there seems every prospect that the war may continue for many half-years yet, and every half-year, as it is at present financed, leaves us with a load of debt which will require the total yield of the income tax and the super-tax before the war to meet the charge upon it. Why have we allowed our present finance to go so wrong? In the first place, perhaps, we may put the bad example of Germany. Then, surely, our rulers might have known better than to have been deluded by such an example. In the second place, it was the cowardice of the politicians, who had not the sense in the early days of the war to see how eager the spirit of the country was to do all that the war required of it, and consequently were afraid to tax at a time when higher taxation would have been submitted to most cheerfully by the country. There was also the absurd weakness of our Finance Ministers and our leading financial officials, which allowed our financial machinery to be so much weakened by the demands of the War Office for enlistment that it has been said in the House of Commons by several Chancellors of the Exchequer that it is quite impossible to consider any form of new taxation because the machinery could not undertake it. There has also been great short-sightedness on the part of the business men of the country, who have failed to give the Government a lead in this important matter. Like the Government, they have taken short views, always hoping that the war might soon be over, and so have left the country with a problem that grows steadily more serious with each half-year as we drift stupidly along the line of least resistance. Such war finance as I have outlined--drastic and impracticable as it seems--would have paid us. Taxation in war-time, when industry's problem is simplified by the Government's demand for its product, hurts much less than in peace, when industry has not only to turn out the stuff, but also find a buyer--often a more difficult and expensive problem. There is a general belief that by paying for war by loans we hand the business of paying for it on to posterity. In fact, we can no more make posterity pay us back our money than we can carry on war with goods that posterity will produce. Whatever posterity produces it will consume. Whatever it pays in interest and amortisation of our war debt, it will pay to itself. We cannot get a farthing out of posterity. All we can do, by leaving it a debt charge, is to affect the distribution of its wealth among its members. Each loan that we raise makes us taxpayers collectively poorer now, to the extent of the capital value of the charge on our incomes that it involves. The less we thus charge our productive power, and the more we pay up in taxes as the war goes on, the readier we shall be to play a leading part in the great time of reconstruction. V A LEVY ON CAPITAL _January_, 1918 The Objects of the Levy--Its Origin and History--How it would work in Practice--The Attitude of the Chancellor--The Effects of the Scheme in discouraging Thrift--Its Fallacies and Injustices--The Insuperable Obstacles to its Application--Its Influence on Production--One of the Tests of a Tax--Judged by this Test the Proposed Levy is doomed. By some curious mental process the idea of a levy on capital has come into rapidly increasing prominence in the last few months, and seems to be gaining popularity in quarters where one would least expect it. On the other hand, it is naturally arousing intense opposition, both among those who would be most closely affected by its imposition, and also among those who view with grave concern the possible and probable economic effects of such a system of dealing with the national debt. I say "dealing with the national debt" because, as will be clear, as a system of raising money for the war the suggestion of the levy on capital has little or nothing to recommend it. But, as will also be made clear, the proposal has been put forward as a thing to be done immediately in order to increase the funds in the hands of the Chancellor of the Exchequer to be spent on war purposes. A levy on capital is, of course, merely a variation of the tax on property, which has long existed in the United States, and had been resorted to before now by Governments, of which the German Government is a leading example, in order to provide funds for a special emergency. This it can very easily do as long as the levy is not too high. If, for example, you tax a man to the extent of 1-1/2 per cent. to 2 per cent. of the value of his property, on which he may be earning an average of 5 to 6 per cent. in interest, then the levy on capital becomes merely a form of income tax, assessed not according to the income of the taxpayer but according to the alleged value of his property. It is thus, again, a variation of the system long adopted in this country of a special rate of income tax on what is called "unearned" income, i.e. income from invested property. But it is only when one begins to adopt the broadminded views lately fashionable of the possibilities of a levy on capital and to talk of taking, say, 20 per cent. of the value of a man's property from him in the course of a year, that it becomes evident that he cannot be expected to pay anything like this sum, in cash, unless either a market is somehow provided--which seems difficult if all property owners at once are to be mulcted of a larger amount than their incomes--or unless the Government is prepared to accept part at least of the levy in the shape of property handed over at a valuation. Before, however, we come to deal in detail with the difficulties and drawbacks of the suggestion, it may be interesting to trace the history of the movement in its favour, and to see some of the forms in which it has been put forward. It may be said that the ball was opened early last September when, in the _Daily News_ of the 8th of that month, its able and always interesting editor dealt in one of his illuminating Saturday articles with the question of "How to Pay for the War." He began with the assumption that the capital of the individuals of the nation has increased during the war from 16,000 millions to 20,000 millions. A 10 per cent. levy on this, he proceeded, would realise 2000 millions. It would extinguish debt to that amount and reduce the interest on debt by 120 millions. The levy would be graduated--say, 5 per cent. on fortunes of £1000 to £20,000; 10 per cent. on £20,000 to £50,000; up to 30 per cent. on sums over £1,000,000; and the individual taxpayer was to pay the levy "in what form was convenient, in his stocks or his shares, his houses or his fields, in personalty or realty." Just about the same time the _Round Table_, a quarterly magazine which is usually most illuminating on the subject of finance, chimed in with a more or less similar suggestion in an article on "Finance After the War." It remarked that the difficulty of applying a levy on capital is "probably not so great as appears at first sight." The total capital wealth of the community it estimated at about 24,000 millions sterling. To pay off a war debt of 3000 millions would therefore require a levy of one-eighth. Evidently this could not be raised in money, nor would it be necessary. Holders of War Loans would pay their proportion in a simple way by surrendering one-eighth of their scrip. Holders of other forms of property would be assessed for one-eighth of its value and be called on to acquire and to surrender to the State the same amount of War Loan scrip. To do this, they would be obliged to realise a part of their property or to mortgage it, "but," added the _Round Table_ cheerfully, "there is no insuperable difficulty about that." The first thing that strikes one when one examines these two schemes is the difference in their view concerning the amount of capital wealth available for taxation. Mr Gardiner made the comparatively modest estimate of 16,000 millions to 20,000 millions; the _Round Table_ plumps for 24,000 millions, and, incidentally, it may be remarked that some conservative estimates put it as low as 11,000 millions. Thus we have a possible range for the fancy of the scheme builder of from 11,000 to 24,000 millions in the property on which taxation is proposed to be levied. But it is when we come to the details of these schemes that the difficulties begin to glare. Mr Gardiner tells us that millionaires would pay up to 30 per cent. of their property, and that they would pay in what form was convenient, in houses, fields, etc., etc. But he does not explain by what principle the Government is to distribute among the holders of the debt, the repayment of whom is the object of the levy, the strange assortment of miscellaneous assets which it would thus collect from the property owners of the country. In commenting on this scheme the _Economist_ of September 15th took the case of a man with a fortune of £100,000 invested before the war in a well-assorted list of securities, the whole of which he had, for patriotic reasons, converted during the war into War Loans. He would have no difficulty about paying his capital levy, for he would obviously surrender something between 10 and 20 per cent. of his holding. But, "in exchange for nearly two-thirds of the rest, he might find himself landed with houses and bits of land all over the country, a batch of unsaleable mining shares, a collection of blue china, a pearl necklace, a Chippendale sideboard, and a doubtful Titian," The _Round Table's_ suggestion seems to be even more impracticable. According to it, holders of all other forms of property besides War Loans would be assessed for one-eighth of its value--it does not explain how the value is to be arrived at, nor how long it would take to do it--and would then be called on to acquire and to surrender to the State the same amount of War Loan scrip. To do this they would be obliged to realise a part of their property or to mortgage it, a process which would seem likely to produce a pretty state of affairs in the property market; and a very pleasant state of affairs indeed would arise for the holders of War Loan scrip, since there would be a large crowd of compulsory buyers in the market from whom the holders would apparently be able to extort any price that they liked for their stock. The next stage in the proceedings was a deputation to the Chancellor of the Exchequer, concerning which more anon, of leaders of various groups of the Labour Party, to press upon Mr Bonar Law the principle of what is called "the Conscription of Wealth," and the publication at or soon after that time, which was about the middle of November, of a pamphlet on the subject of the "Conscription of Riches," by the War Emergency Workers' National Committee, 1, Victoria Street, S.W. Among what this pamphlet describes as "the three practicable methods of conscripting wealth" No. 1 is as follows:-- A Capital Tax, on the lines of the present Death Duties, which are graduated from nothing (on estates under £300, and legacies under £20) up to about 20 per cent. (on very large estates left as legacies to strangers). If a "Death Duty" at the existing rates were now levied simultaneously on every person in the kingdom possessing over £300 wealth (every person might be legally deemed to have died, and to be his own heir), it might yield to the Chancellor of the Exchequer about £900,000,000. It would be necessary to offer a discount for payment in cash; and in order to avoid simultaneous forced sales, to accept, in lieu of cash, securities at a valuation; and to take mortgages on land. Here it will be seen that the Emergency Workers had improved on the _Round Table_, and agreed with Mr Gardiner, by providing that the Government should take securities at a valuation and mortgages on land in lieu of cash in order to avoid simultaneous forced sales. But they do not seem to have perceived that, in so far as the Government took securities or accepted mortgages on land, it would not be getting money to pay for the war, which was the object of the proposed Conscription of Wealth, but would only be obtaining property from which the Government would in due course later on receive an income, probably averaging about one-twentieth of its value. Perhaps, however, it would be more correct to say that those who put the scheme forward did not ignore this drawback to it, but rather liked it, for reasons quite irrelevant to the objects that they were apparently pursuing. A good deal of prominence was given about the same time to the question of a levy on capital in the _New Statesman_ well known to be the organ of Mr Sidney Webb and other members of the Fabian Society. These distinguished and very intellectual Socialists would, of course, be quite pleased if, in an apparent endeavour to pay for the war, they actually succeeded in securing, by the Government's acquisition of blocks of securities from property owners, that official control of industry and production which is the object of State Socialists. It will be noted, however, in this scheme that no mention is made of any forms of property to be accepted by the Government in lieu of cash except securities and mortgages on land. Items such as furniture, books, pictures and jewellery are ignored, and in one of the articles in the _New Statesman_, discussing the question of a capital levy, it was distinctly suggested that these commodities should be left out of the scheme so as to save the trouble involved by valuation. Unfortunately, if we leave out these forms of property the natural result is to stimulate the tendency, lately shown by an unfortunately large number of patriotic taxpayers, of putting money into pearl necklaces and other such gewgaws in order to avoid income tax. If by buying fur coats, old masters and diamond tiaras it will be be possible in future to avoid paying, not only income tax, but also a capital levy, it is to be feared that appeals to people to save their money and invest it in War Bonds are likely to be seriously interfered with. Unfortunately, the _Statesman_ was able to announce that the appeal for this system of taxation had been received with a good deal of sympathy by the Chancellor of the Exchequer, and the next stage in the history of the agitation was the publication on Boxing Day in several of the daily papers of what appeared to be an official summary, issued through the Central News, of what the Chancellor had said to the deputation of Labour Leaders introduced by Mr Sidney Webb, which waited on him, as already described, in the middle of November. Having pointed out that he had never seen any proposal which seemed to him to be practicable for getting money during the war by conscripting wealth, Mr Bonar Law added that, though "perhaps he had not thought enough about it to justify him in saying so," his own feeling was that it would be better, both for the wealthy classes and the country, to have this levy on capital, and reduce the burden of the national debt when the war was over. It need not be said that this statement by the Chancellor has been very far from helpful to the efforts of those who are trying to induce unthrifty citizens to save their money and put it into National War Bonds for the finance of the war. "Why," people argue, "should we go out of our way to save and take these securities if, when the war is over, a large slice of our savings is to be taken away from us by means of this levy on capital? If we had been doubting between the enjoyment of such comforts and luxuries as are possible in war-time and the austere duty of thrift, we shall naturally now choose the pleasanter path, spend our money on ourselves and on those who depend on us, instead of saving it up to be taken away again when the war is over, while those who have spent their money as they liked will be let off scot free." Certainly, it is much to be regretted that the Chancellor of the Exchequer should have let such a statement go forth, especially as he himself admits that perhaps he has not thought enough about it to justify him in saying so. If the Chancellor of the Exchequer has not time to think about what he is going to say to a Labour deputation which approaches him on an extremely important revolution in our fiscal system, it is surely high time that we should get one who has sufficient leisure to enable him to give his mind to problems of this sort when they are put before him. In the course of this review of the forms in which suggestions for a levy on capital have been put forward, some of the difficulties and injustices inherent in it have already been pointed out. Its advocates seem as a rule to base the demand for it upon an assumption which involves a complete fallacy. This is that, since the conscription of life has been applied during the war, it is necessary that conscription of wealth should also be brought to bear in order to make the war sacrifice of all classes equal. For instance, the Emergency Workers' pamphlet, quoted above, states that, "in view of the fact that the Government has not shrunk from Compulsory Conscription of Men," the Committee demands that "for all the future money required to carry on the war, the Government ought, in common fairness, to accompany the Conscription of Men by the Conscription of Wealth." This contention seems to imply that the conscription of men and the conscription of wealth apply to two different classes; in other words, that the owners of wealth have been able to avoid the conscription of men. This, of course, is absolutely untrue. The wealthiest and the poorest have to serve the country in the front line alike, if they are fit. The proportion of those who are fit is probably higher among the wealthy classes, and, consequently, the conscription of men applies to them more severely. Again, the officers are largely drawn from the comparatively wealthy classes, and it is pretty certain that the proportion of casualties among officers has been higher during the war than among the rank and file. Thus, as far as the conscription of men is concerned, the sacrifice imposed upon all classes in the community is alike, or, if anything, presses rather more heavily upon those who own wealth. Conscription of wealth as well as conscription of life thus involves a double sacrifice to the owners of property. This double sacrifice, in fact, the owners of property have, as is quite right, borne throughout the war by the much more rapid increase in direct taxation than in indirect. It is right that the owners of property should bear the heavier monetary burden of the war because they, having more to lose and therefore more to gain by a successful end of the war, should certainly pay a larger proportion of its cost. It was also inevitable that they should do so because, when money is wanted for the war or any other purpose, it can only be taken in large amounts from those who have a surplus over what is needed to provide them with the necessaries and decencies of life. But the argument which puts forward a capital levy on the ground that the rich have been escaping war sacrifice is fallacious in itself, and is a wicked misrepresentation likely to embitter still further the bad feeling between classes. Nevertheless, Mr Bonar Law thinks that, since the cost of the war must inevitably fall chiefly upon the owners of property, and since it therefore becomes a question of expediency with them whether they should pay at once in the form of a capital levy or over a long series of years in increased taxation, he is inclined to think that the former method is one which would be most convenient to them and best for the country. This contention cannot be set aside lightly, and there can be no doubt that if, by making a dead lift, the wealthy classes of the country could throw off their shoulders a large part of the burden of the war debt, such a scheme is well worth considering as long as it does not carry with it serious drawbacks. It seems to me, however, that the drawbacks are very considerable. In the first place, I have not seen any really practicable scheme of redeeming debt by means of a levy on capital In so far as the levy is paid in the form of surrendered War Loans, it is simple enough. In so far as it is paid in other securities or mortgages on land or other forms of property, it is difficult to see how the assets acquired by the State through the levy could be distributed among the debt holders whom it is proposed to pay off. Would they be forced to take securities, mortgages on land, furniture, etc., as the Government chose to distribute them, or would the Government have to nurse an enormous holding of various forms of property and gradually realise them and so pay off debt? Again, a great injustice would surely be involved by laying the whole burden of this oppressive levy upon owners of accumulated property, so penalising those who save capital for the community and letting off those who squander their incomes. A characteristic argument on this point was provided by the _New Statesman_ in a recent issue. It argued that, because ordinary income tax would still be exacted, the contrast between the successful barrister with an Income of £20,000 a year and no savings, who would consequently escape the capital levy, and the poor clergyman who had saved £1000 and would consequently be liable to it, fell to the ground. In other words, because both lawyer and parson paid income tax, it was fair that the former should escape the capital levy while the latter should have to pay it! But needs must when the devil drives, and in a crisis of this kind it is not always possible to look too closely into questions of equity in raising money. It is necessary, however, to look very closely into the probable economic effects of any suggested form of taxation, and, if we find that it is likely to diminish the future wealth production of the nation, to reject it, however attractive it may seem to be at first sight. A levy on capital which would certainly check the incentive to save, by the fear that, if such a thing were once successfully put through, it might very likely be repeated, would dry up the springs of that supply of capital which is absolutely essential to the increase of the nation's productive power. Moreover, business men who suddenly found themselves shorn of 10 to 20 per cent. of their available capital would find their ability to enter into fresh enterprise seriously diminished just at the very time when it is essential that all the organisers of production and commerce in this country should be most actively engaged in every possible form of enterprise, in order to make good the ravages of war. VI OUR BANKING MACHINERY _February_, 1918 The Recent Amalgamations--Will the Provinces suffer?--Consolidation not a New Movement--The Figures of the Past Three Decades--Reduction of Competition not yet a Danger--The Alleged Neglect of Local Interests--Shall we ultimately have One Huge Banking Monopoly?--The Suggested Repeal of the Bank Act--Sir E. Holden's Proposal. Banking problems have lately loomed large in the financial landscape. It will be remembered that about a year and a half ago a Committee was appointed to consider the creation of a new institution specially adapted for financing overseas trade and for the encouragement of industrial and other ventures through their years of infancy, and that the charter which was finally granted to the British Trade Corporation, as this institution was ultimately called, roused a great deal of opposition both on the part of banks and of traders who thought that a Government institution with a monopoly character was going to cut into their business with the help of a Government subsidy. In fact, there was no subsidy at all in question, and the fears of the trading world of competition on the part of the new chartered institution only arose owing to its unfortunate name, which was given to it in order to allay the apprehensions of the banks which had been provoked by the title originally designed for it, namely, the British Trade Bank. There seems no reason why this Company should not do good work for British trade without treading on the toes of anybody. Although naturally its activities cannot be developed on any substantial scale until the war is over, its Chairman assured the shareholders at the end of January that its preliminary spadework was being carefully attended to. After this small storm in a teacup had died down those interested in our banking efficiency were again excited by the rapid progress made by the process of amalgamation among our great banks, which began to show acute activity again in the last months of 1917. The suddenly announced amalgamation of the London and South-Western and London and Provincial Banks led to a whole host of rumours as to other amalgamations which were to follow; and though most of these proved to be untrue a fresh sensation was aroused when the union was announced of the National Provincial Bank of England and the Union of London and Smith's Bank. All the old arguments were heard again on the subject of the objections, from the point of view of industry in the provinces, to the formation of great banking institutions, with enormous figures on both sides of the balance-sheet, working from London, often, it was alleged, with no consideration for the needs of the provincial users of credit. These latest amalgamations, which have united banks which already had head offices in London, gave less cause than usual for these provincial apprehensions, which had far more solid reason behind them when purely provincial banks were amalgamated with institutions whose head office was in London. Nevertheless, the argument was heard that the great size and scale on which these amalgamated banks were bound to work would necessarily make them more monopolistic and bureaucratic in their outlook, and less elastic and adaptable in their dealings with their local customers. It seems to me that there is so far very little solid ground for any apprehension on the part of the business community that the recent development of banking evolution will tend to any damage to their interests. The banks have grown in size with the growth of industry. As industry has tended more and more to be worked by big battalions, it became necessary to have banking institutions with sufficiently large resources at their command to meet the great requirements of the huge industrial organisations that they had to serve. Nevertheless, the tendency towards fewer banks and bigger figures has grown with extraordinary celerity, as the following table shows:-- MOVEMENT OF ENGLISH JOINT-STOCK BANK DEPOSITS, ETC., SINCE 1886. December No. of Number of Capital Deposit and Total 31st Banks Branches Paid up Current Liabilities Accounts 1886 109 1,547 £38,468,000 £299,195,000 £376,808,000 1891 106 2,245 43,406,000 391,842,000 486,632,000 1896 94 3,051 45,203,000 495,233,000 599,518,000 1901 74 3,935 46,631,000 584,841,000 698,150,000 1906 55 4,840 48,122,000 647,889,000 782,353,000 1911 44 5,417 47,265,000 748,641,000 885,069,000 1916 35 5,993 48,237,000 1,154,877,000 1,316,220,000 This table is taken from the annual banking numbers of the _Economist_. It will be noticed that in 1886 there were in England 109 joint-stock banks with 1547 offices, whose accounts were tabulated in the _Economist's_ annual review. Their total paid-up capital was 38-1/2 millions, their deposit and current accounts were just under 300 millions, and their total liabilities were 377 millions. In the course of thirty years the 109 banks had shrunk by the process of amalgamation and absorption to thirty-five, that is to say, they had been divided by three; the number of their offices, however, had been multiplied by nearly four, while their deposit accounts had grown from 300 millions to 1155, and their total liabilities from 377 to 1316 millions. By the amalgamations announced at the end of 1917, and that of the County of Westminster with Parr's announced on February 1st, the number of joint stock banks will be reduced to 32. The picture would be still more striking if the figures of the private banks were included, since their number has been reduced, since 1891, from 37 to 6. These figures are eloquent of the manner in which the number of individual banks has been reduced, while the extent of the banking accommodation given to the community has enormously grown, so that the power wielded by each individual bank has increased by the force of both these processes. The consequent reduction in competition which is causing some concern among the trading community has not, as it seems to me, gone far enough yet to be a serious danger. The idea that the big banks with offices in London give scant consideration to the needs of their local customers seems to be so contrary to the interests of the banks that they would be extraordinarily bad men of business if those who were responsible for their management allowed it to be the fact. It is probably nearer the truth that banking competition in the provinces is still so keen that the London management is very careful not to allow anything like bureaucratic stiffness to get into the methods by which their business is managed. By the appointment of local committees they are careful to do all they can to see that the local interests get all the credit that is good for them. That local interests get as much credit as they want is probably very seldom the case, because it is a natural instinct on the part of an eager business man to want rather more credit than he ought to have, from a banking point of view. Business interests, as long as they exist in private hands, will always want rather more credit than there is available, and it will always be the duty of the banker to ensure that the country's industry is kept on a sound basis by checking the tendency of the eager business man to undertake rather more than is good for him. From the sentimental point of view it is certainly a pity to have seen many of the picturesque old private banks extinguished, the partners in which were in close personal touch with their customers, and entered into the lives of the local communities in a manner which their modern counterpart is perhaps unable to do. Nevertheless, it is difficult to get away from the fact that if these institutions had been as efficient and as well managed as their admirers depict them to have been they would hardly have been driven out of existence by the stress of modern developments and competition. Whatever we may think of modern competition, in certain of its aspects, we may at least be sure of this--that it does not destroy an institution which is really wanted by the business community. And if the complaint of local interests is true, that they are swamped by the cosmopolitan aspirations of the great London offices, they always have it in their power to create an institution of the kind that they want, and by giving it their business to ensure for it a prosperous career. As long as no such tendency is visible in the banking world we may be pretty sure that the views expressed concerning the neglect of local interests by the enormous banks which have grown up with London centres in the last thirty years is to a great extent a myth. It has now announced, however, that the whole problem involved by the amalgamation process is to be sifted by a committee to be appointed for this purpose. Another apprehension has arisen in the minds of those who view with critical vigilance the present tendencies of business and the present development of economic opinion among a great section of the community. If, it is urged, the banks continue to swallow one another up by the process of amalgamation, how will this tendency end except in the creation of one huge bank working a gigantic money monopoly which the Socialistic tendencies of the present day will, with some reason, insist ought to be taken over by the State for the profit of the taxpayer? This view is frankly put forward by those advocates of a Socialistic organisation of society, who say that the modern tendency of industry towards combinations, rings and trusts is rapidly bringing the Socialistic millennium within their reach without any effort on the part of Socialistic preachers. They consider that the trust movement is doing the work of Socialism, much faster than Socialism could do it for itself; that, in short, as has been argued above in regard to banking, the tendency towards centralisation and the elimination of competition can only end in the assumption by the State of the functions of industry and finance. If this should be so, the future is dark for those of us who believe that individual effort is the soul of industrial and financial progress, and that industry carried on by Government Departments, however efficient and economical it might be, would be such a deadly dull and unenterprising business that all the adaptability and tendency to variation in accordance with the needs of the moment, which are so strongly shown by individual enterprise, would be lost, to the great detriment of the material progress of mankind. As things are at present, there is little need to fear that Socialistic organisation of industry could stand up against competent individual effort. Anybody who has ever had any business dealings with a Government Department will inevitably shudder when he tries to imagine how many forms would have to be filled up, how many divisions of the Department the inevitable mass of papers would have to go through, and how much delay and tedium would be involved before the simplest business proposition could be carried out. But, of course, it is argued by Socialists that Government Departments are only slow and tied up with red tape because they have so long been encouraged to do as little as possible, and that as soon as they are really urged to do things instead of pursuing a policy of masterly inactivity, there is no reason why they should not develop a promptitude and elasticity quite as great as that hitherto shown by the business community. That such a development as this might take place in the course of generations nobody can deny; at present it must be admitted that with the great majority of men the money-making incentive is required to get the best out of them. If the process of education produces so great a change in the human spirit that men will work as well for the small salary of the Civil Service, with a K.C.B. thrown in, as they will now in order to gain the prizes of industry and finance, then perhaps, from the purely economic point of view, the Socialisation of banking may be justified. But we are a long way yet from any such achievement, and if it is the case that the rapid centralisation of banking power in comparatively few hands carries with it the danger of an attempt to nationalise a business which requires, above all, extreme adaptability and sensitiveness to the needs of the moment as they arise, this is certainly a danger which has to be carefully considered by those who are responsible for the development of these amalgamation processes. And now another great stone has been thrown into the middle of the banking pond, causing an ever-widening circle of ripples and provoking the beginning of a discussion which is likely to be with us for some time to come. Sir Edward Holden, at the meeting of the London City and Midland Bank shareholders on January 29th, made an urgent demand for the immediate repeal of the Bank Act of 1844. This Act was passed, as all men know, in order to restrict the creation of credit in the United Kingdom. In the early part of the last century the most important part of a bank's business consisted of the issue of notes, and banking had been carried on in a manner which the country considered unsatisfactory because banks had not paid sufficient attention to the proportion of cash that they ought to hold in their tills to meet notes if they were presented. Parliament in its wisdom consequently ordained that the amount of notes which the banks should be allowed to issue, except against actual metal in their vaults, should be fixed at the amount of their issue at that time. Above the limit so laid down any notes issued by the banks were to be backed by metal. In the case of the Bank of England the limit then established was £14,000,000, and it was enacted that if any note-issuing bank gave up its right to a note issue the Bank of England should be empowered to increase its power to issue notes against securities to the extent of two-thirds of the power enjoyed by the bank which was giving up its privilege. By this process the Bank of England's right to issue notes against securities, what is usually called its fiduciary issue, has risen to £18,450,000; above that limit every note issued by it has to be backed by bullion, and is actually backed by gold, though under the Act one-fifth might be in silver. It was thus anticipated by the framers of the Act that in future any credit required by industry could only be granted by an increase in the gold held by the issuing banks. If the Act had fulfilled the anticipations of the Parliament which passed it, if English trade had grown to anything like the extent which it has done since, it could only have done so by the amassing of a mountain of gold, which would have lain in the vaults of the Bank of England. Fortunately, however, the banking community had at its disposal a weapon of which it was already making considerable use, namely, the system of issuing credit by means of banking deposits operated on by cheques. Eight years before Peel's Act was passed two Joint Stock Banks had been founded in London, although the Bank of England note-issuing monopoly still made it impossible for any Joint Stock Bank to issue notes in the London district. It is thus evident that deposit banking was already well founded as a profitable business when Peel, and Parliament behind him, thought that they could sufficiently regulate the country's banking system so long as they controlled the issue of notes by the Bank of England and other note-issuing banks. It is perhaps fortunate that Parliament made this mistake, and so enabled our banking machinery to develop by means of deposit banking, and so to ignore the hard-and-fast regulations laid upon it by Peel's Act. This, at least, is what has happened; only in times of acute crisis have the strict regulations of Peel's Act caused any inconvenience, and when that inconvenience arose the Act has been suspended by the granting of a letter of indemnity from the Treasury to the Governor of the Bank. Under Peel's Act the present rather anomalous form of the Bank of England's Weekly Return was also laid down. It shows, as all men know, two separate statements; one of the Issue Department and the other of the Banking Department. The Issue Department's statement shows the notes issued as a liability, and on the assets side Government debt and other securities (which are, in fact, also Government securities), amounting to £18,450,000 as allowed by the Act, and a balance of gold. The Banking Department's statement shows capital, "Rest" or reserve fund, and deposits, public and other, among the liabilities, and on the other side of the account Government and other securities, all the notes issued by the Issue Department which are not in circulation, and a small amount of gold and silver which the Banking Department holds as till money. Sir Edward Holden's proposal is that the Act should be repealed practically in accordance with the system which has been adopted by the German Reichsbank. The principles which he enumerates, as those on which other national banks of issue work, are as follows:-- 1. One bank of issue, and not divided into departments. 2. Notes are created and issued on the security of bills of exchange and on the cash balance, so that a relation is established between the notes issued and the discounts. 3. The notes issued are controlled by a fixed ratio of gold to notes or of the cash balance to notes. 4. This fixed ratio may be lowered on payment of a tax. 5. The notes should not exceed three times the gold or cash balance. By this revolution Sir Edward would abolish all legal restriction on the issue of notes by the Bank of England. It would hold a certain amount of gold or a certain amount of cash balance against its notes, but in the "cash balance" Sir Edward apparently would include 11 millions odd of Government debt, or of Treasury notes. As long as its notes were only three times the amount of the gold or of the "cash balance," and were backed as to the other two-thirds by bills of exchange, the situation would be regarded as normal, but if, owing to abnormal circumstances, the Bank desired to increase the amount of notes issued against bills of exchange only and to reduce the ratio of its gold or its cash balance to its notes, it would, at any time, be enabled to do so by the payment of a tax, without going through the humiliating necessity for an appeal to the Treasury to allow it to exceed the legal limit. At the same time, by the abolition of Peel's Act the cumbrous methods of stating the Bank's position, as published week by week in the Bank Return, would be abolished. The two accounts would be put together, with the result that the Bank's position would be apparently stronger than it appears to be under the present system, which makes the Banking Department's Return weak at the expense of the great strength that it gives to the appearance of the Issue Department. This will be shown from the following statement given by Sir Edward Holden of the Return as issued on January 16th, and as amended according to his ideas:-- BANK STATEMENT, JANUARY 16, 1918. ISSUE DEPARTMENT Notes Issued .. £76,076,000 Gold .................. £57,626,000 Government Debt ....... 11,015,000 Other Securities ...... 7,435,000 ----------- ----------- £76,076,000 £76,076,000 Ratio of Gold to Notes Issued = 75.7 per cent. BANKING DEPARTMENT. Capital ....... £14,553,000 Government Securities ...... £56,768,000 Rest .......... 3,363,000 Other Securities ........... 92,278,000 Deposits-- Notes .......... £30,750,000 Public £41,416,000 Gold and Silver 1,143,000 Other 121,589,000 ----------- 163,005,000 ------------- 31,893,000 Other Liabilities ... 18,000 ----------- ----------- £180,939,000 £180,939,000 Ratio of Cash Balance to Liabilities = 19.6 per cent. RECONSTRUCTED BALANCE-SHEET OF THE BANK, JANUARY 16, 1918. Capital £14,553,000 Rest 3,363,000 Notes Issued (circulation) 45,325,000 Deposits 163,005,000 Other Liabilities 18,000 ___________ £226,264,000 Gold £58,768,000 Currency Notes 11,015,000 ___________ £69,783,000 Government Securities 56,768,000 Other Securities 7,435,000 _________ 64,203,000 Other Securities 92,278,000 ___________ £226,264,000 Ratio of Gold to Notes =129.7 per cent. " " Cash Balance to Liabilities = 33.5 " It need not be said that these proposals have aroused the liveliest interest. At the Bank Meetings held since then several chairmen have been asked by their shareholders to express their views on Sir Edward's proposed revolution. Sir Felix Schuster pronounced cautiously in favour of the revision of the Bank Act, and said that he had advocated it seventeen years ago. Lord Inchcape, at the National Provincial Meeting, thought that the matter required careful consideration. Most of us will agree with this view. There is certainly much to be said for a reform of the Weekly Statement of the Bank of England, giving, it may be added, a good deal more detail than Sir Edward's revised balance-sheet affords. But concerning his proposal to reconstruct our system of note issue on a foreign model, there is certain to be much difference of opinion. In the first place, owing to the development of our system of banking by deposit and cheque rather than by issue and circulation of notes, the note issue is not nearly so important a business in normal times in this country as it is in Germany and France. Moreover, the check imposed upon our banking community by the need for an appeal to the Treasury before it can extend its note issue beyond a certain point often acts with, a salutary effect, and the view has even been expressed that if that check were taken away from our system it might be difficult, if not impossible, to maintain the gold standard which has been of such enormous value in building up the prestige of London as a financial centre. I do not think there is much weight in this argument, since, under Sir Edward's plan, the note issue could only be increased against discounts, and the Bank, by the charge that it made for discounts, would still be able to control the situation. From the practical point of view of the present moment, a strong objection to the scheme is that it would open the door to fresh inflation by unrestricted credit-making just when the dangers of this process are beginning to dawn even on the minds of our rulers. VII THE COMPANIES ACTS _March_, 1918 Another Government Committee--The Fallacy of imitating Germany--Prussianising British Commerce--The Inquiry into the Companies Acts--Will Labour Influence dominate the Report?--Increased Production the Great Need--Will it be met by tightening up the Companies Acts?--The Dangers of too much Strictness--Some Reforms necessary--Publicity, Education, Higher Ideals the only Lasting Solution--The Importance of Foreign Investments--Industry cannot take all Risks and no Profits. Every week--almost every day--brings with it the announcement of some new committee considering some question that may, or may not, arise now or when the war is over. Especially in the realm of finance has the Government's output of committees been notably prolific of late. We have had a Committee on Currency, a Committee on Banking Amalgamations, and a Committee appointed, humorously enough, by the Ministry of Reconstruction to consider what measures, if any, should be taken to protect the public interest in connection with the policy of industrial combinations--a policy which the Board of Trade has been sedulously fostering. Now comes a Committee to inquire "what amendments are expedient in the Companies Acts, 1908-1917, principally having regard to the circumstances arising out of the war, and to the developments likely to arise on its conclusion, and to report to the Board of Trade and to the Ministry of Reconstruction." It is composed of the Right Hon. Lord Wrenbury (chairman), Mr A.S. Comyns Carr, Sir F. Crisp, Mr G.W. Currie, M.P., Mr F. Gaspard Farrer, Mr Frank Gore-Browne, K.C., Mr James Martin, the Hon. Algernon H. Mills, Mr R.D. Muir, Mr C.T. Needham, M.P., Mr H.A. Payne, Sir Owen Philipps, M.P., Sir William Plender, Mr O.C. Quekett, and Mr A.W. Tait. The secretary is Mr W.W. Coombs, 55, Whitehall, S.W. 1. There are some good names on the Committee. Mr. Gaspard Farrer represents a great issuing house; Sir Frank Crisp, company lawyers; Sir William Plender, the accountants; Mr O.C. Quekett, the Stock Exchange; and Sir Owen Philipps, the shipping interest. Nevertheless, one cannot help shuddering when one considers the dangers that threaten British finance and industry from ill-considered measures which might possibly be recommended by a Committee influenced by the atmosphere of the present outlook on financial and commercial affairs. One of the interesting features of the present war atmosphere is the fact that, now when we are fighting as hard as we can to defeat all that is meant by Prussianism a great many of our rulers and public men are doing their best to impose Prussianising methods upon this unfortunate country, merely because it is generally assumed that Prussian methods have been shown, during the course of the war, to carry with them a certain amount of efficiency. It is certainly true that Prussian methods do very well as applied to the Prussians and submitted to by other races of Germans. On the other hand, it is at least open to argument that the British method of freedom, individual initiative, elasticity and adaptability have produced results, during the present war, which have so far been paralleled by no other country engaged in the contest. Working on interior lines with the assistance of docile and entirely submissive allies, Germany has certainly done wonderful things in the war, but it by no means follows that the verdict of posterity will not give the palm of achievement to England, who has not only carried out everything that she promised to do before the war, but has incidentally and in the course of it created and equipped an Army on a Continental scale, and otherwise done very much more for the assistance of her Allies than was contemplated before the war began. It is untrue to say that we were unprepared for the war. We were more than prepared to do all that we promised to do. What we were unprepared for was finding ourselves required to turn ourselves into, not only the greatest naval Power in the world, but one of the greatest military Powers also. This demand was sprang upon us, and we have met it with extraordinary success. The whole idea that Germany's achievement has been such as to warrant any attempt on our part to model our institutions on her pattern seems to me to fall to pieces as soon as one looks calmly at the actual results produced by the different systems. Moreover, even if we were to admit that Germany's achievement in the war has been immeasurably greater than ours, it still would not follow that we could improve matters here by following the German system. It ought not to be necessary to observe that a system which is good for one nation or individual is not necessarily good for another. In the simple matter of diet, for instance, a most scientifically planned diet given to a child who does not happen to like it will not do that child any good. These things ought to be obvious, but unfortunately in these times, which call for eminently practical thought and effort, there is a curious doctrinaire spirit abroad, and the theorist is continually encouraged to imagine how much better things would be if everything were quite different, whereas what we want is the application of practical common sense to practical facts as they are. In the realm of finance the freedom and individual initiative and elasticity of our English system have long been the envy of the world. Our banking system, as was shown, on an earlier page, has always worked with much less restriction on the part of legislative and official interference than any other, and, with the help of this freedom from official control, English bankers and finance houses had made London the financial centre of the world before the war. The attempt of Parliament to control banking by Peel's Act of 1844 was quietly set aside by the banking machinery through the development of the use of cheques, which made the regulations imposed on the note issue a matter of quite minor importance, except in times of severe crisis, when these regulations could always be set aside by an appeal to the Chancellor of the Exchequer. There was no Government interference in the matter of new issues of securities on the London Stock Exchange or of the quotations granted to new securities by the Committee of the Stock Exchange. Now the Companies Acts are to be revised in view of what may be necessary after the war, and there is only too much reason to fear that mistakes may occur through the imposition of drastic restrictions, which look so easy to work on paper, but are more than likely to have the actual effect of doing much more harm than good. "Circumstances arising out of the war and developments likely to arise on its conclusion" give this Committee a roving commission to consider all kinds of things, which may or may not happen, in the light of wisdom which may be put before it by interested witnesses, and, worse still, in the light of semi-official pressure to produce a report which will go down well with the House of Commons. Our politicians are at present in a state of extreme servility before the enterprising gentlemen who are now at the head of what is called the Labour Party. Every one will sympathise with the aspirations of this party in so far as they aim at bettering the lot of those who do the hard and uninteresting work of the world, and giving them a larger share of the productions that they help to turn out; but that is not the same thing as giving obsequious attention to the views which their representatives may have concerning the management of financial affairs, on the subject of which their knowledge is necessarily limited and their outlook is likely to be, to a certain extent, prejudiced. A recent manifesto put forward by the leaders of the new Labour Party includes in its programme the acquisition by the nation of the means of production--in other words, the expropriation of private capitalists. The Labour people very probably think that by this simple method they will be able to save the labourer the cost of providing capital and the interest which is paid for its use; and people who are actuated by this fallacy, which implies that the rate paid to capital is thinly disguised robbery, inevitably have warped views concerning the machinery of finance and the earnings of financiers. These views, expressed in practical legislation, might have the most serious effects not only upon England's financial supremacy but also on the industrial activity which that financial supremacy does so much to maintain and foster. What, after the war, will be the most important need, from the material point of view, for the inhabitants of this country? However the war may end, and whatever may happen between now and the end of it, there can be only one answer to this question, and that answer is greatly increased production. The war has already diminished our capital resources to the extent of the whole amount that we have raised by borrowing abroad, that is to say, by pledging the production of our existing capital, and by selling to foreign countries the foreign securities in which our capitalists had invested during the previous century. No one knows the extent to which our capital resources have been impaired by these two processes, but it may be guessed at as somewhere in the neighbourhood of 1500 millions; that is to say, about 10 per cent. of a liberal estimate of the total accumulated property of the country at the beginning of the war. To this direct diminution in our capital resources we have to add the impossibility, which has existed during the war, of maintaining our factories and industrial equipment in first-class working order by expenditure on account of depreciation of plant. On the other side of the balance-sheet we can put a large amount of new machinery introduced, which may or may not be useful for industrial purposes after the war; greatly improved methods of organisation, the effect of which may or may not be spoilt when the war is over by uncomfortable relations between Capital and Labour; and our loans to Allies and Dominions, some of which may have to be written off, and most of which will return us no interest for some time to come, or will at first pay us interest if we lend our debtors the money to pay it with. What the country will need, above all, on the material side, is an abundant revenue, which can only be produced by vigorous and steady effort in industry, which, again, can only be forthcoming if the machinery of credit and finance is given the fullest possible freedom to provide every one who wants to engage in industry and increase the output of the country with the financial facilities, without which nothing can be done. Is it, then, wise at such a time to impose restrictions by a drastic tightening up of the Companies Act, upon those who wish by financial activity, to further the efforts of industries and producers? On the contrary, it would seem to be a time to give the greatest possible freedom to the financial machine so that there shall be the least possible delay and difficulty in providing enterprise with the resources that it needs. We can only make good the ravages of war by activity in production and strict economy in consumption. What we want to do is to stimulate the people of this country to work as hard as they can, to produce as much as possible, to consume as little as possible on unnecessary enjoyment and luxury, and, so, by procuring a big balance of production over consumption, to have the largest possible volume of available goods for sale to the rest of the world, in order to rebuild our position as a creditor country, which the war's demands upon us have to some extent impaired. It is a commonplace that if it had not been for the great mass of foreign securities, which this country held at the beginning of the war, we could not nearly so easily have financed the enormous amount of food and munitions which we have had to provide for our population, for our armies, and for the population and armies of our Allies. If, instead of holding a mass of easily marketable securities, we had had to rely, in order to pay for our purchases of foreign goods, on the productions of our own mines and factories, and on our power to borrow abroad, then we should have had to restrict very greatly the number of men we have put into the firing-line so as to keep them at home for productive work, or, by the enormous amount of our borrowings, we should have cheapened the value of British credit abroad to a much greater extent than has been the case. Our position as a great creditor country was an enormously valuable asset, not only during the war but also before it, both from a financial and industrial point of view. It gave us control of the foreign exchanges by enabling us, at any time, to turn the balance of trade in our favour by ceasing for a time to lend money abroad, and calling upon foreign countries to pay us the interest due from them. The financial connections which it implied were of the greatest possible assistance to us in enhancing British prestige, and so helping our industry and commerce to push the wares that they produced and handled. Reform of the Companies Acts has often before the war been a more or less burning question. Whenever the public thought that it had been swindled by the company promoting machinery, it used to write letters to the newspapers and point out that it was a scandal that the sharks of the City should be allowed to prey upon the ignorant public, and that something ought to be done by Parliament to insure that investments offered to the public should somehow or other be made absolutely watertight and safe, while by some unexplained method the public would still be somehow able to derive large benefits from fortunate speculations in enterprises which turned out right. Every one must admit there have been some black pages in the history of British company promoting, and that many swindles have been perpetrated by which the public has lost its money and dishonest and third-rate promoters have retired with the spoil. The question is, however, what is the remedy for this admitted and glaring evil? Is it to be found by making the Companies Laws so strict that no respectable citizen would venture to become a director owing to the fear of penal servitude if the company on whose board he sat did not happen to pay a dividend, and that no prospectus could be issued except in the case of a concern which had already stood so severe a test that its earning capacity was placed beyond doubt? It would certainly be possible by legislative enactment to make any security that was offered as safe as Consols, and less subject to fluctuation in value. But when this had been done the effect would be very much like the effect upon rabbits of the recent fixing of their price. No more securities would be offered. It is certainly extremely important for the future financial and industrial development of this country that the machinery of finance and company promotion should be made as clean as possible. What we want to do is to make everybody see that a great increase in output is required, that this great increase in output can only be brought about if there is a great increase in the available amount of capital, that capital can only be brought into being by being saved, and that it is therefore everybody's business, both for his own sake and that of the country, to earn as much as he can and save as much as he can so that the country's capital fund can be increased; so that industry, which will have many difficult problems to face when the war is over, shall be as far as possible relieved from any difficulty of finding all the capital that it needs. To produce these results it is highly necessary to increase the confidence of the public in the machinery of the Stock Exchange, in company promotion and all financial issues. Any one who sincerely believes that these results can be produced by tightening up the Companies Acts is not only entitled but bound to press as hard as he can for the securing of this object. But is this the right way to do it? There is much to be said at first sight for making more strict the regulations under which prospectuses have to be issued under the Companies Acts, demanding a franker statement of the profits in the past, a fuller statement concerning the prices paid to vendors, and the prices paid by vendors to sub-vendors, and so forth. Any one who sits down with a pre-war industrial prospectus in his hand can find many openings for the hand of the reformer. The accounts published by public companies might also be made fuller and more informing with advantage. But even if these obviously beneficial reforms were carried out, there would always be danger of their evasion. They might tend to the placing of securities by hole-and-corner methods without the issue of prospectuses at all, and to all the endless devices for dodging the law which are so readily provided as soon as any attempt is made by legislation to go too far ahead of public education and public feeling. This is the real solution of this problem--publicity, the education of the public, and a higher ideal among financiers. As long as the public likes to speculate and is greedy and ignorant enough to be taken in by the wiles of the fraudulent promoter, attempts by legislation to check this gentleman's enterprise will be defeated by his ingenuity and the public's eagerness to be gulled. The ignorance of the public on the subject of its investments is abysmal, as anybody knows who is brought into practical touch with it. Just as the cure for the production of rotten and fraudulent patent medicines thrust down the public's throat by assiduous advertising is the education of the public concerning the things of its stomach, so the real cure for financial swindles is the education of the public concerning money matters, and its recognition of the fact that it is impossible to make a fortune in the City without running risks which involve the possible, not to say probable, loss of all the money with which the speculator starts. When once the public has learnt to distinguish between a speculation and an investment, and has also learnt honesty enough to be able to know whether it wants to speculate or invest, it will have gone much further towards checking the activity of the fraudulent promoter than any measure that can be recommended by the most respectable and industrious of committees. At the same time, it must be recognised by those responsible for our finance, that it is their business, and their interest, to keep the City's back premises clean; because insanitary conditions in the back yard raise a stink which fouls the whole City. In the meantime, if gossip is to be believed, some of the members of the Government have the most disquieting intentions concerning the kind of regulations which they wish to impose on the activities of the City, especially in its financial branch. It is believed that some of the bright young gentlemen who now rule us are in favour of Government control over the investment of money placed at home, and the prohibition of the issue of foreign securities; and it is even whispered that a fantastic scheme for controlling the profits of all industrial companies, by which anything earned above a certain level is to be seized for the benefit of the nation, is now a fashionable project in influential Parliamentary circles. Every one must, of course, admit that a certain amount of control will be necessary for some time after the war. It may not be possible at once to throw open the London Money Market to all borrowers, leaving them and it to decide between them who is to be first favoured with a supply of the capital for which there will be so large a demand when the war is over. Certain industries, those especially on which our export trade depends, will have to be first served in the matter of the provision of capital. If it is a choice between the engineering or shipbuilding trades and a company that wants to start an aeroplane service between London and Brighton for the idle rich, it would not be reasonable, during the first few months after the war, that the unproductive project should be able, by bidding a high price for capital, to forestall the demand of the more useful producer. And with regard to the issue of foreign securities, there is this to be said, that foreign securities placed in London have the same effect upon foreign exchange as the import into England of goods shipped from any country; that is to say, for the time being they turn the exchange against us. On the other hand, it is a well-known commonplace that imports of securities have to be balanced by exports of goods or services; and as the times when our export trade is most active are those when most foreign securities are being placed in London, it follows that any restrictions placed upon the issue of foreign securities in London will hinder rather than help that recovery in our export trade which is so essential to the restoration of our position as a creditor country. Moreover, our rulers must remember this, that in War-time, when all the letters sent abroad are subject to the eye of the Censor, it is possible to control the export of British funds abroad; but that in peace time (unless the censorship is to continue), it will not be possible to check foreign investment by restricting the issuing of foreign securities in London. If people see better rates to be earned abroad and more favourable prospects offered by the price of securities on foreign Stock Exchanges, they will invest abroad, whether securities are issued in London or not. As for the curious suggestion that the profits of industrial companies are henceforward to be limited and the whole balance above a statutory rate to be taken over by the State for the public good, this would be, in effect, the continuance on stricter lines of the Excess Profits Duty. As a war measure the Excess Profits Duty has much to be said for it at a time when the Government, by its inflationary policy, is putting large windfalls of profit into the hands of most people who have to hold a stock of goods and have only to hold them to see them rise in value. The argument that the State should take back a large proportion of this artificially produced profit is sound enough; but, if it is really to be the case that industry is to be asked for the future to take all the risk of enterprise and handover all the profit above a certain level to the Government, the reply of industry to such a proposition would inevitably be short, emphatic, unprintable, and by no means productive of revenue to the State. VIII THE YEAR'S BALANCE-SHEET _April_, 1918 The Figures of the National Budget--A Large Increase in Revenue and a Larger in Expenditure--Comparisons with Last Year and with the Estimates--The Proportions borne by Taxation still too Low--The Folly of our Policy of Incessant Borrowing--Its Injustice to the Fighting Men. At first sight the figures of revenue and expenditure for the year ending March 31st are extremely satisfactory, at any rate on the revenue side. The Chancellor anticipated a year ago a revenue from taxation and State services of £638 millions, and the receipts into the Exchequer on these accounts actually amount to £707 millions. On the expenditure side, however, the increase over the Budget estimate was very much greater. The estimate was £2290 millions, and the actual amount expended was £2696 millions. Instead, therefore, of a deficit of £1652 millions having to be met by borrowing, there was an actual gap, to be filled by this method, of, roughly, £1990 millions. To take the revenue side of the matter first, this being by far the most cheering and satisfactory, we find that the details of the revenue, as compared with last year's, were as follows:-- Year ending Year ending Mar. 31, 1918. Mar. 31, 1917. Increase. Decrease. £ £ £ £ Customs 71,261,000 70,561,000 700,000 --- Excise 38,772,000 56,380,000 --- 17,608,000 Estate, etc., Duties 31,674,000 31,232,000 442,000 --- Stamps 8,300,000 7,878,000 422,000 --- Land Tax 665,000 640,000 25,000 --- House Duty 1,960,000 1,940,000 20,000 --- Income Tax and Super Tax 239,509,000 205,033,000 34,476,000 --- Excess Profits Duties, etc. 220,214,000 139,920,000 80,294,000 --- Land Value Duties 685,000 521,000 164,000 --- Postal Service 35,300,000 34,100,000 1,200,000 --- Crown Lands 690,000 650,000 40,000 --- Sundry Loans, etc. 6,056,250 8,055,817 --- 1,999,567 Miscellaneous 52,148,315 16,516,765 35,631,550 --- ----------- ----------- ----------- ----------- 707,234,565 573,427,582 153,414,550 19,607,567 | | +-----------+----------+ £133,806,983 Net Increase. A more interesting comparison perhaps is to take the actual receipts during the past financial year and compare them, not with the former year, but with the estimates of the expected yield of the various items. In this case we get the following comparisons:-- [Transcriber's Note: Corrected a typo in the table: "Sundry Loans" line should have a minus(-) instead of a plus(+) as printed.] Actual. Estimated. Difference. £ £ £ Customs 71,261,000 70,750,000 + 511,000 Excise 38,772,000 34,950,000 + 3,822,000 Estate Duties 31,674,000 29,000,000 + 2,674,000 Stamps 8,300,000 8,000,000 + 300,000 Land Tax and House Duty 2,625,000 2,600,000 + 25,000 Income Tax and Super Tax 239,509,000 224,000,000 + 15,509,000 Excess Profits Tax 220,214,000 200,000,000 + 20,214,000 Land Value Duties 685,000 400,000 + 285,000 Postal Services 35,300,000 33,700,000 + 1,600,000 Crown Lands 690,000 600,000 + 90,000 Sundry Loans, etc. 6,056,000 7,500,000 - 1,444,000 Miscellaneous 52,148,000 27,100,000 + 25,048,000 Certainly, the country is entitled to congratulate itself on this tremendous evidence of elasticity of revenue, and to a certain extent on the effort that it has made in providing this enormous sum of money from the proceeds of taxation and State services. But when this much has been admitted we have to hasten to add that the figures are not nearly so big as they look, and that there is much less "to write home about," as the schoolboy said, than there appears to be at first sight. Those champions of the Government methods of war finance who maintain that we have, during the past year, multiplied the pre-war revenue, of roughly, £200 millions by more than 3-1/2, so arriving at the present revenue of over £700 millions, are not comparing like with like. The statement is perfectly true on paper, and expressed in pounds sterling, but then the pound sterling of to-day is an entirely different article from the pre-war pound sterling. Owing to the system of finance pursued by our Government, and by every other Government now engaged in the war, of providing for a large part of the country's goods by the mere manufacture of new currency and credit, the buying power of the pound sterling has been greatly depreciated. By multiplying the amount of legal tender currency in the shape of Treasury notes, of token currency in the shape of silver and bronze coinage, and of banking currency through the bank deposits which are swollen by the banks' investments in Government securities, the Government has increased the amount of currency passing from hand to hand in the community while, at the same time, the volume of goods to be purchased has not been increased with anything like the same rapidity, and may, in fact, have been, actually decreased. The inevitable result has been a great flood of new money with a greatly depreciated value. Index numbers show a rise of over 100 per cent. in the average prices of commodities during the war. It is, however, perhaps unfair to assume that the buying power of the pound has actually been reduced by a half, but it is certainly safe to say that it has been reduced by a third. Therefore, the revenue raised by the Government during the past year has to be reduced by at least a third before we are justified in comparing our war achievements with the Government's pre-war revenue. If we take one-third off £707 millions it reduces the total raised during the past year by revenue to about £470 millions, less than two and a half times the pre-war revenue. From another point of view our satisfaction with the tremendous figures of the past year's revenue has to be to some extent qualified. The great elasticity shown by the big increase of actual achievement over the Budget estimate has been almost entirely in revenue items which cannot be expected to continue to serve us when the war is over. The total increase in the receipts over estimate amounts to £69 millions, and of this £20 millions was provided by the Excess Profits Duty, a fiscal weapon which was invented during the war, and for the purpose of the war. It has always been assumed that it would be discontinued as soon as the war was over, and if it should not be discontinued its after-war effect is likely to be very unfortunate at a time when our industrial effort requires all the encouragement that it can get. Another £25 millions was provided by miscellaneous revenue, and this windfall again must be largely due to operations connected with the war. Finally, the £15-1/2 millions by which the income tax exceeded the estimate must again be largely due to inflation and extravagance on the part of the Government, which, by manufacturing money, and then spending it recklessly, puts big profits and big incomes into the hands of those who have stocks of goods to sell or who are in a position to produce them. If, therefore, the satisfaction with which we regard the big total of the Government's revenue receipts has to be considerably modified in the cold light of close observation, the enormous increase on the expenditure side gives us very little comfort and calls for the most determined and continued criticism if our reckless Government is to be made to turn over a new leaf. In the early days of the war there was much excuse for wasting money. We had to improvise a great Army, and a great organisation for equipping it; there was no time then to look too closely into the way the money was being spent, but this excuse is long obsolete. It is not possible to waste money without also wasting the energy and working power of the nation; on this energy and working power the staying power of the country depends in its struggle to avert the greatest disaster that can be imagined for civilisation, that is, the victory of the German military power. Seeing that for many months past we have no longer been obliged to finance Russia, and to provide Russia with the mass of materials and the equipment that she required, the way in which our expenditure has mounted up during the course of the year is a very serious blot on the year's balance-sheet. We spent during the year ending March 31st, £2696 millions against £2198 millions in the previous year, an increase of close upon £500 millions; £63 millions of this increase were due to interest on war debt, the rest of it was due to increased cost of the war, and few business men will deny that very many of these extra millions might have been saved if our rulers and our bureaucratic tyrants had been imbued with any real sense of the need for conserving the energy of the nation. Much has been done by the Committee on National Expenditure to bring home to the Government opportunities for economy, and methods by which it can be secured. Can we be equally confident that much has been done by the Government to carry out the advice that has been given by this Committee? The Treasury is frequently blamed for its inability to check the rapacity and extravagance of the spending Departments. It is very likely that the Treasury might have done more if it had not been led by its own desire for a short-sighted economy into economising on its own staff, the activity and efficiency of which was so absolutely essential to the proper spending of the nation's money. But when this has been admitted, the fact remains that the Treasury cannot, or can only with great difficulty, be stronger on the side of economy than the Chancellor of the Exchequer, and that the task of the Chancellor of the Exchequer of imposing economy on a spendthrift War Cabinet is one of extreme difficulty. I hope it is not necessary to say that I do not urge economy from any sordid desire to save the nation's money if, by its spending, victory could be secured or brought a day nearer. I only urge it because I believe that the conservation of our resources is absolutely necessary to maintain our staying power, and that these resources are at present being scandalously wasted by the Government. Inter-departmental competition is still complained of in the latest report of the National Committee on Expenditure, and there seems to be still very little evidence that the Government Departments have yet possessed themselves of the simple fact that it is only out of these resources that victory can be secured, and that any waste of them is therefore a crime against the cause of liberty and progress. It is possible that before these lines are in print the Chancellor will have brought in his new Budget, and therefore any attempt to forecast the measures by which he will meet next year's revenue would be even more futile than most other endeavours at prophecy. But from the figures of last year as they are before us we see once more that the proportion of expenditure raised by revenue still leaves very much to be desired; £707 millions out of, roughly, £2700 millions is not nearly enough. It is true that on the expenditure side large sums have been put into assets which may some day or other be recoverable, and it is therefore impossible to assume with any approach to accuracy what the actual cost of the war has been for us during the past year. We have made, for instance, very large advances to our Allies and Dominions, and it need not be said that our advances to our own Dominions may be regarded as quite as good as if they were still in our own pockets; but in the case of our Allies, our loans to Russia are a somewhat questionable asset, and our loans to our other brothers-in-arms cannot be regarded as likely to be recoverable for some time to come, owing to the severity with which the war's pressure has been laid upon them. With regard to the other assets in which the Government has invested our money, such as factories, machinery, ships, supplies and food, etc., it is at least possible that considerable loss may be involved in the realisation of some of them. It is, however, possible that the actual cost of the war to us during the year that is past may turn out some day to have been in the neighbourhood of £2000 millions. If, on the other hand, we deduct from the £700 millions raised by revenue the £200 millions which represent the normal pre-war cost of Government to this country we find that the proportion of war's cost raised out of revenue is slightly over 25 per cent. This proportion must be taken with all reserve for the reasons given above, but in any case it is very far below the 47 per cent. of the war's cost raised out of revenue by our ancestors in the course of the Napoleonic wars. It seems to me that this policy of raising so large a proportion of the war's cost by borrowing is one that commends itself to short-sighted politicians, but is by no means in the interests of the country as a whole, or of the taxpayers who now and hereafter have to find the money for paying for the war. In so far as the war's needs have to be met abroad, borrowing abroad is to some extent inevitable if the borrowing nation has not the necessary resources and labour available to turn out goods for export to exchange against those which have to be purchased abroad, but in so far as the war's needs are financed at home, the policy of borrowing is one that should only be used within the narrowest possible limits. By its means the Government, instead of making the citizens pay by taxation for the war as it goes on, hires a certain number of them to pay for it by promising them a rate of interest, and their money back some day. The interest and the sinking fund for redemption have to be found by taxation, and so the borrowing process merely postpones taxation from the war period to the peace period. During the war period taxation can be raised comparatively easily owing to the patriotic stimulus and the simplification of the industrial problem which is provided by the Government's insatiable demand for commodities. When the days of peace return, however, there will be very grave disturbance and dislocation in industry, and it will have once more to face the problem of providing goods, not for a Government which will take all that it can get, but for a public, the demands of which will be uncertain, and whose buying power will be unevenly distributed, and difficult to calculate. The process, therefore, which postpones taxation during the war period to the peace period seems to be extraordinarily short-sighted from the point of view of the nation's economic progress. Recovery after the war may be astonishingly rapid if all goes well, but this can only happen if every opportunity is given to industry to get back to peace work with the least possible friction, and a heavy burden of after-war taxation, such as we shall inevitably have to face if our Chancellors of the Exchequer continue to pile up the debt charge as they have done in the past, will be anything but helpful to those whose business it will be to set the machinery of industry going under peace conditions. As things are, if we continue to add anything like £2000 millions a year to the National Debt, it will not be possible to balance the after-war Budget without taxation on a heavier scale than is now imposed, or without retaining the Excess Profit Duty, and so stifling industry at a time when it will need all the fresh air that it can get. Apart from this expedient, which would seem to be disastrous from the point of view of its effect upon fresh industry, the most widely advertised alternative is the capital levy, the objections to which are patent to all business men. It would involve an enormously costly and tedious process of valuation, its yield would be problematical, and it might easily deal a blow at the incentive to save on which the supply of capital after the war entirely depends. A much higher rate of income tax, especially on large incomes, is another solution of the problem, and it also might obviously have most unfortunate effects upon the elasticity of industry. A tax on retail purchases has much to be said in its favour, but against it is the inequity inseparable from the impossibility of graduating it according to the ability of the taxpayer to bear the burden; and a general tariff on imported goods, though it would be welcomed by the many Protectionists in our midst, can hardly be considered as a practical fiscal weapon at a time when the need for food, raw material, and all the equipment of industry will make it necessary to import as rapidly and as cheaply as possible in order to promote our after-war recovery. Apart from these purely economic arguments against the high proportion of the war's costs that we are meeting by borrowing, there is the much more important fact of its bad effect on the minds of our soldiers, and of those members of the civilian population who draw mistaken inferences from its effects. From the point of view of our soldiers, who have to go and fight for their country at a time when those who are left at home are earning high wages and making big profits, it is evidently highly unfair that the war should be financed by a method which postpones taxation. The civilian population left at home, earning high profits and high wages, should clearly pay as much as possible during the war by immediate taxation, so that the burden of taxation may be relieved for our soldiers when they return to civil life. In view of the hardships and dangers which our soldiers have to face, and the heroism with which they are facing them, this argument should be of overwhelming strength in the eyes of every citizen who has imagination enough to conceive what our fighting men are doing for us and how supreme is our duty to do everything to relieve them from any other burden except those which the war compels them to face. There is also the fact that many members of our uninstructed industrial population believe that the richer classes are growing richer owing to the war, and battening on the proceeds of the loans. I do not think that this is true; on the contrary, I believe that the war has brought a considerable shifting of buying power from the well-to-do classes to the manual workers. Nevertheless, in these times misconceptions are awkwardly active for evil. The well-to-do classes as a whole are not really benefited by having their future incomes pledged in order to meet the future debt charge, and if, at the same time, they are believed to be acquiring the right to wealth, which wealth they will have themselves to provide, the fatuity of the borrowing policy becomes more manifest. For these reasons it is sincerely to be hoped that our next fiscal year will be marked by a much higher revenue from taxation, a considerable decrease in expenditure, and a consequently great improvement in the proportion of war's cost met out of revenue, on what has been done in the past year. At our present rate of taxation we are not nearly meeting, out of permanent taxes, the sum which will be needed when the war is over for peace expenditure on the inevitably higher scale, pensions, and interest and sinking fund on war debt. IX COMPARATIVE WAR FINANCE _May_, 1918 The New Budget--Our own and Germany's Balance-sheets--The Enemy's Difficulties--Mr Bonar Law's Optimism--Special Advantages which Peace will bring to Germany--A Comparison with American Finance--How much have we raised from Revenue?--The Value of the Pound To-day--The 1918 Budget an Improvement on its Predecessors--But Direct Taxation still too Low--Deductions from the Chancellor's Estimates. One of the most interesting passages in a Budget speech of unusual interest was that in which the Chancellor of the Exchequer compared the financial methods of Germany and of this country, as shown by their systems of war finance. He began by admitting that it is difficult to make any accurate calculation on this subject, owing to the very thick mist of obscurity which envelops Germany's actual performance in the matter of finance since the war began. As the Chancellor says, our figures throughout have been presented with the object of showing quite clearly what is our financial position. Most of the people who are obliged to study the figures of Government finance would feel inclined to reply that, if this is really so, the Chancellor and the Treasury seem to have curiously narrow limitations in their capacity for clearness. Very few accountants, I imagine, consider the official figures, as periodically published, as models of lucidity. Nevertheless, we can at least claim that in this respect the figures furnished to us by the Government during the war have been quite as lucid as those which used to be presented in time of peace, and it is greatly to the credit of the Treasury that, in spite of the enormous figures now involved by Government expenditure, the financial statements have been published week by week, quarter by quarter, and year by year, with the same promptitude and punctuality that marked their appearance in peace-time. In Germany, the Chancellor says, it has not been the object of German financial statements to show the financial position quite clearly. It is, therefore, difficult to make an exact statement, but he was able to provide the House with a series of very interesting figures, taken from the statements of the German Finance Ministers themselves. His first point is with regard to the increase of expenditure. The alarming rate with which our expenditure has so steadily grown appears to be paralleled also in Germany. Up to June, 1916, Germany's monthly expenditure was £100 millions. It has now risen to over £187 millions. That means to say that their expenditure per diem is £6-1/4 millions, almost the same as ours, although our expenditure includes items such as separation allowances and other matters of that kind, borne by the States and municipalities in Germany, and so not appearing in the German imperial figures. As to the precise extent of the German war debt, there is no certainty, but the Chancellor was able to tell the House that the last German Vote of Credit, which was estimated to carry them on to June or July, brings the total amount of all their Votes of Credit to £6200 millions, and that it is at least certain that that amount has been added to their War Debt, because their taxation during the war has not covered peace expenditure plus debt charge. Up to 1916 they imposed no new taxation. In 1916 they imposed a war increment tax, something in the nature of a capital levy, which is stated to have brought in £275 millions. They added also that year £25 millions nominally to their permanent revenue. In 1917 they added in addition £40 millions to their permanent revenue, "Assuming, therefore, that their estimates were realised, the total amount of new taxation levied by them since the beginning of the war comes to £365 millions, as against our £1044 millions. This £365 millions is not enough to pay the interest upon the War Debt which had been accumulated up to the end of the year." Mr Bonar Law then proceeded to give an estimate of what the German balance-sheet will be a year hence on the same basis on which he had calculated ours. With regard to our position, he had calculated that on the present basis of taxation we shall have a margin of four millions at the end of the present year if peace should then break out. As will be shown later, this estimate of his is somewhat optimistic, but at any rate our position, compared with that of Germany, may be described as on velvet. A year hence the German War Debt will be not less than £8000 millions. The interest on that will be at least £400 millions, a sinking fund at 1/2 per cent. will be £40 millions. Their pension engagements, which will be much higher than ours owing to their far heavier casualties, have been estimated at amounts ranging as high as £200 millions. The Chancellor was sure that he was within the mark in saying that it will be at least £150 millions. Their normal pre-war expenditure was £130 millions, so that they will have to face a total expenditure at the end of the war of £720 millions. On the other side of the account their pre-war revenue was £150 millions. They have announced their intention of this year raising additional permanent Imperial revenue amounting to £120 millions. From the nature of the taxes the Chancellor considers it very difficult to believe that this amount will be realised, but, assuming that it is, it will make their total additional revenue £185 millions. That, added to the pre-war revenue, gives a total of £335 millions, showing "a deficit at the end of this year, comparing the revenue with the expenditure, of £385 millions at least." The Chancellor added that if that were our position he would certainly think that bankruptcy was not far from the British Government. Another point that the Chancellor was able to make effectively, in comparing our war revenue with Germany's, was the fact that, with the exception of the war increment tax, scarcely any of the additional revenue has been obtained from the wealthier classes in Germany. Taxation has been indirect and on commodities which are paid for by the masses of the people. "The lesson to be drawn from these facts is not difficult to see. The rulers of Germany, in spite of their hopes of indemnity, must realise that financial stability is one of the elements of national strength. They have not added to their financial stability." The reason for this failure the Chancellor considers to be largely psychological. It is, in the first place, because they do not care to add to discontent by increased taxation all over the country, but "it is still more due to this, that in Germany the classes which have any influence on or control of the Government are the wealthier classes, and the Government have been absolutely afraid to force taxation upon them." It is certainly very pleasant to be able to contemplate the financial blunders by which Germany is so greatly increasing the difficulties that it will have to face before the war is over. On the other hand, we have to recognise that the Chancellor, with that incorrigible optimism of his, has committed the common but serious error of over-stating his case by leaving out factors which are in Germany's favour, as, for instance, that Germany's debt is to a larger extent than ours held at home. Since the war began we have raised over £1000 millions by borrowing abroad. Our public accounts show that the item of "Other Debt," which is generally believed to refer to debt raised abroad, now amounts to £958 millions, while one of our loans in America, which is separately stated in the account because it was raised under a special Act, amounted to £51-1/2 millions. It is also quite possible that fair amounts of our Treasury bills, perhaps also of our Temporary Advances and of our other war securities, have been taken up by foreigners; but quite apart from that the two items already referred to now amount to more than £1000 millions, though at the end of March last their amount was only £988 millions. It is also well known that we have during the course of the war realised abroad the cream of our foreign investments, American Railroad Bonds, Municipal and Government holdings in Scandinavia, Argentina, and elsewhere, to an amount concerning which no accurate estimate can be made, except by those who have access to the Arcana of the Treasury. It may, however, be taken as roughly true that so far the extent of our total borrowings and realisation of securities abroad has been balanced by our loans to our Allies and Dominions, which amounted at the end of March last to £1526 millions. We have thus entered into an enormous liability on foreign debts and sold a batch of very excellent securities on which we used to receive interest from abroad in the shape of goods and services, against which we now hold claims upon our Allies and Dominions, in respect to the greater part of which it would be absurd to pretend that we can rely on receiving interest for some years after the war, in view of the much greater economic strain imposed by the war upon our Allies. Germany, of course, has been doing these things also. Germany has parted with her foreign securities. She was selling them in blocks for some weeks before the war, and Germany, of course, has done everything that she could in order to induce neutrals, during the course of the war, to buy securities from her and to subscribe to her War Loans. Nevertheless, it cannot have been possible for Germany to carry out these operations to anything like the extent that we have, partly because her credit has not been nearly so good, partly because her ruthless and brutal conduct of the war has turned the sentiment of the world against her, and partly because the measures that we have taken to check remittances and transfers of money have not been altogether ineffective. On this side of the problem Germany has therefore an advantage over us, that her war finance, pitiful a$ it has been, has, not owing to any virtue of hers, but owing to force of circumstances, raised her a problem which is to a great extent internal, and will not have altered her relation to the finance of other countries so much as has been the case with regard to ourselves. We also have to remember that the process of demobilisation will be far simpler, quicker, and cheaper for Germany than for us. Even if the war ended to-morrow the German Army would not have far to go in order to get home, and we hope that by the time the war ends the German Army will all have been driven back into its own country and so will be on its own soil, only requiring to be redistributed to its peace occupations. Our Army will have to be fetched home, firstly, over Continental railways, probably battered into a condition of much inefficiency, and then in ships, of which the supply will be very short. The process will be very slow and very costly. Our Overseas Army will have to be sent back to distant Dominions, and the Army of our American Allies will have to be ferried back over the Atlantic. Consequently if Germany is able to obtain anything like the supply of raw material that she requires she will be able to get back to peace business much more quickly than any of her Anglo-Saxon enemies, and this is an advantage on her side which it would be unwise to ignore in considering the bad effects on her after-war activities of the very questionable methods by which she has financed and is financing the war. Since we are indulging in these comparisons, it may be interesting to consider how our American Allies are showing in this matter of war finance. The _Times_, in its "City Notes" of April 15th, observed, in connection with the unexpectedly small amount of the third Liberty Loan, that the reason why the smaller figure was adopted for the issue was that it seems quite certain now that the original estimate for the expenditure in the fiscal year ending June 30th next was much too high. This estimate was 18,775 million dollars. The _Times_ stated that the realised amount is likely to be hardly more than 12,000 million dollars, of which about 4500 million dollars will represent loans to Allies, and that the estimate for the year's largely increased tax revenue was 3886 million dollars, which now seems likely to be exceeded by the receipts. If this be so, out of a total expenditure of £2400 millions, of which £900 millions will be lent to the Allies, the Americans are apparently raising nearly £800 millions out of revenue. Therefore if we deduct from both sides of the account the pre-war expenditure of about £215 millions and deduct also the loans to Allies from the expenditure, it leaves the cost of the war to America £1285 millions for this year and the war revenue £562 millions. If these figures are correct it would thus appear that America is raising nearly half its actual war cost out of revenue as the war goes on. On the other hand, in the New York _Commercial Chronicle_ of April 6th the total estimated disbursements for the year are still stated at over 16,000 million dollars, that is to say, £3200 millions roughly, so that there seems to be considerable uncertainty as to what the actual amount of the expenditure of the United States will be during the year ending on June 30th. In any case, there can be no question that if the very high proportion of war cost paid out of revenue shown by the _Times_ figures proves to be correct, it will be largely owing to accident or misfortune; if America's war expenditure has not proceeded nearly as fast as was expected, it will be, no doubt, owing not to economies but to shortcomings in the matter of delivery of war goods which the Government had expected to pay for in the course of the fiscal year. It certainly would have been expected that the Americans would in this matter of war finance be in a position to set a very much higher standard than any of the European belligerents owing to the enormous wealth that the country has acquired during the two and a half years in which it, in the position of a neutral, was able to sell its produce at highly satisfactory prices to the warring Powers without itself having to incur any of the expenses of war. On the other hand, its great distance from the actual seat of operations will naturally make it difficult for the American Government to impose taxation as freely as might have been done in the case of peoples which are actually on the scene of warfare; so that it is hardly safe to count on American example to improve the standard of war finance which has been so lamentably low in Europe in the course of the present war. According to their original estimates the proportion of war cost borne out of taxation seems to have been on very much the same level as ours, and this has all through the war been very much lower than the results achieved by our ancestors at the time of the Napoleonic and Crimean wars. On this point the proportion of our expenditure, which has been borne out of revenue, the Chancellor stated that up to the end of last financial year, March 31, 1918, the proportion of total expenditure borne out of revenue was 26.3 per cent. On the estimates which he submitted to the House in his Budget speech on April 22nd, the proportion of total expenditure met out of revenue during the current financial year will be 28.3 per cent., and the proportion calculated over the whole period to the end of the current year will be 26.9 per cent. These proportions, however, are between total revenue and total expenditure during the war period. The proportion, of course, is not so high when we try to calculate actual war revenue and war expenditure by deducting on each side at a rate of £200 millions a year as representing normal expenditure and revenue and leaving out advances to Allies and Dominions. On this basis the proportion of war expenditure met out of war revenue up to March 31, 1918, was, the Chancellor stated, 21.7 per cent. For the year 1917-18 it was 25.3 per cent., for the current year it will be 26.5 per cent., and for the whole period up to the end of the current year 23.3 per cent. The corresponding figures for the Napoleonic and Crimean wars are given by Sir Bernard Mallet in his book on British Budgets as 47 per cent. and 47.4 per cent. So that it will be seen that, judged by this test, our war finance, though very much better than Germany's, is not on so high a standard as that set by previous wars. It is true, of course, that the rate of expenditure during the present war has been on a scale which altogether dwarfs the outgoing in any previous struggle. The Napoleonic War is calculated to have cost some £800 millions, having lasted some twenty-three years. Last year we spent £2696 millions, of which near £2000 millions may be taken as war cost, after deducting normal expenditure and loans to Allies. Nevertheless, this argument of the enormous cost of the present war does not seem to me to be a good reason why the war should be financed badly, but rather a reason for making every possible effort to finance it well Are we doing so? At first sight it is a great achievement to have increased our total revenue from £200 millions before the war to £842 millions, the amount which we are expected to receive during the current year on the basis of the proposed additions to taxation, without taking into account any revenue from the suggested luxury tax. But, as I have already pointed out, the comparison of war pounds with pre-war pounds is in itself deceptive. The pounds that we are paying to-day in taxation are by no means the pounds that we paid before the war; their value in effective buying power has been diminished by something like one half. So that even with the proposed additions to taxation we shall not have much more than doubled the revenue of the country from taxation and State services as calculated in effective buying power. When we consider how much is at stake, that the very existence, not only of the country but of civilisation, is endangered by German aggression, it cannot be said that in the matter of taxation the country is doing anything like what it ought to have done or anything like what it would have done, willingly and readily, if a proper example had been set by the leading men among us, and if the right kind of financial lead had been given to the country by its rulers. When we look at the details of the Budget, it will be seen that the Chancellor has made a considerable advance upon his achievement of a year ago, when he imposed fresh taxation amounting to £26 millions, twenty of which came from excess profits duty, and could therefore not be counted upon as permanent, in his Budget for a year which was expected to add over £1600 millions to the country's debt, and actually added nearly £2000 millions. For the present year he anticipates an expenditure of £2972 millions, and he is imposing fresh taxation which will realise £68 millions in the current year and £114-1/2 millions in a full year. On the basis of taxation at which it stood last year he estimates for an increase of £67 millions, income tax and super-tax on the old basis being expected to bring in £28 millions more, and excess profits duty £80 millions more, against which decreases were estimated at £3-1/2 millions in Excise and £37 millions in miscellaneous. He thus expects to get a total increase on the last year's figures of £135 millions, making for the current year a total revenue of £842 millions, and leaving a total deficit of £2130 millions to be provided by borrowing. Increases in taxation on spirits, beer, tobacco, and sugar bring in a total of nearly £41 millions. An increase of a penny in the stamp duty on cheques is estimated to bring in £750,000 this year and a million in a full year, and the increases in the income tax and the super-tax will bring in £23 millions in the present year and £61 millions in a full year. Increases in postal charges will bring in £3-1/2 millions this year and £4 millions in a full year. There has been little serious criticism of these changes in taxation except that many people, who seem to regard the penny post as a kind of fetish, have expressed regret that the postal rate of the letter should be raised to 1-1/2 d. This addition seems to me to be merely an inadequate recognition of the depreciation of the buying power of the penny and to be fully warranted by the country's circumstances. Either it will bring in revenue or it will save the Post Office labour, and whichever of these objects is achieved will increase the country's power to continue the war. The extra penny stamp on cheques has been rather absurdly objected to as being likely to increase inflation. Since the effect of it is likely to be that people will draw a smaller number of small cheques, and will make a larger number of their purchases by means of Treasury notes, the tax will merely result in the substitution of one form of currency for another, and it is difficult to see how this process will in any way increase inflation. Other arguments might be adduced, which make it undesirable to increase the outstanding amounts of Treasury notes, but in the matter of inflation through addition to paper currency, it seems to me that the proposed tax is entirely blameless. The increase of a shilling in income tax and super-tax produced a feeling of relief in the City, being considerably lower than had been anticipated. It is hardly the business of the Chancellor of the Exchequer in this most serious crisis to produce feelings of relief among the taxpayers, and it seems to me a great pity that he did not make much freer use of these most equitable forms of taxation, having first made arrangements (which could easily have been done) by which their very severe pressure would have been relieved upon those who have families to bring up. Death duties, again, he altogether omitted as a source of extra revenue. His proposed luxury tax he has left to be evolved by the wisdom of a House of Commons Committee, and has thereby given plenty of time to extravagantly minded people to lay in a store of stuff before the tax is brought into being. Space will not allow me to deal fully with the Chancellor's very interesting analysis of our position as he expects it to be at the end of the financial year on the supposition that the war was then over. He expects a revenue then of £540 millions on the present basis, making, with the yield of the new taxes in a full year, £654 millions in all, without including the excess profits duty, and he expects an after-war expenditure of £650 millions, including £50 millions for pensions and £380 millions for debt charge. It seems to me that his expectation of after-war revenue is too high, and of after-war expenditure is too low. He says that the estimates have been carefully made, but that they include "a recovery from the absence of war conditions," but surely the absence of war conditions is much more likely to produce a diminution than a recovery in taxation. Under the present circumstances, with prices continually rising, the profits of those who grow or hold stocks of goods of any kind automatically swell The rise in prices has only to cease, to say nothing of its being turned into a fall, to produce at once a big check in those profits, and when we consider the enormous dislocation likely to be produced by the beginning of the peace period expectations of an elastic revenue when the war is over seem to be almost criminally optimistic. The Chancellor arrived at his after-war debt charge of £380 millions by estimating for a gross debt on March 31, 1919, of £7980 millions, which he reduces to a net debt of £6856 millions by deducting half the expected face value of loans to Allies, £816 millions, and £308 millions for loans to Dominions and India's obligation. But is he, in fact, entitled to count on receiving any interest at all from our Allies for some years to come after the war? If not, then on that portion of our debt which is represented by loans to Allies we shall have to meet interest for ourselves. He also gave an imposing list of assets in the shape of balances in hand, foodstuffs, land, securities, building ships, stores in munitions department, and arrears of taxation, amounting in all to nearly £1200 millions. It is certainly very pleasant to consider that we shall have all these valuable assets in hand; but against them we have to allow, which the Chancellor altogether omitted to do, for the big arrears of expenditure and the huge cost of demobilisation, which is at least likely to absorb the whole of them. On the whole, therefore, although we can claim that our war finance is very much better than that of our enemies, it is difficult to avoid the conclusion that it might have been very much better than it is, and that it is not nearly as good as it is represented to be by the optimistic fancy of the Chancellor of the Exchequer. X INTERNATIONAL CURRENCY _June_, 1918 An Inopportune Proposal--What is Currency?--The Primitive System of Barter--The Advantages possessed by the Precious Metals--Gold as a Standard of Value--Its Failure to remain Constant--Currency and Prices--The Complication of other Instruments of Credit--No Substitute for Gold in Sight--Its Acceptability not shaken by the War--A Fluctuating Standard not wholly Disadvantageous--An International Currency fatal to the Task of Reconstruction--Stability and Certainty the Great Needs. As if mankind had not enough on its hands at the present moment, a number of well-meaning people seem to think that this is an opportune time for raising obscure questions of currency, and trying to make the public take an interest in schemes for bettering man's lot by improving the arrangements under which international payments are carried out. Nobody can deny that some improvement is possible in this respect, but it may very well be doubted whether, at the present moment, when very serious problems of rebuilding have inevitably to be faced and solved, it is advisable to complicate them by introducing this difficult question which, whenever it is raised, will require the most careful and earnest consideration. Since, however, the question is in the air, it may be as well to consider what is wrong with our present methods, and what sort of improvements are suggested by the reformers. At present, as every one knows, international payments are in normal times ultimately settled by shipments from one country to another of gold. Gold has achieved this position for reasons which have been described in all the currency text-books. Mankind proceeded from a state of barter to a condition in which one particular commodity was used as the chief means of payment simply because this process was found to be much more convenient. Under a system of barter an exchange could only be effected between two people who happened to be possessed each of them of the thing which the other one wanted, and also at the same time to want the thing which the other one possessed, and the extent of their mutual wants had to lit so exactly that they were able to carry out the desired exchange. It must obviously have been rare that things happened so fortunately that mutually advantageous exchanges were possible, and the text-books invariably call attention to the difficulties of the baker who wanted a hat, but was unable to supply his need because the hatter did not want bread but fish or some other commodity. It thus happened that we find in primitive communities one particular commodity of general use being selected for the purpose of what is now called currency. It is very likely that this process arose quite unconsciously; the hatter who did not want bread may very likely have observed that the baker had something, such as a hit of leather, which was more durable than bread, and which the hatter could be quite certain that either he himself would want at some time, or that somebody else would want, and he would therefore always be able to exchange it for something that he wanted. All that is needed for currency in a primitive or any other kind of people is that it should be, in the first place, durable, in the second place in universal demand, and, in the third place, more or less portable. If it also possessed the quality of being easily able to be sub-divided without impairing its value, and was such that the various pieces into which it was sub-divided could be relied on not to vary in desirability, then it came near to perfection from the point of view of currency. All these qualities were possessed in an eminent degree by the precious metals. It is an amusing commentary on the commonly assumed material outlook of the average man that the article which has won its way to supremacy as currency by its universal desirability, should be the precious metals which are practically useless except for purposes of ornamentation. For inlaying armour and so adorning the person of a semi-barbarous chief, for making into ornaments for his wives, and for the embellishment of the temples of his gods, the precious metals had eminent advantages, so eminent that the practical common sense of mankind discovered that they could always be relied upon as being acceptable on the part of anybody who had anything to sell. In the matter of durability, their power to resist wear and tear was obviously much greater than that of the hides and tobacco and other commodities then fulfilling the functions of currency in primitive communities. They could also be carried about much more conveniently than the cattle which have been believed to have fulfilled the functions of currency in certain places, and they were capable of sub-division without any impairing of their value, that is to say, of their acceptability. Merely as currency, precious metals thus have advantages over any other commodity that can be thought of for this purpose. So far, however, we have only considered the needs of man for currency; that is to say, for a medium of exchange for the time being. It is obvious, however, that any commodity which fulfils this function, that is to say, is normally taken in payment in the exchange of commodities and services, also necessarily acquires a still more important duty, that is, it becomes a standard of value, and it is on the alleged failure of gold to meet the requirements of the standard of value that the present attack upon it is based. On this point the defenders of the gold standard will find a good deal of difficulty in discovering anything but a negative defence. The ideal standard of value is one which does not vary, and it cannot be contended that gold from this point of view has shown any approach to perfection in fulfilling this function. It could only do so if the supply of it available as currency could by some miracle be kept in constant relation with, the supply of all other commodities and services that are being produced by mankind. That it should be constant with each one of them is, of course, obviously impossible, since the rate at which, for example, wheat and pig-iron are being produced necessarily varies from time to time as compared with one another. Variations in the price of wheat and pig-iron are thus inevitable, but it can at least be claimed by idealists in currency matters that some form of currency might possibly be devised, the amount of which might always be in agreement with the amount of the total output of saleable goods, in the widest sense of the word, that is being created for man's use. It need not be said that this desirability of a constant agreement between the volume of currency and the volume of goods coming forward for exchange is based on what is called the quantitative theory of money. This theory is still occasionally called in question, but is on the whole accepted by most economists of to-day, and seems to me to be a mere arithmetical truism if we only make the meaning of the word "currency" wide enough; that is to say, if we define it as including all kinds of commodities, including pieces of paper and credit instruments, which are normally accepted in payment for goods and services. This addition of credit instruments, however, is a complication which has considerably confused the problem of gold as the best means of ultimate payment. Taken simply by itself the quantitative theory of money merely says that if money of all kinds is increased more rapidly than goods, then the buying power of money will decline, and the prices of goods will go up and vice versa. This seems to be an obvious truism if we make due allowance for what is called the velocity of circulation. If more money is being produced, but the larger amount is not turned over as rapidly as the currency which was in existence before, then the effect of the increase will inevitably be diminished, and perhaps altogether nullified. But other things being equal, more money will mean higher prices, and less money will mean lower prices. But, as has been said, the question is very greatly complicated by the addition of credit instruments to the volume of money, and this complication has been made still more complicated by the fact that many economists have refused to regard as money anything except actual metal, or at least such credit instruments as are legal tender, that is to say, have to be taken in payment for commodities, whether the seller wishes to do so or not. For example, many people who are interested in currency questions would regard at the present moment in this country gold, Bank of England notes, Treasury notes, and silver and copper up to their legal limits as money, but would deny this title to cheques. It seems to me, however, that the fact that the cheque is not and cannot be legal tender does not in practice affect or in any way impair the effectiveness of its use as money. As a matter of fact cheques drawn by a good customer of a good bank are received all over the country day by day in payment for an enormous volume of goods. In so far as they are so received, their effect upon prices is exactly the same as that of legal tender currency. This fact is now so generally recognised that the Committee on National Expenditure has called attention to the financing of the war by bank credits as one of the reasons for the inflation of prices which has done so much to raise the cost of the war. It is, in fact, being generally recognised that the power of the bankers to give their customers credits enabling them to draw cheques amounts in fact to an increase in the currency just as much as the power of the Bank of England to print legal tender notes, and the power of the Government to print Treasury notes. Thus it has happened that by the evolution of the banking system the use of the precious metals as currency has been reinforced and expanded by the printing of an enormous mass of pieces of paper, whether in the form of notes, or in the form of cheques, which economise the use of gold, but have hitherto always been based on the fact that they are convertible into gold on demand, and in fact have only been accepted because of this important proviso. Gold as currency was so convenient and perfect that its perfection has been improved upon by this ingenious device, which prevented its actually passing from hand to hand as currency, and substituted for it an enormous mass of pieces of paper which were promises to pay it, if ever the holders of the paper chose to exercise their power to demand it. By this method gold has been enabled to circulate in the form of paper substitutes to an extent which its actual amount would have made altogether impossible if it had had to do its circulation, so to speak, in its own person. From the application of this great economy to gold two consequences have followed; the first is that the effectiveness of gold as a standard of value has been weakened because this power that banks have given to it of circulating by substitute has obviously depreciated its value by enormously multiplying the effective supply of it. Depreciation in the buying power of money, and a consequent rise in prices, has consequently been a factor which has been almost constantly at work for centuries with occasional reactions, during which the process went the other way. Another consequence has been that people, seeing the ease with which pieces of paper can be multiplied, representing a right to gold which is only in exceptional cases exercised, have proceeded to ask whether there is really any necessity to have gold behind the paper at all, and whether it would not be possible to evolve some ideal form of super-paper which could take the place of gold as the basis of the ordinary paper which is created by the machinery of credit, which would be made exchangeable into it on demand instead of into gold. It is difficult to say how far the events of the war have contributed to the agitation for the substitution for gold of some other form of international currency. It would seem at first sight that the position of gold at the centre of the credit system has been shaken owing to the fact that in Sweden and some other neutral countries the obligation to receive gold in payment for goods has been for the time being abrogated. The critics of the gold standard are thus enabled to say, "See what has happened to your theory of the universal acceptability of gold. Here are countries which refuse to accept any more gold in payment for goods. They say, 'We do not want your gold any more. We want something that we can eat or make into clothes to put on our backs.'" This is certainly an extremely curious development that is one of the by-products of war's economic lessons. But I do not feel quite sure that it has really taught us anything new. All that has ever been claimed for gold is that it is universally acceptable when men are buying and selling together under more or less normal circumstances. It has always been recognised that a shipwrecked crew on a desert island would be unlikely to exchange the coco-nuts or fish or any other commodities likely to sustain life which they could find, for any gold which happened to be in the possession of any of them, except with a view to their being possibly picked up by a passing ship, and returning to conditions under which gold would reassume its old privilege of acceptability. During the war the shipping conditions have been such that many countries have been hard put to it, especially if they were contiguous to nations with which the Entente is at present at war, to get the commodities which they needed for their subsistence. The Entente, with its command of the sea, has found it necessary to ration them so that they should have no available surplus to hand on to the enemy. They have very naturally endeavoured to resist these measures, and in order to do so have made use of the power that they exercise by their being in possession of commodities which the Entente desires. They have shown a tendency to say that they would not part with these commodities unless the Entente allowed them to have a larger proportion of things needed for subsistence than the Entente thought necessary for them, and it was as part of this battle for larger imports of necessaries that gold has been to some extent looked upon askance as means of payment, the preference being given to things to eat and wear rather than to the metal. These wholly abnormal circumstances, however, do not seem to me to be any proof that gold will after the war be any less acceptable as a means of payment than before. The Germans are usually credited with considerable sagacity in money matters, with rather more, in fact, I am inclined to think, than they actually possess; they, at any rate, show a very eager desire to collect together and hold on to the largest possible store of gold, obviously with a view to making use of it when the war is over in payment for raw materials, and other commodities of which they are likely to find themselves extremely short. America also has shown a strong tendency to maintain as far as possible within its borders the enormous amount of gold which the early years of the war poured into its hands. While such is the conduct of the chief foreign nations, it is also interesting to note that one comes across a good many people who, in spite of all the admonitions of the Government to all good citizens to pay their gold into the banks, still hold on to a small store of sovereigns in the fear of some chain of circumstances arising in which only gold would be taken in payment for commodities. On the whole, I am inclined to think that the power of gold as a desirable commodity merely because it is believed to be always acceptable has not been appreciably shaken by the events of the war. This does not alter the fact that, as has been shown above, gold, complicated by the paper which has been based upon it, cannot claim to have risen to full perfection as a standard of value. In primitive times the question of the standard of value hardly arises. Transactions are for the most part carried out and concluded at once, and any seller who takes a piece of metal in payment for his goods does so with the rough knowledge of what that piece of metal will buy for him at the moment, and that is the only point which concerns him. The standard of value only becomes important when under settled conditions of society long-term contracts bulk large in economic transactions. A man who makes an investment which entitles him to 5 per cent. interest, and repayment in 30 years' time, begins to be very seriously interested in the question of what command over commodities his annual income of 5 per cent. will give him, and whether the repayment of his money at the end of 30 years will represent the repayment of anything like the same amount of buying power as his money now possesses. It is here, of course, that gold has failed because, as we have seen, the process has been a fairly steady one of depreciation in the buying power of the alleged standard and a rise in the prices of other commodities. This means to say that the investor who has accepted repayment at the end of 30 years of the amount that he lent, be it £100 or £10,000, has found that the money repaid to him had by no means the same buying power as the money which he originally invested. Within limits this tendency of the standard of value towards depreciation has possessed considerable advantages, probably much greater advantages than would have followed from the contrary process if it had been the other way round. If we can imagine that the currency history of the world had been such that a constantly diminished quantity of currency in relation to the output of other commodities had caused a steady fall in prices, it is obvious that there might have been a very considerable check to the enthusiasm of industry. It has indeed been contended that the scarcity of precious metals which, with the absence of an organised credit system, produced this result during the later Roman Empire was a very important cause of the decay into which that Empire fell. I do not feel at all convinced that this effect would necessarily have followed the cause. It seems to me that the ingenuity of enterprising man is such that the producer might, and probably would, have found means for facing the probability of depreciation in price. But it is always an empty pastime to try to imagine what would have happened "if things had been otherwise." What we do know is that a period of rising prices, especially if the rise does not go too fast, stimulates the enterprise of producers, and sets business going actively, and consequently it may at least be claimed that the failure of the gold standard to maintain that steadiness of value which is an obvious attribute of the ideal standard has at least been a failure on the right side, by tending to depreciation of the value of currency, and so to a rise of the prices of other commodities. Obviously, people will tuck up their sleeves more readily to the business of production and manufacture if the course of the market in the product which they hope to sell some day is likely to be in their favour rather than against them. And when all is admitted concerning the failure of the existing standard of value, the question is, what substitute can we find which will carry with it all the advantages that gold has been shown to possess, and at the same time maintain that steadiness of value which gold has certainly lacked? We hear airy talk of an international currency based on the credit of the nations leagued together to promote economic peace. It is certainly very obvious that the diplomatic relations of the world require complete reform, and the system by which the nations at present settle disputes between themselves has been found by the experience of the last four years to be so disgusting, so barbarous and so ridiculous that all the most civilised nations of the world are determined to go on with it until it is stopped for ever. Nevertheless, obvious as it is that some kind of a League of Nations is essential as a form of international police if civilisation is to be rescued from destruction, it is very doubtful whether such an organisation could, at least during the first half-century or so of its existence, be called upon to tackle so difficult a question as that of the creation of an international currency based on international credit. In the first place, what will be required more than anything else after the war in economic matters will be the elimination of all possible reasons for uncertainty; so much uncertainty and difficulty will be inevitable that it seems to me to be almost criminal to add to those uncertainties by an outburst of eloquence on the part of currency reformers if there were any danger of their recommendations being accepted. It will be difficult enough to know where the producers of the world are to get raw material, find efficient labour, and then find a market for their products, without at the same time upsetting their minds with doubts concerning some kind of new-fangled currency that is to be created, and in which they are to be made to accept payment, with the possibilities of changes in the system which may have to be effected owing to some quite unforeseen results happening from its adoption. The gold standard, with all its failures, we do know; we also know that something may be done some day to remedy them if mankind can produce a set of rulers capable of approaching the question with all the knowledge and experience required; but to substitute this system at a time of great uncertainty for one which might or might not work would seem to be tempting Providence in an entirely unnecessary manner at a time when it is above all necessary to get the economic ship as far as possible on an even keel. If the proposed substitute is to succeed it will have to be at least as acceptable as gold, and at the same time its quantity must be so regulated as to be at all times constant in relation to the output of commodities. Can we pretend that the economic enlightenment of mankind has yet reached a point at which such a currency could be produced and regulated by the Governments of the world and be accepted by their citizens? XI BONUS SHARES _July_, 1918 A Deluge of Bonus Shares--The Effect on the Market--A Problem in Financial Psychology--The Capitalisation of Reserves--The Stock Exchange View--The Issue of Bonus-carrying Shares--The Case of the A.B.C.--A Wiser Variation from Canada--Bonus Shares on Flotation--An American Device--Midwife or Doctor?--The Good and Bad Points of Both Systems. Of the many kinds of Bonus shares, the one which has lately been most prominent in the public eye is that which is produced by the capitalisation of a reserve fund. There has lately been a perfect epidemic of this kind of Bonus share, which is almost as plentiful as the caterpillars in the oak trees and the green fly on the allotments. The reason for this outburst is apparently the anxiety which the directors of many prosperous industrial companies feel lest the high dividends which good management and sound finance in the past have enabled them to pay should lay them open to misunderstanding and attack by well-meaning people who think that it is a crime for a company to earn more than a certain percentage on its capital. This explanation was very frankly given by the directors of Brunner, Mond and Company, when they lately capitalised part of their reserves. The company, they stated, has for many years paid a dividend on its Ordinary shares of 27-1/2 per cent., and "the directors feel that there is a widespread impression that this is the rate of profit earned on the total of the capital invested, and consequently that the company is making an unfair profit out of its customers and the labour it employs. This is by no means the case." It is a lamentable proof of the backward state of the economic education of this country that it should be necessary for well-financed and prosperous concerns to take steps to make it quite clear to the public that they are not earning more than they appear to be. In a well-educated community it would be perceived at once that it is the well-financed and prosperous companies which improve production in the interests of their shareholders, their workmen, and the public; that the price which the public pays for a commodity is ultimately the price at which the worst financed and worst managed companies can just manage to keep alive; that the higher profits earned by the better companies are not wrung out of the pockets of the community, or their workmen, but are the result of good management and good finance; and that the more the good companies are encouraged to go ahead and drive the bad ones out of existence, the better will the community be served, and the better will be the chance of the workmen to get good wages. These platitudes are of course, only true in a state of free competition. If there is anything like monopoly the public and the workers are fully justified in being suspicious and examining the source from which high dividends are produced. Such being the reason why this outburst of capitalisation of reserves first began--since in these days all capitalists and those who have to manage capital feel that they are working under criticism, which is not only jealous and suspicious (as it should be), but is also too often both ignorant and prejudiced--it is interesting to note that the movement which was so started has been stimulated by its very exhilarating effect on the market in the shares of the companies concerned. Why this should be so it is difficult at first sight to say. What happens is merely this--that a company, let us suppose, for the sake of simplicity, with a capital consisting wholly of 3,000,000 Ordinary shares, has accumulated out of past profits, or out of premiums on new issues of shares, a reserve fund of £1,000,000. Its net profit has lately averaged £400,000, and it has, year by year, distributed £300,000 in the shape of a 10 per cent. dividend to its shareholders, and put £100,000 into its reserve fund, which is represented on the other side of the balance-sheet by buildings and plant and a certain amount of first-class investments. If the directors now decide to capitalise that £1,000,000 of reserve fund, the only effect is that each shareholder will be given one new share for every three which he holds in the existing capital, the reserve fund will be wiped out, and the ordinary capital will be increased from £3,000,000 to £4,000,000. None of the shareholders will be in actual fact better off to the extent of one halfpenny, because all will be in the same position with regard to one another; their relative shares in the enterprise will not have been altered. If we imagine, by way of simplifying the problem, that all the Ordinary shares were in one hand, that one holder would have had in his Ordinary shares a claim to the total assets of the company, that is to say, to its earning power as long as it is a going concern, and to whatever its assets realise if it went into liquidation; the fact that £1,000,000 worth of the assets had been bought out of past profits or premiums paid on new issues of shares would have already added to the value of the claim that he had on the property of the company, and no addition would be made to that value by turning the reserve fund into shares. In other words, the reserve fund is already the property of the shareholders, and to convert it from reserve fund into capital, making them a present of new shares, which merely represent their claim to the assets held against the reserve fund, is as empty a gift as presenting a man with a piece of paper informing him that he is the owner of his own hat. All this remains equally true if, besides the ordinary capital, there is a considerable amount outstanding of Preference shares and Debenture debt. In any case, the Ordinary shareholders possess a claim to the earning power of the company when prior charges have been satisfied, and to whatever surplus may remain on liquidation after first charges have been paid off in full. Whether that interest of theirs is represented by a larger or smaller number of shares, or by shares of a larger or smaller denomination, or by a reserve fund upon which they have a claim when all other claims have been settled makes no difference whatever as a matter of academic fact. Apart from the sentiment of the matter, there is no reason why ordinary capital should have any nominal value. As to the earning power of the company, that, of course, is not affected one whit by the process. The earning power of the company is all in the assets--the plant, machinery and other property--plus the elusive qualities which are bound up in the word "goodwill," representing the selling power, organisation, and the expectation of future profits. The capitalisation of the reserve simply affects the manner in which the liabilities of the company are arranged, and the existence of a reserve fund merely means that the Ordinary shareholders have a claim to a larger amount than their nominal holding in case of liquidation. It does not matter in the least whether this larger claim is handed to them in the shape of a certificate, since the nominal amount of their claim has nothing whatever to do with the amount that their claim realises to them annually in the shape of dividends, or in the event of liquidation, from the realisation of the company's assets. In fact, the capitalisation of reserves is sometimes criticised by economic purists as a retrograde step because it seems likely to encourage the directors to be extravagant in the matter of dividends. In the example which we supposed above of the company with a capital of three millions and reserve fund of one million, if the reserve fund is turned into Ordinary shares and the earning power of the company remains the same there may obviously be a temptation to the directors to modify the prudent policy under which they had hitherto placed one hundred thousand a year to reserve, because if they continued it the shareholders would discover they were really no better off and that they simply got a lower rate of dividend on the larger amount of shares, and that their actual receipts from the company were exactly the same as before. And if the earning power of the company remained the same and the directors left off placing the one hundred thousand a year to reserve, and paid away the whole of the net profit in dividend, it is clear that the progressive expansion of the company's business would be to that extent checked. On the other hand, there is a contrary argument that as long as the company has a large reserve fund there is a possibility that dissatisfied shareholders may agitate for a realisation of sufficient assets to enable that reserve fund to be distributed, especially if it has been wholly acquired out of past profits. In this case the capitalisation of the reserve fund puts this temptation out of their reach since, when once the reserve fund has been capitalised, it can only be got at by greedy shareholders through the process of liquidation. Since, however, the shareholder in these times is not quite so short-sighted as he used to be, there is not perhaps really very much advantage in this point. But since, as has been shown, capitalisation of reserves has no effect upon the earning power and assets of the company, it is interesting to try and discover why the rumour and announcement of such an intention on the part of the board of directors is nearly always accompanied by a rise in the shares of the company affected. If the shareholder is merely to be given a larger nominal claim, which does not in the least affect the value of the assets which that claim concerns, and if the relative amount of his claim is exactly the same with regard to the other shareholders, it is clear that the rise in the value of the shares is based entirely either on a psychological mistake on the part of the public and its financial advisers, or on the fact that the transaction called attention to the value of the shares which have hitherto been undervalued in the market. Probably the movement arises from both these causes. A large number of people think they are better off if they have a larger nominal share, without considering that all the other shareholders are at the same time having their claim increased, that the assets to which they all have a claim are not being increased, and that, consequently, if a sharing-out process were to take place they would all be exactly as they would have been if no such capitalisation of reserves had been carried out. And if a sufficient number of people think that a share or any other commodity is more valuable, it thereby becomes more valuable, because value is nothing else than the amount, whether in money or other commodities, at which a commodity can be disposed of. But it is also true that there are, at all times, a very large number of securities, especially in the industrial market, which would stand higher if their earning power and position were more closely scrutinised. This is very clearly seen to be the case from the apparently extravagant prices at which insurance companies, for example, sometimes buy the businesses of one another. They give a price which is considerably above the market value of the concern as represented by the price of its shares. Critics say that the terms are extravagant, and yet the deal is found to be highly profitable to the buying company. The profit of the deal, of course, may be increased by the advantages of amalgamation, but quite apart from that it is clear that the market price of securities very often undervalues, as it also, perhaps, still oftener overvalues, the real position of the companies on whose earning powers they represent claims. In any case, there is the fact that these capitalisations of reserve funds, which make no real difference to the actual position of the company, are universally regarded, in the language of the Stock Exchange, as "bull points." It is assumed, of course, that the directors would not carry out such an operation unless they saw their way to a higher earning power in the future as a justification for the larger capital. In this expectation the directors might be right or wrong, and, even if they are right, that prospect of higher earning power, if market prices could be relied upon to express the true position of a company, would have been "in the price." There is another kind of Bonus share, which is not exactly a Bonus share, but carries a bonus with it. This comes into being when the directors of a company sell new shares to existing shareholders at a price below the terms which they might have obtained if they made a new issue to the general public. The classical example of this system is the Aerated Bread Company, that concern to which City clerks and journalists and others owe so much as pioneers of cheap and simple catering. It will be remembered that in the palmy days of this company, before it had been severely cut into by competition, its £1 shares used to stand in the neighbourhood of £15. The directors used then to make issues of new shares to existing shareholders at their face value, that is to say, at £1 per share, although it was obvious that if they had made a public issue inviting all and sundry to subscribe they could have sold their new issues at or above £14 per share. This system put an enormous bonus in the pockets of the existing shareholders at the expense of the company and its future prospects. The directors practically gave to the existing shareholders a present of £130,000 if they sold them 10,000 new shares for £10,000, which they and the public would have readily subscribed for at £140,000. There was nothing wicked about the process, but it was extremely short-sighted. If the company had retained the monopoly which its pioneer work as a cheap caterer for a long time secured it, it might have kept its prosperity unimpaired even by this short-sighted finance. As it was, attracted several competitors, some of which were extremely well managed and financed, and although it still does a most useful work for the community, its earning power has suffered considerably. But this is only an extreme example of a system which is reasonable enough if it is not carried too far. The Canadian Pacific Railway, for instance, has for many years adopted a very moderate use of this system, making new issues to its shareholders on terms rather cheaper than it could have obtained by a public issue, but not giving away enough to impair its future seriously in order to make presents to the existing stockholders by this means. By the continued making of small presents to their constituents the directors of the company have obtained the support of a very loyal body of stockholders, who feel that they are being well treated but not pampered. This system of granting a small bonus to existing shareholders on occasions when the company has to issue new capital is one which is quite unobjectionable as long as it is not abused. If, owing to the use of it, the directors are encouraged to finance themselves badly, that is to say, to pay out of new capital for improvements and extensions which a more prudent policy would have financed out of earnings, just because they find that these issues carrying a small bonus makes them popular with the stockholders, then the system is being abused. Otherwise there seems no reason to object to a measure which keeps the shareholders happy and does not do any harm to the concern so long as it is worked in moderation. Finally, there is a Bonus share or stock which does not represent accumulation out of vast profits or issues of new shares at a premium, and does not involve a bonus by the sale to existing shareholders at a price below the terms which could be got in the market, but is at first sight pure water, representing merely possibilities, perhapses, and potentialities. This kind of Bonus share is chiefly known on the other side of the Atlantic, and is usually damned with bell, book and candle by purists among English financial critics. We say on this side of the water that every pound of an English well-financed company represents a pound which has actually been spent and put into tangible assets which help the company to earn profits. This boast is by no means true, since nearly all industrial companies come into being with something paid for in the shape of goodwill, which is of enormous importance, but can hardly be called a tangible asset; and even in the case of our railway companies, many millions of original capital went into Parliamentary and legal expenses, which have been, in one sense, dead capital ever since, though without this expenditure the railways could never have got to work. The American system of Common shares, representing what appears to be water, is only a modification of what every company has to do, in one form or another, on this side or anywhere in the world. Wherever an existing business is bought out something has to be given over and above the old iron value of the concern for the value of the connection and other intangible assets. Wherever an entirely new industry is started it has to meet certain initial expenses. It has to placate, to use the unpleasant American word, various interests in order to get to work, or it has to lay out money, in building up a concern by advertising or otherwise. It is impossible that every penny which is put into it will go into actual buildings, plant, machinery, and stock-in-trade. In America the system has been preferred by which the actual tangible assets of a new concern are financed wholly or largely by issues of bonds or Preferred stock, and the Common stock is given away to those interested in the promotion, for them either to hold or to use in order to secure the co-operation of those who may be useful, or modify the opposition of those who may be dangerous. The net result of it is that the Common stock is represented in fact by goodwill or the power to get to work. If the company prospers, then it is the business of those who hold these Common shares to see that assets are accumulated out of profits, to be held against their Common stock, so squeezing the water out of it and making it good. The system thus possesses this very considerable advantage, that those who promote a company are interested in its future welfare, and watch over it and guide it through its subsequent existence, putting energy and good management at its disposal in order that the paper which they hold may be represented, not by water, but by real assets, and so may bring them a tangible reward. It has thus in some ways a great advantage over the English system, by which the company promoter is too often concerned merely in the immediate success of the promotion. He is, as one of the greatest of them described himself, a mere midwife, who brings the interesting infant into the world, pats its little head, says good-bye to it, and leaves it to take care of itself throughout its troubled existence. By the American system the promoter is not a midwife but a doctor who assists at the birth of the infant, and also watches over its youth and makes every effort to guide its toddling footsteps in such a way that it may grow into lusty manhood. It is not until he has done so that he is enabled, by the sale of the shares which were given to him at the beginning, to realise the full profit which he expected. The profits realised by this method are in many cases enormous. On the other hand, the amount of work that is put in to secure them is infinitely greater than happens in the case of the English midwife promoter; and if the enterprise is a failure, then the promoter goes without his profits. The system, like everything else, is liable to abuse, if a rascally board of directors, in a hurry to unload their holding of Common stock on an unsuspecting public, makes the position and prospects of the company look better than they are by unscrupulous bookkeeping and extravagant distribution of profits, earned or unearned. These things happen in a world in which the ignorance of the public about money matters is a constant invitation to those who are skilled in them to relieve the public of money which it would probably mis-spend; but, if well and honestly worked, the system is by no means inherently unsound, as some English critics too often assume, and it has been shown that it carries with it a very great and substantial advantage in the hands of honest people who wish to conduct the business of company promotion on progressive lines. XII STATE MONOPOLY IN BANKING _August_, 1918 Bank Fusions and the State--Their Effects on the Bank of England--Mr Sidney Webb's Forecast--His Views of the Benefits of a Bank Monopoly--The Contrast between German Experts and British Amateurs--Bankers' Charges as affected by Fusions--The Effects of Monopoly without the Fact--The "Disinterested Management" Fallacy--The Proposal to split Banking Functions--A Picture of the State in Control. A few months ago, writing in this Journal on the subject of banking amalgamations, I referred to one of the objections against them, that they tended towards the creation of monopoly, and so encouraged hope on the part of those who would like to see all forms of industry managed by the State, that the banking business might sooner or later be taken over and worked as a State monopoly. At that time this danger of monopoly seemed to be still fairly remote, but since then the progress of amalgamations has brought it appreciably nearer, and so has vigorously stimulated both the hopes and fears of those who consider that it tends to bring nearer the seizure of banking business by the State. The fear is expressed by Sir Charles Addis, manager of the Hongkong Bank and director of the Bank of England, in the July number of the _Edinburgh Review_ in a very interesting article on the "Problems of British Banking." Sir Charles observes that: "It may even be questioned whether the gigantic size they have already attained does not constitute a menace to the predominant position which the Bank of England has hitherto enjoyed as the bankers' bank. How will the Bank of England be able to maintain its supremacy and control the money market, surrounded by banks individually greater and more powerful than itself, especially when the object in view is by raising the rate of interest to prevent an internal or external drain upon our gold reserve? It is even conceivable that the finance of the State may be threatened, and it is probably for this reason that in Germany the Prussian Minister is said to be considering a State monopoly of banking. Nor can the psychological effect of these great aggrandisements of capital in the hands of a few banks be ignored. They are virtually Government-guaranteed institutions. The insolvency of one of the great banks would involve such widespread disaster that no Government could stand aside. They would be compelled to make use of the national resources in order to guarantee the solvency of private banks. From Government guarantee to Government control is but a step, and but one step more to nationalisation. We are playing into the hands of Mr Sidney Webb and the Socialists." As it happens, in the July number of the _Contemporary Review_, Mr Sidney Webb was developing the same theme, namely, the inevitability of banking monopoly and the necessity, as he conceives it, of defeating private monopoly for the sake of profit, by State monopoly to be worked, as he hopes, in the public interest. His article is headed by the rather misleading title, "How to Prevent Banking Monopoly," for, as has been said, Mr Webb very much wants monopoly, says that it cannot be helped, and sees the fulfilment of some of his pet Socialistic dreams in the direction of it by the bureaucrat whom he regards as the heaven-sent saviour of society. His very interesting argument is most easily followed by means of a series of quotations. "We are, it is said, within a measurable distance of there being--save for unimportant exceptions--only one bank, under one general manager, probably a Scotsman, whose power over the nation's industry would be incalculable. Even in the crisis of the war the matter is receiving the attention of the Government. "In the opinion of the present writer, the amalgamation of banks in this country, which has been going on continuously for a century, though at varying rates, and is being paralleled in other countries, notably in Germany, and latterly in the Canadian Dominion, is an economically inevitable development at a certain stage of capitalist enterprise, and one which cannot effectively be prevented." Mr Webb considers that there is no economic limit to this policy of amalgamation, and that the gains it carries with it are obvious. He dilates upon these as follows:-- "It may be worth pointing out: "(a) That apart from the obvious economies in the cost of administration, common to all business on a large scale, there is, in British banking practice, a special advantage in a bank being as extensive and all-pervasive as possible. Where distinct banks co-exist, there can be no assurance that the periodical shifting of business, the perpetual transformations in industrial organisation, the rise and fall of industries, localities or firms, the changes of fashion and the ebb and flow of demand, and even a relative diminution of reputation may not lead to a shrinking of the deposits and current account balances of any one bank, or even of each bank in turn. Accordingly, every bank has to maintain an uninvested, or, at least, a specially liquid, reserve to meet such a possible withdrawal. The smaller, the more numerous, the more specialised by locality or industry are the competing banks, the larger must be this reserve. On the other hand, if all the deposit and current accounts of the nation were kept at one bank, even if it has innumerable branches, as the experience of the Post Office Savings Bank shows, no such shifting of business would affect it; no mere transfers from firm to firm or from trade to trade would involve any shrinking of its aggregate balances; and it would need only to have in hand, somewhere, sufficient currency to replenish temporarily a local drain on its 'till money.' The nearer the banks can approach to this condition of monopoly, not only the lower will be their percentage of working expenses, but also the greater will be the financial stability, and the smaller the amount that they will need to keep uninvested in order to meet possible withdrawals. "(b) That the process of amalgamation has involved an ever-increasing elimination, from the British banking business, of the typical profit-maker, first as partner in a private bank, then as a director in a Joint Stock bank, representing a large personal holding of shares; and the gradual transfer of practically the whole conduct of the business to what may be called 'disinterested management'--that is to say, management by trained, professional officers serving for salaries, whose remuneration bears no relation to the profit made on each piece of business transacted. The part played in the business by the directors themselves seems to be, with every increase in the magnitude and scope of the concern, steadily diminishing; and these directors, moreover, come to be chosen, more and more, not because of their large holdings of shares, or because of their ancestral or personal connection with banking, but because of their reputation or influence, commercial, social or political. The result is that, along with the process of amalgamation, there has been going on a transfer of the whole management of banking to the hierarchy of salaried officials; whilst the supreme decisions on financial policy are in the hands, in practice, of a very small group of salaried general managers, only partially in consultation with an equally small group of chairmen of boards of directors, themselves usually drawing not inconsiderable salaries." It seems to me that Mr Webb exaggerates in rather a dangerous degree the reduction, through amalgamation, of the necessity which obliges a bank to keep a considerable reserve of cash. It is quite true that under normal circumstances cash withdrawn from one bank finds its way in due course to another, and that with regard to these mere "till money" transfers there might be a considerable reduction in the amount of cash required if all the banking of the country were in the hands of one business, so that what was withdrawn from one branch would be paid into another. But this fact would not alter the need which compels a bank to keep considerable reserves in cash in order to provide against the possibility of a run. A State bank, if the public takes it into its head that it prefers to have a larger proportion of currency in its own pocket rather than in its bank, may find itself pulled at for cash just as vigorously as a bank managed by private enterprise. This was shown in August, 1914, when very large sums were withdrawn from the Post Office Savings Bank during the crisis which then impelled many members of the public to hoard money, or compelled them to take it out of their banks because they did not find that the ordinary system of payment by cheques was working with its usual ease. Moreover, Mr Webb's point about what he calls disinterested management--that is to say, the management of banks by officers whose remuneration bears no relation to the profit made on each piece of business transacted--is one of the matters in which English banking seems likely at least to be modified. Sir Charles Addis, in the article already referred to, calls attention in a very striking passage to the efficiency of the administration of German and English banks, and makes a comparison between the remuneration given to the banking boards of the two countries. The passage is as follows:-- "Scarcely second in importance to the financial strength of a bank is the efficiency of its administration. The German board of direction is composed, to an extent unknown in England, of men possessed of professional and technical knowledge. No one who has been present at a meeting of German bank directors in Berlin, when some foreign enterprise has been under consideration, can have failed to be impressed by the animation with which it was discussed, and by the expert and comparative knowledge displayed by individual directors of the enterprise itself and of the conditions prevailing in the foreign country in which it was proposed to undertake it. He may have been led to reflect ruefully upon the different reception his project met with in his own country. He will recall the meeting of the London board; the difficulty of withdrawing its members even temporarily from their country pursuits and their obvious anxiety to lose no time in returning to them; most of them old men, many of them long retired from business; some of them ex-Government officials and the like, who have never been in business; a few ornamental titled persons; only one or two here and there who have no train to catch and are willing to discuss the matter in hand with attention, and, it may be, with understanding. "It would be idle to pretend that a board of this kind constitutes anything like the nexus between industry and finance which obtains in Germany, and which is very much to be desired in this country. It may be that we do not pay our men enough. A London director has to be content with an honorific position, a fee of a few hundred pounds a year, and, it must be added, a very exiguous degree of responsibility. That is not enough to attract men in the prime of life with expert or technical knowledge of industry and finance, who would have to submit to a reduction in the large incomes they are earning by the exercise of their special abilities if they were to accept a seat on the board of a bank. There are two things which a good man, in the business sense of the term, will not do without--pay and responsibility. Give him sufficient of the former, and you may saddle him with as much of the latter as you like. You may not always get good men by offering them good pay, but you will certainly not get them without doing so. Apparently shareholders are content so long as their profits are not reduced by more than nominal directors' fees. At a recent meeting of a bank with deposits of over £200,000,000 the proposal to increase the directors' fees to £1000 a year was met by the rejoinder from one of the shareholders present that he did not know what the directors would do with such a sum. "They manage these things differently in Germany. In the three banks to which we have already referred, after payment by the Deutsche Bank of 5 per cent. of the net profits to reserve, and of the ordinary dividend of 6 per cent., and by the Disconto-Gesellschaft and the Dresdner Bank of 4 per cent., the directors receive respectively 7 per cent., 7-1/2 per cent., and 4 per cent. (the Disconto's personally liable partners receive 16 per cent.) out of the remainder. The directors are bound by law to supervise all the details of the bank's business, and to keep themselves well informed as to its general policy and methods of management. They are bound by law to exercise the caution of a careful business man, and are liable to be sued for damages arising out of the crime or negligence of their employees. If cases of this kind are seldom brought to public notice, it is not because they do not occur, but because the directors, as a rule, prefer to pay up for the laches of their employees, as they can well afford to do out of their profits, rather than be haled before the Court." When Mr Webb comes to the question of the dangers resulting from monopoly, he finds that they lie chiefly in a restriction of facilities, and in raising the price exacted for them, and that in both respects the danger appears to be great. There is, he says, every reason to expect that the banker, as the nearest approach to the "economic man," will take the opportunity of raising his charges either by increasing the frequency and the rate of the commission exacted for the keeping of a small account, or by reducing the rate of interest allowed on balances, or adopting the common London practice of refusing it altogether. "The banker, who is not in business for his health, may be expected, on this side of his enterprise, to pursue the policy of 'charging all that the traffic will bear.' It would probably pay the banker actually to refuse small accounts, and to penalise the employment of cheques for small sums. This would be a social loss." With regard to the other side of his business, lending to the borrowers, Mr Webb thinks it need not be assumed that the monopolist banker will actually lend less, because he will seek at all times to employ all the capital or credit that he can safely dispose of, but Mr Webb thinks that he is likely, as the result of being relieved of the fear of competition; to feel free to be more arbitrary in his choice of borrowers, and therefore able to indulge in discrimination against persons or kinds of business that he may dislike; that he will raise his charges generally for all accommodation, again, theoretically to "all that the traffic will bear"; and, finally, that in times of stress with regard to all applicants, and at all times with regard to any applicant who was "in a tight place," that he will extort as the price of indispensable help a theoretically unlimited ransom. Such are the effects which Mr Webb fears from the process which has already put the control of the greater part of the banking facilities of England into the hands of five huge banks. He thinks that these things may happen long before it is a question of an absolute monopoly in one hand. A monopoly, he says, may be more or less complete, and the economic effects of monopoly may be produced to a greater or less degree at a point far below a complete monopolisation in a single hand. There is much truth in this contention of his. Amalgamation has now come to such a point that every new one not only brings absolute monopoly more closely in sight, but increases the ease with which agreements among the huge banks might suffice to produce the effects of monopoly without further amalgamations. Mr Webb goes on to argue that it is impossible to stop by legislative prohibition or restriction the progress towards economic monopoly where such progress is financially advantageous to those concerned, and that the only remedy ultimately by which the community can be protected from the dangers which he sees threatening it is for the community to take the monopoly into its own hands, and so to get rid, not of the monopoly, which, from the standpoint of national organisation, he thinks is advantageous, but of the motives leading to extortion. If, he says, "no shareholders are in control with their perpetual and insatiable desire for profit, there is no inducement to take advantage of the needs or helplessness of the customers by restricting service or raising prices." In this sentence, of course, he begs the whole question between the advantage of private enterprise and of Socialistic organisation. Private enterprise works for profit, and therefore makes as much profit as it can out of its customers. It is, therefore, according to Mr Webb's argument, probable that if private enterprise in banking is able to establish monopoly it will squeeze the public to the point of restricting banking facilities and making them dearer. No one can deny that there is some truth in this contention, but, on the other hand, it may very fairly be argued that modern business has perceived the great advantages of a big turnover and small profits on each transaction. The experience of the great insurance companies, and of great catering companies, and of enormous private organisations such as the Imperial Tobacco Company, has shown the enormous advantage of providing cheap facilities to the largest possible number of customers; so that fears of natural restriction of banking facilities, through monopoly, if they cannot be set altogether aside, are not by any means a certain consequence even of the establishment of monopoly in private enterprise. Still weaker is Mr Webb's assumption that if the interests of the shareholders with "their perpetual and insatiable desire for profit" were eliminated, cheap and plentiful banking facilities would inevitably result from bureaucratic management. The contrary has been shown to be the case in the examples of the Post Office, of the Telephone Service, and the London Water Supply. In the case of the telegraph and the telephones, the Government took over prosperous businesses, and has managed them at a loss. In the matter of the Post Office it is not possible to compare the Government with individual enterprise, but it will generally be admitted that the Telephone Service has by no means been improved since the Government took it over. Mr Webb points out that nationalisation, whether of banks or of other forms of enterprise, does not necessarily mean government under a Minister by a branch of the Civil Service. But it is impossible to ignore the fact that as soon as nationalisation takes place those who are responsible for the management of the enterprise are practically certain to develop the qualities and idiosyncrasies of civil servants, which are so unlikely to tend to elasticity, rapidity and efficiency in business management. In fact, Mr Webb practically grants this point by the very interesting development he suggests by which the two chief functions of banking should be differentiated, and one of them should be nationalised and the other should remain in the hands of private enterprise. He develops this truly ingenious suggestion as follows:-- "Just as we have (except for some obsolescent survivals) separated the function of issuing paper money from that of keeping current accounts, so we shall separate the function of keeping current accounts from that of money-lending. The habit of the British banker of combining in one and the same concern (_a_) the essentially routine business of keeping current accounts or receiving deposits; and (_b_) the much more difficult and hazardous business of lending capital to private traders, is not a necessary characteristic of banking organisation; and, whilst possibly the most profitable to the profit-seeking banker, this combination may not be the most advantageous from the standpoint of the community. "It may accordingly be suggested that the business of banking, as understood in this country, is destined to be further divided into two parts, one of which is ripe for immediate nationalisation, and need no longer be carried on for private profit, whilst the other should be the sphere of a number of separate and diversely specialised organisations catering for particular needs. The whole of the deposit and current account side of banking--with its services in the way of keeping securities, collecting dividends, meeting calls, making regular payments, and carrying through the purchase and sale of securities--ought to be united with the Post Office and Trustee Savings Banks and the money order and other postal remittance business, and run as a national service for the receipt and custody of cash, for the utmost possible development of the cheque system, and for the cheapest possible organisation of remittances. There is no longer any reason why this important branch of social organisation should be abandoned to the profit-maker, should be made the instrument of levying an unnecessarily heavy toll on the customers for the benefit of shareholders, and should now be exposed to the imminent danger of monopoly. "If the receipt and custody of deposits and the keeping of current accounts were made a public service the Government might invest the funds thus placed at its disposal in a variety of ways. A certain proportion, perhaps corresponding to what is now held as savings, would be invested, as at present, in Government securities--not Consols, but such as are repayable at par at fixed dates, including Treasury Bills and Terminable Annuities; and any increase in this amount would, in effect, release so much capital for other uses, by paying off part of the National Debt. But the bulk of the amount, corresponding with the proportion of their resources that the bankers now lend for business purposes, might be advanced, for terms of varying duration, partly to Government Departments and local authorities for all their great and rapidly extending enterprises, formerly abandoned to the profit-maker; and partly to a series of financial concerns, whose business it should be to discount the bills and satisfy the requests for loans of those profit-makers who now appeal to the bankers. But these financial concerns should be organised, it is suggested, very largely by trades and industries, specialising in particular lines, and devoted, so far as possible, to meeting the business needs of the different occupations. Whether they should be financial concerns, owned and directed by shareholders, and ran for their profit; or whether they might not, in some cases, be owned and directed by the great industrial associations and combinations that the Government is now promoting in the various industries, and be run for the advantage of the industries as wholes, may be a matter for consideration and possible experiment. In either case, the concerns to which the Government would lend its capital would, of course, have to be of undoubted financial stability to be secured, it may be, by large uncalled capital, or by the joint and several guarantees of a numerous membership; coupled, possibly, with a charge on the assets." At first sight this proposal to differentiate the functions of banking is somewhat startling, and one wonders whether it could possibly work. On consideration, however, there seems to be nothing actually impracticable about the scheme. The Government would presumably take over all the offices and branches of the banks of the country, and would therein accept money on deposit and current account, making itself liable to pay the money out on demand or at notice, as the case may be, just as is done by the existing banks; it would hold the necessary cash reserve, and it would apparently itself invest a certain proportion of the money in Government securities, as the banks do at present. The more difficult part of the banking business, the advancing of money to borrowing customers, it would hand over to financial institutions, created for this purpose presumably out of the ashes of the nationalised banking business. These institutions would make themselves responsible for the lending side of banking, and would obviously, and naturally, be allowed to make a profit on this side of the business. In this differentiation Mr Webb's ingenuity is seen at its very best. He reserves for the State that part of banking which is purely a matter of routine, and he leaves to private enterprise that part of it which requiries the elasticity and judgment and quickness in which the average bureaucrat is most likely to fail. A certain amount of friction may easily arise from this differentiation. The interest that the State would be enabled to allow to depositors would clearly depend to a great extent on the interest which it would be able to receive from the financial institutions engaged in lending the money. These institutions could naturally pay the State interest according to the rate which they were able to charge their borrowing customers, leaving themselves a margin for profit and for protection against the risk that their business would involve. It is obvious that there might at times be considerable difficulty in adjusting these two different points of view, and anybody who knows anything about the length of time and argument involved in inducing officials to make up their minds can only fear that occasional jarring in this connecting link between the two sides of banking might sometimes produce effects which would be awkward for the industry of the country. But apart from this obvious difficulty, can we contemplate with equanimity the prospect of the State monopoly of the ordinary banking facilities as they present themselves to the man in the street, namely, the provision of bank branches, the use of the cheque book, the custody of securities and any other articles that the customer wishes to leave with his bank? At present the ease and quickness with which these routine matters of banking are carried out in England are developed to a point which is the envy of foreign visitors. How would it be if every cashier of every bank were converted by the process of nationalisation from the kindly, businesslike human being as we know him into the kind of person who ministers to our wants behind the counters of the Post Office? As it is, we go into our bank, to present a cheque in order to provide ourselves with cash for the daily purposes of life; the cashier looks at the signature, recognises the customer, hands him over the money. If that cashier became a Government official how long would it take him to verify the signature, to see whether the customer really had a balance to his credit, and finally furnish him with what he wanted? It is obvious that the change suggested by Mr Webb, though it might work, could only work to the detriment of the convenience of the public, and his hopeful view that the elimination of the profits of the shareholders would mean that these profits would go into the pockets of the community in the form of cheapened facilities for banking customers is an ideal largely based on the assumption, that has so often been proved to be incorrect, that the State can do business as well and as cheaply as private enterprise. It is much more likely that after a few years' time the public would find the business of paying in and getting out its money a very much more tedious and irritating process than it is at present, and that the expenses of the matter would have grown to such an extent that the taxpayer might be called upon annually to make good a considerable loss. XIII FOREIGN CAPITAL _September_, 1918 The Difference between Aims and Acts--Should Foreign Capital be allowed in British Industry?--The Supremacy of London and National Trade--No Need to fear German Capital--We shall need all we can get--Foreign Shares in British Companies--Can and should the Disclosure of Foreign Ownership be forced?--The Difficulties of the Problem--Aliens and British Shipping--The Position of "Key" Industries--Freedom to Import and Export Capital our Best Policy. Many things that are now happening must be tickling the sardonic humour of the Muse of History. The majority of the civilised Powers are banded together to overthrow a menace to civilisation, carrying on a war which, it is hoped, is to produce a state of things in which mankind, purged of the evil spirits of militarism and aggression, is to start on a new order of co-operation. At the same time, while we are engaged in fighting under banners with these noble ideals inscribed on them, a large number of citizens of this country are airing proposals aimed at restrictions upon our intercourse with other nations, especially in the economic sphere. In last month's issue of this Journal a very interesting article, signed "Veritas," discussed the question as to how far it was in the power of the Allies to make use of the economic weapon against their enemies after the war. That such a question should even be mooted as an end to a war undertaken with these objects, shows what a number of queer cross-currents are at work in the minds of many of us to-day. But some people go much further than that, and are advocating policies by which we should even restrict our commercial and economic intercourse with our brothers-in-arms. If the clamour for Imperial preference is to have any practical result, it can only tend to cultivate trade within the British Empire, protected by an economic ring-fence at the expense of the trade which, before the war, we carried on with our present Allies. And a large number of people who, under the cover of Imperial preference, are agitating also for Protection for this country, would endeavour to make the British Isles as far as possible self-sufficient at the expense of their trade, not only with all their present Allies, but even with their brethren overseas. It is fortunately probable that the very muddle-headed reasoning which is producing such curious results as these, at a time when the world is preparing to enter on a period of closer co-operation and improved and extended relations between one country and another, is confined, in fact, to a few noisy people who possess in a high degree the faculty of successful self-advertisement. I do not believe that the country as a whole is prepared to relinquish the economic policy which gave it such an enormous increase in material resources during the past century, and has enabled it to stand forward as the industrial and financial champion of the Allied cause during the difficult early years of the war. Our rulers seem to be sitting very carefully on the top of the fence, waiting to see which way the cat is going to jump. They have made brave statements about abrogating all treaties involving the most-favoured nation clause and about adopting the principle of Imperial preference; but when their eager followers press them to do something besides talking about what they are going to do, they then have a tendency to return to the domain of common-sense and to point out that it is above all desirable that our economic policy should be in unison with that of the United States. Whatever may happen in the realm of trade and commercial policy, it would seem to be self-evident that with regard to capital it would be still more difficult and undesirable to impose restrictions than with regard to the entry of goods; and above all, it seems to be obvious that at any rate the free entry of capital into this country is a matter which should be specially encouraged when the war is over. At that difficult period we have to secure, if possible, that British industry shall be entirely unhampered in its endeavours to carry out the very puzzling operations involved by transferring its energies from war activities to peace production. However well the thing may be managed, it will be an exceedingly difficult and complicated operation. In certain industries, especially in shipbuilding and engineering, the building trade and all the allied enterprises, those who are responsible for their efficient management ought to be able to count upon a keen and widely-spread demand for their products. But in many industries there will necessarily be a good deal of doubt as to the kind of article which the consuming public at home and abroad is likely to want. There will be the great difficulty of sorting out the right kind of labour, of obtaining the necessary raw materials, and of getting the necessary credit and capital. That this huge problem can be solved, and solved so well that the country can go ahead to a great period of increased productivity and prosperity, I fully believe; but this can only be done if it is able to command the most efficient co-operation of all the various factors in production--if employers put their best brains and if workers put their best energy into the business, and if everything is done to make the whole machinery work with the utmost possible smoothness. One element in the machinery, and a highly important one, is the question of capital. During the war the citizens of this country have been trained to save and to put their money at the disposal of the Government with a success which could hardly have been expected when the war began. Whether they will continue to exercise the same self-denial when the war is over Is a very open question. At any rate, there can be no doubt that there will be a tendency among a very large number of people who have answered the appeal to save money for the war to listen with considerable indifference to any appeals that may be made to them to save money in order to provide industry with capital. All the capital that industry can get, it will certainly want. If, besides what it can get at home, it can also get a considerable amount from foreign countries, then its ability to resume work on a prosperous and profitable basis when the war is over will be very greatly helped. This would seem to be so obvious that one might have thought that even a Government which is believed to be flirting with what is called Tariff Reform would think twice before it imposed any restrictions on the free flow of foreign capital into British industry. In so far as foreigners lend to us we shall be able to import raw materials, to be worked up to the profit of British industry, in return for promises to pay--very timely convenience at a critical moment. Nevertheless, it would appear that obviousness of the desirability of foreign capital, from whatever source it comes, is by no means evident to those who are now in charge of the nation's destinies. At any rate, the Company Law Amendment Committee, which was appointed last February "to inquire what amendments are expedient in the Companies Acts, 1908 to 1917, particularly having regard to circumstances arising out of the war and of the developments likely to arise on its conclusion," seems to have thought it necessary to provide the Government with schemes by which alien capital could, if the Government thought necessary, be kept out of the country. It was a powerful and representative Committee, and it is very satisfactory to note that its own view concerning the policy to be pursued was strongly in favour of freedom. It points out in its Report that the question which lay in the forefront of its investigations was that of the employment of foreign capital in British industries. On the preliminary question of whether it was desirable that foreign capital should be freely attracted to this country, there was little, if any, difference of opinion. For this very sensible conclusion the Committee gives rather a curious reason. It states that the maintenance of London as the financial centre of the world is of the first importance for the well-being of the Empire, and that anything which could impede or restrict the free flow of capital to the United Kingdom would, in itself, be prejudicial to Imperial interests. Now, of course, if is entirely true that the maintenance of London as a financial centre is very important, but I venture to think that those who are most jealous concerning the prestige of London and the importance of its financial operations would say that it ranks only second to the industrial efficiency of the country as a whole and cannot, in fact, be long maintained unless there is that industrial efficiency behind it, providing a surplus out of which London may be able to finance the world and so, incidentally, and as a side issue, be to a great extent helped by foreign capital to do so. It is surely evident that a financial supremacy which was based merely on a jobbing business, gathering in capital from one nation and lending it to another, would be an extremely precarious and artificial structure, the continuance of which could not be relied on for many decades. Finance can only flourish healthily and wholesomely in a country which produces a considerable surplus of goods and services which it is prepared to place at the disposal of the world. Owing to the possession of this surplus it becomes a market in capital, and so gets a considerable jobbing business, but the backbone and foundation of its position must be, in the end, industrial activity in the widest sense of the word. It therefore seems that the Committee's argument that the free flow of capital is essential to the maintenance of London's finance might have been reinforced by the very much stronger one that it is essential to the recuperative power of British industry, which will need every assistance it can get in order to re-establish itself after the war. The Committee points out that "any legislation which would tend to impede or restrict the free flow of capital here by imposing restrictions or creating impediments ought to be jealously watched, lest in the endeavour to prevent what has come to be called 'peaceful penetration' the normal course of commercial development should be arrested," and it goes on to observe that at the end of the war, "if it should be concluded upon such terms as we hope and anticipate," it is not likely that our present enemies will be in possession of capital looking for employment abroad. This is certainly very true. By the time the Germans have made the reparations, which will involve so much rebuilding in Belgium and in the parts of France that they have overrun and swept clean of industrial plant, and have in other respects made good the damage which their ruthless and uncivilised methods of warfare have inflicted, not only on their enemies, but on neutrals, it does not seem likely that they will have much to spare for capital expansion in foreign countries, especially when we consider how many problems of reconstruction they will themselves have to face at home. "To impose restrictions upon the influx of capital," the Report continues, "aimed at our present enemies, with the result of deterring the flow of capital from (say) America, would be a policy highly injurious to the economic recovery and renewed prosperity of this country after the war. For these reasons we are of opinion that in all amendments of the law falling within the scope of our reference, the expediency of the attraction of foreign capital should be steadily borne in mind." The Committee thus seems to have thought it necessary to administer comfort to anybody who might fear that the unrestricted flow of capital from abroad might involve this country in the terrible danger of being assisted in its industrial recovery by capital from Germany. If there were, in fact, any possibility of this assistance being given, it would seem to be extremely short-sighted not to allow British industry to make use of it. In the matter of "peaceful penetration," we have ourselves in the past done perhaps as much as all the rest of the countries of the world put together, with the result that we have greatly stimulated the development of economic prosperity all over the world; in fact, it may be argued that the great progress made in the last century in man's power over the forces of Nature has been to a great extent due to the freedom with which we invested capital abroad and opened a free market to the products of all other countries. At a time when, owing to exceptional circumstances, we ourselves happen to be in need of capital, it would appear to be an extremely short-sighted policy to refuse to admit it, wherever it came from. We have excellent reason to known that, when capital is once invested in a foreign country, it is largely in the power of the inhabitants and Government of that country to control its working. Any foreigner, even an enemy, who set up a factory in England after the war would be doing just the very thing which we most of all want to be done, namely, setting the wheels of industry going, relieving the labour market from a possible glut after demobilisation, and helping that difficult stage of transition from war work to peace work. The Committee, however, considers that "at the root of the whole matter lies a question which is not one of Company Law amendment at all, but one of high political and economic policy." It does not fall within its province "to inquire whether the traditional policy of this country to admit and welcome all who seek our shores and submit themselves loyally to our laws ought, in the case of some and what aliens, to be revised"; or whether discrimination ought to be made between an alien of one nationality and an alien of another. "As regards aliens who are now our enemies, it may be that the British Empire may adopt the policy that a special stigma ought to be attached to the German, and that neither as an individual nor as a firm, nor as a corporation, ought he, for a time at any rate, to be admitted to commercial fellowship or to any fellowship with the civilised nations of the world." It need not be said that any attempt to apply this stigma in practice would be extremely difficult to carry out, would involve all kinds of difficulties and complications in trade and in finance, and that the threat of it is more likely than anything else to stiffen the resistance of the Germans and to force them to rely on their militarist leaders as their only hope of salvation. However, the Committee points out that recent legislation shows a desire to ascertain and record the extent to which aliens are active in commerce here, and thinks it necessary to make provision to meet the requirements of the Government in case our rulers should decide to impose the restrictions which its own common-sense shows it are so undesirable. If, it says, foreign capital is to be attracted here, it must be represented either by shares or by debentures. "The question, therefore, is whether restrictions ought to be imposed upon the extent to which the control of the company shall be allowed to reside in aliens, either by reason of their holding a majority of the shares, or of the debentures, or by reason of their obtaining a majority upon the Board of Directors; and, if so, how disclosure of their alien character is to be enforced." It goes on to point out the great difficulties which present themselves in the way of securing disclosure of nationality and ensuring that aliens shall not command the control. "The law of trusts," it says, "is firmly established in this country. If A, be the registered holder of a share, he is not necessarily the beneficial owner. He may be a trustee for B. To enact that the registered holder must be a British subject effects nothing, for B. may be an alien and an enemy. Suppose, however, that you enact that A., when his share is allotted or transferred to him, shall make a declaration that he holds in his own right, or that he holds in trust for B., and that both A. and B. are British subjects. There is nothing to prevent the creation of a new trust the next day, under which C., an alien enemy, will be the person beneficially entitled. Further, at the earlier date (the date of allotment or transfer) the facts may be that A. (a British subject) is trustee for B. (a British subject), but that B. (unknown to A.) is a trustee for C., an alien enemy. The fact that B. is trustee for C. would be purposely withheld from A., and A.'s declaration that he was simply trustee for B. would be perfectly true. To require that A. should make a declaration at short intervals (say once a month), or that A., B., C., and so on, should all make declarations would be, of course, so harassing and so detrimental as to be, as a matter of business, impossible. The only effectual way of dealing with the matter would be by a provision that the share might be forfeited, or might be sold and the proceeds paid to the owner, if an alien should be, or become beneficially entitled to or interested in the share. Such a provision does not in the general case commend itself to us as practical or desirable." Any endeavour to control the nationality of the Board of Directors produces similar difficulties. It is easy to ensure that they shall be all, or a majority of them, British subjects, but there is no means of ensuring that their actions shall not be controlled by aliens whose nationality is not disclosed. Having pointed out these difficulties, which seem in effect to reduce the whole question to the domain of farce, the Committee goes on to inquire whether it is desirable to legislate in the direction of forbidding the employment of foreign capital here in Joint Stock Companies, unless:-- (1) There is disclosure of the alien character of the foreign owner; (2) Not more than a certain proportion of the Company's shares are held by aliens; (3) The Board, or a certain proportion of the Board, shall not be alien; and, further, whether it is desirable to discriminate between one alien and another, and to legislate in that direction in the case of certain aliens and not of others. In answering these questions, the Committee decided that it was necessary to discriminate between certain classes of companies--Class A being companies in general, Class B being companies owning British shipping, and Class C companies engaged in "key" industries. With regard to companies in Class A, they recommend that no restrictions at all be imposed, but, nevertheless, they elaborate a scheme of enforcing disclosure of alien ownership if that policy seems to the legislature to be right. This scheme, the Committee admits, is necessarily detailed and laborious; it puts difficulties in the way of investment in English securities, whether by British subject or alien. It would supply, no doubt, to the Board of Trade useful information as to the extent of foreign investment in English industries, but the price paid for this advantage would, in the Committee's opinion, be too great. If adopted, the scheme could be evaded. And, with regard to companies in general, the Committee's recommendations go the length of allowing complete freedom as to the nationality both of the corporators and of the Board. They would allow, for instance, American capitalists to come here and establish themselves as a British corporation in which all the corporators and all the directors were American, and so with every other nationality. They would make no discrimination between aliens of different nationality, for, if there is to be such discrimination, there must be the machinery of disclosure, involving a deterrent effect and acting prejudicially in the case of all investors. But, if any such discrimination were adopted, the Committee thinks that at any rate it should be limited to some short period, say, three or five years after the end of the war. If, however, the legislature should decide upon the necessity of disclosure of alien ownership, the Committee draws up the following scheme for securing it in Paragraph 15 of its Report: 15. For reasons already given, it is not possible efficiently to ensure full disclosure, but the following suggestions would, in the absence of deliberate and intentional evasion (which would be quite possible), meet the point and in the large majority of cases would disclose the extent of alien interests and control:-- (a) Every allottee of shares upon allotment and every transferee upon transfer should be required to make a declaration disclosing his nationality and whether he is the beneficial owner of the shares, and, if not, for whom he is trustee, and what is the nationality of the beneficial owner, and should undertake within a limited time, after any change in the beneficial ownership, to communicate the new facts to the company. In default of compliance with the above, the shares should, at the option of the company, either (1) be liable to sale by the company and the holder be entitled only to the proceeds; or (2) be liable to forfeiture and the holder be entitled to receive payment from the company of 10 per cent. less than the market value of the share, or if there be no market value, then 10 per cent. less than the value at which the share would be taken for _ad valorem_ stamp duty if it were the subject of transfer. In case the company made default in exercising its power, the Board of Trade should be authorised to require the above sale to be made. (b) Every director, upon coming into office, should be required to make a declaration disclosing his nationality and stating whether in his office he is wholly free from the control or influence of any alien, and if he is not so free, stating by whose directions or under whose control or influence he is to act and what is the nationality of that person, and should undertake within a limited time after any change in that state of things to communicate the facts to the Board and procure a statement of the facts to be entered in the Board minutes. Any breach of these obligations to be visited with a penalty which should be severe. (c) The company should be required to enter in the register of members, against the name of every registered member, his nationality as disclosed by the declaration. In the case where the registered member is not the beneficial owner, the company should be required to record, not in the register, but in another book, the nationality of the beneficial owner as disclosed by the declaration, and, as regards the latter book, to record the nationality of any new beneficial owner when and as disclosed by the registered member. These particulars should be required to be included in the annual list under Section 26 of the Act of 1908. That list would thus become not a list of members only, but a list of members with the addition of beneficial owners. The company should, further, be required to add to the annual list a summary of the result as regards nationality showing (1) as regards registered members, how many are British subjects and how many shares they hold, and how many are aliens and how many shares they hold, subdividing the number of the aliens and their holdings under their respective nationalities; and (2) as regards the registered members who are British subjects; (a) how many of them are the beneficial owners and how many shares they hold, and (b) as regards the rest, what are the nationalities and holdings of the beneficial owners. With regard to companies owning British shipping, the Committee is satisfied that the total exclusion of aliens from ownership of British ships is not essential for national safety and is not expedient. It therefore considers that in these companies it will be sufficient to ensure that not more than 20 per cent. of the power of control should be in alien hands. It thinks that there should be this, limit of 20 per cent., that not more than 20 per cent. of the share capital should be held by aliens, and that those shares should carry no more than 20 per cent. of the voting power. Alternatively, it considers that the alien holdings should carry no vote at all, but that is a point of detail deserving further consideration. It follows that in this class there must, in the opinion of the Committee, be disclosure of nationality, which should be enforced in the manner detailed above, which, on its own admission, is not proof against deliberate evasion. With regard to companies carrying on "key" industries, a very complicated system is recommended. In the first place, the question whether a company is one to carry on a "key" industry would seldom or never arise at the time of its registration. The modern Memorandum of Association includes so many things that a "key" industry might be within the powers of almost any company. The question would thus arise when the company has got to work. And so the Committee thinks that the Board of Trade should be empowered at any time to make an inquiry whether any company is carrying on a "key" industry and, if it finds that it is, then the company shall, at the direction of the Board of Trade, require every registered member to make a declaration such as, under the disclosure procedure already described, he would have had to make if he were at the date of the notice about to receive an allotment or become a transferee. Further, the holders of share warrants to bearer would be required to surrender their warrants for cancellation and have their names entered in the register, and all subsequent allottees and transferees would be subject to the obligation of disclosure, as already described, and the limits of 20 per cent. recommended in the case of merchant shipping would then be made applicable. Under the system of disclosure it follows that bearer shares are impossible, but, if disclosure be negatived, the opinion of the Committee is in favour of the maintenance of the bearer share. It should be mentioned that one member of the Committee produced a reservation strongly combating even the very moderate views expressed by the Committee on the subject of British shipping and "key" industries. It should be noted, however, that he attended very few meetings of the Committee. He points out that, with regard to the registration of ships as British when they are owned by a company which has alien shareholders, "it is not usually a question of permitting a ship which would in any case be British to be under the control of aliens; the question is whether, if a number of persons, some or all of whom are aliens, own a ship, they should be permitted to register it as a British ship by forming themselves into a British company and establishing an office in the British Dominions. If," he observes, "they were not allowed to do so they would still own the ship, but register it as a foreign ship in some other country. It appears that a number of ships were registered here before the war by companies with alien shareholders (some even with enemy shareholders). They were managed in this country; the profits earned by them were subject to our taxation; they were obliged to conform to the regulations of our Merchant Shipping Acts; they carried officers and men who were members of the Royal Naval Reserve; on the outbreak of war our Government was able to requisition the ships owing to their British registration and without regard to the nationality of the shareholders in the companies owning them." It appears to this recalcitrant member--and there is much to be said for his view--that all these consequences have been highly advantageous to this country. On the subject of "key" industries he is equally unconvinced. It appears to him that "the important thing is to get the industries established in this country, and that the question of their ownership is of secondary consequence." It is very satisfactory to note, in view of wild talk that has lately been current with regard to restrictions on our power to export capital, that the Committee has not a word to say for any continuance, after the war, of the supervision now exercised over new issues. The restrictions which it did recommend, while admitting their futility, on imports of capital into our shipping and "key" industries were evidently based on fears of possible war in future. The moral is that this war has to be brought to such an end that war and its barbarisms shall be "spurlos versenkt," and that humanity shall be able to go about its business unimpeded by all the stupid bothers and complications that arise from its possibility. XIV NATIONAL GUILDS _October_, 1918 The Present Economic Structure--Its Weaknesses and Injustices--Were things ever better?--The Aim of State Socialism--A Rival Theory--The New Movement of Guild Socialism--Its Doctrines and Assumptions--Payment "as Human Beings"--The "Degradation" of earning Wages--Production irrespective of Demand--Is that the Real Meaning of Freedom?--The Old Evils under a New Name--A Conceivably Practical Scheme for some other World. Most people will admit that there are many glaring faults in the present economic structure of society. Wealth has been increased at an exhilarating pace during the last century, and yet the war has shown us that we had not nearly realised how great is the productive power of a nation when it is in earnest, and that the pace at which wealth has been multiplied may, if we make the right use of our plant and experience, be very greatly quickened in the next. The great increase in wealth that has taken place has been certainly accompanied by some improvement in its distribution; but it must be admitted that in this respect we are very far from satisfactory results, and that a system which produces bloated luxury plus extreme boredom at one end of the scale and destitution and despair at the other, can hardly be called the last word, or even the first, in civilisation. The career has been opened, more or less, to talent. But the handicap is so uneven and capricious that only exceptional talent or exceptional luck can fight its way from the bottom to the top, the process by which it does so is not always altogether edifying, and the result, when the thing has been done, is not always entirely satisfactory either to the victorious individual or to the community at whose expense he has won his spoils. The prize of victory is wealth and buying power, and the means to victory is, in the main, providing an ignorant and gullible public with some article or service that it wants or can be persuaded to believe that it wants. The kind of person that is most successful in winning this kind of victory is not always one who is likely to make the best possible use of the enormous power that wealth now puts into the hands of its owner. Those who are fond of amusing themselves by looking back, through rose-coloured spectacles, at more or less imaginary pictures of the good old mediaeval times, can make out a fair case for the argument that in those days the spoils were won by a better kind of conqueror, who was likely to make a better use of his victory. In times when man was chiefly a predatory animal and the way to success in life was by military prowess, readiness in attack and a downright stroke in defence, it is easy to fancy that the folk who came to the top of the world, or maintained a position there, were necessarily possessed of courage and bodily vigour and of all the rough virtues associated with the ideal of chivalry. Perhaps it was so in some cases, and there is certainly something more romantic about the career of a man who fought his way to success than about that of the fortunate speculator in production or trade, to say nothing of the lucky gambler who can in these times found a fortune on market tips in the Kaffir circus or the industrial "penny bazaar," Nevertheless, it is likely enough that even in the best of the mediaeval days success was not only to the strong and brave, but also went often to the cunning, fawning schemer who pulled the brawny leg of the burly fighting-man. However that may be, there can be no doubt that now the prizes of fortune often go to those who cannot be trusted to make good use of them or even to enjoy them, that Mr Wells's great satire on our financial upstarts--"Tono-Bungay"--has plenty of truth in it, and that our present system, by its shocking waste of millions of good brains that never get a chance of development, is an economic blunder as well as an injustice that calls for remedy. This being so, it is the business of all who want to see things made better to examine with most respectful attention any schemes that are put forward for the reconstruction of society, however strongly we may feel that real improvement is only to be got, not by reconstructing society but by improving the bodily and mental health and efficiency of its members. The advocates of Socialism have had a patient and interested hearing for many decades, except among those to whom anything new is necessarily anathema. There was something attractive in the notion that if all men worked for the good of the community and not for their own individual profit, the work of the world might be done much better, because all the waste of competition and advertisement would be cut out, machinery would be given its full chance because it would be making work easier instead of causing unemployment, and a greater output, more evenly distributed, would enable the nation to breed a race, each generation of which would come nearer to perfection. So splendid if true; but one always felt misgivings as to whether the general standard of work might not deteriorate instead of improve if the stimulus of individual gain were withdrawn; and that the net result might probably be a diminished output consumed by a discontented people, less happy under a possibly stupid and short-sighted bureaucracy, than it is now when the chances of life at least give it the glorious uncertainty of cricket. Since the war our experiences of official control, even when working on a nation trained in individual initiative, have increased those misgivings manifold; and hundreds of people who were Socialistically inclined in 1914 will now say that any system which handed over the regulation of production and distribution to the State could end only in disaster, unless we could first build up a new machinery of State and a new people for it to work on. Partly, perhaps, owing to this discredit into which the doctrines of State Socialism have lately fallen, increasing attention has been given to a body of theory that was already active before the war and advocates a system of what it calls Guild Socialism, under which industry is to be worked by National Guilds, embracing all the workers, both by brain and by hand, in the various kinds of production. Its advocates are, as far as I have been able to study their pronouncements, decidedly hostile to State Socialism and needlessly rode to some of its most prominent preachers, such as Mr and Mrs Webb, who at least merit the respect due to those who have given lives of work to supporting a cause which they believe to be sound and in the best interests of mankind. But in spite of their chronic and sometimes ill-mannered facetiousness at the expense of State Socialism and its advocates, the Guild Socialists, as we shall see, have to rely on State control for very important wheels in their machinery and leave gaps in it which, as far as disinterested observers can see, can only be filled by still further help from the discredited State. It is no disparagement of the efforts of these writers and thinkers to say that their sketch of the system that they hope to see built up is somewhat hazy. That is inevitable. They are groping towards a new social and economic order which, in their hope and belief, would be an improvement. To expect them to work it out in every detail would be to ask them to commit an absurdity. The thing would have to grow as it developed, and we can only ask them to show us a main outline. This has been done in many publications, among which I have studied, with as much care as these distracting times allow, "Self-Government in Industry," by G.D.H. Cole, "National Guilds," by A.R. Orage (so described on the back of the book, but the title-page says that it is by S.G. Hobson, edited by A.R. Orage), and "The Meaning of National Guilds," by C.E. Bechhofer and M.B. Reckitt. These authorities seem to agree in thinking (1) that the capitalist is a thief, (2) that the manual worker is a wage slave, (3) that freedom (in the sense of being able to work as he likes) is every man's rightful birthright, and (4) that this freedom is to be achieved through the establishment of National Guilds. As to (1) Messrs Bechhofer and Reckitt speak on page 99 of their book of the "felony of Capitalism" as a matter that need not be argued about. Mr Cole makes the same assumption by observing on page 235 of the work already mentioned that "to do good work for a capitalist employer is merely, if we view the situation rationally, to help a thief to steal more successfully." Well, this view of capital and the capitalist may be true. Mr Cole is a highly educated and gifted gentleman, and a Fellow of Magdalen. He may have expounded and proved this point in some work that I have not been fortunate enough to read. But as the abolition of the capitalist is one of the chief aims put forward by these writers it seems a pity that they should thus first assert that he is a thief to be stamped out, instead of explaining the matter to old-fashioned folk who believe that capitalists are, in the main, the people (or representatives of the people) who have equipped industry, and enormously multiplied its efficiency and output, and so have enabled the greater part of the existing population of this country (and most others) to come into being. But to the Guild Socialists the identity of robbery with capitalism seems to be so self-evident that it needs no proof. Next, as to the wage system. They seem to think that to earn a wage is slavery and degradation, but to receive pay is freedom. With the best will in the world I have tried to see where this immense difference between the use of two words, which seem to me to mean much the same thing, comes in in their view, but I have not succeeded. Perhaps you will be able to if I give you Mr Cole's own words. On page 154 of the book cited, he says that the wage system is "the root of the whole tyranny of capitalism," and then continues: "There are four distinguishing marks of the wage system upon which National Guildsmen are accustomed to fix their attention. Let me set them out clearly in the simplest terms, "1. The wage system abstracts 'labour' from the labourer, so that the one can be bought and sold apart from the other. "2. Consequently, wages are paid to the wage worker only when it is profitable to the capitalist to employ his labour. "3. The wage worker, in return for his wage, surrenders all control over the organisation of production. "4. The wage worker, in return for his wage, surrenders all claim upon the product of his labour. "If the wage system is to be abolished, all these four marks of degraded status must be removed. National Guilds, then, must assure to the worker, at least, the following things:-- "1. Recognition and payment as a human being, and not merely as a mortal tenement of so much labour power for which an efficient demand exists. "2. Consequently, payment in employment and in unemployment, in sickness and in health alike. "3. Control of the organisation of production in co-operation with his fellows. "4. A claim upon the product of his work, also exercised in co-operation with his fellows." Now, looking with a most dispassionate eye and an eager desire to find out what it is that Labour and its spokesmen are grouping after, can one find in these "marks of degraded status" any serious evil, or anything that is capable of remedy under any conceivable economic system? In all of them the wage-earner is on exactly the same footing as the salary-earner or the professional piece-worker. The labour of the manager of the works can also be abstracted from the manager, and can be bought and sold apart from him. One would have thought that this fact is rather in favour of the manager and of the wage-earner--or would Mr. Cole prefer that the latter should be bought and sold himself? The salary-earner and the professional are only employed when somebody wants them. The manager's term of employment is longer, but the professional pieceworker, such as I am when I write this article, has usually no contracted term, and is only paid for actual work done. I also have no control over the organisation of the production of _Sperling's Journal_ or any other paper for which I do piecework. I am very glad that it is so, for organising production is a very difficult and complicated and risky business, and from all the risks of it the wage-earner is saved. The salary-earner or the professional, when once his product is turned out and paid for, also surrenders all claim upon the product. What else could any reasonable wage-earner or professional expect or desire? The brickmaker or the doctor cannot, after being paid for making bricks or mending a broken leg, expect still to have the bricks or the leg for his very own. And how much use would they be to him if he could? Unless he were to be allowed to sell them again to somebody else, which, after being once paid for them, would merely be absurd. But when we come to the remedies that Mr. Cole suggests for these "marks of degraded status," we find in the forefront of them that the worker must be secured "payment as a human being, and not merely as a mortal tenement of so much labour power for which an efficient demand exists." This, especially to an incurably lazy person like myself, is an extremely attractive programme. To be paid, and paid well, merely in return for having "taken the trouble to be born," is an ideal towards which my happiest dreams have ever struggled in vain. But would it work as a practical scheme? Speaking for myself, I can guarantee that under such circumstances I should potter about with many activities that would amuse my delicious leisure, but I doubt whether any of them would be regarded by society as a fit return for the pleasant livelihood that it gave me. And human society can only be supplied with the things that it needs if its members turn out, not what it amuses them to make or produce, but what other people want. And It is here that the National Guildsmen's idea of freedom seems, in my humble judgment, to be entirely unsocial As things are, nobody can make money unless he produces what somebody wants and will pay for. Even the capitalist, if he puts his capital into producing an article for which there is no demand, will get no return on it. In other words, we can only earn economic freedom by doing something that our fellows want us to do, and so co-operating in the work of supplying man's need. (That many of man's needs are stupid and vulgar is most true, but the only way to cure that is to teach him to want something better.) The Guildsmen seem to think that this necessity to make or do something that is wanted implies slavery, and ought to be abolished. They are fond of quoting Rousseau's remark that "man is born free and is everywhere in chains." But is man born free to work as and on what he likes? In a state of Nature man is born--in most climates--under the sternest necessity to work hard to catch or grow his food, to make himself clothes and build himself shelter. And If he ignores this necessity the penalty is death. The notion that man is born with a "right to live" is totally belied by the facts of natural existence. It is encouraged by humanitarian sentiment which, rightly makes society responsible for the subsistence of all those born under its wing; but it is not part of the scheme of the universe. Such are a few of the weaknesses involved by the theoretical basis on which Guild Socialism is built. When we come to its practical application we find the creed still more unsatisfactory. Even if we grant--an enormous and quite unjustified assumption--that the Guildsman, if he is to be paid merely for being alive, will work hard enough to pay the community for paying him, we have then to ask how and whether he will achieve greater freedom under the Guilds than he has now. Now, freedom is only to be got by work of a kind that somebody wants, and wants enough to pay for it. And so the consumer ultimately decides what work shall be done. The Guildsman says that the producer ought to decide what he shall produce and what is to be done with it when he has produced it. "Under Guild Socialism," says Mr Cole,[1] "as under Syndicalism, the State stands apart from production, and the worker is placed in control." Very well, but what one wants to know is what will happen if the Guilds choose to produce things that nobody wants. Will they and their members be paid all the same? Presumably, since they are to be paid "as human beings" and not because there is a demand for their work. But if so, what will happen to the Guildsman as consumer? There will be no freedom about his choice of things that he would like to enjoy. And what about admission to membership of a Guild, the price at which the Guilds will exchange products one with another, and the provision of capital? The nearest approach to an answer to these questions is given by Messrs Bechhofer and Reckitt in Chapter VIII, of the "Meaning of National Guilds." This chapter describes "National Guilds in Being." It tells us that "each man will be free to choose his Guild," which sounds very pleasant, but is completely spoilt by the end of the sentence, which says "and actual entrance will depend on the demand for labour." It sounds just like a capitalistic factory. And then--"Labour in dirty industries, sewaging, etc.--will probably be in the main of a temporary character, and will be undertaken by those who are for the time unable to obtain an entry elsewhere." Most sensible, but where is the freedom? The Guildsman will not be able to do the work that he wants to do unless there is a demand for that kind of labour, and in the meantime, just like the unemployed in the days of darkness, he will be set to cleaning the streets and flushing the drains. Messrs. Bechhofer and Reckitt are, in fact, so sensible and practical that they abandon altogether the freedom of the producer to produce what he likes. "Indeed," they write, "a query often brought to confound National Guildsmen is this: What would happen to a National Guild that began to work wholly according to its own pleasure without regard to the other Guilds and the rest of the community? We may reply, first, that this spirit would be as unnatural among the Guilds as it is natural nowadays with the present anti-communal, capitalist system of industry" (but under the present system any one who worked without regard to the rest of the community would very soon be in the hands of a Receiver); "secondly, if it did arise in any Guild, this contempt for the rest of the community would be met by the concerted action of the other Guilds. The dependence of any individual Guild upon the others would be necessarily so great that a recalcitrant Guild would find itself at once in a most difficult position, and a Guild that pressed forward demands that were generally felt by the rest of the community to be impossible or unreasonable would soon be brought back into line again." [Footnote 1: "The Meaning of Industrial Freedom," page 39.] Of course; but if so, where is the Guildsman's alleged freedom? Every Guild and every Guildsman would have to adapt himself to the wants of the community, just as all of us who work for our living have to do now. He would be no more free than I am, and I am no more free than the person who is sometimes described as a "wage slave." The Guildsman might be happier in the feeling that he worked for a Guild rather than a capitalist employer, but this is by no means certain. The writers just quoted show with much frankness and good sense that there would be plenty of opening for friction, suspicion, discontent and strikes. "A Guild," they say, "that thought itself ill-used by its fellows would be able to signify its displeasure by the threat of a strike." The officials of the Guild are to be chosen by the "men best qualified to judge" of their ability, whoever they may be, and every such choice would be ratified by the workers who are to be affected by it. "The Guild would build up in this way a pyramid of officers, each chosen by the grade immediately below that which he is to occupy," Did not the Bolsheviks try something like this system, with results that were not conducive to efficient production? And to meet the danger that the officials as a whole might combine "in a huge conspiracy against the rank and file," Messrs Bechhofer and Reckitt can only suggest vigilance committees within the Guilds. In a word, Guild Socialism seems to be a system that might possibly be worked by a set of ideally perfect beings; but as folk are in this workaday world one can only doubt whether it would be conducive either to freedom, efficiency or a pleasant life for those who lived under it. XV POST-WAR FINANCE _November_, 1918 Taxation after the War--Mr. Hoare's Scheme described and analysed--The Position of the Rentier--Estimates of the Post-War Debt--The Compulsory Loan Proposal--What Advantages has it over a Levy on Capital?--The Argument from Social Justice--Questions still to be answered--The Choice between a Levy and Stiff Taxation--Are we still a Creditor Nation?--Our Debt not a Hopeless Problem--Suggestions for solving it. Under this heading two very interesting articles were contributed to the October issue of _Sperling's Journal_ by Mr Alfred Hoare and an "Ex-M.P.," and the subject is clearly one to which, now that the end of the war has been brought appreciably nearer by the feats of the Allied armies, too much thought and discussion can hardly be given. How are we going to face the problem that has been built up for us by the bad finance of the war, the low proportion of its cost that has been paid for out of taxation, and the consequent huge debt with which--it is already over £7000 millions gross--the State will be saddled? Mr. Hoare answered the question by proposing a scheme of taxation of what he called Rente, by which he meant all forms of "unearned income"--"rentals from freehold and leasehold property, interest upon loans whether public or private, and dividends on joint stock companies or sleeping partnerships." He added that in his opinion earned income above a certain figure might reasonably be added to this category on the ground that it has, in some instances, very much the same characteristics as unearned; the income of a "successful professional man or clown or jockey or opera star" being due to peculiar qualities; "and it would be no great hardship if earned income above, say, a thousand a year for a married couple, with an additional three hundred for every child under twenty-five years of age were regarded as unearned, and taxed accordingly." Income was thus the basis of Mr Hoare's scheme. Rente he regards as an agency regulating distribution, and requiring to be constantly checked. "It is," he says, "an elementary principle of social health, and economic prosperity that the share of the national wealth enjoyed by the Rentier, by the owner, that is, of unearned income, should not be excessive," Most people who can follow his admirable example and take a detached and unbiassed view of questions which affect their pocket so closely, will agree with him In this opinion. The Rentier lives on the proceeds of work done in the past by him or by some other person; and it is not good for our economic health that he should grow too fat at the expense of those who are working now, lest the latter be discouraged and work with less spirit. At the same time we have to remember that the work done in the past by the Rentier or those whom he represents, has given us the plant and equipment (in the widest sense of the phrase) with which we are now working. If, therefore, we penalise the Rentier too severely we shall discourage his future creation; the present race of earners, if they see that those who are living on past savings are shorn too close will be deterred from saving, will put their surplus earnings into extravagant spending instead of into plant and equipment, and the economic future of the nation, and of the world, will be _pro tanto_ less hopeful. If once our fiscal system is going to propagate the view--already so rampant among the happy-go-lucky citizens of this unthrifty people--that the worst thing to do with money is to save it there will be bad times ahead for our industry and commerce, which can only get the capital that it needs if somebody saves it. Mr Hoare's elaborate calculations led him to conclusions involving a tax of 11s. 6d. in the pound on unearned income. This figure is, I hope, needlessly high. To arrive at it he assumed that peace might be concluded towards the end of 1919, and that when peace conditions are fully re-established--which will take, he thinks, three years, the National Debt will amount to £10,000 millions, involving annual interest of £500 millions, which, added to the total Rente of the country in 1913 (which he made out to be £520 millions), will make a total Rente in 1923 of £1020 millions. His view is that the burden of the National Debt should be thrown by means of the income tax upon the national Rente, not taxing it out of existence, but by such a scale of taxation as would reduce the net Rente of the country to approximately the level at which it stood before the war. There is good reason to hope that Mr Hoare's figures will not be reached. He took £10,000 millions merely as a round sum. Mr Bonar Law, it will be remembered, worked out our net debt on March 31st next at £6856 millions, taking credit for half the estimated amount of loans to Allies as a good asset. If we prefer as sounder bookkeeping to write off the whole of our loans to Allies for the time being and to apply anything that we may hereafter receive on that account to Sinking Fund, the debt, on the Chancellor's figures, will amount on March 31st (if the war goes on till that date) to £7672 millions. Even if the war went on for six months more it ought not to bring the debt up to more than £9000 millions at the outside. It is quite true, as Mr Hoare says, that the return to peace conditions will be a gradual process, and that expenditure will not come back to a peace basis all at once. Demobilisation and other matters which were left, by our cheery Chancellor, out of the airy after-war balance-sheet that he so light-heartedly constructed, may cost £1000 millions or more before we have done with them. But against them we can set a string of recoverable assets which, in the Chancellor's hands, footed up a total of £1172 millions--balances in agents' hands, due debts (apart from loans to Allies), land, securities, ships, buildings, stores In Munitions Department, arrears of taxation, and so on. With his 11s. 6d. in the pound on unearned and 6s. in the pound on earned incomes, Mr Hoare expects a revenue of £620 millions, "or enough to provide for the interest of the debt with a 1 per cent. Sinking Fund, and leave £20 millions towards the Supply Services." But Mr Bonar Law anticipated a total peace Budget (if the war ended by March 31st next) of £650 millions. This was probably too low, but we may at least hope that Mr Hoare has gone rather further than was necessary to be on the safe side. In the other article on the subject of post-war debt contributed to the last number of this Journal, an "Ex-M.P." plumped for a somewhat novel variety of the Levy on Capital, in the shape of a Compulsory Loan, bearing no interest and repayable in 100 years. Each individual citizen to be made to subscribe to the extent of 20 per cent. of his possessions. Ten per cent. of the amount due to be paid on application, 10 per cent. six months after allotment, and 80 per cent. on January 1st of the following year. When desired, the Government to advance at 5 per cent. the money necessary for the payment subsequent to allotment, full repayment of such advances to be made within eight years. A Sinking Fund to be established to redeem the loan at maturity. But is there any real advantage in this scheme over the Levy on Capital, from which it only differs by the receipt by the payer of a promise to repay in 100 years' time? The approximate value of £1000 nominal of the Compulsory Loan stock would be, according to "Ex-M.P.'s" calculation, in the year of issue £7 12s., money being worth 5 per cent. and assuming that rate to be current during the remainder of the term. The claim that there is no confiscation, because "a perfectly good security is given for the money received," would seem rather futile to those who paid £1000 and received a security, the present value of which might be below £10. They might very likely think that outright confiscation (since confiscation originally means nothing but "putting into the Treasury") is really a simpler way of dealing with the problem. "Ex-M.P.," however, estimates that the immediate redemption of £2800 millions of debt (which he, rather modestly, expects to be the result of his 20 per cent. levy) would enable the balance of the War Debt to be converted into 3-1/2 per cent. stock. This may be true, but if so it is equally true if a similar or larger amount of debt is cancelled by means of an outright Levy on Capital. The merits and demerits of a Levy on Capital have already been dealt with in the pages of this Journal "Ex-M.P.," however, brought forward a slightly novel form of argument in its favour. He pointed out that the money constituting the great increase in debt that has taken place during the war will have been, in the main, contributed by people who have worked at home under the protection of the Army and Navy, while the soldiers and sailors have been prevented by the duty which sent them out to risk their lives from subscribing a proportionate share to the National Debt. Hence "a class that deserves most of the State will find itself indebted to a class which--if it does not deserve least of the State--has, at any rate, turned a national emergency to personal profit." This is a strong argument, which, has been used frequently in the course of the war in the pages of the _Economist_, against borrowing for war purposes to the large extent to which our timid rulers have adopted the policy. "To be really just," the writer continued, "the process of taxation ... must be applied with greatest force to those who have accumulated their money since the outbreak of war, and only to a less degree to those whose fortunes have not been built upon their country's necessity. The difficulty of separating these two classes of wealth is great, and must, in the writer's opinion, be effected by separate legislation--legislation which might justly be based upon the increase in post-1913 incomes, a record of which should now be in preparation at Somerset House." Everyone will agree that everything possible should be done to take the burden of the war debt off the shoulders of those who have fought for us; but it is equally clear that now that the mischief of this huge debt has been done, it will be exceedingly difficult to repair it by any ingenuities of this kind. For instance, if the kind of taxation--in the shape of a Compulsory Loan--proposed by "Ex-M.P." were enforced, how can we be sure that it would not take a large slice off capital, the next heir to which is a soldier or a sailor? Bad finance is so much easier to perpetrate than to remedy that one is almost certain to come across such objections as this to any scheme for making the war profiteers "cough up" some of their gains. Moreover, we have to remember that by no means the whole of the war debt represents the gains of those who "have turned a national emergency to personal profit." Some people whose incomes have been actually decreased by the war, especially when currency depreciation is taken into account, have, in response to the appeals of the War Savings Committee, saved more than they ever saved before by patriotically stinting themselves. And even the savers who have saved out of war profits were so far more patriotic than the war profiteers who did not save but squandered. In all the discussion concerning the Levy on Capital I have not seen any answer (even in Mr Pethick Lawrence's very persuasive little book in its favour) to the three great objections to it (1) that it lets off the squanderer and penalises the saver; (2) that the difficulty, trouble and expense involved by the necessary valuation, and the iniquities and frauds that are almost certain to arise out of it, will be enormous; and (3) that its economic effect may be very serious in discouraging accumulation. "Why should any one save," the unthrifty soul will most naturally ask, "if his savings are liable to have a slice cut out of them by a levy at any time?" The advocates of the Levy, and "Ex-M.P." in his advocacy of a Compulsory Loan for repayment of debt; assume that it can be done once and for all and never again. "Take one-fifth of a man's savings away as an emergency measure not to be repeated, and he will at once endeavour to save it back again." But how will you persuade him that it is an emergency measure not to be repeated? How can you be sure that it is so? I have heard a very distinguished Socialist, discussing in private the beauties of the Levy on Capital, point out that it is the sort of thing which, when once the ice has been broken, can be done again so easily. From the Socialist point of view the Levy on Capital is, of course, a simple means of getting, by repetitions of it at regular intervals, all the means of production into the hands of the State; but would the State make a good use of them? Another assumption about the Levy on Capital that seems to me to be the merest will o' the wisp is the delusion that the whole saving that it would entail by reducing the debt charge would necessarily and certainly go to the relief of income tax. On this assumption Mr Pethick Lawrence bases his most persuasive appeal to the smaller income-tax payer, by showing that he would be better off after a Levy on Capital than before it, thanks to the reduction in income tax, which is assumed as axiomatically arising in its train. But is this certain or even likely? Is it not much more probable that our Government, finding its post-war Budget greatly lightened by a Levy on Capital or a Compulsory Loan to redeem debt, will think itself free to indulge in extravagance, maintaining a considerable part of the war income tax and wasting it on rash experiments? All these weaknesses, which appear to be inherent alike in the Levy on Capital or in the scheme which gilds the pill by calling it a Compulsory Loan, seem to be ignored or neglected (perhaps because they are unanswerable) by their advocates. On the other hand, there are certain psychological arguments on the other side. If the well-to-do, who would have to pay the Levy or subscribe to the Compulsory Loan, would prefer that system to a high income tax, there is no more to be said. A tax that is popular with the payer, as compared with other modes of shearing his fleece, needs no further recommendation. But, in view of the probability of the experiment, once tried, being shortly and frequently repeated, I Very much doubt whether this is so; as far as I have been able by personal inquiry to test opinion on the point I have found it almost unanimously adverse among those whom the Levy would most seriously affect. If, as is much more likely, the imposition of a Levy created better feeling among the working classes and the returning soldiers and tended to more harmonious co-operation in after-war tasks of reconstruction, it might be worth while to face its evils and its dangers. But here again it is quite probable that if the burden of war debt were clearly and palpably put on the shoulders best able to bear it, that is, on those who are lifted by the gifts of fortune--either in inherited money or unusual brainpower or faculties--by an equitably graded income tax, the effect might be just as good on the minds of those who suspect that the rich have battened throughout the war on exploitation of the poor. This much at least seems to be agreed by most reasonable people about the debt charge--that it will have to be raised, either by a Levy on Capital or by income tax or some other form of direct taxation, from those who are blessed with a margin. We are not likely to repeat our ancestors' mistake, after the Napoleonic War, of throwing the whole burden on to the general consumer by indirect taxation of necessaries and of articles of general consumption. Even Tariff "Reformers" say little about the revenue that their fiscal schemes would bring in. And with good reason. For in so far as they secured Protection they would bring in no revenue; we cannot at once keep out foreign goods and tax them; and any revenue that they brought in would be most expensively raised, because a large part of the extra price paid by the consumer would go not to the State but into the pockets of the home producer. Nor is it likely that any of the many schemes--of which Mr Stilwell's "Great Plan, How to Pay for the War," is a particularly bold example--for paying off debt by a huge issue of inconvertible currency, will achieve any practical result. Not only would they defraud the debt-holder by paying him off in currency enormously depreciated by the multiplication of it that would be involved; but they would also, by that depreciation, throw the burden of the debt on the shoulders of the general consumer through a further disastrous rise in prices, and so would accentuate the bitterness and discontent already rife owing to the war-time dearness and all the suspicions of profiteering and exploitation that it has engendered. After all, this problem of the war debt, in so far as it is held at home, is not one that ought to terrify us if we look at it steadily. People talk and write as if when the war is over the business of paying for it will begin. That is not really so. The war has been paid for as it went on, and, except in so far as it has been financed by borrowing abroad, it has been paid for by us as a nation. Whatever we have used for the war we have paid for as it went on, partly with the help of loans from America and from other countries--Argentina, Holland, Switzerland, etc.--that have lent us money. These loans amount, as far as they can be traced from the official figures, to about £1300 millions. Against them we can set our loans to our Dominions, over £200 millions (a perfectly good asset), and our loans to our Allies, perhaps £1500 millions, which the Chancellor proposes to write down by 50 per cent., and might perhaps treat still more drastically. To meet this foreign debt we shall have to turn out so much stuff--goods and services of all kinds--for sale abroad to meet the interest and repayment. We have further impoverished ourselves by selling our foreign securities abroad No figure has been published giving any clue to the amount of these sales, and we may perhaps guess them at £1000 millions. If the pre-war estimates of our overseas investments at £4000 millions were anywhere near the mark. It thus appears that we shall end the war still a great creditor nation. In so far as the debt was raised at home, the war was paid for by those who bought the securities offered, and we have now to pay them interest and set about repaying them the capital. This process will not diminish the national wealth, but will only affect its distribution. It will not diminish the amount of available capital, but may even rather increase it by gathering into the hands of the debt-holders--who are ex-hypothesi folk with an inclination for saving--money that might, if left in the hands of those from whom it is collected, have been squandered. The payment of the debt charge merely means that those who came forward with their money when they were asked to subscribe to war loans, have, according to the extent of the effort that they then made, a set-off against the subsequent taxation involved by the war debt. It would have been a much simpler and more businesslike proceeding to have taken, instead of borrowing, a much larger proportion of the war's cost during the war; but it is too late now to rub in this platitude which is now pretty generally admitted. Mr Hoare showed in last month's Journal that the creation of the War Debt has caused a huge addition to what he has called Rente--the gross income of the propertied classes; and there is much logic in his contention that this income is the source from which the debt charge should be met. At the same time both justice and economic expediency seem to demand that his wider interpretation of Rente, to make it include the earnings of those whose special qualifications (or, we may add, special luck) put them in a position to earn more easily than the struggling majority, should be applied to taxation involved by the debt charge. How, then, shall we deal with the debt? In the first place we want a good Sinking Fund--1 per cent. at least--and all realisations of assets in the shape of loans repaid, ships, etc., sold, should be used for reduction of our foreign debt. For the home charge we want a special form of income tax that will fall as lightly and indirectly as possible on industry; that is, that it should be imposed on the individual taxpayer direct. So that what we want is an extended, reformed and better graduated form of the super-tax brought down so low that every one who is not merely rich but comfortable should pay his share, For example, any single man or woman with any excess over £500 a year of unearned income, or over £800 a year of earned income might well pay super-tax on that excess. The exemption limit might well be raised by 50 per cent. for married couples (if their joint incomes are still to be counted as one), and by £100 a year for each child between the age of five and twenty-five. But all these figures are mere suggestions, and the details of the scheme would have to be worked out by Inland Revenue officials, whose experience and knowledge of the practical working of such matters qualifies them for the task. The broad principle is a special tax for the debt charge to be raised direct from individual incomes with skilful differentiation, according to the circumstances of the taxpayer, in the matter of the number of his dependants, and also according to the source of the income, whether it is being earned by exertions which illness might terminate or received from invested funds, and therefore beyond the reach of the "slings and arrows of outrageous fortune." That portion of the tax that is required for Sinking Fund might be made payable, at the option of the taxpayer, in Government securities at prices giving some advantage to the holder. This form of special debt-charge super-tax would enable the ordinary income tax to be reduced considerably at once. Mr Edward Lees, secretary to the Manchester and County Bank, has put forward a scheme by which taxpayers can buy in advance immunity for so many years from so much annual income tax. If this suggestion could be worked it might provide a means of quickening the debt's repayment, though it looks rather like exchanging one form of debt for another. But, in any case, it is urgent that the long promised reform of income tax should be set in hand at once, so that it may be purged of its present inequities and anomalies and set to work in peace to redeem debt on a new and more scientific basis. XVI THE CURRENCY REPORT _December_, 1918 Currency Policy during the War--Its Disastrous Mediaevalism--The Report of the Cunliffe Committee--A Blast of Common Sense--The Condemnation of our War Finance--Inflation and the Rise in Prices--The Figures of the Present Position--The Break in the Old Relation between Legal Tender and Gold--How to restore it--Stop Borrowing and reduce the Floating Debt--Return to the Old System--The Committee's Sane Conservatism--A Sound Currency vital to National Recovery. Among the many features of the late war (how comfortable it is to talk about the "late war"!) that seem likely to astonish the historian of the future, perhaps the thing that will surprise him most is the behaviour of the warring Governments in currency matters. It is surely, a most extraordinary thing after all that has been thought, said and written about monetary policy since money was invented that as soon as a great economic effort was necessary on the part of the leading civilised Powers, they should all have fallen back on the old mediaeval dodge of depreciating the currency, varied to suit modern needs, in order to pay part of their war bill, and should have continued this policy throughout the course of the war, in spite of the obvious results that it was producing in the shape of unrest, suspicion and bitterness on the part of the working classes, who very naturally thought that the consequent rise in prices was due to the machinations of unscrupulous capitalists who were exploiting them. It is even possible that the historian of a century hence may ascribe to this cause the beginning of the end of our present economic system, based on the private ownership of capital, for it is very evident that we have not yet seen the end of the harvest that this bitterness and discontent are producing. A less important but still very objectionable consequence of the flood of currency and credit that the Government has poured out to fill a gap in its war finance is the encouragement that it has given to a host of monetary quacks who believe that all the financial ills of the world can be saved if only you give it enough money to handle, oblivious of the effect on prices of mere multiplication of claims to goods without a corresponding increase in the volume of goods. These enthusiasts have seen that during war a Government can produce money as fast as it likes, and since they think that producing money makes every one happy they propose to adopt this simple method for paying off war debt, restarting trade and generally creating a monetary millennium. How far their nostrums are likely to be adopted, no one can yet say, but some of the utterances of our rulers make one shudder. Into this atmosphere of quackery and delusion the report of the Committee on Currency and Foreign Exchanges breathes a refreshing blast of sound common sense. Everybody ought to read it. It costs but twopence; it is only a dozen pages long, and it is described (if you want to order it) as Cd. 9182. In view of the many attacks that have been made on our banking system--especially the Bank Act of 1844--by Chambers of Commerce and others before the war, it is rather surprising that so little criticism should have been heard of this Report, which practically advocates a return, as rapidly as possible, to the practice and principles imposed by that Act. It may be that peace, and all the preoccupations that have followed it, have absorbed men's minds so entirely that questions of currency seem to be an untimely irrelevance; or possibly the very heavy weight of the Committee's authority may have silenced the opposition to its recommendations. Presided over by Lord Cunliffe, the late Governor of the Bank, and including Sir John Bradbury and Professor Pigou and an imposing list of notable bankers, it was a body whose opinion could only be challenged by critics gifted with the most serene self-confidence. One of the most interesting--especially to advocates of sound finance--points in its Report is the implied condemnation that it pronounces on the methods by which the war has been financed by our rulers. It points out that "the need of the Government for funds wherewith to finance the war in excess of the amounts raised by taxation or by loans from the public has made necessary the creation of credits in their favour with the Bank of England.... The balances created by these operations passing by means of payments to contractors and others to the Joint Stock banks have formed the foundation of a great growth in their deposits, which have also been swelled by the creation of credits in connection with the subscriptions to the various War Loans.... The greatly increased volume of bank deposits, representing a corresponding increase of purchasing power and, therefore, tending in conjunction with other causes to a great rise of prices, has brought about a corresponding demand for legal tender currency which could not have been satisfied under the stringent provisions of the Act of 1844." Here we have the story of bad war finance put as clearly as it can be. Because the Government was not able to raise all the money needed for the war on sound lines--that is, by taxation and loans to it of money saved by investors--it had recourse to credits raised for it by the Bank of England and the other banks against Treasury Bills, Ways and Means Advances, War Loans, War Bonds, and loans to customers who were taking up War Loans, etc. Thereby as these credits created fresh deposits there was a huge increase in the community's purchasing power; and since the supply of goods to be purchased was stationary or reduced, the only result was a great increase in prices which made the war, perhaps, nearly twice as costly as it need have been and produced all the suspicion and unrest that has already been referred to. Considering that the Committee included an ex-Governor of the Bank and the Permanent Secretary to the Treasury it could hardly have been expected to use much plainer language concerning the failure of our rulers to get money out of us in the right way for the war and the vigour with which they made use of the demoralising weapon of inflation. It followed as a necessary consequence that the volume of legal tender currency had to be greatly increased. As prices rose wages rose with them, and so much more "cash" was needed in order to pay for a turnover of goods which, fairly constant in volume, demanded more currency because of their inflated prices. As the Committee says in its Report (page 5): "Given the necessity for the creation of bank credits in favour of the Government for the purpose of financing war expenditure, these issues could not be avoided. If they had not been made, the banks would have been unable to obtain legal tender with which to meet cheques drawn for cash on their customers' accounts. The unlimited issue of currency notes in exchange for credits at the Bank of England is at once a consequence and an essential condition of the methods which the Government have found necessary to adopt in order to meet their war expenditure." The effect of these causes upon the amount of legal tender currency (other than subsidiary coin) in the banks and in circulation is summarised by the Committee in the following table:-- "The amounts on June 30, 1914, may be estimated as follows:-- "Fiduciary Issue of the Bank of England £18,450,000 "Bank of England Notes issued against gold coin or bullion 38,476,000 "Estimated amount of gold coin held by Banks (excluding gold coin held in the Issue Department of the Bank of England) and in public circulation 123,000,000 ___________ "Grand total £179,926,000 ___________ "The corresponding figures on July 10, 1918, as nearly as they can be estimated, were:-- "Fiduciary Issue of the Bank of England 18,450,000 Currency Notes not covered by gold 230,412,000 ___________ "Total Fiduciary Issues [1] £248,862,000 Bank of England Notes issued against coin and bullion 65,368,000 Currency Notes covered by gold 28,500,000 Estimated amount of gold coin held by Banks (excluding gold coin held by Issue Department of Bank of England), say 40,000,000 ___________ "Grand total £382,730,000 "[Footnote 1: The notes issued by Scottish and Irish banks which have been made legal tender during the war have not been included in the foregoing figures. Strictly the amount (about £5,000,000) by which these issues exceed the amount of gold and currency notes held by those banks should be added to the figures of the present fiduciary issues given above.] "There is also a certain amount of gold coin still in the hands of the public which ought to be added to the last-mentioned figure, but the amount is unknown." It will be noted that the gold held by the banks (other than the Bank of England) and by the public has declined from £123 to £40 millions, according to the Committee's estimate, while, on the other hand, the circulation of bank notes has risen by £27 millions and the issue of currency notes has taken place to the tune of £259 millions (at the date of the Report; it is now nearly £300 millions), making a net addition to legal tender currency of over £200 millions. When we also remember that there has been a very heavy coinage of silver and copper, that the Bank of England's deposits have risen by over £100 millions and the deposits of the other banks by nearly £700 millions, and all this at a time when most of the industrial activity of the country was going into the production of destructive weapons and the support of those who were using them, the behaviour of commodities of ordinary use in rising by nearly 100 per cent. seems to be an example of remarkable moderation. With all this new buying power in the hands of the community there is little wonder that some people should think that we have enormously increased our wealth during this most destructive and costly war, and should then feel hurt and disappointed when they find that this new buying power is robbed of all its beauty by the fact that its efficiency as buying power is seriously diminished by its mere quantity. Such being the state of affairs--a great mass of new credit and currency based on securities--it is clear that our currency has been deprived for the time being of that direct relation with its gold basis that used in former time to regulate its volume according to world prices and our international trade position. As the Committee says, "It is not possible to judge to what extent legal tender currency may in fact be depreciated in terms of bullion. But it is practically certain that there has been some depreciation, and to this extent therefore the gold standard has ceased to be effective." Very well, then, what has to be done to get back to the old state of things under which there was a more or less automatic check on the creation of credit and the issue of currency? This check worked by a system which was elastic and simple. It was not entirely automatic, because its working had to be controlled by the Bank of England, which, by the action of its discount rate, could, more or less, quicken or check the working of the machine. Legal tender currency could only be increased by imports of gold; and exports of gold reduced the available amount of legal tender currency; and since a stock of legal tender currency was essential to meet the demands upon them that bankers made possible by creating credits, there was thus an Indirect and variable connection between the country's gold stock and the extent to which bankers would think it prudent to multiply credits. If credits were multiplied too fast, our currency was depreciated in value as compared with those of other countries and the exchanges went against us and gold either was exported or began to look as if it might be exported. If it was exported the legal tender basis of credit was reduced and the creation of credit was checked. If the Directors of the Bank of England thought it inadvisable that gold should be exported they could, by raising the rate of discount and taking artificial measures to control the supply of credit, produce, without the actual loss of gold, the effects which that loss would have brought about. The keystone of the system was the rigid link between legal tender currency and gold. This was secured by the provisions of the Bank Act of 1844, which laid down that above a certain line--which was before the war roughly £18-1/2 millions--every Bank of England note issued should have gold behind it, pound for pound. In other words, the Bank of England note was, for practical purposes, a bullion certificate. The legal limit on the fiduciary issue (that is, the issue of £18-1/2 millions against securities, not gold) could only be exceeded by a breach of the law. The many critics of our banking system seized on this hard-and-fast restriction and accused it of making our system inelastic as compared with the German arrangement, under which the legal limit could at any time be exceeded on payment of a tax or fine on any excess perpetrated. These critics might have been right if legal tender currency had been the only, or even the predominant, means of payment in England. But, as every office boy knows, it was not. Legal tender--gold and Bank of England notes--was hardly ever seen in commercial and financial transactions on a serious scale. We paid, sometimes, our retail purchases of goods and services in gold; and Bank notes were a popular mode of payment on racecourses and in other places where transactions took place between people who were not very certain of one another's standing or good faith. But the great bulk of payments was made in the cheque currency which our bankers had developed outside of the law and could create as fast as prudence--and an eye to the supply of legal tender which every holder of a cheque had a right to demand--allowed them to do so. While cheques provided the currency of commerce, another form of "money" was produced, again without any restriction by the Act, by the pleasant convention which caused a credit in the Bank of England's books to be regarded as "cash" for balance-sheet purposes by the banks. These advantages gave the English system a freedom and elasticity, in spite of the strictness of the law that regulated the issue of paper currency, that enabled it to work in a manner that, judged by the test of practical results, had one great advantage over that of any of the rival centres. It alone in days before the war fulfilled the functions of an international banker by being ready at all times and without question to pay out the gold that was, in the last resort, the final means of settling international balances. It is the object of Lord Cunliffe's Committee to restore as quickly as possible the system which, has thus been tried by the test of experience, "After the war," they say in their Report, "our gold holdings will no longer be protected by the submarine danger, and it will not be possible indefinitely to continue to support the exchanges with foreign countries by borrowing abroad. Unless the machinery which long experience has shown to be the only effective remedy for an adverse balance of trade and an undue growth of credit is once more brought into play there will be very grave danger of a credit expansion in this country and a foreign drain of gold which might jeopardise the convertibility of our note issues and the international trade position of the country.... We are glad to find that there was no difference of opinion among the witnesses who appeared before us as to the vital importance of these matters." The first measure that they put forward as essential to this end is the cessation at the earliest possible moment of Government borrowings. "A large part of the credit expansion arises, as we have shown, from the fact that the expenditure of the Government during the war has exceeded the amounts which they have been able to raise by taxation or by loans from the actual savings of the people. They have been obliged therefore to obtain money through the creation of credits by the Bank of England and the Joint Stock banks, with the result that the growth of purchasing power has exceeded that of purchasable goods and services." It is therefore essential that as soon as possible the State should not only live within its income but should begin to reduce indebtedness, especially the floating debt, which, being largely held by the banks, has been a cause of credit creation on a great scale. "The shortage of real capital must be made good by genuine savings. It cannot be met by the creation of fresh purchasing power in the form of bank advances to the Government or to manufacturers under Government guarantee or otherwise, and any resort to such expedients can only aggravate the evil and retard, possibly for generations, the recovery of the country from the losses sustained during the war." With these weighty words the Committee brushes aside a host of schemes that have been urged for putting everything right by devising new machinery for the manufacture of new credit. That new credits will be needed for industry after war is obvious, but what else are our banks for, if not to provide it? They can only be set free to provide it on the scale required if, by the necessary reduction of the floating debt, they are relieved of the locking up of their funds in Government securities, which has been one of the bad results of our bad war finance. It goes without saying that the Committee does not recommend the continuance in peace of the differential rates for home and foreign money that were introduced as a war measure with a view to lowering a rate at which the Government borrowed at home for war purposes. It would evidently be too severe a strain on human nature to attempt to work such a system, except in war-time, when the artificial conditions by which the market was surrounded made it both feasible and desirable to do so. With regard to the note issue, the Committee proposes a return to the old system and a strictly drawn line for the amount of the fiduciary note issue, the whole note issue (with the exception of the few surviving private note issues) being put into the hands of the Bank of England, all notes being payable in gold in London only and being made legal tender throughout the United Kingdom. These suggestions are subject to any special arrangements that may be made with regard to Scotland and Ireland. An early resumption of the circulation of gold for internal purposes is not contemplated. The public has become used to paper money, which is in some ways more convenient and cheaper; and the luxury of a gold circulation is one that we can hardly afford at present. Gold will be kept by the Bank of England in a central reserve, and all the other banks should, it is suggested, transfer to it the whole of their present holdings of the metal. In order to give the Bank of England a closer control of the bullion market the Committee thinks it desirable that the export of gold coin or bullion should, in future, be subject to the condition that such coin or bullion had been obtained from the Bank for the purpose. This measure would give the Bank of England a very close control of the bullion market, so close that there is a danger that if this control were too rigorously exercised, gold that now comes to this country might be diverted, with a view to more advantageous sale, to other centres. The amount of the fiduciary issue is a matter that the Committee leaves open to be determined after experience of post-war conditions. They "think that the stringent principles of the Act (of 1844) have often had the effect of preventing dangerous developments, and the fact that they have had to be temporarily suspended on certain rare and exceptional occasions (and those limited to the earlier years of the Act's operation, when experience of working the system was still immature) does not," in their opinion, invalidate this conclusion. So they propose that the separation of the Issue or Banking Departments should be maintained, but that in future if an emergency arose requiring an increase in the amount of fiduciary currency, this should not involve a breach of the law, but should be made legal (as it is now under the Currency and Bank Notes Act of 1914), subject to the consent of the Treasury. It is not proposed at present to secure the circulation of paper instead of gold by legislation. The Committee considers that "informal action on the part of the banks may be expected to accomplish all that is required." If necessary, however, it points out that the circulation of gold could be prevented by making the notes convertible, at the discretion of the Bank of England, into coin or bar gold. The amount which, in the opinion of the Committee, should be aimed at for the central gold reserve is £150 millions (a sum which is already almost in sight on its figures quoted above); and "until this amount has been reached and maintained concurrently with a satisfactory foreign exchange position for a period of at least a year," it thinks that the policy of reducing the uncovered note issue "as and when opportunity offers" should be consistently followed. How this opportunity is going to "offer" is not made clear; but presumably a reflow of notes from circulation can only happen through a fall in prices or a reduction in bank deposits by the liquidation of advances made to the Government, directly or indirectly, by the banks. Concerning the difficult problem of replacing the Bradbury notes by Bank of England notes of £1 and 10s., an ingenious suggestion is made by the Committee. It observes that there would be some awkwardness in transferring the issue to the Bank of England before the future dimensions of the fiduciary issue have been arrived at; and it suggests that during the transitional period any expansion in Treasury notes that may take place should be covered, not as now, by Government securities, but by Bank of England notes taken from the Bank. By this means any demands for new currency would operate in the normal way to reduce the reserve of the Banking Department, "which would have to be restored by raising money rates and encouraging gold imports," and so a step would have been taken to getting back to a business basis in the currency system and away from the profligate printing-press policy of the war period. Such are the suggestions made by this distinguished body for the restoration of our currency. Little has been said against them in the way of serious criticism, but their conservative tendency and the fact that they practically recommend a return to the _status quo_ has caused some impatience among the financial Hotspurs who proposed to begin to build a new world by turning everything upside down. In matters of finance this process is questionable, interesting as the result would undoubtedly be. To get to work on tried lines and then, when once industry and finance have recovered their old activity, to amend the machine whenever it is creaking seems to be a more sensible plan than to delay our start until we have fashioned a new heaven and earth, and then very probably find that they do not work. If the machine is to be set moving, it can only be done by close co-operation between the Bank of England and the other banks which have grown by amalgamation into institutions the size of which seem likely to make the task of central control more difficult than ever. On this important point the Committee is curiously silent. But it recommends the adoption of a suggestion made by a Committee of Bankers, who proposed that banks should in future be required "to publish a monthly statement showing the average of their weekly balance-sheets during the month." (Will this requisition apply to the Bank of England?) This is a welcome suggestion as far as it goes, but unless something is done by co-operative action to make the Bank rate more automatic in its influence on the actions of the other banks, the difficulty of making it effective seems likely to be considerable. Getting the currency right is a most important matter for the future of our financial position. Another is the question of our debt to foreigners. Most of this debt we owe to America, and we only owe it because we had to finance our Allies. We surely ought to be able to arrange with America that anything that we have to do in giving our Allies time before asking for repayment they also should do for us--within limits, say, up to thirty years. In view of all that they have made and we have lost by this war waged for the cause of all mankind, this would seem to be reasonable concession on America's part. XVII MEETING THE WAR BILL _January_, 1919 The Total War Debt--What are our Loans to the Allies worth?--Other Uncertain Items--The Prospects of making Germany pay--The Right Way to regard the Debt--Our Capital largely intact--A Reform of the Income Tax--The Debt to America--The Levy on Capital and other Schemes--The only Real Aids to Recovery. A table published week by week by the _Economist_ shows that from August 1, 1914, to November 9, 1918, the Government paid out £8612 millions sterling. From this we have to deduct an estimate of the amount that the Government would have spent if there had not been a war, so that we are at once landed in the realm of conjecture. The last pre-war financial year saw an expenditure of £198 millions, and it is safe to assume that this figure would have swollen by a few millions a year if peace had continued, so that we may take at least £860 millions from the above total as normal peace expenditure for the 4-1/2 years. This gives us £7752 millions as the gross cost of the war, as far as the period of actual fighting is concerned. From this figure, however, we are able to make some big deductions. There are loans to Allies and Dominions, and some other much more readily realisable assets than these. We do not know the actual figure of the loans to Allies and Dominions during the war period, because they are not included in the weekly financial statements. The amount that we borrow abroad is set out week by week--at least, that is believed to be the meaning of the cryptic item "Other Debt"--but the amount that we lend to Allies and Dominions is hidden away in the Supply Services or somewhere, and we only get occasional information about it from the Chancellor in the course of his speeches on the Budget or on Votes of Credit. In his last Vote of Credit speech, on November 12, 1918, Mr Bonar Law gave the chief items of the loans to Allies, and a very interesting list it was. The totals up to October 19, 1918, were £1465 millions to Allies and £218-1/2 millions to Dominions. The Allies were indebted to us as follows:--Russia, £568 millions; France, £425 millions; Italy, £345 millions; smaller States, £127 millions.[1] [Footnote 1: Parliamentary Debates, Vol. 110, No. 114, p. 2560.] Some of these debts may be written off at once, and that cheerfully, seeing that they have been lent brothers-in-arms who have been hit much harder than we have by the war, and had nothing like our financial strength. The question is, what figure ought we to put on this asset in deducting it from gross war expenditure in order to arrive at a guess at the real cost? We take our loans to Dominions, of course, as good to the last penny. Mr Bonar Law, in his Budget speech last April, took our loans to Allies at half their face value. Strict bookkeeping would probably demand a lower figure than 50 per cent.; but let us follow the ex-Chancellor's example and take loans to Allies, which we will estimate at £1480 millions up to November 9th, as good for £740 millions, and loans to Dominions at £220 millions up to the same date, a total of £960 millions, to be deducted from gross war cost. Concerning £740 millions of this sum, however, there is a certain amount of doubt. No one questions for a moment the solvency of France and Italy, but in view of the pressure that the war has exercised on their producing power, and, in the case of France, the complication added by the uncertainties of the position in Russia, in which French investors are so deeply interested, one cannot feel sure that they will be able at once to make interest payments. Much will depend on the sums that they are able to recover from Germany against their bill of damages, on which more anon. But in any case it seems likely that a general scheme of interest funding, as between the Allies, may have to be adopted for some years to come. As to the other assets that we have to set against our gross expenditure during the fighting period, they were enumerated by the Chancellor in his Budget speech last April in the following terms;-- Balances in agents' hands, debts due, foodstuffs, etc £375 millions. Land, securities, buildings and ships 97 " Stores in Munitions Department (cost price 325 millions) taken at 100 " Additions this financial year 100 " Arrears of taxation 500 " --- Total[1] £1172 [Footnote 1: Parliamentary Debates, Vol. 105, No. 33, pp. 698-699.] It will be remembered that in his Budget speech the Chancellor was proceeding on the assumption that the war would last till March 31st next--the date at which our financial year ends--and would then be convenient enough to stop. Happily for us, the valour of our soldiers and those of our Allies, the splendid success of our Fleet and our merchantmen In bringing over American troops and their food and equipment with astonishing speed, and the straightforward diplomacy of President Wilson, combined to achieve victory nearly five months earlier than the most sanguine had dared to expect. With the very pleasant result--though it is a small matter when compared with the end of the killing of the best of our manhood--that the financial position is very greatly improved. With regard to the figures given above, it should be observed that the "debts" are advances to Dominions, but on quite a different basis from our loans to them, being money owed by them against goods and services supplied.[1] They and the balances in the hands of agents are both as good as gold. Concerning the others, one is entitled at first sight to feel a good deal of scepticism, since such articles as land, buildings, ships and stores, bought or built by Government during a war, are likely to find an extremely sluggish demand when the war is over. However, Mr Bonar Law assured the House that his valuation of these amounts had been arrived at on a conservative basis, and, what is better still, in his Vote of Credit speech on November 12th, he was able to state that revised estimates had shown that their value would be "far greater" than he had previously expected. So perhaps we are entitled to take them at £1300 millions. [Footnote 1: Parliamentary Debates, Vol. 105, No. 33, p. 698.] If so, we get the following results for the cost of the fighting period:-- Total Government expenditure, August 1, 1914, to November 9, 1918 £8612 millions. Less estimate of normal peace expenditure 860 " ----- 7752 " Less Loans to Dominions 220 millions. Less Loans to Allies (half face value) 740 " Realisable assets 1300 " ---- 2260 " ---- Net cost of period £5492 " If war cost would be good enough to cease with the fighting we should thus now be able to see, more or less, how we stand. During the fighting period the Government raised by taxation the sum of £2120 millions,[1] from which we have again to deduct £860 millions as an estimate for normal peace taxation, if the war had not happened, leaving £1350 millions as the net war taxation, and £4142 millions as the net addition to debt from the war. [Footnote 1: _Economist_, Nov. 16, 1918.] But, of course, there are still some large and uncertain sums to come in to both sides of the account. There is the cost of maintaining our Army and Navy during the armistice period, the cost of demobilisation, and the cost of putting an end to war munitions contracts running for many months ahead, holders of which will have to be compensated. Who has enough assurance to venture on an estimate of the cost of these items? Shall we guess them at something between £1000 and £1500 millions? And when we have made this guess are we at the end of the war's cost? Ought we not to include pensions to be paid, and if so, at what figure? Fifty millions a year for thirty years? If so, there is another £1500 millions. And interest on war debt, and for how long? On the other side of the balance-sheet, the only asset that has not yet been included in the calculation is the sum that we are going to receive from Germany, Some cheery optimists think that it is possible for us and for the Allies to make Germany pay the whole of our war cost. If so, we have halcyon days ahead, for not only shall we be able to repay the whole war debt but also to pay back to the taxpayer all the £1350 millions that he produced during the war, unless, as seems more likely, the Government finds other uses, or abuses, for the money, and sets its motley horde of wasters to work again. But this problem, of course, is not going to arise. It would not be physically possible for Germany to pay the whole of the Allies' war cost, except in the course of many generations, and, moreover, the Allies have bound themselves not to make any such demand by the rider that they added to President Wilson's peace terms, in giving their assent to them as the basis on which they were prepared to make peace. Early in November they stated that President Wilson's reference to "restoration" of invaded countries should, in their view, be expanded into a claim for compensation "for all damage done to the civilian population of the Allies and to their property by the aggression of Germany by land, by sea, and from the air."[1] This is letting Germany off lightly; but, after stating their readiness to make peace on the basis of the fourteen points, if amended as above (and also with regard to the Freedom of the Seas question) it is not possible for the European Allies, as the Prime Minister's late manifesto says they propose to do[2] to expand this claim for civilian damage into a demand for the whole of their war cost up to the limit of the capacity of the Central Powers to pay, without a serious breach of faith. So that the question of how much we can get out of Germany is complicated by the further uncertainty of the size of the bill for damages that we can present. It will be big enough. We know that the Germans have sunk 8-1/2 million tons of British ships during the war. As to the price at which, for "restoration" purposes, we shall value those ships and their cargoes, and all the civilian property damaged by aircraft and bombardment, this is a matter which it would be obviously improper to discuss; but we may be sure that the bill will mount up to many hundreds of millions, and it remains to be seen whether, after Belgium and France have presented their account, it will be possible for us to secure payment even for all the civilian damage that we have suffered. [Footnote 1: _Times_, November 7, 1918.] [Footnote 2: _Times_, December 6, 1918.] It thus appears that the net cost of the fighting period has been somewhere in the neighbourhood of £5500 millions, taking our loans to Allies at half their face value; and that the armistice and demobilisation period is likely to cost another £1000 to £1500 millions more, to say nothing of pensions and debt charge that will go on for years (unless the supporters of Levy on Capital have their way and wipe the debt out), and that against this further expenditure we can set whatever sum is recovered from Germany. Seeing that our total pre-war debt was £710-1/2 millions, or, omitting what the Government returns call the Other Capital Liabilities, £653-1/2 millions, these figures of war debt and war cost are at first sight somewhat appalling. But there is no reason why they should terrify us, and there are several reasons why they are, when looked at with a discriminating eye, much less frightening than when we first set them out. In the first place, we have always to remember that these figures are in after-war pounds, and that the after-war pound is, thanks to the profligate use by our war Governments of the printing-press and the banking machine, just about half the size, when measured in actual buying power, of the pre-war pound. Any one who pays £100 in taxes to-day thereby surrenders claims to about the same amount of goods and service as he did if he paid £50 in taxes before the war. So that in making any comparison between the position now and the position then we have to divide the figures of to-day by two. In the second, we need not be misled by the Jeremiahs who tell us that now that we have won the war we have before us the task of paying for it. This is not true, or true only to a small extent--to the extent, that is to say, to which we shall, when all these assets and liabilities have been settled up and balanced, be afflicted with a foreign debt. Let us leave this question on one side for the time being, and consider what the position really is with regard to that part of the war's cost that has been raised at home. In so far as that has been done, the war cost has been raised by us while the war went on. In fact, all the war cost has to be raised by somebody while the war goes on, because the war is fought with stuff and services produced at the time and paid for at the time. But when Americans lend us money to pay for some of the stuff that they send us, they pay at the time and we, or our posterity, have to pay them back later on; this is the only way in which we can make posterity pay for the war, and then it only means that our posterity pays America's. It is not possible to carry on war with wealth that is going to be produced some day. The effort of self-sacrifice that war demands has to be made by somebody during its progress--otherwise the war could not be fought. That effort of self-sacrifice we have already made in so far as we have paid for our war cost out of money raised at home. That money has been raised in three ways--by taxation, by borrowing saved money, and by inflation. When it is raised by taxation the sacrifice is obvious, and, in nearly all cases, inevitable: we pay our larger war taxes and so we have less to spend on ourselves, and so we go without things. A few people raise money to pay taxes during war by borrowing or drafts on capital, but they are probably so exceptional that their case need not be considered. We transfer our buying power to the Government to be used for the fighters, and so we set free the labour and material that used to go in providing us with comforts and pleasures; our competition for goods is reduced, and so the Government is able to get what it needs out of the nation's production, which is _pro tanto_ relieved of our demand. The same thing happens when the Government gets money for the war by borrowing money that we save. We reduce expenditure, and transfer buying power to the State and diminish our demand on the nation's production, or that of its foreign supplies. If the whole war cost had been met by these two methods there need have been little or no increase in prices here, and the cost of the war would have been about half what it has been. Of the two methods, taxation is obviously the cleaner, simpler and more honest. By borrowing, the State hires those who have a margin to put part of it at the disposal of the State at a time of national crisis, instead of taking it from them outright. As most of the taxation involved by the subsequent debt charge falls on those who have a margin (as it obviously should) the result is that the people who subscribed to the loans are afterwards taxed to pay themselves interest and to repay themselves their debt. This subsequent taxation falls on them all alike in proportion to their ability to pay, or would if the income tax was more equitably imposed; those who have subscribed their fair share to the loans have an offset, in the interest that they receive, against the taxation; those who subscribed less are properly penalised, those who subscribed more are properly benefited. If only the income tax did not make the position of fathers of families so unjust, the whole arrangement would look, at first sight, quite fair, though rather absurd and clumsy, involving all this subscribing and taxing and paying back instead of an outright tax and having done with it. But in fact a very grave inequity is involved by this business of borrowing for war, and laid upon just the people whom we ought, above all, to treat most fairly, namely, those who fight for us. The soldiers and sailors risk their lives for a pittance during the war, while their brothers and sisters and cousins and uncles and aunts, left at home in security and comfort, earn bloated profits and wages, and put them, or part of them, into War Loans; then when the fighters come back, very likely with their business and connection ruined or lost, they are expected to contribute to the taxation that goes into the pockets of debt-holders. Inflation, the third method of paying for war, again produces the same effect of a reduction of consumption by the civilian population, but in a roundabout manner, which works at first without being noticed, and so is particularly dear to the adroit politician. By it nobody transfers buying power to the Government, but the Government and the bankers, who are generally most reluctant accessories to the transaction, between them create new buying power, which, coming into a restricted market for goods in addition to all the existing buying power, simply forces everybody to consume less because the money in their pockets fetches less goods owing to the rise in prices. The evil attached to this system is obvious enough. It amounts to a tax on the general consumer in proportion to his consumption, and so it lays the sacrifice on the shoulders of those least able to bear it. No Government would have the courage to impose such a tax openly and frankly. All the warring Governments in varying degrees have used this roundabout device of imposing it, very likely being quite unaware of the fraud on the consumer that they were perpetrating. Our own Government, in fact, having first added by this process to a rise in the price of bread, then reduced it by a special subsidy--a pleasant touch of Alice in Wonderland finance. This mode of taxing by raising prices hits, of course, all those who live on fixed incomes and salaries and wages. Those who can strike, or take more out of the consumer, can evade it, and so it falls on the weakest shoulders and incidentally produces friction, discontent and dangerous suspicion. But even it works at the time when it happens. Each creation of new buying power gives the Government, for the moment, control of so much in goods and services at the expense of the consumer; but when once the new buying power has been distributed by the State's payments it is in the hands of the nation as a whole. If the process ceased, the nation would still have control of the whole of its output, which is its income, though the injustice involved, to those who are not strong enough to resist the effects of higher prices, would continue. Thus, whatever means--straightforward or devious--are used for financing war, it is paid for while it goes on by the warring country if the financing is done at home, or by its foreign creditors if the financing is done abroad. And it is, necessarily, almost entirely paid for out of income, that is, out of current production. It is curious to find that many people still seem to think that the whole cost of the war has come out of capital. Luckily for us it could not be done, or only to a very small extent. Our capital mostly consisted of railways, factories, ships, roads, agricultural land, machinery, houses and other things that could not be taken and shot out of a gun. These things we have still got, and though many of them are not in such good shape as they were, some of them are much better equipped and organised. We have drawn on our stocks of materials and goods--how far it is impossible to say; we have lost 8-1/2 million tons of shipping by war losses; in the meantime we have built, bought and captured 5-1/2 millions of new tonnage, and we have a claim against the Germans for such tonnage. On capital account we have suffered by wear and tear in so far as our upkeep has been neglected owing to lack of labour during the war, and by depletion of materials and stocks, and also, of course, by the fact that if the war had not happened, we should, if pre-war calculations were correct, have put some £1700 millions into new investments at home and abroad during the 4-1/4 years of fighting and some more hundreds of millions during the after-war period of Government borrowing and restriction on private investment. But a very large part of the money that went into victory would otherwise have gone not to capital account but into the pleasant frivolities, embellishments and vulgarities that made life an amusing absurdity in days before the war. If, then, the war sacrifice was made during the war, in so far as its cost was raised at home, how far is it true that we are now faced with the business of paying for it? If taxation were equitable it would only be to the extent that those who ought to have made the sacrifice and did not, will in future have to pay interest to those who did, or their representatives. So that the first thing we have to do is to make taxation equitable, that is, lay it on the taxpayer in proportion to his ability to pay. There will still remain the injustice to those who have fought for us, which might be cured, or amended, by special exemptions. With taxation on a really sound basis no further sacrifice would be involved by the debt charge, and no diminution of the nation's wealth or consuming power, which will depend, as always, on its output of goods and services; but only a transfer of consuming power from taxpayers to debt-holders in accordance with the sacrifice made by the latter during the war. What we produce as a nation we shall consume as a nation, subject to the extent that we financed the war during its course by operations abroad. These operations were twofold. We sold to foreigners part of our holdings of foreign securities, thereby and to this extent paying for war cost out of capital--out of the investments made by ourselves and our forbears in America and elsewhere. Mr Bonar Law, in a recent interview in the _Observer_, stated that we had sent back to the United States practically the whole of our holdings of American securities to be sold or pledged as collateral for loans, and that the value of them was three billion dollars--£600 millions sterling. Any of them that have only been pledged can presumably be used to meet the loans raised as they fall due, and so will lighten our burden in the matter of repayment. These loans raised abroad are the second mode of foreign financing. By it we had raised up to November 9th nearly £1300 millions, as shown by the _Economist's_ table, and to that extent we have pledged our future production and that of our posterity, to meet the annual service for interest and repayment. On the other hand, all this sum and more we have (as shown above) lent to our Allies and Dominions, so that the ex-Chancellor was well justified in his boast that we had only borrowed to finance our Allies, and that we had been self-sufficient for our own war cost.[1] [Footnote 1: Budget Speech, Parliamentary Debates, vol. 105, No. 33.] In other words, all that we needed for the war we were able to produce ourselves, or to obtain in exchange for our produce and assets. On paper, therefore, our position as a creditor country is only impaired by our sales of securities. But that is only so on paper. In fact, the loans that we have raised abroad are good debts that have to be met to the last penny, and are a first charge on our future output, but the advances that we have made to our Allies, much harder hit than we are by the war, are assets on which we cannot depend. They were taken in our balance-sheet above at half their face value, but there is much to be said for writing them off altogether and tearing up the I.O.U.'s of our foreign brothers-in-arms. Their need is greater than ours, it would be little satisfaction to receive interest and repayment from them, and the payment due from them, involving difficult problems of taxation for them, would not help the good relations with them which, we hope, may be a lasting effect of the war. And such an act of renunciation on our part would do something towards a restoration of the spirit with which we entered on war, a spirit which has been seriously demoralised during its course, largely owing to the results of our faulty finance, which encouraged profiteering in all classes. In any case, there is our position. We have a big debt to meet at home and abroad, and we are weakened on capital account by foreign indebtedness, wear and tear of plant and dimunition of stocks and materials. Wear and tear and depletion we can soon make good if we set to work and work hard, if our bureaucracy takes away the fetters of its restrictions and controls (instead of making further additions to the "Black List" even after the armistice!), and if our ruling wiseacres will refrain from trying to stimulate industry by taxing raw and half-raw materials. For the debt charge many pleasant and simple fancy strokes are suggested. The Levy on Capital is popular, especially with those who do not own any, but its advocacy is by no means confined to them. Mr Pethick Lawrence has published a persuasive little book about it, but I cannot see that he meets the objections to it. These are, the difficulty of valuation, the fact that in many cases it would have to be paid by instalments, and so would be merely another form of income tax, its sparing of the waster and penalising of the saver, and, consequently, the grave danger that it would check accumulation and so dry up the springs of capital. Mr Stilwell has produced a "Great Plan to Pay for the War," by which all the belligerents and neutrals who have been involved in expense by the war would receive World Bonds from an International Congress for what they have spent owing to the war, and would then pay one another any international debts by exchanging these World Bonds, and deal with the home debt by paying it off in new currency raised on the World Bonds. But, surely, to pay off war debt with a huge addition to currency, making war's inflation many times worse, would be a disastrous beginning to that new era which is alleged to be dawning. By hard work, sparing consumption of luxuries, and a big industrial output, we can soon make the debt charge look smaller and smaller as compared with our aggregate income. Our foreign debt we can only meet by shipping goods and rendering services. But since it was all raised to be lent to our Allies and our lending of it was essential to a victory which has rid mankind of a terrible menace, it is surely reasonable that our creditors should not press for repayment in the first few difficult years, but should fund our short-dated debts into loans with twenty-five or thirty years to run. As to the home debt, we can only lighten its burden on the taxpayer by making taxation equitable. To this end reform of the income tax is an urgent need. We have to lighten its pressure much more effectively on those who are bringing up families, and by collecting it through employers make it an effective and just tax on those of the working class whose earnings and family liabilities make them fairly subject to it. XVIII THE REGULATION OF THE CURRENCY _February_, 1919 Macaulay on Depreciated Currency--Its Evils To-day--The Plight of the Rentier--Mr Goodenough's Suggestion--Sir Edward Holden's Criticisms of the Currency Committee--His Scheme of Reform--Two Departments or One in the Bank of England?--Not a Vital Question--The Ratio of Notes to Gold--Objections to a Hard-and-fast Ratio--The Limit on Note Issues--The Federal Reserve Act and American Optimism--Currency and Commercial Paper--A Central Gold Reserve with Central Control. Everyone has read, and most of us have forgotten, the great passage in Macaulay's history which describes the evils of a disordered currency. "It may well be doubted," he says, "whether all the misery which had been inflicted on the English nation in a quarter of a century by bad Kings, bad Ministers, bad Parliaments and bad judges was equal to the misery caused in a single year by bad crowns and bad shillings.... While the honour and independence of the State were sold to a foreign Power, while chartered rights were invaded, while fundamental laws were violated, hundreds of thousands of quiet, honest and industrious families laboured and traded, ate their meals and lay down to rest in comfort and security. Whether Whigs or Tories, Protestants or Jesuits were uppermost, the grazier drove his beasts to market, the grocer weighed out his currants, the draper measured out his broadcloth, the hum of buyers and sellers was as loud as ever in the towns, the harvest-time was celebrated as joyously as ever in the hamlets, the cream overflowed the pails of Cheshire, the apple juice foamed in the presses of Herefordshire, the piles of crockery glowed in the furnaces of the Trent, and the barrows of coal rolled fast along the timber railways of the Tyne. But when the great instrument of exchange became thoroughly deranged, all trade, all industry, were smitten as with a palsy.... Nothing could be purchased without a dispute. Over every counter there was wrangling from morning to night. The workman and his employer had a quarrel as regularly as the Saturday came round. On a fair-day or a market-day the clamours, the reproaches, the taunts, the curses, were incessant; and it was well if no booth was overturned, and no head broken.... The price of the necessaries of life, of shoes, of ale, of oatmeal, rose fast. The labourer found that the bit of metal which, when he received it was called a shilling, would hardly, when he wanted to purchase a pot of beer or a loaf of rye bread, go as far as sixpence." From some of the evils thus dazzlingly described we are happily free in these times. We are not cursed with a currency composed of coins which are good, bad and indifferent, with the result that the public gets the bad and indifferent while the nimble bullion dealers absorb and export the good. There is nothing to choose between one piece of paper and another, and all that is wrong with them is that there are too many of them. But the general result as it affects the labourer who wants to purchase a pot of beer or anyone else who wants to buy anything is very much the same. A bit of metal that is called a shilling has about the value of a pre-war sixpence and a bit of paper that is called a Bradbury fetches half as much as the pound of five years ago. Compared with what other peoples are suffering from the same disease arising from the same surfeit of money in one form or another, this nuisance that we are enduring is not too terribly severe. It has entailed great hardship on a class that is small in number, namely, those who have to live on fixed incomes. The salary-earner and the rentier have borne the brunt, while the wage-earner and the profit-maker have been able to expand their earnings, in paper, at least to a point at which the depreciation of currency have left them no worse off. Seeing that the wage-earners are those who do the dreariest and dirtiest jobs, and that the profit-makers are those who take the risks of industry and the enormous responsibility of organising enterprise, they are the classes whom it is clearly most desirable to encourage. The rentier in these days gets less than no sympathy, but we make a great mistake if we think that we can with impunity crush him between the upper and nether millstone of fixed income and rising prices. With his help we have equipped industry at home and abroad. We can, if we choose, by depreciating the currency still further, lessen still more the reward that we pay him for that benefit. He may kick, but he cannot abolish the equipment with which he has already provided industry. But if we make his life too hard he can strike like the rest of us, and by refusing to provide for any further expansion in industrial equipment, he can hold up production until we have devised some new method of laying up capital. Currency depreciation is good for the debtor and bad for the creditor; if it goes too far it kills the creditor and reduces business to chaos. We are a very long way from the chaos to which many of our Continental neighbours have already reduced their monetary systems; but there is fortunately a very general feeling that we are a country with a reputation and a prestige on this point; and the business world is growing restive concerning the delay on the part of those responsible in putting an end to a state of things which may have been justified by the war's exigencies (though there is much to be said for the view that in fact it only added to the war's difficulties) but is now clearly as out of date as the censorship, which, like it, nevertheless, continues to flourish. This state of things arises from the arrangement tinder which an unlimited supply of legal tender currency can be manufactured by the Government, which encouraged to continue the system by the fact that each note issued is in effect a loan to itself without interest. At the meeting of Barclays Bank on January 27th, Mr. Goodenough demanded that the issue of currency notes by the Government should be stopped forthwith, and that if it were necessary to provide more currency it would be better for the banks to be allowed to issue notes themselves. This suggestion involves, of course, a complete reversal of the principles on which our monetary system has grown up, since it has long been based on a note-issuing monopoly in the hands of the Bank of England. But these are topsy-turvy days, in which greyheaded precedent is very justly at a heavy discount; and Mr Goodenough's suggestion very practically gets over a big difficulty that stands in the way of stopping the stream of Bradburys. This difficulty lies in the fact that if the banks were pulled at by their customers for currency and could not supply them with Bradbury notes, they would be forced to take notes from the Bank of England, with a bad effect on the appearance of its reserve. If the business of issuing notes were put into the hands of the clearing banks, their power to do so would be limited by the extent of their assets, or of such of their assets as were thought fit to rank as backing for their notes. In other words, the note-issuing business would once more have to be regulated on banking principles and controlled by the price asked, for advances, instead of expressing the helplessness and improvidence of an impecunious and invertebrate Government. In this manner the new departure might be a convenient halfway-house on the way from chaos back to sanity. But probably it is too revolutionary and goes too straight in the teeth of the Bank of England's privilege to receive much practical consideration; and there is the question whether the public would take the new paper readily and whether it could be made legal tender. Sir Edward Holden, in one of those masterly surveys of world finance with which he now instructs the shareholders of the London Joint City and Midland Bank, assembled at their annual meeting, gave much of his attention to an attack on the report of Lord Cunliffe's Committee on Currency. This was only to be expected, since the Committee had made recommendations on lines which were largely conservative and did not embody any of the reforms or changes which had been previously advocated by Sir Edward. Being on this occasion chiefly critical, he did not make very clear in his latest speech the precise proposals that he favours. For them we have to go back to his speech of a year ago, as reported in the _Economist_ of February 2, 1918, p. 171, where he stated that "if the Bank (of England) had been working on the same principles as other national banks of issue, there would have been little ground for anxiety," and that these principles are:-- 1. One bank of issue and not divided into departments. 2. Notes are created and issued on the security of bills of exchange and on the cash balance, so that a relation is established between the notes issued and the discounts. 3. The notes issued are controlled by a fixed ratio of gold to notes or of the cash balance to notes. 4. This fixed ratio may be lowered by the payment of a tax. 5. The notes should not exceed three times the gold or the cash balance. As will be remembered, the Cunliffe Committee recommended that the division of the Bank of England into an Issue Department and a Banking Department, should be retained; that the old principle by which above a certain fixed limit all notes should be backed by gold, should also be retained, but that if at any time a breach of this rule should be found necessary it should be possible, with the consent of the Treasury, and that Bank rate "should be raised to a rate sufficiently high to secure the earliest possible retirement of the excess issue." Since it was formerly only possible to exceed the limit on the fiduciary issue by a breach of the law, under the Chancellor of the Exchequer's promise to get an indemnity for it from Parliament, and since Treasury tradition insisted on a 10 per cent. Bank rate whenever such a breach was permitted or contemplated, it will be seen that the Cunliffe Committee proposed some considerable modifications in our system and hardly justified Sir Edward's assertion that it "proposed that the Bank should continue to work under the Act of 1844 as heretofore." At first sight there seems to be a good deal of difference between Sir Edward's ideal and Lord Cunliffe's, but is not the difference to a great extent superficial? Whether the Bank be divided into two departments, each presenting a separate account, or its whole business be regarded as one and stated in one account, seems to be rather a trifling question. And the arguments put forward for their several views by the two champions are not strikingly convincing. Sir Edward wants only one account, because he thinks the consequence would be a stronger reserve and fewer changes in bank rate. But a mere change of bookkeeping such as the amalgamation of the two accounts would not make a half-pennyworth of difference to the extent of the Bank's responsibilities and its ability to meet them, and it is on variations in these factors that movements in bank rate are in most cases decided. On the other hand, Lord Cunliffe and his colleagues argue that the main effect of putting the two departments into one would be to place deposits with the Bank of England in the same position as regards convertibility into gold as is now held by the note. On this point Sir Edward's answer is telling: "In reply to this statement, I say that the depositors at the present time can always get gold by drawing out notes from the reserve and taking gold from the Issue Department. There seems to be little difference between the depositors attacking gold direct and attacking the gold through the notes in the reserve. If the Bank cannot pay the notes when demanded the whole machinery stops." Quite so. The notion that the holder of a Bank of England note has now a stronger hold over the Bank's gold than the depositor seems to be baseless. He can exercise his hold more quickly perhaps, though even this is doubtful. Since banknotes are not legal tender at the Bank of England, it is not quite clear that the depositor would even have to take the trouble to go first to the Banking Department for notes and then to the Issue Department for gold. He might be able to insist on gold in immediate payment of his deposit. Still less convincing is the Committee's argument that "the amalgamation of the two departments would inevitably lead in the end to State control of the creation of banking credit generally." Their report might have explained why this should be so, for to the ordinary mind the chain of consequence is not apparent. On the whole it is hard to see much good or harm to be achieved by changing the form of the Bank return. It might make the Bank's position look stronger, but it could not make it really stronger. Nor would it really impair the strength of the note-holder's position as against the depositor, because even now there is no essential difference. It would substitute a more businesslike and simple statement for a form of accounts which is cumbrous and stupid and Early Victorian--a relic of an age which produced the crinoline, the Crystal Palace and the Albert Memorial. On the other hand, to alter a statistical record merely for the sake of simplicity and symmetry is questionable. Unless we are getting more and truer information, it is a pity to make comparisons between one year and another difficult by changing the form in which figures are given. A more essential difference between the two policies lies in Sir Edward's advocacy of a ratio--three to one--between notes and gold, and the Committee's support of the old fixed line system. By the latter, if gold comes in, notes to the same extent can be created, and if gold goes out notes to the amount of the export have to be cancelled. Under Sir Edward's policy the influx and efflux of gold would have an effect on the note issue which would be three times the amount of the gold that came in or went out. This at least is the logical effect of his statement that "the notes should not exceed three times the gold or the cash balance." This law does not seem to be quite consistent with his view that the fixed ratio of gold to notes may be lowered by the payment of a tax; but presumably the tax would come into operation before the three to one part was reached, and at three to one there would be a firm line drawn. On this assumption the Committee's argument is a very strong one. "If," says its report (Cd. 9182, p. 8), "the actual note issue is really controlled by the proportion, the arrangement is liable to bring about very violent disturbances. Suppose, for example, that the proportion of gold to notes is actually fixed at one-third and is operative. Then, if the withdrawal of gold for export reduces the proportion below the prescribed limit, it is necessary to withdraw notes in the ratio of three to one. Any approach to the conditions under which the restriction would become actually operative would then be likely to cause even greater apprehension than the limitation of the Act of 1844." Certainly if, during a foreign drain, for every million of gold that went out, another two millions of credit, over and above, had to be cancelled, it is easy to imagine a very jumpy state of mind in Lombard Street and on the Stock Exchange. Sir Edward and the Committee seem to be agreed as to a limit on the note issue, but of the two limiting systems the old one advocated by the Committee, though apparently more severe, would seem to have much less alarming possibilities behind it. A point on which the commercial world does not seem to have made up its mind, however, is whether there should be a limit at all. Under the old Act there was a limit which could only be passed by a breach of the law. Under the Cunliffe proposal the limit could be passed with the consent of the Treasury. Sir Edward has not told us of what machinery he proposes for the passing of the limit which he lays down; but in view of the great apprehension that an approach to the limit point would, as shown by the Committee, produce, it is clear that there would have to be a way round. In Germany there is no limit; you pay a tax on the excess issue and go on merrily. In America it would seem that the German system has been taken for a model. In his speech on January 29th Sir Edward quoted Senator Robert Owen, who was the principal pioneer of the Federal Reserve Bill through the Senate, as follows:--"The central idea of the system is elastic currency issued against commercial paper and gold, expanding and contracting according to the needs of commerce.... It is of great importance that the volume of these notes should contract when the commerce of the country does not require the notes to be circulation, and the reserve board can require them to be returned by imposing a tax upon the issue.... Under the reserve system a financial panic is impossible. People will not hoard currency nor hoard gold when they know that they can get currency or get gold when required.... America no longer believes a financial panic possible, and therefore the business men, being perfectly assured as to the stability of credits, do not hesitate to enter manufacturing and commercial enterprises from which they would be deterred under old conditions of unstable credit." Well, let us hope the Senator is right and that America is right in believing that a financial panic is no longer possible there. But one cannot help feeling that such a belief may be rather dangerous in the minds of people so ready to take rose-coloured views as our American cousins. The Federal Reserve system has worked beautifully in a period in which American finance has had nothing to do but rake in the enormous profits of American production at the expense of warring Europe and lend part of them, to be spent in America, to the Allied belligerents. It may work equally well if and when the problem to be faced is different, but it will be interesting to see--for those of us who live to see--what sort of a tax will be needed to "require" America, in one of its holiday moods, to return currency that it thinks it needs and the Federal Reserve Board regards as redundant. Another point on which Sir Edward lays great stress, in his attack on the Bank Act of 1844 and the Committee which supports its main principles, is the beauty of the bill of exchange as backing for a note issue, as opposed to Government securities. "There is," he says, "no automatic system for the redemption of currency notes as would be the case if they were issued against bills of exchange, which in due course would have to be paid off." Again, "it seems to me that notes should not be issued against Government securities which may or may not be paid off, but against bills of exchange which must be met at due date." This advantage about a bill of exchange is a very real one to the individual holder who can always put himself in funds by letting the contents of his portfolio "run off"; but is there much in it as a safeguard against excessive issue of currency in times of exuberance? In such times bills that fall due are pretty sure to be replaced by new ones drawn against fresh production--since over-production is a common symptom of commercial exuberance--or against a resale of the goods on which the original bills were based. As long as anyone who can show produce can be certain to get credit and currency, the notion that the maturing of bills of exchange can be relied to restrict currency expansion within safe limits is surely a dangerous assumption. The principle of a fixed limit, to be broken in case of real need, but only after some ceremony has been gone through giving notice of the fact that a crisis has been reached, seems rather to be required by the psychology of speculative mankind. But even if Sir Edward's preference for bills of exchange as backing for notes has all the merits that he claims that is no reason for urging the repeal of the Bank Act to secure their use. Because the Bank Act does not forbid it: it merely says, "there shall be transferred, appropriated and set apart by the said governor and company to the Issue Department of the Bank of England securities to the value of," etc. It is the practice of the Bank to put Government securities into the Issue Department, but the terms of the Act do not compel them to do so, and if an excess issue were needed they would seem to be empowered to put any bills that they discounted into the assets held against the note issue. On the whole the terms of the Act leaving them freedom in the matter, except with regard to the "Government debt" of £11 millions, which is specially mentioned as to be transferred to the Issue Department, seem to be preferable to a special stipulation in favour of bills of exchange. But the most important difference between Sir Edward Holden and the Cunliffe Committee seems to be in their attitude towards the gold reserve and the relation between the Bank of England and the rest of the items that compose the London money market. The Committee, working to restore the conditions which made our market the centre of the world's finance, endeavoured to give back the control of the central gold reserve to the Bank of England by suggesting, among other things, that the other banks should hand over their gold to it. They omitted to discuss the serious question of the greater difficulty that the Bank is likely to find in future in controlling the price of money in the market, owing to the huge size that the chief clearing banks have now reached. But a central gold reserve under central control was evidently the object at which they aimed. Sir Edward will have none of this. He says that if this were done the position of the Joint Stock banks would be weakened, though he does not explain why, since they would obviously hold notes in place of their gold and so would be able to meet their customers' demands, now that the latter are accustomed to the use of notes for pocket money. He points out that "the gold which was held by the Joint Stock banks before the war proved most useful.... At the beginning of the war the banks paid out gold, satisfied the demands of their customers for small currency, and thus eased the situation until currency notes became available." He seems to have forgotten that the banks, or most of them, refused to part with their gold, paid their customers in Bank of England notes which, being for £5 at the smallest, were of little use for pocket money, and so drove them to the Bank to get gold; and we had to have a prolonged bank holiday and a moratorium. Sir Edward is in favour of three gold reserves, one to be held by the Government, one by the clearing banks, and one by the Bank of England. If there were differences between the three controllers of the reserve at a time of crisis the consequence might be disastrous. In view of the admiration expressed by Sir Edward for the new American system which is so clearly based on central control it is rather illogical that he should be so strongly in favour of independence on this side of the water. His opinion is that "the policy of the Joint Stock banks ought to be to make themselves independent of the Bank of England by maintaining large reserves in their vaults." Independence and individualism are a great source of strength in most fields of financial activity, but in view of the great problems that our money market has to face there seems to be much to be said for co-operation and central control, at least until we have got back to a normal state of affairs with regard to the foreign exchanges. XIX TIGHTENING THE FETTERS OF FINANCE _March_, 1919 The New Meaning of Licence--The Question of Capital Issues--Text of the Treasury Regulations--Their Scope and Effect--The Position of the Stock Exchange--Wider Issues at Stake--Should Capital be set Free?--The Arguments for and against--Perils of an Excessive Caution--The New Committee and its Terms of Reference--The Absurdity of prohibiting Share-splitting--The Storm in the House of Commons--Disappearance of the Retrospective Clause--A Sample of Bureaucratic Stupidity. A contrast between liberty and licence is a pleasant alliterative commonplace beloved by political writers, especially those with a reactionary bias. In the light of recent events it seems to be going to take a new meaning. Licence will soon be understood, not as the abuse of liberty, to which democracies are prone, but as a new weapon by which our bureaucracy will do away with liberty by tightening the shackles on our economic and other activities. For imports and exports the licence system is already familiar; if the mines and railways are to be nationalised we may have to be licensed before we can burn coal or go away for a week-end; if the Eugenists have their way a licence will be necessary before we can propagate the species; and before we can get a licence to do anything we shall have to go through an exasperating process of filling in forms innumerable, inconsistent, overlapping and incomprehensible. Finance is the latest victim of this melancholy tendency. Under the guise of an attempt to give greater freedom to it a system has been introduced which makes a Treasury licence necessary, with penalties under the Defence of the Realm Act, for doing many things which have hitherto been possible for those who were prepared to forgo the privilege of a Stock Exchange quotation. Let the story be told in official language, as uttered through the Press Bureau, on February 24th, in "Serial No. C. 10917." "In view of the changed conditions resulting from the conclusion of the armistice, the Treasury has had under consideration the arrangements which have been in force during the war for the control of New Issues of Capital. "The work of scrutinising proposals for new Capital Issues has been performed during the war by the Capital Issues Committee, the object being to refuse sanction for all projects not immediately connected with the successful prosecution of the war. The decisions of the Treasury, taken upon the advice of this Committee, have, however, not had any binding force, beyond what is derived from the emergency regulations of the Stock Exchange, which forbids dealings in any new Issues which have not received Treasury consent. "While it is not possible under existing financial conditions to dispense altogether with the control of Capital Issues, it has clearly become necessary to reconsider the principles upon which sanction has been given or refused in order that no avoidable obstacles may be placed in the way of providing the Capital necessary for the speedy restoration of Commerce and Industry, and the development of public utility services. "In view of the numbers of the proposals for fresh Issues of Capital which are to be expected, it is necessary to provide further machinery for dealing with them and for making the decisions upon them effective. "A regulation under the Defence of the Realm Act has accordingly been made prohibiting all Capital Issues except under licence from the Treasury, and the Capital Issues Committee has been reconstituted with new Terms of Reference, which are as follows:-- "'To consider and advise upon applications received by the Treasury for licences under Defence of the Regulation (30 F) for fresh Issues of Capital, with a view to preserving Capital during the reconstruction period for essential undertakings in the United Kingdom, and to preventing any avoidable drain upon Foreign Exchanges by the export of Capital, except where it is shown to the satisfaction of the Treasury that special circumstances exist.' "It will be an instruction to the Committee that, in order that applications may be dealt with expeditiously and to enable oral evidence to be given in support of them when desired by the applicant, that the Committee should sit by Panels consisting of three members, the decision of the Panels to be subject to confirmation by the full Committee. "All applications for licences most be made, in the first instance, in writing on a Form which can be obtained from the Secretary of the Capital Issues Committee, Treasury, S.W. 1. "Before any application is refused the Committee will give the applicant an opportunity of giving oral evidence in support of his case." The notice then proceeded to recite the terms of D.O.R.A. 30 F, of which more anon. Next day came a supplementary announcement, "Serial No. C 10938," as follows:-- "With reference to the recent announcement in the Press that all applications for Treasury licences must be made in writing on a form obtainable from the Secretary of the Capital Issues Committee, Treasury, S.W. 1, delay will be avoided if intending applicants will state which of the following forms they require:-- "Form No. 1. Issue by a proposed New Company to start a fresh business. "Form No. 2. Issue by an Existing Company (other than for the purpose of capitalising profits). "Form No. 3. Issue by an Existing Company for the purpose of capitalising profits. "Form No. 4. Conversion of a Firm into a Limited Company which does Not involve the introduction of fresh capital. "Form No. 5. Conversion of a Firm into a Limited Company which Does involve the introduction of fresh capital. "If none of the above Forms appears to be applicable (as, e.g., in amalgamations, sub-divisions of shares, etc.), a statement of the facts should be submitted in writing." Before we go on to consider the new regulation, 30 F, let us try to see what is the real effect of the document above quoted. It was evidently intended to be a relaxation of the control of finance. This is shown by the sentence which says that the matter was to be reconsidered "in order that no avoidable obstacle may be placed in the way of providing the capital necessary for the speedy restoration of commerce and industry, and the development of public utility services." And yet it was thought necessary to give legal force and attach penalties to regulations that have worked during the war quite sufficiently well to secure a much stricter control than is now required. The explanation of this apparent inconsistency is probably to be found in the desire of the Government to meet a grievance of the Stock Exchange. Hitherto the only penalty that befell those who made a new issue without getting Treasury sanction was that the securities issued could not be dealt in on the Stock Exchange. The practical effect of this was that those who acted without Treasury sanction could only issue securities subject to this serious drawback, and so an effective but not altogether prohibitive bar was put on the process. If this bar was not strong enough in war-time it ought clearly to have been strengthened long ago; if it was strong enough, then why should it be strengthened now? From the Stock Exchange point of view it is easy to make out a good case for working through licence and penalty rather than through the banning, of the securities effected, from sanction for dealings. By thus being used as an official weapon the Stock Exchange penalised itself and its members. By saying "no security not sanctioned by the Treasury shall be dealt in here," its Committee restricted business in the House and drove it outside. This grievance was obvious and was plentifully commented on during the war. If the Committee had pressed the point vigorously it could probably have forced the Government long ago to abolish the grievance by making all dealings in new issues that appeared without Treasury sanction illegal and liable to penalty. A patriotic readiness to fall in with the Government's desires was probably the reason why the Stock Exchange refrained from embarrassing it, during the war, by too active protests against a grievance that was then more or less real; though it should be noted that even if the grievance had been amended, the Stock Exchange would not necessarily have got any more business, but would only have succeeded in stopping a very moderate amount of business that was being done by outsiders. But when all is said that can be said for the justice of the case that can be made by the Stock Exchange, the question still arises whether it was advisable, at a time when relaxation of restrictions was desirable in the interests of the revival of industry, to draw tighter bonds which had been found tight enough to do their work. That the Stock Exchange should suffer from limitations from which outside dealers were exempt was certainly a hardship. On the other hand, since the armistice there has been a considerable expansion in Stock Exchange business. Oil shares, Mexican securities, industrial shares, insurance shares, and others in which capitalisation of reserves and bonus issues have been used as an effective lever for speculation, have enjoyed spells of considerable activity. With this revival in progress, in spite of many obvious bear points, such as industrial unrest at home, Bolshevism abroad, the continuance of heavy expenditure by the Government, and the hardly slackened growth of the national debt, it seems to have been scarcely necessary in the interests of the House to have made regulations which, though perhaps demanded by abstract justice, imposed new ties on enterprise at a time when complete freedom, as far as it was consistent with the best interests of the country, was most of all desirable. How far, we have next to ask, is it necessary for the best interests of the country to restrict the freedom of capital issues? If we look back at the terms of reference under which the reconstituted Committee is to work, we see that the officially expressed objects are (1) preserving capital for essential undertakings in the United Kingdom, and (2) preventing any avoidable drain upon Foreign Exchanges by the export of capital. There is certainly much to be said for both these objects. When we lend money to foreigners we give them the right to draw on us now in return for their promises to pay some day; in other words, we make an invisible import of foreign securities, and in the present state of our trade balance all imports, whether visible or invisible, need careful watching. It is also very evident that at a time when capital is scarce there is much to be said for keeping it for essential industries, especially those which produce necessaries and goods for export, and not allowing it to be swept up by borrowers who are going to devote it to making expensive fripperies on which big profits are probable. There remains a very big other side to both these questions. All over the world there is a demand for goods which have not been produced, or only in greatly reduced quantities, during the war. This demand is only effective in so far as willing buyers can pay; some of them have the needful cash in hand or waiting in London or elsewhere to be drawn on, but a great number of would-be buyers want to be financed, and will have to be financed by somebody if the needs that they feel are to be translated into actual purchases. In other words, in order that the wheels of industry are to be set turning as fast as they might, if they had a full chance, somebody has to lend freely. Now, it is surely most of all important in the national interest that those wheels should begin spinning as fast as possible, and the question is whether we are more likely to serve that interest best by keeping a meticulous eye on the course of exchange and buttoning up our pockets to foreign borrowers or by leaving capital free to seek its market, knowing that every time we give the foreigner the right to draw on us we stimulate our export trade, because his drawing must finally mean a demand on us for something--goods, securities or gold--and goods are what people are in these times most anxious to take. If we are going to leave all the financing to be done by America and fear to import promises to pay lest they should be followed by demands on our gold, shall we not be rather in the position of Barry Lyndon, who was given a gold piece by his mother when he went out into the world, with strict injunctions always to keep it in his pocket and never to change it? Regard for our gold standard is most necessary, but the gold standard is not an end in itself, but merely an important part of a machine which only exists to serve our industry. If we are so careful of the machine, which is a mere subsidiary, that we check the industry which it is there to serve, we shall be like the dandy who got wet through because he had not the heart to unfurl his beautifully rolled-tip umbrella. Again, it looks very sound and sensible to keep capital for purposes that are essential, but, on the other hand, it is so enormously important to set industry going as fast as possible that almost any one who will do anything in that direction is entitled to be given a chance. In war-time, when labour and materials were so scarce that they could not turn out all the munitions that were necessary, such a restriction was clearly inevitable. Now, when labour and materials are becoming more plentiful, and the scarce commodity is the pluck and enterprise that will take the risks involved by getting to work on a peace basis, it may be argued that any one who will take those risks, whatever be the stuff or services that he proposes to produce, should be encouraged rather than checked. It is again a question of the balance of advantage. If we are going to be so careful in seeing that capital is not put to a wrong use that we take all the heart out of those who want to make use of it, we shall do more harm than good. If by leaving capital free to go into any enterprise that it fancies we can give a start to industry and promote a spirit of courage and enterprise among its captains, it will be well worth while to do so at the expense of seeing a certain amount of capital going into the production of articles that the community might, if it made a more reasonable use of its purchasing power, very well do without. The same question arises when we consider the desire of the Government, not expressed in the above statement, but very freely admitted by Mr Bonar Law, in discussing it in the House of Commons, to keep capital to be lent to it rather than expended in, perhaps unnecessary, industry. Here, again, it is clearly in the interest of the taxpayer that Government loans should be raised on the most favourable terms possible. But if, in order to do so, we starve industry of capital that it needs, and so check the production on which all of us, Government and citizens alike, ultimately have to live, we shall be scoring an immediate advantage at the expense of future progress--spoiling a possibly brilliant break by putting down the white ball for a couple of points. There is thus a good deal to be said for setting capital free, before we have even arrived at the most serious objection to regulating it under Treasury licence. This objection is the exasperation, delay and uncertainty involved by this control. Even if we had an ideally wise and expeditious body to decide about capital issues it might not be the best thing to set it to work. But when we remember that in order to see that the wrong sort of issue is not made, all issues will have to pass through the terribly slow-working process of official selection before the necessary licence is finally granted, it begins to look still more likely that we should do well to run the risk of letting a few goats through the gate, rather than keep all the sheep waiting outside for months, with the probable result that many of them may lose altogether their chance of final salvation. It will be noted from the official statement that the arbitrary methods of the old Committee are to be modified. It has long been a by-word among those who had dealings with it; they abused it in quite sulphurous language and were wont to quote it as an example of all that bureaucratic tyranny is and should not be, thereby doing some injustice to our bureaucrats, seeing that the Committee was manned not by officials but by business men, clothed _pro hac vice_ in the thunder of Whitehall. The new Committee is to sit by panels of three, so as to expedite matters, and so as to allow applicants the privilege of giving oral evidence. This is an innovation that will save some exasperation, but it will hardly accelerate matters, especially as the decision of the panels will be subject to confirmation by the full Committee, so that all the work will have to be done twice over. There is thus much reason to fear that delay, so fatal in business matters, will be an inevitable offspring of the efforts of the new Committee, and the list of different forms on which applications are to be made, given above, shows that all the paraphernalia of red tape will dominate the proceedings. Now for the terms of the new Regulation under the Defence of the Realm Act. "1. The following regulation shall be inserted after Regulation 30 EE:-- "30 F. The following provisions shall have effect in respect of new capital issues and to dealings in securities issued for the purpose of raising capital: "(1) No person shall, except under and in pursuance of a licence granted by the Treasury-- "(a) issue, whether for cash or otherwise, any stock, shares or securities; or "(b) pay or receive any money on loan on the terms express or implied that the money is to be or may be applied at some future date in payment of any stock, shares or securities to be issued at whatever date to the person making the loan; or "(c) sub-divide any shares or Debentures into shares or Debentures of a smaller denomination, or consolidate any shares or Debentures of a larger denomination; or "(d) renew or extend the period of maturity of any securities; or "(e) purchase, sell or otherwise transfer any stock, shares or securities or any interest therein, or the benefit of any agreement conferring a right to receive any stock, shares or securities, if the stock, shares or securities were issued, sub-divided or consolidated, or renewed or the period of maturity thereof extended, or the agreement was made, as the case may be, at any time between the 18th day of January, 1915, and the 24th day of February, 1919, and the permission of the Treasury was not obtained to the issue, sub-division, consolidation, renewal or extension or the making of the agreement, as the case may be. "(2) No person shall except under and in pursuance of a licence granted by the Treasury-- "(a) buy or sell any stock, shares or other securities except for cash or when the purchase or sale takes place in any recognised Stock Exchange, subject to the rules or regulations of such exchange. "(b) buy or sell any stock, shares or other securities which have not remained in physical possession in the United Kingdom since the 30th September, 1914. "(3) A licence granted under this regulation may be granted subject to any terms and conditions specified therein. "(4) If any person acts in contravention of this regulation, or if any person to whom a licence has been granted under this regulation subject to any terms or conditions fails to comply with these terms or conditions, he shall be guilty of a summary offence against these regulations. "(5) In this regulation the expression 'securities' includes Bonds, Debentures, Debenture stock, and marketable securities." It will be seen at once that the terms of this document, on any interpretation of them, go far beyond the intentions expressed in what may be called the official preamble and in the new Committee's terms of reference. One of the clauses seems, with all deference to its august composers, to be merely silly. This is (1)(c) forbidding sub-division of securities. If a £10 share is split into ten _£1_ shares this operation cannot make the smallest difference to the supply of capital for essential industries or cause any drain on the Foreign Exchanges. I am assured by those who have delved into the official intention that the reason for the objection of the old Committee to splitting schemes, on which this new prohibition is based, was that splitting made shares more marketable and popular and so more likely to compete with War Bonds. But a mere sale of shares, split small and so popularised, does not absorb any capital. That only happens when, money is put into some new form of industry. If A, who holds ten £20 shares, is enabled to dispose of them to B because they are split into 200 £1 shares, then, A instead of B has got the money and has to invest it in something. The amount of capital available for investment is not diminished by a halfpenny. This regulation is just a piece of short-sighted tyranny which exasperates without doing the smallest good to anybody. More serious, however, was clause (1)(e) under which any securities that have been issued, split, consolidated or renewed without Treasury sanction since January, 1915, were not to be dealt in, in future, without a licence. The result of this clause, if it had stood, would have been that all loans under which such securities had been pledged would have had to be called in because the collateral became unsaleable, except after all the ceremonies had been gone through and a licence had been got. It was also possible to argue that the prohibition to renew or extend the maturity of any security meant that no loans of any kind could be renewed, and that no commercial bills could be renewed, without a licence. It is true that No. 5 paragraph says what the expression "securities" includes, but it does not state definitely that bonds, Debentures, Debenture stock and marketable securities are the only things included. It was a pretty piece of drafting, and raised a pretty storm in the House of Commons on February 27th, when a somewhat lurid picture of its effects was drawn by Sir H. Dalziel and Mr Macquisten. Mr Chamberlain not being then legally a member of the House, it fell to the lot of Mr Bonar Law to explain that the Government had really meant to give greater freedom, in making new issues, that the evils anticipated had not been intended, that he hoped the House would not judge the Government too harshly for not making unsanctioned issues illegal from the beginning, and that a new Order would be issued removing the retrospective effect of the new regulation. And so amendment was promised of a measure which would have had very awkward and unjust effects. It may be argued that it would only have affected people who had done, during the war, what they were asked not to do, namely, make issues without Treasury sanction. If the old Committee had been a reasonable and expeditious body this argument would have had great weight. But, in view of its caprices and dilatoriness, there was a good deal of excuse for those who decided to do without Treasury sanction and take the consequence of being unable to market their securities on the Stock Exchange. To propose to add a new penalty and cause the cancelling of all the financial arrangements made in connexion with such issues during four years was simply piling blunder on blunder. Luckily, the protests of the Government's own supporters sufficed to undo the worst of the mischief; but the whole affair is only another argument in favour of the earliest possible ridding of finance and industry from control that is so clumsily exercised. XX MONEY OR GOODS?[1] _December_, 1918 [Footnote 1: This was the latter of two articles contributed to the _Times Trade Supplement_ in answer to a series in which Mr Arthur Kitson had attacked our banking and currency system suggested an inconvertible paper currency.] "Boundless Wealth"--Money and the Volume of Trade--The Quantity Theory--The Gold Standard--How is the Volume of Paper to be regulated?--Mr Kitson's Ideal. In the November _Trade Supplement_ an endeavour was made to answer Mr Kitson's rather vague and general insinuations and charges against our bankers concerning the manner in which they do their business. Now let us examine the larger and more interesting problem raised by his criticism of our currency system. In his article in the June _Supplement_ he told us that "if the British public had any grasp of the fundamental truths of economic science they would know that a future of boundless wealth and prosperity is theirs." This is a cheery and encouraging view and, let us hope, a true one. But, that boundless wealth can only be got if we work for it in the right way. Can Mr Kitson show it to us, and what are these "fundamental truths of economic science"? It is easier to talk about them than to find any two economists who would give an exactly--or even nearly--similar list of them. Mr Kitson glances "at a few elementary truths." "Wealth," he says, "is the product of two prime factors, man and Nature, generally termed labour and land. With an unlimited, or practically unlimited, supply of these two factors, how is it that wealth is and has been hitherto so comparatively scarce?" But is the supply of "man" unlimited in the sense of man able, willing, and properly trained to work? And is the supply of "Nature" unlimited in the sense of land, mines, and factories fully equipped with the right machinery and served and supplied by adequate means of transport? Surely the failure In production on which Mr Kitson so rightly lays stress is due, at least partly, to lack of good workers, good organisers, good machinery, and good transport facilities. Workers who restrict output, employers who despise science and cling to antiquated methods, the opposition of both classes to new and efficient equipment, and large tracts, even of our own land, still without reasonable transport facilities, have something to do with it. And lack of capital--this answer to the question Mr Kitson flouts because, he says, "since capital is wealth," to say that "wealth is scarce because capital is scarce is the same as saying that wealth is scarce because it is scarce." But is it not a "fundamental truth of economic science" that capital is wealth applied to production? Wealth and capital are by no means identical. When a well-known shipbuilding magnate laid waste several Surrey farms to make himself a deer-park, the ground that he thus abused was still wealth, but it is no longer capital because it has ceased to produce good food and is merely a pleasant lounging-place for his lordship. May not the failure of production be partly due to the fact that, owing to the extravagant and stupid expenditure of so many of the rich, too much work is put into providing luxuries--of which the above-mentioned deer-park is an example--and too little into the equipment of industry with the plant that it needs for its due expansion? Mr Kitson's answer is much easier. According to him, instead of working better, organising better, and putting more of our output into plant and equipment and less into self-indulgence and vulgarity all that we have to do to work the necessary reform is to provide more money and credit. Since, he says, under the industrial era-- "All goods were made primarily for exchange or rather for sale ... it followed, therefore, that production could only continue so long as sales could be effected; and since sales were limited by the amount of money or credit offered, it followed that production was necessarily limited by the quantity of money or credit available for commercial purposes." But is this so? If goods are produced more rapidly than money, it does not follow that they could not be sold, but only that they would have been sold for less money. The producer would have made a smaller profit, but on the other hand the cheapening of the product would have improved the position of the consumer, the cheapening of materials would have benefited the manufacturer, and it is just possible that production, instead of being limited, might have been stimulated by cheapness due to scarcity of currency and credit, or, at least, might have gone on just as well on a lower all-round level of prices. On the whole, it is perhaps more probable that a steady rise in prices caused by a gradual increase in the volume of currency and credit would have the more beneficial effect in stimulating the energies of producers. But Mr Kitson's argument that the volume of currency and credit imposes an absolute limit on the volume of production is surely much too clean-cut an assumption. This absolute limit may be true, if currency cannot be increased, with regard to the aggregate value in money of the goods produced. But money value and volume are two quite different things. If our credit system had not been developed as it has, and we had had to rely on actual gold and silver for carrying on all production and trade, it does not by any means follow that trade and production might not have been on something like their present scale in the matter of volume and turnover; but the money value would have been much smaller because prices would have been all round at a much, lower level. This contention is based on what is called the "Quantity Theory of Money." This theory Mr Kitson wholeheartedly believes, so that this is not a point that has to be argued with him. "The value of money," he says, "as every student of economics knows, is determined by the quantity of money in use and its velocity of circulation." Quite so. If you increase the amount of money faster than that of goods, more money has to be given for less goods; the value, or buying power, of money is depreciated and prices go up. The present war has given an excellent example of this process at work. All the warring Governments have printed acres of paper money, and have worked the credit system with profligate energy; and so we have a huge increase in currency and credit, along with little or no increase (probably a decrease) in consumable goods, and prices have soared like rockets all over the world. In neutral countries the rise has been as bad as anywhere, because the neutrals have been choked with the gold that the warring Powers exported, putting paper in its place. So we see that the volume of money, on the theory so emphatically expounded by Mr Kitson and endorsed by common-sense--as long as we are careful to include all forms of money that are taken in exchange for goods in the definition--reflects itself at once in prices. If money does not increase in quantity and goods do, then prices go down, and after the necessary adjustments are made in rates of wages and salaries, a larger trade can be done with the same amount of money at a lower level of values. The volume of money thus limits the aggregate value of trade, but not its aggregate volume. Periods of falling prices are not encouraging to producers, and they put too much advantage into the hands of the _rentier_--the man who lives on fixed interest; on the other hand, they are generally believed to be in favour of the working classes, since reductions in wages generally lag behind the fall in prices, which means increased buying power to the wage-earner. Mr Kitson's view that the volume of trade is limited by the quantity of currency and credit is thus based on confusion between volume and value. Moreover, it follows also from the "Quantity Theory of Money," which he holds, that if he applies his remedy and multiplies currency and credit as fast as he appears to want to, the result will be a still further depreciation in the buying power of money, and a further rise in prices and an increase in all the bitterness, discontent, suspicion, and strikes that the rise in prices has already caused during the war. Is this a prospect to pray for? Surely if we want to enjoy "boundless wealth and prosperity" the way to do so is to turn out goods--things to eat and wear and enjoy--and not to multiply money, thereby merely depreciating its value, on Mr Kitson's own admission. He thinks that "nothing but an abundant supply of currency in the shape of legal tender notes and bank credit, could have enabled us to undertake successfully such unprecedented burdens" as we have borne during the war. But it may equally well be argued that we have borne these burdens because we worked harder than ever before to turn out the needed stuff, organised better, used our machinery to its full power, and spent less of our product on luxuries; and that the abundant currency, by forcing up prices, immensely increased the cost of the war and produced industrial friction which several times brought us unpleasantly close to disaster. Mr Kitson, however, uses the "Quantity Theory of Money"--the doctrine that the value or buying power of money varies according to its quantity in relation to that of the goods that it buys--chiefly as a stick wherewith to beat the Gold Standard. He shows, very easily and truly, that it is absurd to suppose that the value of the monetary gold standard is invariable. Thereby he is only beating a dead horse, for no such argument is nowadays put forward. The variability of the gold standard of value is acknowledged, whenever a fluctuation in the general level of commodity prices is recorded. But gold is the basis of our credit system, and of those of all the economically civilised countries of the world, not because its value is believed to be invariable, but because it is the commodity which is universally accepted, in such countries and in normal times, in payment of debts. This quality of acceptability it has got largely by custom and convention. Mr Kitson speaks of the "selection of gold by the world's bankers as the basis for money and credit." But it was selected as currency by common custom long before bankers were heard of. And it was selected because of its permanence, ductility and other qualities, especially its beauty as ornament, which made man, eager to adorn himself, his women-kind, and the temples of his gods, always ready to accept it in payment, knowing also that, because of this acceptability, he would always be able to exchange it into any goods that he wanted. Any other commodity that earned this quality of universal acceptability could do the work of gold just as well. But until one has been found, gold, as long as it keeps that quality, holds the field. And bankers use it as the basis for money and credit, not because, as Mr Kitson says, they selected it owing to its scarcity, but because this quality of universal acceptability made it the thing in which all debts, both at home and abroad, could be paid. "Given," says Mr Kitson, "a self-contained trading community with a certain quantity of legal tender, just sufficient for its commercial needs, and it makes no difference either to the value or efficiency of the money or to the trade affected whether it be made of metal or paper." Quite so, but trading communities are not self-contained. Their currency has to be convertible into something acceptable abroad, and that something is, at present, gold. It is possible that the world may some day evolve an international paper currency that will be everywhere acceptable. But such an ideal requires a growth of honesty and mutual confidence among the nations that puts it a long way off. And how is its volume to be regulated? This question is all-important, whether the currency be national or international. Mr Kitson speaks of a currency "just sufficient" for the community's commercial needs. Who is to decide when the currency is just sufficient? The Government? A sweet world we should live in, if among other party questions, Parliament had to consider multiplying or contracting the currency every year or every month, with all the interests that would be affected by the consequent rise or fall in prices, lobbying, speech-making, and pulling strings to work the oracle to suit their pockets. And, according to Mr Kitson's view, that the volume of trade is limited by the supply of currency, this volume would then depend on the whims of the House of Commons, half the members of which would probably be innocent of a glimmering of understanding of the enormously important question that they were deciding. The gold standard, which makes the course of prices depend, more or less, on the chances of digging up a capricious metal from the bowels of the earth, has its obvious drawbacks; but it is a clean and sensible business compared with making them depend on the caprices of Parliament, complicated by the political corruption that would be only too likely to follow the putting of such a question into the hands of our elected and hereditary representatives and rulers. Such, however, seems to be the Promised Land to which Mr Kitson wants to lead us. Thus he propounds his remedy. "The remedy is surely obvious. Divorce our legal tender from its alliance with gold entirely, so that the supply of money and credit for our home trade is no longer dependent upon our foreign trade rivals. Base our currency upon the national credit ... treat gold as a commodity only, for the settlement of foreign trade balances." This passage in his article in the September _Supplement_ tells us what to do. Keep gold, out of deference for foreign prejudice, for the settlement of foreign trade balances, but make as much paper money as you like for home use. As our legal tender money is to be "divorced entirely from its alliance with gold" it clearly cannot be convertible into gold. So that apparently we shall have a paper pound and a gold pound (the latter for foreign use) with no connection between them. This stage of economic barbarism has been left behind now even by some of the South American republics. The paper pound, based on the national credit, can be multiplied as fast as our legislators think fit. If they do not multiply it fast enough, Mr Kitson will tell them that they are strangling trade, because the volume of production is limited by the amount of money available. At the same time bank credits will be multiplied indefinitely because, as was shown in the November _Supplement_, Mr Kitson supports a view that the average business man holds (according to him) that he ought to have a legal right to as much credit as he wants. With the Government printing paper to please its supporters, with the banks obliged by law to give credit to every one who asks for it, and with prices soaring on every addition to currency and credit, what a country this will be to live in, and what a life will be led by those who have to compile and work out the index numbers of the prices of commodities! Some of us, perhaps, will prefer the jog-trot conservatism of Lord Cunliffe's Currency Committee, who in their recently issued report[1] (which every one ought to read) recommend that gold should not be used for circulation at present, but that endeavours should be made towards the cautious reduction of our swollen paper currency, and that its convertibility into gold should be maintained. [Footnote 1: Cd. 9182, _2d_.] INDEX Addis, Sir Charles, on banking, Aërated Bread Co., and bonus issues, Allies, loans to, America, effect of war on, War finance of, Bank Act: its purpose, Its suggested repeal, Its working, Bank Amalgamations, progress of, Bechhofer, Mr, on Guild Socialism, Bills of Exchange, as basis of issue, Bonar Law, Mr, on after-war position, On capital levy, On sale of securities, British Trade Corporation, formation of, Brunner, Mond, and bonus shares, Budget, in 1918, Canadian Pacific, and bonus issues, Capital, foreign, Levy on, Meaning of, Supply of, War's destruction of, Capital Issues, Committee on, Licence required for, Need to restrict, Stock Exchange and, Cole, Mr, on Guild Socialism, Cunliffe Committee, report of Currency: inflation of, International, Metals as, Origin of, Quantity theory of, Report on, _Daily News_, on capital levy, Expenditure, Committee on, France, after-war position of, Free Trade and British supremacy, Germany, after-war position of, Our claims against, War finance of, Gold standard: affected by war, Faults of, Reasons for, Goodenough, Mr, on note issue, Hoare, Mr Alfred, on taxation, Holden, Sir Edward, and the Bank Act, Inflation, working of, Interest, rate of, Kitson, Mr, on currency, Labour, example set by, Lawrence, Mr Pethick, on capital levy, Lees, Mr Edward, on debt redemption, Lloyds, elasticity of, London, prestige of, Macaulay, Lord, on bad money, _New Statesman_, on capital levy, Owen, Senator, on American system, "Quantity Theory," of currency, Reserves, capitalising, _Round Table_, on capital levy, Socialism, and bank amalgamations, In light of war, Guild, Stilwell, Mr, on paying for war, Taxation, as war weapon, Increase of, in war, "War Emergency Workers," on capital levy, Webb, Mr, on State banking, 
17563	----	Note: Project Gutenberg also has an HTML version of this file which includes the original illustrations. See 17563-h.htm or 17563-h.zip: (http://www.gutenberg.net/dirs/1/7/5/6/17563/17563-h/17563-h.htm) or (http://www.gutenberg.net/dirs/1/7/5/6/17563/17563-h.zip) Two obvious typographical errors were corrected in transcribing this text. For a complete list, please see the Transcriber's note at the end of the file. KING'S CUTTERS AND SMUGGLERS 1700-1855 by E. KEBLE CHATTERTON Author of "Sailing Ships and Their Story," "The Romance of the Ship" "The Story of the British Navy," "Fore and Aft," Etc. With 33 Illustrations and Frontispiece in Colours [Illustration: REVENUE CRUISER CHASING SMUGGLING LUGGER. Before firing on a smuggler the cruiser was bound to hoist his Revenue colours--both pennant and ensign--no matter whether day or night. (_from the original painting by Charles Dixon, R.I._)] London George Allen & Company, Ltd. 44 & 45 Rathbone Place 1912 [All rights reserved] Printed by Ballantyne, Hanson & Co. At the Ballantyne Press, Edinburgh PREFACE I have in the following pages endeavoured to resist the temptation to weave a web of pleasant but unreliable fiction round actual occurrences. That which is here set forth has been derived from facts, and in almost every case from manuscript records. It aims at telling the story of an eventful and exciting period according to historical and not imaginative occurrence. There are extant many novels and short stories which have for their heroes the old-time smugglers. But the present volume represents an effort to look at these exploits as they were and not as a novelist likes to think they might have occurred. Perhaps there is hardly an Englishman who was not thrilled in his boyhood days by Marryat and others when they wrote of the King's Cutters and their foes. It is hoped that the following pages will not merely revive pleasant recollections but arouse a new interest in the adventures of a species of sailing craft that is now, like the brig and the fine old clipper-ship, past and done with. The reader will note that in the Appendices a considerable amount of interesting data has been collected. This has been rendered possible only with great difficulty, but it is believed that in future years the dimensions and details of a Revenue Cutter's construction, the sizes of her spars, her tonnage, guns, &c., the number of her crew carried, the names and dates of the fleets of cutters employed will have an historical value which cannot easily be assessed in the present age that is still familiar with sailing craft. In making researches for the preparation of this volume I have to express my deep sense of gratitude to the Honourable Commissioners of the Board of Customs for granting me permission to make use of their valuable records; to Mr. F.S. Parry C.B., Deputy Chairman of the Board for his courtesy in placing a vast amount of data in my hands, and for having elucidated a good many points of difficulty; and, finally, to Mr. Henry Atton, Librarian of the Custom House, for his great assistance in research. E. KEBLE CHATTERTON. CONTENTS CHAP. PAGE I. INTRODUCTION 1 II. THE EARLIEST SMUGGLERS 14 III. THE GROWTH OF SMUGGLING 40 IV. THE SMUGGLERS' METHODS 56 V. THE HAWKHURST GANG 82 VI. THE REVENUE CRUISERS 94 VII. CUTTERS AND SLOOPS 121 VIII. PREVENTIVE ORGANISATION 138 IX. CUTTERS' EQUIPMENT 157 X. THE INCREASE IN SMUGGLING 182 XI. THE SMUGGLERS AT SEA 199 XII. THE WORK OF THE CUTTERS 215 XIII. THE PERIOD OF INGENUITY 239 XIV. SOME INTERESTING ENCOUNTERS 257 XV. A TRAGIC INCIDENT 276 XVI. ADMINISTRATIVE REFORMS 295 XVII. SMUGGLING BY CONCEALMENTS 320 XVIII. BY SEA AND LAND 339 XIX. ACTION AND COUNTER-ACTION 361 XX. FORCE AND CUNNING 379 APPENDICES 403 ILLUSTRATIONS PLATES REVENUE CRUISER CHASING SMUGGLING LUGGER _Colour frontispiece_ FACING PAGE A REPRESENTATION OF YE SMUGGLERS BREAKING OPEN YE KING'S CUSTOM HOUSE AT POOLE 86 MR. GALLEY AND MR. CHATER PUT BY YE SMUGGLERS ON ONE HORSE NEAR ROWLAND CASTLE 88 GALLEY AND CHATER FALLING OFF THEIR HORSE AT WOODASH 88A CHATER CHAINED IN YE TURFF HOUSE AT OLD MILLS'S 89 CHATER HANGING AT THE WELL IN LADY HOLT PARK, THE ) BLOODY VILLAINS STANDING BY ) ) 90 THE BLOODY SMUGGLERS FLINGING DOWN STONES AFTER THEY ) HAD FLUNG HIS DEAD BODY INTO THE WELL ) H.M. CUTTER "WICKHAM," COMMANDED BY CAPTAIN JOHN FULLARTON, R.N. 178 H.M. CUTTER "WICKHAM" 179 IN TEXT PAGE "DOW SENT HIS MATE AND TEN MEN ON BOARD HER" 72 "CAME CHARGING DOWN ... STRIKING HER ON THE QUARTER" 102 "A GREAT CROWD OF INFURIATED PEOPLE CAME DOWN TO THE BEACH" 187 "THE 'FLORA' WITH THE 'FISGARD,' 'WASSO,' AND 'NYMPH'" 202 "THE 'CAROLINE' CONTINUED HER COURSE AND PROCEEDED TO LONDON" 211 HOW THE DEAL BOATMEN USED TO SMUGGLE TEA ASHORE 213 "THE 'BADGER' WAS HOISTING UP THE GALLEY IN THE RIGGING" 265 "FIRE AND BE DAMNED" 278 THE SANDWICH DEVICE 314 THE SLOOP "LUCY" SHOWING CONCEALMENTS 324 CASK FOR SMUGGLING CIDER 326 THE SMACK "TAM O'SHANTER" SHOWING METHOD OF CONCEALMENT 329 FLAT-BOTTOMED BOAT FOUND OFF SELSEY 332 PLAN OF THE SCHOONER "GOOD INTENT" SHOWING METHOD OF SMUGGLING CASKS 334 THE SCHOONER "SPARTAN" 336 DECK PLAN AND LONGITUDINAL PLAN OF THE "LORD RIVERS" 337 "THE CRUISER'S GUNS HAD SHOT AWAY THE MIZZEN-MAST" 348 "THE 'ADMIRAL HOOD' WAS HEAVING TUBS OVERBOARD" 358 "GETTING A FIRM GRIP, PUSHED HIM ... INTO THE WATER" 365 "LET'S ... HAVE HIM OVER THE CLIFF" 373 "UNDER COVER OF DARKNESS TOOK ON BOARD ... FORTY BALES OF SILK" 377 "ANOTHER SHOT WAS FIRED" 383 METHODS EMPLOYED BY SMUGGLERS FOR ANCHORING TUBS THROWN OVERBOARD 385 THE "RIVAL'S" INGENIOUS DEVICE 392 "TAKEN COMPLETELY BY SURPRISE" 398 King's Cutters & Smugglers CHAPTER I INTRODUCTION Outside pure Naval history it would be difficult to find any period so full of incident and contest as that which is covered by the exploits of the English Preventive Service in their efforts to deal with the notorious and dangerous bands of smugglers which at one time were a terrible menace to the trade and welfare of our nation. As we shall see from the following pages, their activities covered many decades, and indeed smuggling is not even to-day dead nor ever will be so long as there are regulations which human ingenuity can occasionally outwit. But the grand, adventurous epoch of the smugglers covers little more than a century and a half, beginning about the year 1700 and ending about 1855 or 1860. Nevertheless, within that space of time there are crowded in so much adventure, so many exciting escapes, so many fierce encounters, such clever moves and counter-moves: there are so many thousands of people concerned in the events, so many craft employed, and so much money expended that the story of the smugglers possesses a right to be ranked second only to those larger battles between two or more nations. Everyone has, even nowadays, a sneaking regard for the smugglers of that bygone age, an instinct that is based partly on a curious human failing and partly on a keen admiration for men of dash and daring. There is a sympathy, somehow, with a class of men who succeeded not once but hundreds of times in setting the law at defiance; who, in spite of all the resources of the Government, were not easily beaten. In the novels of James, Marryat, and a host of lesser writers the smuggler and the Preventive man have become familiar and standard types, and there are very few, surely, who in the days of their youth have not enjoyed the breathless excitement of some story depicting the chasing of a contraband lugger or watched vicariously the landing of the tubs of spirits along the pebbly beach on a night when the moon never showed herself. But most of these were fiction and little else. Even Marryat, though he was for some time actually engaged in Revenue duty, is now known to have been inaccurate and loose in some of his stories. Those who have followed afterwards have been scarcely better. However, there is nothing in the following pages which belongs to fiction. Every effort has been made to set forth only actual historical facts, which are capable of verification, so that what is herein contained represents not what _might_ have happened but actually did take place. To write a complete history of smuggling would be well-nigh impossible, owing to the fact that, unhappily through fire and destruction, many of the records, which to-day would be invaluable, have long since perished. The burning down of the Customs House by the side of the Thames in 1814 and the inappreciation of the right value of certain documents by former officials have caused so desirable a history to be impossible to be written. Still, happily, there is even now a vast amount of material in existence, and the present Commissioners of the Board of Customs are using every effort to preserve for posterity a mass of data connected with this service. Owing to the courtesy of the Commissioners it has been my good fortune to make careful researches through the documents which are concerned with the old smuggling days, the Revenue cutters, and the Preventive Service generally; and it is from these pages of the past and from other sources that I have been enabled to put forth the story as it is here presented; and as such it represents an attempt to afford an authentic picture of an extremely interesting and an equally exciting period of our national history, to show the conditions of the smuggling industry from the seventeenth to the nineteenth century, and the efforts to put a stop to the same. We shall soon find that this period in its glamour, romance, and adventure contains a good deal of similarity to the great seafaring Elizabethan epoch. The ships were different, but the courage of the English seamen was the same. Nor must we forget that those rough, rude men who ran backwards and forwards across the English Channel in cutters, yawls, luggers, and sometimes open boats, stiffened with a rich ballast of tea, tobacco, and brandy, were some of the finest seamen in the world, and certainly the most skilful fore-and-aft sailors and efficient pilots to be found anywhere on the seas which wash the coasts of the United Kingdom. They were sturdy and strong of body, courageous and enterprising of nature, who had "used" the sea all their lives. Consequently the English Government wisely determined that in all cases of an encounter with smugglers the first aim of the Preventive officers should be to capture the smugglers themselves, for they could be promptly impressed into the service of the Navy and be put to the good of the nation instead of being to the latter's disadvantage. As everyone familiar with the sea is aware, the seamanship of the square-rigged vessel and of the fore-and-aft is very different. The latter makes special demands of its own which, for the present, we need not go into. But we may assert with perfect confidence that at its best the handling of the King's cutters and the smuggling craft, the chasing and eluding in all weathers, the strategy and tactics of both parties form some of the best chapters in nautical lore. The great risks that were run, the self-confidence and coolness displayed indicated quite clearly that our national seafaring spirit was not yet dead. To-day many descendants of these old smugglers remain our foremost fore-and-aft sailors, yet engaged no longer in an illicit trade but in the more peaceful pursuits of line fishermen, oyster dredging, trawling during the winter, and often shipping as yachts' hands during the summer. But because we are to read fact and not fiction we shall scarcely find the subject inferior in interest. Truth often enough is stranger, and some of the tricks and devices employed by the smuggling communities may well surprise us. And while we shall not make any vain attempt to whitewash a class of men who were lawless, reckless, and sometimes even brutal in their efforts, yet we shall not hesitate to give the fullest prominence to the great skill and downright cleverness of a singularly virile and unique kind of British manhood. In much the same way as a spectator looks on at a fine sporting contest between two able foes, we shall watch the clashing exploits of the King's men and the smugglers. Sometimes the one side wins, sometimes the other, but nearly always there is a splendidly exciting tussle before either party can claim victory. No one who has not examined the authentic records of this period can appreciate how powerful the smugglers on sea and land had become. The impudence and independence of some of the former were amazing. We shall give instances in due course, but for the present we might take the case of the Revenue cutter which, after giving chase to a smuggling vessel, came up to the latter. Shots were exchanged, but the smuggler turned his swivel guns on to the Government craft with such a hot effect that the Revenue captain deemed it prudent to give up the fight and hurry away as fast as possible, after which the positions were reversed and the smuggler _actually chased the Revenue cutter!_ In fact during the year 1777 one of the Customs officials wrote sadly to the Board that there was a large lugger off the coast, and so well armed that she was "greatly an overmatch" for even two of the Revenue cruisers. It seems almost ludicrous to notice a genuine and unquestionable report of a smuggling vessel coming into a bay, finding a Revenue cruiser lying quietly at anchor, and ordering the cruiser, with a fine flow of oaths, immediately to cut his cable and clear out; otherwise the smugglers promised to sink her. The Revenue cutter's commander did not cut his cable, but in truth he had to get his anchor up pretty promptly and clear out as he was told. It was not till after the year 1815 that the Government began seriously to make continuous headway in its efforts to cope with the smuggling evil. Consider the times. Between the years 1652 and 1816 there were years and years of wars by land or by sea. There were the three great Anglo-Dutch wars, the wars with France, with Spain, to say nothing of the trouble with America. They were indeed anxious years that ended only with the Battle of Waterloo, and it was not likely that all this would in any way put a stop to that restlessness which was unmistakable. Wages were low, provisions were high, and the poorer classes of those days had by no means all the privileges possessed to-day. Add to this the undoubted fact that literally for centuries there had lived along the south coast of England, especially in the neighbourhood of the old Cinque ports, a race of men who were always ready for some piratical or semi-piratical sea exploit. It was in their blood to undertake and long for such enterprises, and it only wanted but the opportunity to send them roving the seas as privateers, or running goods illegally from one coast to another. And it is not true that time has altogether stifled that old spirit. When a liner to-day has the misfortune to lose her way in a fog and pile up on rock or sandbank, you read of the numbers of small craft which put out to salvage her cargo. But not all this help comes out of hearts of unfathomable pity. On the contrary, your beachman has an eye to business. He cannot go roving nowadays; time has killed the smuggling in which his ancestors distinguished themselves. But none the less he can legally profit by another vessel's misfortune; and, as the local families worked in syndicate fashion when they went smuggling, so now they mutually arrange to get the cargo ashore and, incidentally, make a very handsome profit as well. We need not envy the Government the difficult and trying task that was theirs during the height of the smuggling era. There was quite enough to think of in regard to foreign affairs without wanting the additional worry of these contraband runners. That must be borne in mind whenever one feels inclined to smile at the apparently half-hearted manner in which the authorities seemed to deal with the evil. Neither funds nor seamen, nor ships nor adequate attention could be spared just then to deal with these pests. And it was only after the wars had at last ended and the Napoleonic bogey had been settled that this domestic worry could be dealt with in the manner it required. There were waiting many evils to be remedied, and this lawlessness along the coast of the country was one of the greatest. But it was not a matter that could be adjusted in a hurry, and it was not for another forty or fifty years, not, in fact, until various administrative changes and improvements had taken place, that at last the evil was practically stamped out. As one looks through the existing records one cannot avoid noticing that there was scarcely a bay or suitable landing-place along the whole English coast-line that did not become notorious for these smuggling "runs": there is hardly a cliff or piece of high ground that has not been employed for the purpose of giving a signal to the approaching craft as they came on through the night over the dark waters. There are indeed very few villages in proximity to the sea that have not been concerned in these smuggling ventures and taken active interest in the landing of bales and casks. The sympathy of the country-side was with the smuggling fraternity. Magistrates were at times terrorised, juries were too frightened to convict. In short, the evil had grown to such an extent that it was a most difficult problem for any Government to be asked to deal with, needing as it did a very efficient service both of craft and men afloat, and an equally able and incorruptible guard on land that could not be turned from its purpose either by fear or bribery. We shall see from the following chapters how these two organisations--by sea and land--worked. If we exclude fiction, the amount of literature which has been published on smuggling is exceedingly small. Practically the whole of the following pages is the outcome of personal research among original, authentic manuscripts and official documents. Included under this head may be cited the Minutes of the Board of Customs, General Letters of the Board to the Collectors and Controllers of the various Out-ports, Out-port Letters to the Board, the transcripts from shorthand notes of Assizes and Promiscuous Trials of Smugglers, a large quantity of MSS. of remarkable incidents connected with smuggling, miscellaneous notes collected on the subject in the Library of the Customs House, instructions issued at different times to Customs officers and commanders of cruisers, General Orders issued to the Coastguard, together with a valuable précis (unpublished) of the existing documents in the many Customs Houses along the English coast made in the year 1911 by the Librarian to the Board of Customs on a round of visits to the different ports for that purpose. These researches have been further supplemented by other documents in the British Museum and elsewhere. This volume, therefore, contains within its pages a very large amount of material hitherto unpublished, and, additional to the details gathered together regarding smuggling methods, especial attention has been paid to collect all possible information concerning the Revenue sloops and cutters so frequently alluded to in those days as cruisers. I have so often heard a desire expressed among those interested in the literature of the sea to learn all about the King's cutters, how they were rigged, manned, victualled, armed, and navigated, what were their conditions of service at sea, and so on--finally, to obtain accounts of their chasing of smuggling craft, accounts based on the narratives of eye-witnesses of the incidents, the testimony of the commanders and crews themselves, both captors and captives, that I have been here at some pains to present the most complete picture of the subject that has hitherto been attempted. These cutters were most interesting craft by reason both of themselves and the chases and fights in which they were engaged. The King's cutters were employed, as many people are aware, as well in international warfare as in the Preventive Service. There is an interesting letter, for instance, to be read from Lieutenant Henry Rowed, commanding the Admiralty cutter _Sheerness_, dated September 9, 1803, off Brest, in which her gallant commander sends a notable account to Collingwood concerning the chasing of a French _chasse-marée_. And cutters were also employed in connection with the Walcheren expedition. The hired armed cutter _Stag_ was found useful in 1804 as a despatch vessel. But the King's cutters in the Revenue work were not always as active as they might be. In one of his novels (_The Three Cutters_) Captain Marryat gives the reader a very plain hint that there was a good deal of slackness prevalent in this section of the service. Referring to the midshipman of the Revenue cutter _Active_, the author speaks of him as a lazy fellow, too inert even to mend his jacket which was out at elbows, and adds, "He has been turned out of half the ships in the service for laziness; but he was born so, and therefore it is not his fault. A Revenue cutter suits him--she is half her time hove-to; and he has no objection to boat-service, as he sits down in the stern-sheets, which is not fatiguing. Creeping for tubs is his delight, as he gets over so little ground." But Marryat was, of course, intentionally sarcastic here. That this lazy element was not always, and in every ship, prevalent is clear from the facts at hand. It is also equally clear from the repeated admonitions and exhortations of the Board of Customs, by the holding-out of handsome rewards and the threatenings of dire penalties, that the Revenue-cutter commanders were at any rate periodically negligent of their duties. They were far too fond of coming to a nice snug anchorage for the night or seeking shelter in bad weather, and generally running into harbour with a frequence that was unnecessary. The result was that the cutter, having left her station unguarded, the smugglers were able to land their kegs with impunity. But we need not delay our story longer, and may proceed now to consider the subject in greater detail. CHAPTER II THE EARLIEST SMUGGLERS It is no part of our intention to trace the history of the levying of customs through different reigns and in different ages, but it is important to note briefly that the evading of these dues which we designate smuggling, is one of the oldest offences on record. The most ancient dues paid to the English sovereigns would seem to have been those which were levied on the exportation and importation of merchandise across the sea; and it is essential to emphasise at the outset that though nowadays when we speak of smuggling we are accustomed to think only of those acts concerned with imports, yet the word applies equally to the unlawful manner of exporting commodities. Before it is possible for any crime to be committed there must needs be at hand the opportunity to carry out this intention; and throughout the history of our nation--at any rate from the thirteenth century--that portion of England, the counties of Kent and Sussex, which is adjacent to the Continent, has always been at once the most tempted and the most inclined towards this offence. Notwithstanding that there are many other localities which were rendered notorious by generations of smugglers, yet these two between them have been responsible for more incidents of this nature than all the rest put together. What I am anxious at first to emphasise is the fact that, although smuggling rose to unheard-of importance as a national danger during the eighteenth and nineteenth centuries (and this is the period to which we shall especially address ourselves presently as affording the fullest and the most interesting information on an ingenious phase of human energy), yet it was not a practice which suddenly rose into prominence during that period. Human nature is much the same under various kings and later centuries. Under similar circumstances men and women perform similar actions. Confronted with the temptation to cheat the Crown of its dues, you will find persons in the time of George V. repeating the very crimes of Edward I. The difference is not so much in degree of guilt as in the nature of the articles and the manner in which they have been smuggled. To-day it may be cigars--centuries ago it was wool. Although the golden age (if we may use the term) of smuggling has long since passed, I am by no means unconvinced that if the occasions of temptation recurred to carry on this trade as it was pursued during the eighteenth and the first half of the nineteenth centuries, there would not be found many who would be ready to apply themselves to such a task. To some extent the modern improvements in living, in education, and increased respect for lofty ideals would modify this tendency; and long years have awakened so keen a regard for the benefits of law and order that the nefarious practice might not break out immediately on a large scale. But when we speak of smuggling it is perhaps more correct to speak of it as a disease which has not been exterminated from the system, but is, as it were, a microbe that is kept well under control and not allowed to spread. Everyone who is familiar with English history is aware of the important position which was occupied by the wool trade. Because of the immense value to the nation of the fleece it was necessary that this commodity should be kept in the country and not sent abroad. If in the present day most of our iron and coal were to be despatched abroad regardless of what was required by our manufacturers it would not be long before the country would begin to suffer serious loss. So, in the thirteenth century, it was with the wool. As a check to this a tax was levied on that wool which was exported out of the country, and during the reign of Edward III. attempts were made by the threat of heavy penalties to prevent the Continent from becoming the receptacle of our chief product. But the temptation was too great, the rewards were too alluring for the practice to be stopped. The fleece was carried across from England, made into cloth, and in this state sent back to us. Even in those days the town of Middleburgh, which we shall see later to have been the source of much of the goods smuggled into our country in the grand period, was in the fourteenth century the headquarters abroad of this clandestine trade. We need not weary the reader with the details of the means which were periodically taken to stop this trade by the English kings. It is enough to state that practically all the ports of Sussex and Kent were busily engaged in the illegal business. Neither the penalties of death, nor the fixing of the price of wool, nor the regulating of the rate of duty availed in the long-run. Licences to export this article were continually evaded, creeks and quiet bays were the scenes where the fleece was shipped for France and the Low Countries. Sometimes the price of wool fell, sometimes it rose; sometimes the Crown received a greater amount of duty, at other times the royal purse suffered very severely. In the time of Elizabeth the encouragement of foreign weavers to make their homes in England was likely to do much to keep the wool in the country, especially as there began to be increased wealth in our land, and families began to spend more money on personal comforts. Even in the time of Charles I. proclamations were issued against exporting wool, yet the mischief still went on. In the time of Charles II. men readily "risked their necks for 12d. a day."[1] The greatest part of the wool was sent from Romney Marsh, where, after nightfall, it was put on board French shallops with ten or twenty men to guard it, all well armed. And other parts of Sussex as well as Kent and even Essex were also engaged in similar exportations. But it is from the time of King Charles II. that the first serious steps were taken to cope with the smuggling evil, and from here we really take our starting-point in our present inquiry. Prior to his time the Customs, as a subsidy of the king, were prone to much variability. In the time of James I., for instance, they had been granted to the sovereign for life, and he claimed to alter the rates as he chose when pressed for money. When Charles I. came to the throne the Commons, instead of voting them for the extent of the sovereign's life, granted them for one year only. At a later date in the reign of that unhappy king the grant was made only for a couple of months. These dues were known as tonnage and poundage, the former being a duty of 1s. 6d. to 3s. levied on every ton of wine and liquor exported and imported. Poundage was a similar tax of 6d. to 1s. on every pound of dry goods. It was not till after the Restoration that the customs were settled and more firmly established, a subsidy being "granted to the king of tonnage and poundage and other sums of money payable upon merchandise exported and imported." Nominally the customs were employed for defraying the cost of "guarding and defending the seas against all persons intending the disturbance of his subjects in the intercourse of trade, and the invading of this realm." And so, also, there was inaugurated a more systematic and efficient method of preventing this export smuggling. So far as one can find any records from the existing manuscripts of this early Preventive system, the chronological order would seem to be as follows: The first mention of any kind of marine service that I can trace is found in a manuscript of 1674, which shows the establishment of the Custom House organisation in that year for England and Wales. From this it is clear that there had been made a beginning of that system which was later to develop into that of the Revenue cutters. And when we recollect how extremely interested was Charles II. in everything pertaining to the sea and to sloop-rigged craft especially, it seems very natural to believe that this monarch inspired, or at any rate very considerably encouraged, the formation of a small fleet of Custom House sailing craft. Elsewhere I have discussed this matter at length, therefore it may suffice if attention is called to the fact that to Charles was due the first yacht into England, presented to him by the Dutch; while from his encouragement were born the sport of yachting and the building of English yachts. He was very much concerned in the rig of sloops, and loved to sail in such craft, and his yacht was also most probably the first vessel of that rig which had ever been employed by English sailors. Further still, he was something of a naval architect, the founder of the Greenwich Royal Observatory and the _Nautical Almanac_, and under his rule a fresh impulse was given to navigation and shipbuilding generally. At any rate by the year 1674 there were among the smaller sailing craft of England a number of sloops and smacks employed doubtless for fishing and coasting work. As a kind of marine police, the Custom House authorities determined to hire some of these to keep a watch on the "owlers," as the wool-smugglers were termed, so called, no doubt, because they had to pursue their calling always by night. Whatever efforts had been adopted prior to his reign probably had consisted for the most part, if not entirely, of a land police. But under this second Charles the very sensible and obvious idea of utilising a number of sailing craft was started. In the above MS. volume the first reference is to "Peter Knight, Master of ye smack for ye wages of him self and five men and boy, and to bear all charges except wear and tear ... £59." "For extraordinary wear and tear," he was to be paid £59. His vessel was the Margate smack. In the same volume there is also a reference to the "Graves End smack," and to "Thomas Symonds for wages and dyett [diet] for himself, master and six men ... £56, 5s. 0d." And for the "wear and tear to be disposed as ye Commrs. direct ... £14, 15s. 0d." There was yet a third vessel stationed a few miles away, the "Quinborrough smack," and a reference to "Nicholas Badcock for hire of ye smack, two men, and to bear all charges ... £23." These vessels were not known as Revenue cutters at this time, but as Custom House smacks. They were hired by the Commissioners of the Customs from private individuals to prevent the owlers from smuggling the wool from Kent, Essex, and Sussex. But it would seem that these smacks, even if they modified a little the activities of the owlers, did not succeed in bringing about many convictions. Romney Marsh still sent its contribution across to France and Holland, much as it had done for generations. But in 1698 the attack on the men of Kent and Sussex was strengthened by legislation, for by 7 & 8 William III. cap. 28, it was enacted that "for the better preventing the exportation of wool and correspondence with France ... the Lord High Admiral of England, or Commissioners for executing the office of Lord High Admiral for the time being, shall from time to time direct and appoint one ship of the Fifth Rate, and two ships of the Sixth Rate, and four armed sloops constantly to cruise off the North Foreland to the Isle of Wight, with orders for taking and seizing all ships, vessels, or boats which shall export any wool or carry or bring any prohibited goods or any suspected persons." It was due to William III.'s Government also that no person living within fifteen miles of the sea in those counties should buy any wool before he entered into a bond, with sureties, that all the wool he might buy should be sold by him to no persons within fifteen miles of the sea, and all growers of wool within ten miles of the sea in those counties were obliged within three days of shearing to account for the number of fleeces, and where they were lodged. Instructions were duly issued to captains of sloops, and a scheme drafted for surrounding the whole of the coast with sloops, the crews consisting of master, mate, and mariners. But from an entry in the Excise and Treasury Reports of 1685, it is clear that a careful regard even at that date was being had for the import smuggling as well. The reference belongs to September 24, and shows that a "boarding" boat was desired for going alongside vessels in the Downs, and preventing the running in of brandies along the coast in that vicinity. The charge for building such a boat is to be £25. In another MS. touching the Customs, there is under date of June 1695 an interesting reference to "a Deale yoghall to be built," and that "such a boat will be here of very good use." She is to be "fitt to go into ye roads for boarding men or other ocations when ye sloops may be at sea." So much, then, for the present as to the guarding by sea against the smugglers. Let us now turn to look into the means adopted by land. The wool-owners of Romney Marsh were still hard at their game, and the horses still came down to the beach ladened with the packs ready to be shipped. If any one were sent with warrants to arrest the delinquents, they were attacked, beaten, and forced to flee, followed by armed gangs on horseback. But it was evident that the Crown was determined not to let the matter rest, for a number of surveyors were appointed for nineteen counties and 299 riding officers as well, though they made few seizures, and obtained still fewer condemnations, but at great expense to the State. In 1703 it was believed that the owling trade, especially in Romney Marsh, was broken if not dead, although the smuggling by import was on the increase, especially as regards silks, lace, and such "fine" goods. At that time for the two hundred miles of coast-line between the Isle of Sheppey and Emsworth--practically the whole of the Kentish and Sussex shore--fifty officers were being employed at a salary of £60 per annum, with an allowance to each of another £30 annually for a servant and horse to assist them during the night. And there was authority also for the employment of dragoons to aid the riding officers, especially in the neighbourhood of Romney Marsh; but there was a number of "weak and superannuated" men among the latter, who did not make for the efficiency of the service. We need not say much more about the wool-exportation. In spite of all the efforts of the Custom House smacks and the assistance of his Majesty's ships of war, in spite, too, of further legislation, it still continued. It went on merrily at any rate till the end of the eighteenth century, by which time the smuggling by imports had long since eclipsed its importance. It was the wars with France during the time of William and Mary which increased and rendered more easy the smuggling into England of silk and lace. And by means of the craft which imported these goods there used to be smuggled also a good deal of Jacobite correspondence. As Kent and Sussex had been famous for their export smuggling, so these counties were again to distinguish themselves by illicit importation. From now on till the middle of this eighteenth century this newer form of smuggling rose gradually to wondrous heights. And yet it was by no means new. In the time of Edward III. steps had to be taken to prevent the importation of base coin into the realm, and in succeeding reigns the king had been cheated many a time of that which ought to have come to him through the duties of goods entering the country. It was impossible instantly to put down a practice which had been pursued by so many families for so many hundreds of years. But the existing force was not equal to coping with the increase. As a consequence the daring of the smugglers knew no bounds--the more they succeeded the more they ventured. A small gang of ten would blossom forth into several hundreds of men, there would be no lack of arms nor clubs, and adequate arrangements would be made for cellar-storage of the goods when safely brought into the country. Consequently violence became more frequent than ever--bloodshed and all sorts of crimes occurred. In the year 1723 several commissions or deputations were issued by the Chancellor of the Exchequer to captains of his Majesty's sloops to make seizures, and the following year the Treasury authorised the construction of seven sloops for service off the coast of Scotland. The smugglers had in fact become so desperate, the English Channel was so thoroughly infested with them, and the Revenue service was so incapable of dealing with them in the manner that was obviously essential for effectiveness, that the Admiralty ordered the captains and commanders of His Majesty's ships to assist the Revenue officers all they could in order to prevent the smuggling trade, and to look out and seize all vessels employed in illegally exporting wool; for the Admiralty had been informed by the Commissioners of Customs that the Revenue officers frequently met with insults from French smuggling luggers manned by armed crews, who carried on a brisk smuggling trade by force and even dared the Revenue men to come aboard them. But as the Revenue service afloat was assisted now by the Navy, so the Revenue land guard was also aided by the Military. In 1713 arrangements had been made that dragoons should co-operate with the riding officers in their operations against the owlers, and there are plenty of skirmishes recorded showing that the dragoons were actually so employed. Originally these soldiers were employed under the direction of the riding officers, but, as can well be expected, there was a good deal of jealousy and friction caused through the sharing of the soldiers in the rewards for seizures, and after the year 1822 this military assistance was not utilised to any great extent, although legally Army officers can still be called upon to render assistance against smuggling. And, in passing, one might mention that this co-operation afloat between the Customs men and the Navy was equally noticeable for a certain amount of ill-feeling, as we shall mention on a later page. Before the first quarter of the eighteenth century was completed, smuggling between England and the Continent was proceeding at a brisk pace, and by the middle of that century it had well-nigh reached its climax for fearlessness. We have already alluded to the establishment of hired smacks and sloops inaugurated towards the end of the seventeenth century. The sloop rig, as I have shown in another volume,[2] had probably been introduced into England from Holland soon after the accession of Charles II., but from that date its merits of handiness were so fully recognised that for yachts, for fishing craft, for the carrying of passengers and cargo up and down the Thames and along the coast as well as across to Ireland and the Continent, the rig was adopted very readily in place of the lug-sails. The smack was also a sloop-rigged vessel. We need not enter here into a discussion as to the comparative merits of sloops and cutters and smacks. It is enough if we state that when it was realised that a vessel of say 100 tons, sloop-rigged, with her one mast, mainsail, and two headsails and square topsail (set forward of the mast on a yard) could be handled with fewer men and therefore less expense than a lugger of similar size; was also more suitable for manoeuvring in narrow channels, and for entering and leaving small harbours, the fishermen, coasters, and so on took to this improvement. Thus most naturally the larger smuggling craft were till well on into the nineteenth century sloops or cutters, and equally natural was it that the Revenue availed themselves of this rig first by hiring smacks, and, later, by building for themselves. These sloops, whether hired or owned, were given each a particular station to guard, and that plan was followed by the Revenue cruisers for many years to follow. Among the Exeter documents of the Customs Department is included an interesting document dated July 10, 1703, wherein the Board of Customs informs the collector at the port of Dartmouth of the list of vessels appointed by the Commissioners to cruise against owlers, the district comprised extending from Pembroke in the west to the Downs in the east. The following is the list of these vessels with their respective cruising territories:-- NAME OF CRUISER LIMITS OF HER SPHERE _Rye_ Pembroke to Lundy Island _Discovery_ Milford to Swansea _Dolphin_ Milford to Exmouth _Hastings_ " " " _Woolwich_ Downs to Falmouth _Swan_ " " " _Fly_ Off Folkestone _Dispatch_ " " This fairly well covered the region to which goods were likely to be run from the Continent as well as that from which the owlers were wont to export their wool. From an entry among the documents preserved in the Custom House at Newcastle, dated September 1729, we can see that also the north-east coast was guarded thus:-- NAME OF CRUISER LIMITS OF HER SPHERE _Cruiser_ Flamborough Head to Newcastle _Deal Castle_ Newcastle to Leith _Spy_ Firth of Forth to Newcastle And about the last-mentioned date the _Deal Castle_ had succeeded in capturing four French smuggling craft and brought them into Shields. To the other side of England the Isle of Man, which was a veritable contraband depôt, used to send quantities of dutiable goods, Liverpool being the favourite destination, and it was a more difficult matter here to deal with than in many other ports. On October 9, 1713, the Collector at Liverpool writes to the Board of Customs that he thinks a sloop would be of little service for that port. Some time ago they had one, which was not a success "by reason of ye dangerousness and difficulty of the harbour and ye many shoales of sand, which often shift in bad weather." The Manxmen were a thoroughly lawless, desperate species of smugglers, who stopped at nothing, and were especially irate towards all Revenue and public officials, recognising no authority other than might and a certain respect for the Duke of Atholl, the owner of the Isle of Man. Among the letters to Southampton there is a record dated June 14, 1729, which shows that a number of his Majesty's sloops were appointed by the Admiralty to cruise off the coasts of the kingdom to prevent the exporting of wool and the running of goods by the import-smugglers. For instance, the Admiralty sloop _Swift_ was appointed to cruise between Portland, Poole, and Jack-in-the-Basket off the entrance to Lymington Harbour, Hants, her commander being a Captain Cockayne. Similarly the sloop _Success_ (Captain Thomas Smith, commander) was to cruise between Portland and Spithead, and the _Rye_ (Captain John Edwards) between the Isle of Wight and Beachy Head to the eastward. It was part of the duty of the Revenue officers at Southampton to see that these three ships constantly cruised on their station, and if their commanders were found negligent of this duty the matter was to be reported to the Board of Customs. The Revenue craft were apparently not above suspicion, for in November of 1729 the Southampton officers of the Customs reported to headquarters that this very sloop, the _Swift_, every time she went across to Guernsey in connection with her duties of prevention, used to bring back quantities of wine, brandy, and other dutiable goods under the pretence that they were the ship's stores. The intention, however, was nothing less than that which dominated the actions of the smugglers themselves--the very class against which the _Swift_ was employed--for Captain Cockayne's men used to find it no very difficult matter to run these goods ashore clandestinely under the very eyes of the unsuspecting Customs officers. The Commissioners of the Customs therefore sent down strict instructions that the _Swift_ was to be rummaged every time she arrived at Southampton from Guernsey. We shall have reason presently to refer more especially to the Channel Isles again, but it may suffice for the present to state that they were in the south the counterpart of the Isle of Man in the north as being a depôt whence the import smugglers fetched their goods across to England. Additional to the Naval sloops just mentioned, there were two other cutters belonging to the Southampton station under the Revenue and not, of course, Admiralty-owned craft. These vessels were respectively the _Calshot_ and the _Hurst_, and it is worth noting that at the time we are thinking of (1729) these vessels are referred to generally as "yatchs" or "yachts." It was not quite seventy years since the first yacht--that presented to Charles II., named the _Mary_--had arrived in England, and it was only in 1720 that the first yacht club had been established, not in England, but in Cork. If we may judge from contemporary paintings of yachts we can visualise the _Hurst_ and _Calshot_ as being very tubby, bluff-bowed craft with ample beam. But what would especially strike us in these modern days would be the exceptionally long bowsprit, the forward end of which was raised considerably above the water than its after end, both jib and foresail each working on a stay. The commander of the _Calshot_ yacht was a Captain Mears, and there is an entry in the Southampton documents to the effect that he was paid the sum of £2, 12s. 6d. for piloting his vessel from Southampton to Guernsey and back in connection with the Preventive duties. This trip took him five days, his pay being half a guinea a day. It is clear from a record of the following year that Mears was employed by special arrangement, for on July 18, 1730, the Board of Customs decided that it was necessary that Captain John Mears, commander of the _Calshot_ yacht at Southampton, should now be placed on the same footing as the other commanders of the Revenue sloops and smacks in regard to the matter of wear and tear. Henceforth the sum of 30s. per ton was to be allowed him instead of £47 per annum. Both yacht and her boats were to be kept in good repair, but the commander was first to give security to have the vessel and her boats generally in good order and reasonable repair, loss by violence of the sea or other unavoidable accidents excepted. The commander was also to find the sloop and her boats with all manner of necessaries and materials, so that the Crown was to be at no charge on that account in the future; and every quarter the Comptroller and Collector of the port were to certify to the Board as to whether the yacht and boats were in good repair. It would appear that these two vessels were not actually owned by the Customs but hired from Captain Mears; and less than a month before the above order the Surveyor-General of the Customs for Hampshire represented to the Board that it would be necessary to allow the commander of the _Hurst_ half-a-dozen muskets, two pairs of pistols, half-a-dozen swords or cutlasses, and these were accordingly ordered to be sent, together with two swivel guns, from Weymouth to Captain Mears "by the first coast vessel bound to" Southampton. There was certainly need for a strict vigilance to be kept in that neighbourhood, for there was a good deal of smuggling then being carried on along the Hampshire shore in the vicinity of Hurst Castle and Beaulieu. In another chapter we shall go into the important matter touching the flags that were worn by the vessels employed in looking after smuggling, but, in passing, we may call attention to a letter which the Board sent to Southampton at this time referring to the proclamation of December 18, 1702, by which no ships whatsoever were allowed to wear a pendant excepting those engaged in the service of the Royal Navy, but that the sloops employed in the several public offices (as, for instance, the Customs and the Excise) should wear Jacks, whereon was to be described the seal used in the respective offices. And Captain John Mears, senior, of the _Calshot_, and Captain John Mears, junior, of the _Hurst_, were to be informed that they must deliver up their pendants to the Customs' office at Southampton and for the future forbear wearing a pendant. Instead thereof they are to wear a Jack and ensign with the seal of office therein, "but the mark in the ensign is to be twice as large as that in the Jack; and if the captain should hereafter find that the not wearing a pendant will be any obstruction or hindrance to the service," the Board of Customs is to be informed.[3] We have now seen something of the sloops and cutters on the south, the west, and the north-east coasts. Let us take a glance at the district to the southward of Flamborough during this same period. From the Hull letter book we find that in September of 1733 the Admiralty appointed Captain Burrish of the _Blandford_ and Sir Roger Butler of the _Bonetta_ to cruise between Flamborough and Newcastle; but Captain Oates of the _Fly_ and Captain Rycant of the _Tryal_ were to cruise between Flamborough and Yarmouth. There is also a reference to the Revenue sloop _Humber_ employed in this neighbourhood on Preventive work. She was a somewhat expensive craft to keep up, as she was frequently needing repairs and renewals. First, she was to have a new cable which was to cost £20, 14s. 3-1/2d.; and it is a striking reminder of those days of hemp and sail that this bill was paid to the "ropemakers." A few months later she had to undergo repairs which amounted to £31, 10s. 6-1/4d., and less than six months afterwards she had to be given a new anchor which cost £18, 8s. 9d. Three years later she was given a new suit of sails which came to £25, 17s. 1d. but her old suit was sold for the sum of eight guineas. And finally, in 1744, as she had begun to cost so much for repairing, the Board determined to sell her. Notwithstanding that the south coast, by reason of its proximity to the Continent and the Channel Isles, was a convenient and popular objective for the smugglers running their goods from France and Holland, yet the Yorkshire coast was by no means neglected. From Dunkirk and Flushing especially goods poured into the county. There was a small sloop, for instance, belonging to Bridlington, which was accustomed to sail across the North Sea to one of the ports in Zealand, where a cargo was taken aboard consisting of the usual dutiable articles such as tea, tobacco, and gin. The return voyage was then made and the goods landed clandestinely at some convenient spot between the Spurn Lighthouse and Bridlington. Similarly, farther south than the Humber smuggling by illegal importation went on extensively in the early eighteenth century. Sometimes a Dutch vessel would arrive in Grimsby Roads and succeed in quietly running her goods to the shore. In the autumn of 1734 the master of the Dutch schuyt _The Good Luck of Camphire_, alias _The Brotherly Love_, had succeeded in running as many as 166 half-ankers[4] of brandy and 50 lbs. of tea on the coast near Great Yarmouth, the skipper's name being Francis Coffee. He was a notorious smuggler. But on this occasion both he and his vessel were captured. Still, matters were not always satisfactory on board the Revenue sloops and smacks, for whenever, at this time, there was an encounter with the smugglers afloat the latter were so violent and desperate that the captors went about their work with their lives in their hands. Furthermore, it was not altogether a pleasing business to have to fire at fellow-countrymen, many of whom they had known from boyhood. Then, again, there was not the space on these sloops and cutters, nor the amount of deck room to be found on the men-of-war; and to be cooped up in these comparatively small vessels always on the _qui vive_, usually near the shore but able to have shore-leave all too rarely, was calculated to make for restlessness. Added to which a very considerable portion of the crews of these Revenue craft was composed of men who had spent years of their lives as smugglers themselves. Consequently it was not altogether surprising that mutinies and refusals to obey their commander's orders were of frequent occurrence. After a time it was decided that those members of the crew which had to be dismissed for such offences were to be handed over to the commander of the next man-of-war that should come along, and be pressed into the service of the Navy, though, it may be added, this was not always a welcome gift to the Naval commander compelled to receive a handful of recalcitrant men aboard his ship. Then, again, when at last a handful of smugglers had been captured it was the duty of the Revenue officers to prosecute them before the magistrate at their own expense. This was regarded as an unfair hardship, and in 1736 the system was modified by the Treasury allowing an officer a third of whatever amount was recovered, the prosecution to be carried on at the King's expense. At the same time it was undeniable that some commanders of these sloops and cutters were not quite as active as they might be on their station. There was too ready an excuse to run in from the sea and too great an inclination to spend valuable time in port. They were accordingly now enjoined not to presume to lay up for the purpose of giving the ship's bottom a scrub, or for a refit, without previously giving the Collector and Comptroller of the port ten days' notice. This was not to occur unless the cruiser really needed such attention; but if it was essential then to prevent the station remaining unguarded some other smack or vessel was to be sent out to take her place for the time being. For the smugglers were kept so well informed of the movements of the Revenue ships that a contraband cargo of goods would soon be found approaching the shore during the night when the watch had been relaxed. But from an early date--at any rate as far back as 1694--the East India ships were notorious also for smuggling into the country a considerable amount of goods that ought to have paid duty. We shall bring forward instances presently of East Indiamen, homeward bound, being boarded as they come up Channel, or while waiting in the Downs and putting some of their cargo on board smuggling cutters and Deal boats, which was subsequently quietly and secretly brought into the country. Silks were especially popular among the smugglers in this connection. In those days, too, the more wealthy passengers coming home by these East Indiamen used to leave the ship at Spithead, where they came in for that purpose. These passengers would then be put ashore at Portsmouth, and, proceeding by coach to London, thus shortened their sea journey. But notwithstanding their ample means, many of these travellers were constantly found endeavouring to land dutiable articles. In short, rich and poor, high and low, there was no class that did not endeavour to engage in smuggling either directly or indirectly. Even if the party never ventured on the sea, he might be a very active aider and abettor in meeting the boat as it brought the casks ashore, or keeping a look out for the Preventive men, giving the latter false information, thus throwing them on the wrong scent. Or again, even if he did not act the part of signaller by showing warning lights from the cliff, he could loan his cellars, his horses, or his financial support. In fact there were many apparently respectable citizens who, by keeping in the background, were never suspected of having any interest in these nefarious practices, whereas they were in fact the instigators and the capitalists of many a successful run. And as such they were without doubt morally responsible for the deaths by murder which occurred in those incidents, when violence was used after the Revenue men had come on to the scene. But as to morality, was there ever a period when the national character was so slack and corrupt as in the eighteenth century? FOOTNOTES: [1] "Smuggling in Sussex," by William Durrant Cooper, F.S.A., in vol. x. of the _Sussex Archæological Collection_, to which I am indebted. [2] _Fore and Aft: The Story of the Fore-and-Aft Rig._ London, 1911. [3] "Southampton Letters," November 6, 1730. But in 1719, the Customs Commissioners had, _inter alia_, agreed to provide Captain Mears with "a suit of colours" for the _Calshot_. This provision was, therefore, now cancelled in the year 1730. [4] A half-anker held 3-1/4 gallons. CHAPTER III THE GROWTH OF SMUGGLING About the middle of the eighteenth century the smuggling of tea into the country had reached such extensive limits that the revenue which ought to have been expected from this source was sinking instead of rising. In fact it came to this, that of all the tea that was consumed in this country not one half had paid duty and the rest was smuggled. The bands of smugglers were well financed, were themselves hardy sailors and skilful pilots. They had some of the best designed and best built cutters and luggers of that time. They were able to purchase from an almost inexhaustible market, and to make a quick passage to the English shores. Arrived there they could rely on both moral and physical support; for their friends were well mounted, well armed, and exceedingly numerous, so that ordinarily the cargo could be rapidly unshipped, and either hidden or run into the country with despatch. Not once, but times without number the smuggling cutters had evaded the Revenue cruisers at sea, showing them a clean pair of heels. With equal frequency had the Preventive men on land been outwitted, bribed, or overpowered. And inasmuch as the duties on the smuggled articles were high, had they passed through the Customs, so, when smuggled, they could always fetch a big price, and the share for the smugglers themselves was by no means inconsiderable. But it is always the case that, when large profits are made by lawless, reckless people, these proceeds are as quickly dissipated in extravagance of living. It is sad to think that these seafaring men, who possessed so much grit and pluck, had such only been applied in a right direction, actually died paupers. As one reads through the pitiful petitions, written on odd scraps of paper in the most illiterate of hands begging for clemency on behalf of a convicted smuggler, one can see all too clearly that on the whole it was not the actual workers but the middle-men who, as is usually the case, made the profits. A life of such uncertainty and excitement, an existence full of so many hairbreadth escapes did not fit them for the peaceful life either of the fisherman or the farmer. With them money went as easily as it had come, and taking into account the hardness of the life, the risks that were undertaken, the possibility of losing their lives, or of being transported after conviction, it cannot be said that these men were any too well paid. Carelessness of danger led to recklessness; recklessness led on to a life that was dissolute and thriftless. And in spite of the fact that these tear-stained appeals were usually signed by all the respectable inhabitants of the seaside village--the rector, the local shipbuilder, Lloyds' shipping agent, the chief landowners and so forth--many a wife and family had to starve or become chargeable to the Union, while the breadwinner was spending his time in prison, serving as an impressed sailor on board one of his Majesty's ships against the enemy; or, if he had been found physically unfit for such service, condemned to seven or more years of transportation. But by the year 1745 smuggling had reached such a pitch that something had to be done. The country was in such a state of alarm and the honest traders made such bitter complaints of the disastrous effect which these illicit practices were having on their prosperity that, on the 6th of February in that year, a Parliamentary Committee was formed "to inquire into the causes of the most infamous practice of smuggling and consider the most effectual methods to prevent the said practice." For it was clear that in spite of all that had been done by the Customs and Excise, by the Admiralty and the military, they had not succeeded in obtaining the desired effect. And during the course of this inquiry a great deal of interesting evidence came out from expert witnesses, some of whom had not long since been the greatest smugglers in existence, but had come forward and received the pardon of the State. We may summarise the testimony obtained by this Committee as follows. The smugglers, after sailing away from England, used to purchase the tea abroad sometimes with money but at other times with wool. That was a serious matter in either alternative if, as was the case, the transactions were carried on to any large extent; for the country simply could not afford to be denuded either of its valuable wool--since that crippled the wool manufactures--or of the coin of the realm, which made for bankruptcy. But this was not all. England was at war with her neighbours, and the French only too gladly admitted the smuggling vessels into her ports, since these lawless and unpatriotic men were able to give information of the state of affairs in England. There was in the Isle of Man at this time no levying of Customs or other duties, so that between that island and France there was kept up a constant trade especially in teas, other East India goods and brandies, which were afterwards conveyed clandestinely to English ports, especially to Liverpool, as already we have noted, and also to Glasgow, Dumfries, as well as to Ireland. In the days when there were sloops at Liverpool doing duty for the Crown they used to set forth and do their best to stop this running, "but as it is a very dangerous station, a seizure is scarce heard of." As illustrative of the achievements of smugglers at that time let us mention that it was reported officially from Yarmouth that on July 11 fifty smugglers had run a cargo of tea and brandy at Benacre in Suffolk, and only a fortnight later a band of sixty smugglers landed another contraband cargo at the same place, while a gang of forty got another cargo safely ashore at Kesland Haven. A week later a still larger band, this time consisting of seventy, passed through Benacre Street with a large quantity of goods, a cart and four horses. The smugglers at Kesland Haven had been able to bring inland their cargo of tea and brandy by means of fifty horses. In one month alone--and this at the depth of the winter when cross-channel passages could not be expected to be too safe for small sailing craft--nine smuggling cutters had sailed from the port of Rye to Guernsey; and it was estimated that during the last half of the year there had been run on to the coast of Suffolk 1835 horse-loads of tea as well as certain other goods, and 1689 horse-loads of wet and dry goods, to say nothing of a large quantity of other articles that should have paid duty. These were conveyed away up country by means of waggons and other vehicles, guarded by a formidable band of smugglers and sympathisers well armed. Notwithstanding that the Revenue officers were in some cases aware of what was going on, yet they positively dared not attempt any seizures. And in those instances where they had undertaken the risk they had been frequently beaten and left cruelly wounded with bleeding heads and broken limbs. One reliable witness testified that whereas it was computed that at this time about 4,000,000 lbs. of tea were consumed in this kingdom, yet only about 800,000 lbs. of this had ever paid duty, so that there was considerably over 3,000,000 lbs. weight of tea smuggled in. Therefore on this one item of tea alone the loss to the Crown must have been something enormous. Multiply this by the long years during which the smuggling went on, add also the duties which ought to have been paid on tobacco and spirits, even if you omit to include the amount which should have accrued from lace and other commodities, and you may begin to realise the seriousness of the smuggling evil as viewed by the Revenue authorities. It was noted that a great deal of this contraband stuff was fetched over from Flushing and from Middleburgh, a few miles farther up on the canal. The big merchant sailing ships brought the tea from the East to Holland, France, Sweden, and Denmark. But the Dutch, the French, the Swedes, and the Danes were not great tea drinkers, and certainly used it in nothing like the quantities which were consumed in England. But it was profitable to them to purchase this East Indian product and to sell it again to the smugglers who were wont to run across from England. It should be added, however, that the species of tea in question were of the cheaper qualities. It was also frankly admitted in evidence that many of the civil magistrates, whose duty it was to grant warrants for the arrest of these delinquents, were intimidated by the smugglers, while the officers of the Customs and Excise were terrorised. At this period of the smuggling era, that is to say prior to the middle of the eighteenth century, most of the smuggled tea was brought over to the south coast of England in Folkestone cutters of a size ranging from fifty to forty tons burthen. These vessels usually came within about three or four miles of the shore, when they were met by the smaller boats of the locality and the goods unladened. Indeed the trade was so successful that as many as twenty or thirty cargoes were run in a week, and Flushing became so important a base that not merely did the natives subsidise or purchase Folkestone craft, but ship-builders actually migrated from that English port to Flushing and pursued their calling in Dutch territory. As to the reward which the smugglers themselves made out of the transaction, the rates of payment varied at a later date, but about the years 1728 and 1729 the tea-dealers paid the men eight shillings a pound for the commodity. And in spite of the seizures which were made by the Revenue cutters and the land guard, yet these losses, admitted a witness, were a mere trifle to the smugglers. In fact he affirmed that sometimes one tea-dealer never suffered a seizure in six or seven years. We can therefore readily believe that the financiers netted a very handsome profit on the whole, and there are still standing plenty of fine mansions in different parts of our country which are generally supposed to have been erected from the proceeds of this form of activity. There was a kind of local intelligence bureau in most of the smuggling centres on the south coast, and so loyal and so watchful were these craftsmen that the inhabitants of the coast-line managed to let their _confreres_ know when the Custom House sloops had sailed out of port or when they hauled up for repairs and refit. As a consequence the smuggling craft commonly escaped capture. Animated by a natural hatred of all Government officials in general, especially of all those whose duty it was to collect taxes, dues, and any kind of tolls; disliking most of all the men of the Customs and Excise, and, further, being allied by sympathy and blood relationship to many of the smugglers themselves, it was almost impossible for the representatives of the Crown to make any steady progress in their work. We all know that when a number of even average law-abiding people get together, that crowd somehow tends towards becoming a mob. Each person, so to speak, forfeits his own individuality, that becomes merged into the personality and character of the mob, which all the time is being impelled to break out into something unlawful of a minor or greater degree. Whenever you have stood among crowds you must have noted this for yourself. It gets restive at the least opposition with which it is confronted, it boos and jeers with the smallest incitement; and, finally, realising the full strength of its unity, breaks out into some rash violence and rushes madly on, heedless of the results. Many murders have been in this way committed by men who ordinarily and in their individual capacity would shrink from such crimes. But having become merely one of the limbs, as it were, of the crowd they have moved with the latter and obeyed its impulses. It was just the same when many of the dwellers of the country-side, many of the fishermen, labourers, and farm-hands found themselves assembled on the report of a pistol shot or the cry of angry voices coming up from the beach below. Something was happening, some one was in trouble, and the darkness of the night or the gloom of the fog added a halo of mystery round the occasion. Men and women came out from their cottages, some one got hit, and then a general affray began. Clubs and pistols and cutlasses were busy, men were bellowing forth oaths, women shrieking, and the galloping of horses heard rapidly approaching. Amid such excitements we can readily understand that a good many acts of violence and deep injury occurred which afterwards, when the heat of the event had vaporised, were regretted. At the same time, notwithstanding that one is aware that the men were engaged in an unlawful pursuit and that they themselves fully appreciated their degree of guilt, yet we cannot but feel some sort of sympathy with a crew who, after a long and exciting passage through bad weather all the way across the Channel, after perhaps a breathless race against the Government cruisers, had finally succeeded in landing their tubs on the shore only to be pounced on immediately by the riding officers and a _posse_ of dragoons. It must have been heart-breaking that all their carefully laid plans, all their hardships and trials should end in disaster. Realising this and that their craft as well as their persons would be seized, it was but natural that they would fight like the most desperate of men. And, at the same time, those their relatives on shore who largely depended on them for their bread and butter would rush to their aid with a spirit and an impetuosity that could only end in one way. The pity of it all was that so much fine daring and enthusiasm were not being employed for a better cause and for more worthy results. But the smugglers found that, contrary to what one would expect, their greatest risk was not when landing the goods, but when bringing them across from the Continent. A seizure on land was, at any rate during the first half of the eighteenth century, comparatively rare if they had been able to get away from the sloops and cutters. For the bodyguard of armed men on horseback who promptly met and escorted the contraband into the country frequently did as they had planned. And when once the tea has arrived inland it was easily sold to people who bought it not in small quantities but took as much as 1000 lbs. at a time. In addition, there were a number of men called "duffers," who used to walk inland wearing coats in which a hundred-weight of tea was concealed between two layers of cloth stitched together. They were accordingly said to "quilt" so much of this commodity. These duffers, having set forth on their walk, would eventually arrive in London and dispose of the tea to hawkers who, in turn, carried it about the town and sold it to the consumers, who, even if they had possessed any scruples, could not possibly know that the leaves had been smuggled in without paying the Crown's levy. But it was not merely by exercising the strictest vigilance on the activities of the Government sloops and land officers, nor entirely by resort to trickery and violence, to threats and intimidation that the smugglers managed to keep out of the hands of justice. They even advanced one step further still, for there was a man named Norton whom they employed as their agent to defend them against prosecutions. This Norton at one time had actually been in the employ of the Crown as clerk of the late Solicitor to the Customs. And it was generally believed that Norton by some means--most probably by offering tempting bribes--obtained news from the clerks of the Customs' solicitor when a smuggler was likely to be arrested and a warrant was about to be issued. Norton was then supposed to give the smuggler an immediate warning and the man was able to make himself scarce. It was quite an easy operation, for in those days when there was no telegraph and no steamboat service across the Channel, all the "wanted" man had to do was instantly to board his cutter, set sail, and hurry across to France or Holland, where he was sure of a welcome, where also he could employ himself in arranging for cargoes to be run into England perhaps in the very vessel which had brought him across. There were plenty of his compatriots resident in Flushing, so he need not feel homesick, and when at last the incident had blown over he could find his way back to Kent or Sussex. It was reckoned that about this time there were at least 20,000 people in England employed in smuggling, and in some parts (as, for instance, the village of Hawkhurst, about which we shall have more to say presently) gangs of large numbers could be got together in a very short time. In Hawkhurst alone 500 smugglers could be collected within an hour. Folkestone, however, ran Hawkhurst fairly close with a similar notoriety. Such gangs, well armed as they were, went about with impunity, for notwithstanding that they were well known, yet no one dared to molest them. We mentioned just now that the danger to the State of this import smuggling was not merely that goods were brought into the country without payment being made to the Customs, but that inasmuch as the contraband goods were purchased abroad partly by wool and partly by actual coin England was being robbed both ways. And as the wool exportation declined and the import smuggling rose, so the amount of gold that passed out of the country seriously increased. At least £1,000,000 sterling were carried out of the kingdom each year to purchase these goods, and of this amount somewhere about £800,000 were paid for tea alone. At a later date the price of tea often went up, but the dealer still made a profit of 40s. on every 100 lbs. We alluded just now also to the dangers of seizure, and it is worth remarking that these were recognised by the smugglers as being greater in one district than in another. For instance, it was much more difficult to run goods into the counties of Kent and Sussex than into Suffolk, owing to the fleet at sea and the troops on the coast. And as to the amount of support which could be relied on it was an admitted fact that there was not one person in ten in the country but would give the smugglers assistance, and even lend them horses and carts. For the use of these the smugglers made payment at an increased rate. There was one witness before this Commission who stated that he knew of about sixty English cutters of from thirty to forty tons burthen each, and five or six vessels of the same burthen belonging to merchants at Flushing which were employed constantly in running goods across to England, and several of those who gave evidence confessed that they had for years been actively engaged in smuggling, but had taken advantage of the late Act of Indemnity. One reason alleged for smuggling tea was that the East India Company did not sufficiently supply the dealers with the low-priced kinds, whereas the Dutch did. And it was further contended that if the price of tea were lessened sixpence per lb. it would put a stop to smuggling of the commodity, for at this date, although other articles such as spirits and tobacco were brought in, yet there was far more tea run than anything else. But at the same time the smugglers rather liked to include a quantity of brandy casks among their cargo for the reason that they were heavy and made very good ballast. And as to the ships themselves, it was agreed that those of the smugglers were the best sailing fore-and-afters that were built in those days, and could easily out-sail both the King's ships and the Custom House sloops. Finally, it was shown that in spite of the large and tempting rewards that were offered by advertisement for the apprehension of those persons who had been concerned in smuggling, no one had come forward to give information for the reason that, even if he would, he dared not. And so fascinating was the call of smuggling, that although there were those who had willingly embraced the pardon granted them by the recent Act, forsaken this illegal trade and settled down on farms or devoted themselves to other occupations which were within the law, yet there were many others who had returned to their former practices. After accumulating this evidence, the Committee issued their first report on March 24, 1745, and expressed themselves of the opinion that the high duties charged on tea and other commodities had certainly been one cause of smuggling. But they also added that the exposing for sale of those boats and vessels which had been seized from the smugglers was certainly another potent reason, for these craft were frequently bought back by the men; they therefore recommended that all captured craft should be burned. Furthermore, the Commission condemned the custom of allowing penalties to be compounded so easily. As an instance of this last-mentioned custom we might call attention to three smugglers belonging to the county of Hampshire. There is a reference to them in the Southampton Letters under date of April 28, 1730, from which it appears that Matthew Barton, John Gibort, and William Moadon of Fordingbridge were under prosecution for running goods ashore. They subsequently offered to compound for the said offence on the following terms: Barton to pay the sum of £35, Gibort to pay £25, and Moadon £15. But before allowing the matter to be settled straight away the Collector and Comptroller at Southampton were ordered to look carefully into the affair and to inquire what these men were generally esteemed to be worth. CHAPTER IV THE SMUGGLERS' METHODS It was not till June of 1746 that the Committee issued their second report, and the evidence therein contained is even more interesting to us than any which had hitherto been given. After the Solicitor to the Commissioners had shown how biassed juries frequently were towards prisoners brought up on charges connected with smuggling, how they declined to bring in a verdict against them even in spite of the clearest of evidence, another official (the Surveyor of the Searchers in the Port of London) stated that when he had received information that there had been a run of goods in a certain locality and had even received information as to the road along which they would be brought, he had been compelled to travel by night and carefully to avoid all the beaten paths. Indeed, if people whom they might meet on the road noticed a Custom House officer and any soldiers together, their design would immediately be suspected and warning would promptly be sent to the smugglers, who would hide their goods. He added, also, that he remembered on one occasion that a couple of vessels landed in the Isle of Thanet as much tea as could be loaded on the backs of two hundred horses. But it was when the ex-smugglers came to give their evidence that the real secrets of the trade were unfolded. Robert Hanning, who for years had been one of the most distinguished members of the industry, informed the Commission that formerly he was the principal dealer with the smugglers when he resided at Dunkirk. Some idea of the colossal business which he had carried on may be gathered from his admission that he had sold teas, brandies, and wines to be run into England _to the extent of_ £40,000 _per annum_. And let us not forget to bear in mind that of course this probably represented the value of the goods when they were put on board. What they actually realised after they were smuggled into the English market must have been something considerable. Hanning was followed by a certain Captain Joseph Cockburn, who had a very instructive story to tell, which must have amazed even the Commissioners. This gallant skipper was now commanding one of his Majesty's sloops, but prior to that he had been engaged in privateering, and before that had commanded several vessels employed in smuggling. From his very infancy he had been concerned in the practice of running goods, and his apprenticeship had been served to a smuggler at Rochester, who was nominally a fisherman. Consequently, with an accumulated knowledge obtained first as a smuggler and subsequently as a pursuer of smugglers, there was not much, if anything at all, in connection with the work which could have missed his attention. He proved himself a veritable encyclopædia of smuggling information, and even the following brief summary will show that his experience was something exceptional. First of all, he instanced the case of five cutters which he knew were constantly employed in running tea and brandy from Boulogne into Kent and Sussex. They imported at least six tons of tea and two thousand half-ankers of brandy _every week_. He estimated that the six tons of tea would be purchased abroad for £1920. The two thousand half-ankers of brandy, even if they cost but ten shillings apiece, would represent the sum of £1000; so altogether there was a total of nearly £3000 being carried out of the country in specie every week by these five cutters alone. But he also knew of five other cutters which were constantly employed in fetching brandy and tea from Middleburgh and Flushing, and he reckoned that these ten cutters in the aggregate smuggled into the United Kingdom each year goods to the value of £303,680. Possibly there was no living person who possessed so perfect and exact a knowledge of the smuggling trade, so we can have little reason to doubt for a moment the veracity of his figures. Passing, then, to describe the methods employed by these men, he divided them into two classes. Firstly, there were those adopted by the cutters and smacks which did little else than smuggle, and, secondly, there were the British ships which primarily carried on a legitimate trade to foreign parts. As to the first class, the practice of these cutters and smacks was to put to sea from whatever port to which they belonged--London, Dover, Rye, Folkestone, or wherever it might be--having on board a small number of hands, their professed object being to fish. Having stood some distance away from the land, they would be met during the night by a number of smaller craft, and under cover of darkness would take on board from the latter large crews, much merchandise, and a considerable amount of money. The smaller craft rowed or sailed back to the beach before daylight, and the bigger craft, now well supplied with men, money, and merchandise, stood on their course for some Dutch or French port. There they purchased such goods as they required, disposed of those which they had brought, and again set sail for home. The vessel was again met at a convenient distance from the English shore by smaller boats if a favourable signal had been flashed from the land; and, using the darkness of the night, once more both the cargo and the supernumerary men were put into the boats, after which the latter ran the stuff ashore in casks already slung and in bales, while the smack headed for her harbour whence she had set out. As she had just the same small crew as before no suspicions were aroused, and it was presumed she had been out fishing. But additional to these comparatively large vessels there were smaller craft--open boats, yawls, and little sloops--which in fine weather were wont to run across from the south coast of England to Boulogne, Guernsey, and from the west of England to the Isle of Man. They also loaded up with as much cargo as they could carry, and, since they were able to be beached, the process of discharging their contents as soon as they returned was much simpler. These smaller craft also were in the habit of running out well clear of the land and meeting Dutch vessels, from which they would purchase similar kinds of goods and run them in by the usual methods. In these lesser craft were frequently carried a great many stones, anchors, and heavy weights by means of which the half-ankers of brandy could be sunk near the shore and afterwards taken up as required. The exact way in which this was done we shall discuss fully in a later chapter. Some of the cobbles, "hovelings," and small fishing craft that were accustomed to run out to big sailing merchantmen under pretence of shipping pilots to take them into the next port, were actually engaged in smuggling all sorts of goods out of these ships. Perhaps it was a lurking sympathy with the men engaged in a trade with which his earlier years had been so intimately associated that made Captain Cockburn suggest that it was because the Dutchmen brought such large quantities of fish into Billingsgate that the English fishermen found their work unprofitable, and were accordingly driven to devote themselves to smuggling. But from evidence in other documents it would certainly seem that Cockburn was speaking the truth and that the fishing industry was not a very good livelihood at that time. Then, secondly, there was the smuggling that was carried on by the trading sailing ships from abroad. Great quantities of goods were being run into the country by colliers--they were usually brig-rigged--by corn-ships, packet-boats from the Continent and other vessels trading with Holland. At least, one thousand five hundred vessels were engaged in this trade, "and," added Cockburn, "he scarcely ever knew one of them return without some prohibited or high duty goods." The smuggling from these vessels was done in various ways. There were the pilot-boats and fishing craft which frequently met them near the coast, as already explained. Another way was for the merchantmen to put into harbours, roadsteads, and rivers, where they lay at anchor under pretence of waiting for orders. Another method still, that was as simple as it was successful, consisted of landing their goods at outports on such holidays as the King's birthday, &c., when the Revenue officers were absent. Cockburn admitted that he had done this himself and had run great quantities of brandies, teas, and Spanish liquorice even as much as nearly a ton of the latter at a time. But besides these two classes there was a third. The whole of the coasting trade in those days was of course done in sailing ships; and inasmuch as there were no railways for carrying merchandise there was a good deal more encouragement for the sailing ship owner than there is to-day. The methods of smuggling adopted by these coasters was a little more complicated, and this was done by such means as fraudulently obtaining permits, by cockets clandestinely obtained, by false entry of one sort of goods for another, and by corrupting the Customs' officers. To prove his case the captain gave the following examples, _all of which he had himself employed since the year 1738!_ As regards the obtaining of permits fraudulently, he said that he had gone to Dunkirk, taken aboard 2040 gallons of French brandy and cleared for North Bergen in Norway. Of course he had no intention whatever of steering for that port, but in case he met any of the Custom House sloops as he approached the English coast, it would be convenient to show this clearance and so prevent his brandy being seized. From Dunkirk, then, he sailed across the North Sea and ran up the river Humber. There, by previous arrangement, one of those keels which are so well known in the neighbourhood of the Humber and Trent met him. The keel had been sent from York down the Ouse with permits to cover the brandy. The keel was cleared by a merchant at York, who obtained permits for conveying to Gainsborough a quantity of French brandy equal to that which Cockburn had on board his ship, though in fact the keel, notwithstanding that she obtained these permits, set forth with no brandy in her at all. It was the point where the Ouse crosses the Trent at right angles that had been arranged as the trysting-place, and there the keel took on board from Cockburn the brandy which had come from Dunkirk. Cockburn himself nailed the permits on to the heads of the casks, which in due course were taken by the keel, when the flood tide made again, to Gainsborough some distance up the Trent. Arrived there the casks were properly taken into stock and entered in the Custom House books as if the brandy had been actually brought down from York and had previously paid duty. On this one venture the garrulous skipper admitted that he cleared a profit by the brandy of £250 per cent., which was a remarkably handsome reward for so short a voyage as from Dunkirk. Port wines, he said, were purchasable at Dunkirk because these had been taken from English merchantmen by privateers; and since there was little or no market for such wines in Spain they were brought into Dunkirk, whither resorted the smugglers eager to buy them. He proceeded also to explain another method of cheating the customs. Large quantities of very inferior British brandy were taken on board a ship and clearance was obtained for some other English port, but instead of proceeding to the latter the vessel would run across to Dunkirk or Holland, where she would unload the cheap brandy, and in its place take on board some high-priced French brandy equal in quantity to the British commodity which had been put ashore at the French port. After this, with now a much more valuable cargo, the vessel would put to sea again and make for that British port for which originally she had cleared. And as to the practice of bribery, he himself had several times bought permits from the Excise officers to cover smuggled brandy and tea. On one occasion he had paid an officer fifty guineas for a permit to cover a certain quantity of tea and brandy about to be run into the country. Next came Captain Ebenezer Hartley, who had also formerly commanded a ship that was engaged in smuggling. He had known of large quantities of muslins and silks brought into the country on board East Indiamen. These goods were smuggled by throwing them through the port-holes at night into boats waiting below, alongside the ship, or whilst the Custom officer was being entertained on board with food and drink. Sometimes, he said, this was even done under the very eyes of the Revenue officer, who took no notice of it. He recalled an incident in an earlier part of his life when he had sailed from England to Holland, in which country he had filled up with twenty-six casks of oil. After that his orders were to cross the North Sea and meet a certain vessel which would await him off Aldborough. This last-mentioned craft would give Hartley's vessel the signal by lowering her jib three times. A more tragic story was related by George Bridges, a tidesman of the Port of London. He showed that it did not always "pay" to be diligent in one's duty, for he quoted the case of a Captain Mercer, in the employ of the Custom House, who did now and then make a seizure, but he "was broke for doing his duty"; and when Mercer came into Cork on the occasion in question, the mob set upon him so that he was compelled to escape into the sheriff's house. The mob then surrounded the house in their thousands until the sheriff interceded with them. They were wild with fury and threatened to pull the house down, until the sheriff gave them his oath that Captain Mercer should never again be guilty of seizing the wool which the smugglers had endeavoured to export. But the mob afterwards went to Passage and took hold of a Custom House officer named May. They brought him forth from his house, cut out his tongue, and cut off his ears, one of which the witness said he remembered seeing nailed on to the Cork Exchange. They dragged the man with a rope round his neck, gave him several blows, hurled him into the river, and finally the poor fellow died of his ill-treatment. Although handsome rewards were offered for the discovery of the offenders, yet no one ever came forward. One could quote similar instances of the vehemence of the smugglers from other sources. For instance, on February 2, 1748-49, the Collector of the Port of Penzance wrote to the Board to give them some idea of the people among whom he had to work. "The insolence," he said, "of some of the smuglers [_sic_] and wreckers in this neighbourhood is run to such a heighth, that tho our officers have from time to time secured severall Hogsheads, it has been by force taken from them [again], 'and the officers forced to save their lives.'" Writing again on the 14th December, the same correspondent added that "the smugglers never behaved with more insolence than at present, or was it ever known to be carried on with more audaciousness," mentioning also that the previous night the snow[5] _Squirrel_ of North Yarmouth had driven ashore loaded with a cargo of brandy. The country-folk had immediately boarded her, stripped the master of everything valuable, and then carried off all the brandy they could lay their hands on, and, in their haste, had set fire to the rest of the cargo, so that at the time of writing the whole ship was in flames. He mentioned also a couple of months later the difficulty he had to secure arrests of smugglers, for even when he had obtained warrants for the apprehension of eight most notorious men, the constables excused themselves from doing their duty in serving the warrants, and pretended that the eight men had absconded. And anyone who cares to examine the Treasury Books and Papers for this period will find similar cases. In July of 1743 some smugglers had seized the Custom House boat at Dover and coolly employed her for their own purposes in running tea. The Custom officers deemed matters to be in such a state that they begged that a man-of-war might be stationed on that coast to prevent smuggling. Similarly in January of 1743-44, during a skirmish near Arundel between the preventive men assisted by some dragoons against a band of smugglers, the latter had wounded three of the soldiers and carried off an officer and two other dragoons on board the smugglers' cutter. This was no unique occurrence, for sometimes the contraband runners, when infuriated, captured the would-be captors, hurried them out to sea, and then, having bound the unfortunate victims with a bit of spare rope and having tied a piece of ballast to their live bodies, they would be hurled overboard into the sea, and the soldier or preventive man would never be seen or heard of again unless his lifeless body were cast upon the beach. At Folkestone, about this time, three men were carried off by the smugglers in trying to effect an arrest, and the supervisor at Colchester had been also carried off, but afterwards he had been released on promising not to mention the smugglers' names. It was bad enough, therefore, for the Revenue men when they had the assistance of the dragoons, but it was infinitely worse when they had to contend alone. There is an almost pathetic petition from the Folkestone riding-officers sent on New Year's Day 1744-45, begging for military assistance against the smugglers, as although there were soldiers stationed at Dover yet they were unobtainable, since they refused to march more than five miles. And it was just as bad, if not worse, about this time in the Isle of Man, for the latter's inhabitants consisted almost exclusively of smugglers and their families, some of whom had long since been outlawed from England and Ireland. So rich and prosperous, indeed, had these Manxmen become by means of smuggling that they were recognised with a degree of importance which was almost ludicrous. The two deemsters (or deputy-governors) of the island even countenanced and protected the men, who would often assemble together to scheme and drink to the damnation of His Britannic Majesty. Unhindered in their nefarious work, able to obtain all the cargo they required from France and the Channel Isles; able, too, to run their contraband into the west of England, they waxed exceedingly independent and wealthy. At Douglas they had built themselves a good quay for the shelter of their ships and for convenience in landing their cargoes, the only drawback being that the harbour dried out at low water. It happened that on the 26th of June 1750, that Captain Dow, commanding H.M. cruiser _Sincerity_[6] was, according to the orders received from the Board of Customs, on duty in Douglas Roads. A notorious Irish smuggling wherry came in from Ireland and ran under the _Sincerity's_ stern, while the smugglers "with opprobrious, treasonable, and abusive language abused His Majesty King George and all that belonged to or served under him." This, of course, was too much for any naval officer to endure, and Captain Dow immediately caused the ship to come alongside, and, after being rummaged, she was found to have concealed in a jar of butter-milk twenty-five English guineas tied up in a bag. There were also papers on board which proved that this money was to be expended in the purchase of brandies and tea, &c., and that, having obtained these articles, she was then to return to Ireland. The English captain therefore promptly seized both money and papers. On the same day that this incident occurred a Dutch dogger[7] also came into Douglas Roads loaded with prohibited goods from Holland. As soon as he had noticed her come to anchor Dow sent his boat to board her with his mate and six men, and to examine and see if she had the prohibited goods on board which were suspected. If she had, then she was to be seized. At the same time Dow had requested Mr. Sidebotham, his Majesty's officer in the Isle of Man, to cast off the _Sincerity's_ headfast and sternfasts from the shore. But thereupon a riotous and angry mob, fearing that the cruiser should be able to get under weigh and seize the Dutch dogger, refused to allow Sidebotham to let go the ropes. Armed with bludgeons, muskets, swords, and stones they rushed down on to the quay, and did all they could to force the cruiser on shore by aiming showers of stones at the cruiser's men and restraining Sidebotham in his endeavour to help the _Sincerity_. They even carried the latter away by force, and beat and bruised him in the most brutal manner. Captain Dow, realising that the intention of the mob was to get the _Sincerity_ stranded, determined to cut his cable and exhorted them in his Majesty's name to disperse, to which they paid not the slightest attention except to send more showers of stones on to the cruiser's decks. Seeing from afar what was happening, the mate and six men who had been sent to board the dogger now returned to the _Sincerity_. Whereupon the dogger, perceiving her chance, promptly got under way. As the crowd on shore still continued to pelt his ship with stones and had already wounded two of his crew, the cruiser's commander fired amongst them. For a time, at least, this dispersed them, and so Dow was able to get his vessel clear. He immediately proceeded to follow the Dutch dogger, and chased her until she had, perforce, to run herself on to the sands at Ramsey to the north of the island. Determined not to be beaten, Dow now sent his mate and ten men on board her, seized her, and marked her in several places with the sign of a broad arrow to denote her capture. [Illustration: "Dow sent his mate and ten men on board her."] But when the mate came to open the hatches several of the islanders who had been secreted on board, with the assistance of two boat-loads of armed men who had rowed off from the shore, seized the mate and his men, and threatened that if they resisted they would kill them. Being completely overpowered, the eleven naval men were compelled to yield and be carried ashore, where they were shut up in cellars and finally carried down to Castletown Castle. Meanwhile, the smugglers set to work on the dogger's cargo and landed it safely. A few days later six of the eleven were released, but the other five were detained until Captain Dow should refund the twenty-five guineas he had seized from the Irish wherry. In order to give him a fright they also sent word that the five men should be tried before one of their Courts of Judicature on the following Thursday, were he to fail to send the money. As the captain declined to accede to their demands, the five prisoners were on July 5 brought up and remanded till a month later. Finding it was impossible to obtain their release the commander of the _Sincerity_ weighed anchor and ran back to Ramsey to take in the six released men, and then, sailing away to Whitehaven, arrived at that place on the 10th of July. We need not say more. The story is sufficient to indicate the utter state of lawlessness which prevailed there. Peopled by outlaws and by the scum of France, Holland, Ireland, Scotland, and England, they were a pretty tough proposition. Their violence was rivalled only by their impudence; and fleets of wherries[8] would sail in company into Ireland and Scotland loaded with cargoes of cheap brandy, which had been brought from Holland for that purpose. As a means of checking these Manx smugglers it was suggested that the English Government should employ a number of tenders in this neighbourhood, since they drew less water than the sloops-of-war and so would be more useful for a locality that was not well supplied with deep harbours. Moreover, these tenders would be well able to take the ground in the harbours which dried out. Such craft as the latter were of about 160 tons, mounted twelve to fourteen carriage guns, and were manned by a captain, second officer, two mates, two quartermasters, a gunner, a boatswain, carpenter, surgeon, and forty seamen. From the south-east corner of England came reports not much better. Just before the close of the year 1743 the Surveyor at Margate and his men were out on duty along the coast one night when five of them came upon a gang of about twenty-five smugglers. An encounter quickly ensued, and as the latter were well armed they were, by their superior numbers, able to give the officers a severe beating, especially in the case of one unfortunate "whose head is in such a miserable condition that the Surveyor thought proper to put him under the care of a surgeon." Both this Surveyor and the one at Ramsgate asserted that the smugglers were accustomed to travel in such powerful gangs, and at the same time were so well armed, that it was impossible to cope with them, there being seldom less than thirty in a gang "who bid defiance to all the officers when they met them." On the 7th April 1746, the Collector and Controller of the Customs at Sandwich wrote to the Board: "We further beg leave to acquaint your Honours that yesterday about four o'clock in the afternoon a large gang of near 100 smuglers [_sic_] with several led horses went thro' this town into the island of Thanet, where we hear they landed their goods, notwithstanding that we took all possible care to prevent them. "_P.S._--This moment we have advice that there is a gang of 200 smugglers more at St. Peter's in the Isle of Thanet." Seven months later in that year, at nine o'clock one November morning, a gang of 150 smugglers managed to land some valuable cargo from a couple of cutters on to the Sandwich flats. Several Revenue officers were despatched into the country for the purpose of meeting with some of the stragglers. The officers came into collision with a party of these men and promptly seized two horse-loads of goods consisting of five bags of tea and eight half-ankers of wine. But they were only allowed to retain this seizure for half-an-hour, inasmuch as the smugglers presently overpowered the Revenue men and wrested back their booty. The preventive men were also considerably knocked about, and one of them had his thumb badly dislocated. The officers declared that they knew none of the people, the latter being well supplied not with firearms but with great clubs. A fortnight later, just a few miles farther along the coast, a gang of 150 smugglers succeeded in landing their goods at Reculvers near Birchington; and ten days later still another gang of the same size was able to land their goods near Kingsgate, between the North Foreland and Margate. But it cannot be supposed that the Revenue officers were not aware of the approach of these incidents. The fact was that they were a little lacking in courage to face these problems on every occasion. Indeed, they were candid enough to admit that they dared not venture near these ruffians "without the utmost hazard of their lives." But the riding-officers were not solely to blame, for where were the Custom House sloops? How was it they were always absent at these critical times? Indeed, the Collector and Controller informed the Commissioners that not one of these sloops had been seen cruising between Sandwich and Reculvers for some months past. This complaint about the cruisers was made in March 1747, and in that same month another gang, two hundred strong, appeared on the coast, but this time, after a smart encounter, the officers secured and placed in the King's warehouse a ton of tea as well as other goods, and three horses. A day or two later a gang of smugglers threatened to rescue these goods back again. The property formed a miscellaneous collection and consisted of fifty pieces of cambric, three bags of coffee, some Flemish linen, tea, clothes, pistols, a blunderbuss, and two musquetoons. To prevent the smugglers carrying out their intention, however, a strong guard was formed by an amalgamation of all the officers from Sandwich, Ramsgate, and Broadstairs, who forthwith proceeded to Margate. In addition to these, it was arranged that Commodore Mitchell should send ashore from the Downs as many men as he could spare. This united front was therefore successful, and for once the smugglers were overmatched. And but for a piece of bad luck, or sheer carelessness, a couple of years later a smart capture might well have been brought about. It was one day in August when the officers had received information that a gang of twenty men and horses had appeared near Reculvers to receive goods from a cutter that was seen to be hovering near the coast. The smugglers on shore were cute enough to locate the officers, and by some means evidently signalled to the cutter, for the latter now put to sea again and the gang cleared off. Although for some time after this incident both officers and dragoons patrolled the coast in the neighbourhood no one was ever fortunate enough to gather information either as to the cutter or the people who had vanished into the country with such rapidity. And yet in spite of the very numerous sympathisers which these illicit importers possessed, yet of course there were some individuals who were as much against them as any officer of the Customs. In the neighbourhood of Plymouth legitimate trade had suffered a great deal owing to these practices. The mayor, aldermen, and merchants of Saltash were at last compelled to send a memorial to the Lords of the Treasury complaining that in the rivers adjacent to that place there were several creeks and inlets which were being made of considerable use by the smugglers for landing their goods. Especially was this the case up the river Tamar, and all this had been and was still "to the great prejudice of the fair traders and merchants." They pointed out that a great deal of it consisted of clandestine running from ships in the Sound, Hamoaze, and other anchorages round about there. Large quantities of French linings, wines, and brandies were being run ashore with impunity and speedily sold in the adjacent towns or conveyed some distance into Devonshire. The mayor therefore begged the Treasury for three additional Custom officers consisting of an inspector of roads and two tide-waiters to be established at Saltash, but the Treasury could not see their way to grant such a request. But in other parts of the country the roads were kept carefully watched to prevent goods being brought inland. The coaches which ran from Dover to London with passengers who had come across from the Continent were frequently stopped on the highway by the riding-officers and the passengers searched. Harsh as this mode of procedure may seem to us to-day, yet it was rendered necessary by the fact that a good many professional carriers of contraband goods were wont to travel backwards and forwards between England and abroad. Some years later, for example, when the Dover coach was stopped at "The Half-Way House," a foreigner, who was travelling by this conveyance and had been able to evade the Customs' search at Dover, was found to be carrying two gold snuff-boxes set with diamonds, four lockets also set with diamonds, eighteen opals, three sapphires, eight amethysts, six emeralds, two topazes, and one thousand two hundred torquoises--all of which were liable to duty. And thus the illegal practices continued all round the coast. From Devonshire it was reported that smuggling was on the increase--this was in the autumn of 1759--and that large gangs armed with loaded clubs openly made runs of goods on the shore, the favourite _locale_ being Torbay, though previously the neighbourhood of Lyme had been the usual aim of these men who had sailed as a rule from Guernsey. All that the Collector could suggest was that an "impress smack" should be sent to that district, as he promised that the notorious offenders would make excellent seamen. There was an interesting incident also off the north-east coast of England, where matters were still about as bad as ever. We referred some pages back to the capture of a Dutch dogger off the Isle of Man; we shall now see another of these craft seized in the North Sea. Captain Bowen of the sloop _Prince of Wales_, hearing that the dogger _Young Daniel_ was running brandy on the coast near to Newcastle, put to sea in search of her. He came up with a number of those cobbles--open boats--which are peculiar to the north-east coastline, though at one time they were used as far south as Great Yarmouth. The cobbles which he was able to intercept had just been employed in transferring the contraband from the dogger to the shore. Bowen captured one of these small craft with a dozen casks aboard. Another was forced ashore and secured by the land officers. Meanwhile, the Dutchman stood out to sea so that he might be able to draw off the spirits from large casks into smaller ones, which were the better fitted for running ashore. It was found afterwards that he had large numbers of these lesser casks, and during that evening she put about and crept stealthily in towards the shore again until she approached within about a mile of the mouth of the Tees. Her intention was to run the rest of her cargo under cover of darkness, and her skipper had arranged for large numbers of men to be on that coast ready to receive and carry off these casks. But Bowen was determined to head her off this project. An exciting chase followed, during which--to quote an official report of the time--the dogger did her best "to eat the sloop out of the wind," that is to say sailed as close to the wind as she could travel in the hope of causing her adversary to drop to leeward. For seven hours this chase continued, but after that duration the _Prince of Wales_ captured the _Young Daniel_ eight leagues from the shore. This is not a little interesting, for inasmuch as the chase began when the dogger was a mile from the mouth of the river, the vessels must have travelled about 23 statutory miles in the time, which works out at less than 3-1/2 miles an hour. Not very fast, you may suggest, for a Revenue cutter or for the Dutchman either. But we have no details as to the weather, which is usually bad off that part of the coast in February (the month when this incident occurred), and we must remember that the doggers were too bluff of build to possess speed, and the time had not yet arrived when those much faster Revenue cutters with finer lines and less ample beam were to come into use. FOOTNOTES: [5] A snow was a vessel with three masts resembling the main and foremast of a ship with a third and small mast just abaft the mainmast, carrying a sail nearly similar to a ship's mizzen. The foot of this mast was fixed in a block of wood or step but on deck. The head was attached to the afterpart of the maintop. The sail was called a trysail, hence the mast was called a trysail-mast. (Moore's _Midshipman's Vocabulary_, 1805.) [6] It was the frequent custom at this time to speak of sloops as cruisers. [7] A dogger was a two-masted Dutch fishing-vessel usually employed in the North Sea off the Dogger Bank. She had two masts, and was very similar to a ketch in rig, but somewhat beamy and bluff-bowed. [8] These, of course, were not the light rowing-boats of the kind that were in use on the Thames and elsewhere. The term wherry was applied to various decked fishing-vessels belonging to England, Ireland, and the Isle of Man. CHAPTER V THE HAWKHURST GANG We come now to consider the desperate character of a band of men who rendered themselves for all time notorious in the domestic history of our country by acts of unbridled violence and consummate cruelty. But before we proceed to relate as fully as our limited space will allow the details of these incidents, it is necessary to remind ourselves once again of the great, solid mass of sympathy, both active and passive, that was always at the back of the smugglers. Without this such daring runs by night could never have occurred: doubtful of the assistance which could be whole-heartedly given by the people on shore, the seafaring men would never have dared to take such enormous risks of life and goods. Not merely did the villagers come down to the shore to help to bring the goods inland, not only did they lend their horses and carts, but they would tacitly suffer the smugglers to hide casks of spirits in wells, haystacks, cellars, and other places. In Cornwall, for instance, fifty-five tubs of spirits were found concealed in a well, over the top of which a hay-stack had been built. This was near Falmouth, one of the most notorious of the smuggling localities. And there is actual record of at least one instance where the natives charged a rent of a shilling a tub for stowing away the smuggled goods. In another county a cavern had most ingeniously been hollowed out under a pond big enough to hold a hundred casks, the entrance being covered over with planks carefully strewed with mould. So clever and original was this idea that it was never discovered for many years. But the most notorious, the most formidable, and certainly the most abominably cruel gang of smugglers which ever achieved notice was the Hawkhurst contingent. The "Hawkhurst Gang," as they were known, were a terror to whatever law-abiding citizens existed in the counties of Kent and Sussex. They feared neither Custom officers nor soldiery, they respected neither God nor man, and in the course of attaining their aims they stopped at no atrocity nor brooked any interference from anyone. By the year 1747 smugglers had become so daring and committed such terrible crimes that the only course left open for decent people was to band together in mutual protection. The inhabitants of one locality joined together under the title of the "Goudhurst Band of Militia," their leader being a man named Sturt, a native of Goudhurst, who had recently obtained his discharge from the Army. But this union became known to the smugglers, who waylaid one of the militia, and by means of torture the whole of the defenders' plans were revealed. After a while he was released and sent back to inform the militia that the smugglers on a certain day would attack the town, murder all its inhabitants, and then burn the place to the ground. The day arrived and both forces were prepared. Sturt had gathered his band, collected fire-arms, cast balls, made cartridges, and arranged entrenchments, when, headed by one Thomas Kingsmill, the Hawkhurst gang appeared in order to make the attack. But after a smart engagement in which three were killed and many wounded, the smugglers were driven off, whilst others were captured and subsequently executed. Kingsmill escaped for a time, and became the leader of the famous attack on the Poole Custom House in October 1747. Another of the gang was named Perin and belonged to Chichester. Perin was really a carpenter by trade, but after being afflicted with a stroke of the palsy, he became attached to the smugglers, and used to sail with them to France to purchase goods that were to be smuggled, such as brandy, tea, and rum. Now in September of 1747 Perin went across the Channel in a cutter called _The Three Brothers_, loaded up with the above commodities, and was approaching the English coast when he was met with a rebuff. For Captain William Johnson, who held a deputation from the Customs to seize prohibited goods, got to know of Perin's exploit, and on the 22nd of this month, whilst cruising in the Poole Revenue cutter, sighted _The Three Brothers_ to the eastward of Poole. Whereupon the smuggler began to flee, and, running before the wind, fled to the N.N.W. From five in the afternoon till eleven at night the Revenue cutter, with every stitch of canvas set, chased her, and after firing several shots caused her to heave-to. Johnson then boarded her, and found that the tea was in canvas and oil-skin bags, but Perin and the crew of six had escaped in _The Three Brothers_ boat. However, Johnson captured the cutter with her cargo and took the same into Poole. The two tons of tea, thirty-nine casks of brandy and rum, together with a small bag of coffee, were conveyed ashore and locked up safely in the Poole Custom House. Such was the introduction to the drama that should follow. Enraged at their bad luck, the smugglers took counsel together. They assembled in Charlton Forest, and Perin suggested that they should go in a body and, well-armed, break open the Poole Custom House. So the next day they met at Rowland's Castle with swords and firearms, and were presently joined by Kingsmill and the Hawkhurst gang. Till night had fallen they secreted themselves in a wood, and eventually reached Poole at eleven o'clock at night. Two of their members were sent ahead to reconnoitre, and reported that a sloop-of-war lay opposite to the quay, so that her guns could be pointed against the doors of the Custom House; but afterwards it was found that, owing to the ebb-tide, the guns of the sloop could not be made to bear on that spot. The band, numbering about thirty, therefore rode down to spot, and while Perin and one other man looked after their horses, the rest proceeded to the Custom House, forced open the door with hatchets and other implements, rescued the tea, fastening packages of the latter on to their horses, with the exception only of 5 lbs. The next morning they passed through Fordingbridge in Hampshire, where hundreds of the inhabitants stood and watched the cavalcade. Now among the latter was a man named Daniel Chater, a shoemaker by trade. He was known to Diamond, one of the gang then passing, for they had both worked together once at harvest time. Recognising each other, Diamond extended his arm, shook hands, and threw him a bag of tea, for the booty had been divided up so that each man carried five bags of 27 lbs. [Illustration: _A Representation of ye Smugglers breaking open ye_ KING'S _Custom House at Poole_.] After the Poole officers discovered what had happened to their Custom House, there was not unnaturally a tremendous fuss, and eventually the King's proclamation promised a reward for the apprehension of the men concerned in the deed. Nothing happened for months after, but at last Diamond was arrested on suspicion and lodged in Chichester Gaol. We can well imagine the amount of village gossip to which this would give rise. Chater was heard to remark that he knew Diamond and saw him go by with the gang the very day after the Custom House had been broken open. When the Collector of Customs at Southampton learned this, he got into communication with the man, and before long Chater and Mr. William Galley were sent with a letter to Major Battin, a Justice of the Peace for Sussex. Galley was also a Custom House officer stationed at Southampton. The object of this mission was that Chater's evidence should be taken down, so that he might prove the identity of Diamond. On Sunday February 14, then, behold these two men setting out for Chichester. On the way they stopped at the White Hart Inn, Rowland's Castle, for refreshment. But the landlady suspecting that they were going to hurt the smugglers, with the intuition of a woman and the sympathy of a mother decided to send for two men named Jackson and Carter. For this Mrs. Paine, a widow, had two sons herself, who though nominally blacksmiths were in fact smugglers. Jackson and Carter came in, to whom the widow explained her suspicions, and these two men were presently followed by others of the gang. Before very long they had got into conversation with Galley and Chater, and plied them with drink, so that they completely gave away the nature of their mission, and after being fuddled and insulted were put to bed intoxicated. After a while, they were aroused by Jackson brutally digging his spurs on their foreheads and then thrashing them with a horse-whip. They were then taken out of the inn, both put on to the same horse, with their legs tied together below the horse's belly. They were next whipped as they went along, over the face, eyes, and shoulder, till the poor victims were unable to bear it any longer, and at last fell together, with their hands tied underneath the horse, heads downwards. In this position the horse struck the head of one or the other with his feet at every step. Afterwards the blackguardly tormentors sat the two men upright again, whipped them, and once more the men fell down, with heels in air. They were utterly weak, and suffering from their blows. [Illustration: Mr. Galley and Mr. Chater put by ye Smugglers on one Horse near Rowland Castle _A. Steele who was Admitted a Kings Evidence B. Little Harry. C. Iackson D. Carter E. Downer. F. Richards. 1. Mr. Galley. 2. Mr. Chater._] [Illustration: Galley and Chater _falling off their Horse at_ Woodash draggs their Heads on the Ground, while the Horse kicks them as he goes; the Smugglers still continuing their brutish Usage.] We need not enlarge upon the details, some of which are too outrageous to repeat. After a while they thought Galley was dead, and laid him across another horse, with a smuggler each side to prevent him falling. They then stopped at the Red Lion, at Rake, knocked up the landlord, drank pretty freely, and then taking a candle and spade dug a hole in a sand-pit where they buried him. But at a later date, when the body was exhumed, it was seen that the poor man had covered his eyes with his hands, so there can be little doubt but that Galley was buried alive. As for Chater, they delayed his death. Throughout Monday they remained drinking at the Red Lion, discussing what to do with him, Chater being meanwhile kept secured by the leg with an iron chain, three yards long, in a turf-house. At dead of night they agreed to go home separately so that the neighbours might not be suspicious of their absence. On Wednesday morning they again repaired to the Red Lion, after having left Chater in the charge of two of their number. Then, having discussed what should be done with Chater, some one suggested that a gun should be loaded with two or three bullets, and after having tied a long string to the trigger, each member of the gang should take hold of the string together, and so become equally guilty of the poor man's death. But this idea was unwelcomed, as it was thought it would put Chater too quickly out of his sufferings. Meanwhile, Chater was visited at various times, to receive kicks and severe blows, and to be sworn at in the vilest and most scurrilous language. [Illustration: Chater Chained in ye Turff House at Old Mills's Cobby, kicking him & Tapner, cutting him Cross ye Eyes & Nose, while he is saying the Lords Prayer. Several of ye other smugglers standing by.] One of the gang now came up to him, and uttering an oath, brandishing aloft a large clasp-knife, exclaimed: "Down on your knees and go to prayers, for with this knife I will be your butcher." Terrified at the menace, and expecting momentarily to die, Chater knelt down on the turf and began to say the Lord's Prayer. One of the villains got behind and kicked him, and after Chater had asked what they had done to Galley, the man who was confronting him drew his knife across the poor man's face, cut his nose through, and almost cut both his eyes out. And, a moment later, gashed him terribly across the forehead. They then proceeded to conduct him to a well. It was now the dead of night, and the well was about thirty feet deep, but without water, being surrounded with pales at the top to prevent cattle from falling in. They compelled him to get over, and not through these pales, and a rope was placed round his neck, the other end being made fast to the paling. They then pushed him into the well, but as the rope was short they then untied him, and threw him head foremost into the former, and, finally, to stop his groanings, hurled down rails and gate-posts and large stones. [Illustration: Chater hanging at the Well in LADY HOLT Park, the Bloody Villains Standing by.] [Illustration: The Bloody Smugglers flinging down Stones after they had flung his Dead Body into the Well.] I have omitted the oaths and some of the worst features of the incident, but the above outline is more than adequate to suggest the barbarism of a lot of men bent on lawlessness and revenge. Drunk with their own success, the gang now went about with even greater desperation. Everybody stood in terror of them; Custom officers were so frightened that they hardly dared to perform their duties, and the magistrates themselves were equally frightened to convict smugglers. Consequently the contraband gangs automatically increased to great numbers. But, finally, a reward of £500 was offered by the Commissioners of Customs for the arrest of everyone of the culprits, and as a result several were arrested, tried, convicted, and executed. The murderers were tried at a special assize for smugglers held at Chichester, before three judges, and the seven men were sentenced to death. William Jackson died in prison a few hours after sentence. He had been very ill before, but the shock of being sentenced to death, and to be hung afterwards in chains and in ignominy, rapidly hastened his death, and relieved the executioner of at least one portion of his duty. He had been one of the worst smugglers in his time, and was even a thief among thieves, for he would even steal his confederates' goods. Between the sentence and the hour for execution a man came into the prison to measure the seven culprits for the irons in which their bodies were subsequently to be hung by chains. And this distressed the men more than anything else, most of all Jackson, who presently succumbed as stated. Mills, senior, had gradually been drawn into the smuggling business, though previously he had been quite a respectable man. After giving up actual smuggling, he still allowed his house to be used as a store-place for the contraband goods. His son, Richard, also one of the seven, had been concerned in smuggling for years, and was a daring fellow. John Cobby, the third of the culprits, was of a weaker temperament, and had been brought under the influence of the smugglers. Benjamin Tapner was especially penitent, and "hoped all young people would take warning by his untimely fate, and keep good company, for it was bad company had been his ruin." William Carter complained that it was Jackson who had drawn him away from his honest employment to go smuggling, but John Hammond was of a more obdurate nature, and had always hated the King's officers. According to the testimony of the Rev. John Smyth, who visited them in gaol, all the prisoners received the Holy Communion at ten o'clock, the morning after being sentenced to death. All the prisoners except the two Mills admitted that they deserved the sentence, but all the surviving six acknowledged that they forgave everybody. On January 19, 1748-9, they were executed. The two Mills were not hung in chains, but having neither friend nor relation to take them away their bodies were thrown into a hole near the gallows, into which also was placed Jackson's body. Carter's body was hung in chains on the Portsmouth Road, near Rake; that of Tapner on Rook's Hill, near Chichester; those of Cobby and Hammond on the sea coast near Selsey Bill; so that from a great distance they could be observed across the sea by the ships as they went by east and west. Later on, John, the brother of Richard Mills, and one of the gang, was also arrested. When the above three judges were travelling down to Chichester for the trial of the seven men, John had intended waylaying their lordships on Hind Heath, but his companions had refused to support him. But soon after his father's and brother's execution he met with a man named Richard Hawkins, whom he accused of having stolen two bags of tea. Hawkins denied it, and was brutally and unmercifully thrashed to death in the Dog and Partridge Inn at Slindon Common, his body being afterwards carried a dozen miles, thrown into a pond, with stones attached, and then sunk. John Mills was convicted and hanged at East Grinstead, and afterwards remained hanging in chains on Slindon Common. Other members of the gang were also arrested, tried at the same assizes as highwaymen, and then executed. * * * * * Later on, two of the smugglers who had given evidence against the men that were hanged at Chichester, gave information also, which led to the arrest of Kingsmill, Perin, and two others who had been concerned in breaking open the Poole Custom House. Kingsmill, Perin, and one other were hanged at Tyburn in April of 1749; the other man, however, was pardoned. Thus at length this dreaded Hawkhurst Gang was broken up. CHAPTER VI THE REVENUE CRUISERS We drew attention some time back to the assistance occasionally rendered by soldiers when the Riding officers were about to arrest smugglers. Early in the year 1740, or about the close of 1739, Thomas Carswell, one of the Revenue officers stationed at Rye, was murdered, and a corporal and three dragoons whom he had taken to his assistance were badly wounded, and a large quantity of tea that had been seized was rescued. It was after this incident that Revenue officers of this port--perhaps the most notorious of all the south-east smuggling territory--were ordered that in future when they went forth to make seizures they were to have with them an adequate military force, and to this end they were to make previous arrangements with the commanding-officer of the forces in that district. But in spite of the seizures which the officers on land from time to time effected, and notwithstanding the shortcomings of the Custom House cruisers in regard to speed, and the frequent negligence of their commanders, it still remains true that these cutters and sloops, at any rate until about the year 1822 (when the Coastguard service was instituted) continued to be the principal and the most important of all the machinery set in motion against the smugglers. We have seen this service in working order as far back as the year 1674, at any rate, when the fleet consisted of only hired vessels. We have also seen that they were employed in sufficient numbers all round the coast, and that the Customs authorities, not content merely to hire such vessels, also presently obtained some of their own. It is possible that the smacks were used for such service even before the date 1674--perhaps very soon after Charles came to the throne--but there are no existing records of this to make the matter certain. The Revenue preventive work, in so far as the cruisers were employed, was carried on by a mixed control, and embraced six separate and distinct types:-- 1. There were the English Custom House smacks, cutters, and sloops, some of which were hired vessels: others were actually owned by the English Customs Board. 2. There were the English Excise cruisers, which were controlled by the English Excise Board. They appeared to be very similar to the craft in the first class. 3. There were the Scottish Customs cruisers, under the control of the Scottish Customs Board. The official at the head of these was known as the Agent for yachts. 4. There were the Scottish Excise cruisers, controlled by the Scottish Excise Board. 5. There were the Irish Revenue cruisers, controlled by the Irish Customs and Excise. 6. And lastly, there were these vessels of the Royal Navy which were employed to assist the Revenue, such vessels consisting of ships of the fifth-rate, sixth-rate, and especially the armed sloops. In the present volume it has been necessary, owing to the limits of our space, to restrict our consideration of cruisers chiefly to the most important of these, viz. those of the English Custom House and those of the Royal Navy. Under such a mixed rule it was obvious that many difficulties arose, and that the clashing of interests was not infrequent. For instance, between the English Custom House cruisers and the English Excise cruisers there was about as much friendship as there exists usually between a dog and a cat. Similarly between the former and the Naval cruisers there was considerable jealousy, and every display of that pompous, bombastic exhibition of character which was such a feature of the life of the eighteenth century, and the first years of the next. Although the Revenue cruisers were employed primarily and ordinarily for the purpose of protecting the revenue, yet from time to time they were mobilised for coast defence. On different occasions during the eighteenth century they were lent to the Admiralty, and well supplied with men and arms in readiness for actual warfare. After the third quarter of the eighteenth century these Revenue cruisers seem to have been built in greater numbers and with some improvement as to design, which, seeing that they had so frequently been left well astern by the smuggling cutters, was more than necessary. There was issued in November of 1780, by the Board of Customs, an interesting letter that shows how closely these cruisers approximated to vessels of war, even when they were not under the jurisdiction of the Admiralty. This letter was sent to the Collector and Controller at the different English Customs ports, and began by referring to the fact that many applications had been made to the Board asking permission to take out Letters of Marque. It will be remembered that this was a time when wars seemed to go on interminably, and there had been only a few brief intervals of peace ever since the Anglo-Dutch wars began. The Commissioners replied that they had no objection to the commanders of the cruisers providing themselves with Letters of Marque, if done at the latter's own expense "during present hostilities": but the Board declined to bear any part of the expense for any damages that might be sustained in an engagement where no seizure had been made and brought into port for a breach of the Revenue laws, so long as a commander should continue to hold these Letters of Marque. It was, in fact, a basis of no cure no pay. Each commander was, further, strictly enjoined not to quit his station and duty as a Revenue officer "under pretence of looking for captures, it being our resolution to recall the permission hereby granted, as soon as it shall be discovered in any instance to be prejudicial to our service." But this war-like and semi-war-like service was entirely subservient to their ordinary work. It is evident from the correspondence of the Customs Board of this same year, 1780, that their minds were very uneasy. The smugglers, far from showing any slackening, had become more active than ever. These men had, to quote the words of the Commissioners, considerably increased the size and force of their vessels; they had also added to their number of both men and guns. They had become so violent and outrageous, they had acquired so much audacity as to "carry on their illicit designs in sight of the Revenue cruisers," and "whenever they have appeared within a certain distance have actually fired into and threatened to sink them." In such cases as these, it was reported to the Board, the mariners on board these cruisers have frequently refused to bear down and repel their attacks, explaining their conduct by saying that no provision was made for their support in case they received injury during these encounters. To meet such objections as these the Board resolved to allow the sum of £10 per annum to every mariner employed on board their cruisers who should lose a hand or foot, or receive any greater injury by firearms "or other offensive weapons of the smugglers while in the actual execution of their duty so as to disable them from further service; and we have also resolved to pay the surgeons' bills for such of the mariners as may receive slighter wounds." But it was stipulated that no allowance was to be paid unless certificates were produced from the commanders of these cruisers. And before we go any further with the progress of these cutters, let us afford actual instances of the kind of treatment which had led the Board to make this allowance to its men. Three years before the above resolution, that is to say on April 24, 1777, Captain Mitchell was cruising in command of the Revenue cutter _Swallow_ in the North Sea. Off Robin Hood's Bay he fell in with a smuggling cutter commanded by a notorious contraband skipper who was known as "Smoker," or "Smoaker." Mitchell was evidently in sufficient awe of him to give him a wide berth, for the cruiser's commander in his official report actually recorded that "Smoker" "waved us to keep off"! However, a few days later, the _Swallow_, when off the Spurn, fell in with another famous smuggler. This was the schooner _Kent_, of about two hundred tons, skippered by a man known as "Stoney." Again did this gallant Revenue captain send in his report to the effect that "as their guns were in readiness, and at the same time waving us to go to the Northward, we were, by reason of their superior force, obliged to sheer off, but did our best endeavours to spoil his Market. There [_sic_] being a large fleet of colliers with him." But that was not to be their last meeting, for on May 2, when off Whitby, the _Swallow_ again fell in with the _Kent_, but (wrote Mitchell) the smuggler "would not let us come near him." The following day the two ships again saw each other, and also on May 13, when off Runswick Bay. On the latter occasion the _Kent_ "fired a gun for us, as we imagined, to keep farther from him." The same afternoon the _Swallow_ chased a large lugsail boat, with fourteen hands in her, and supposed to belong to the _Kent_. But the _Swallow_ was about as timid as her name, for, according to her commander, she was "obliged to stand out to sea, finding that by the force they had in their boat, and a number of people on shore, we had no chance of attacking them with our boat, as they let us know they were armed, by giving us a volley of small arms." None the less the _Swallow_ had also fourteen men as her complement, so one would have thought that this chicken-hearted commander would at least have made an effort to try conclusions. No doubt, the _Kent_ was a pretty tough customer, and both skipper and his crew likewise. But there was something wanting in Captain Mitchell. For consider another of the latter's exploits. It was the last week of September of that same year, and the scene had again the Yorkshire coast for its background. During the evening they espied what they rightly believed to be a smuggling cutter. They got as far as hailing her, but, as it was very dark, and the _Swallow_ did not know the force of the cutter, Mitchell "thought it most prudent to leave her," and so came to anchor in Saltburn Bay. But the smuggler had not done with this enterprising gentleman; so the next day the smuggler came into the bay, stood down under full sail, and came charging down on to the poor _Swallow_, striking her on the quarter, the smuggler swearing terrible oaths the meanwhile, that if Mitchell did not promptly cut his cable--it was the days of hemp, still--and hurry out of that anchorage, he would sink him. What happened, do you ask? Of course the _Swallow_ ought to have been under way, and should never have been lying there. She was acting contrary to the orders of the Board. But what must we think of a captain who calmly awaits the on-coming of a smuggler's attack? Why, so soon as the _Swallow_ espied him approaching, did he not up anchor, hoist sails, and go to meet him with his crew at their stations, and guns all shotted? But even after this gross insult to himself, his ship, and his flag, was the commander of a Revenue sloop to obey? [Illustration: "Came charging down ... striking her on the quarter."] Yes--it is shameful to have to record it--Mitchell did obey. True, he didn't cut his cable, but he soon tripped his anchor and cleared out as ordered. The poor _Swallow_ had been damaged both as to her tail and her wings, for the smugglers had injured the stern, taken a piece out of the boom, and carried away the topping-lift. But evidently in those days the Revenue service attracted into its folds men of the type of Mitchell. Take the case of Captain Whitehead of the Revenue cruiser _Eagle_. Espying a smuggling vessel, he gave chase, and eventually came up with her, also off Saltburn. Whitehead hailed her, but the smuggler's skipper replied--one cannot resist a smile--"with a horrid expression," and called his men to arms. The smuggler then fired a volley with muskets, wounding one of the _Eagle's_ crew. Presently they also fired their swivel-guns, "on which Captain Whitehead thought it prudent to get away from her as fast as he could, the greatest part of his people having quitted the deck." The smuggler continued to fire at the retreating cruiser, and chased the _Eagle_ for a whole hour after. The cutter turned out to be that which Mitchell had encountered on April 24, 1777, and her skipper was our friend "Smoker" again. This smuggling craft was described as a stout cutter of 130 tons, and a crew of upwards of forty men. She carried fourteen carriage guns, four three-pounders, as well as a great number of swivels. "Smoker's" real name was David Browning, and he was recognised by the _Eagle's_ crew from his voice, which was familiar to several of them. During that affray the Revenue cruiser received about twenty shot in her sails, about a dozen in her boat, and half as many in her fore-and main-mast. She also had her mizzen halyards shot away. From these details it would seem that she was dandy-rigged, that is to say, she had a mizzen or jigger in addition to her cutter rig, and on this jigger would be set a small lugsail as was the old custom. Following on Mitchell's meeting with the _Kent_, we have a record belonging to July of that same year--1777. This time a different result was to come about. For instead of acting single-handed, the sloops _Prince of Wales_ and the _Royal George_--both being employed by the Scottish Excise Board, aided by H.M.S. _Pelican_ and _Arethusa_--four of them--at last managed to capture this schooner. She was found to be armed with sixteen four-pounders and twenty swivel-guns, and also had a large stock of gunpowder, blunderbusses, and muskets. "Stoney" was taken out of her, and he was said to be an outlaw whose real name was George Fagg. The guns and ammunition were taken ashore and put in the King's warehouse at Hull, and the crew of thirty-nine were placed on board the _Arethusa_. Among these prisoners were those who had murdered a dragoon the previous year, while the latter was assisting a Custom officer at Whitby. The arrest of these men was all the more interesting for a reward of £100 for their capture had been long outstanding. The capture of the _Kent_ had been effected as follows: the two Excise cruisers were off St. Abb's Head on July 8, and hearing that the _Kent_ had been seen off Flamborough Head they sailed south, and off Filey fell in with her. On being hailed, the smuggler beat to quarters, shouting to the cruisers. "Fire, you ----, and be ---- to you." The battle at once commenced and continued smartly for an hour, when the _Pelican_ came up to give assistance to the two cruisers. The _Kent_, big as she was, now used sweeps--it was reminiscent of the days of Elizabethan galleasses--and drew away. However the _Pelican_ (a frigate) overhauled her, and the _Arethusa_ which had also come up gave valuable aid as well. The two naval captains allowed the cruisers to seize the _Kent_, and to take her into Hull, but the prisoners were put on board the _Arethusa_ as stated. The _Kent's_ master and four of the men had been killed. It should be added that the day before this incident the _Pelican_ had also chased the _Kent_ out of Bridlington Bay, so the smuggler must have come further north in the meanwhile, thus meeting the two Scottish cruisers bound south. The hatches of the _Kent_ were found to be unbattened, and her cargo in great disorder. The latter consisted of 1974 half-ankers, and a large amount of tea packed in oilskin-bags to the number of 554. This schooner had been built at that other famous home of smugglers, Folkestone. She was specially rigged for fast sailing, her mainmast being 77 feet long, and her main-boom 57 feet. It was found that her sails were much damaged by shot. Her mainmast was shot through in two places, and her main-boom rendered quite unserviceable. Ship and tackle were appraised at £1405, 16s., so with the addition of her cargo she represented a fair prize. But "Smoker" was still at large even though "Stoney" was a prisoner. It was in April of 1777, when Captain Mitchell had fallen in with him off Robin Hood's Bay. A month later the Collector of Hull wrote up to the Board to say that a large lugger had been seen off Whitby, and well armed. She was described as "greatly an overmatch" for any of the Revenue cruisers, "or even for a joint attack of two of them": and that as long as she and the armed cutter commanded by Browning, _alias_ "Smoker" continued so daringly to "insult" the coasts, there was little prospect of success. For six months past the Revenue cruisers had not been able to make any seizures, because these smuggling craft not only brought over vast quantities themselves, but protected the smaller ones from the attempts of the Revenue cruisers. A year later, and we find that Mitchell was every bit as slack as before. This is made quite clear from a letter which the Collector of Hull was compelled on November 12 (1778) to write. In this epistle he informs Mitchell that either he or his mate, one of them, must remain on board the _Swallow_ at night, when lying in the Humber. For it appeared that two days earlier both were ashore. The mariner who had the midnight watch on board the cruiser saw a vessel, supposed to be a privateer, come right up the Humber into Hull Roads, sail around the naval tender there lying, then sail round the _Swallow_, and finally down the river again. Although there were twelve or fourteen men on the supposed privateer's deck, yet the _Swallow's_ watchman did not even hail her, Mitchell and his mate being ashore all the while. Such incidents as the above show that there undoubtedly was cause for the complaints of the Customs Board that the commanders of their cruisers were not doing all that might have been done towards suppressing the evil at hand. On the other hand, it was equally true that the delinquents with whom these commanders had to contest were of a particularly virulent and villainous type. Thus, between the negligence of the one side, and the enterprise of the other, his Majesty's revenue had to suffer very considerably. No better instance of the potency of this lawlessness could be afforded than by an event which happened in the summer of 1777. Everyone knows, of course, that those were the days when men had to be impressed into the service of the Navy, so that, when any of these hardy smugglers were captured, they were valuable acquisitions to the Service, and far more useful than many of the disease-stricken crews which so often had to be shipped to make up a man-of-war's complement. In the year we are speaking of a number of smugglers who had been captured on the North Sea were put on board H.M. tender _Lively_ by Captain O'Hara of the Impress service, the intention being to convey these men to one of his Majesty's ships at the Nore. The tender got under way and was proceeding to her destination when the smuggler-prisoners mutinied, overpowered the _Lively's_ crew, and carried the _Lively_ into Flushing. And similar examples of the impudence and violence of other North Sea smugglers could also be quoted. On the 7th of May 1778, Captain Bland, of the _Mermaid_ Revenue cruiser, was off Huntcliff Fort, when he sighted a smuggling shallop.[9] Bland promptly bore down, and as he approached hailed her. But the shallop answered by firing a broadside. The Revenue cruiser now prepared to engage her, whereupon the shallop hoisted an English pennant, which was evidently a signal for assistance, for a large armed cutter promptly appeared and came to the shallop's rescue. Seeing that he was overmatched, Bland, therefore, sheered off. During the same month Captain Whitehead, of the _Eagle_, to whom we have already referred, reported that he seldom went for a cruise without being fired on, and he mentioned that sometimes these smuggling vessels carried musket-proof breast-works--a kind of early armour-plating, in fact. The principal rendezvous of the smuggling craft in the North Sea was Robin Hood's Bay. Whenever the cruisers used to approach that bight the smugglers would sail out, fire upon them, and drive them along the coast. Before firing, the smugglers always hoisted English colours, and on one occasion a smuggling craft had the temerity to run alongside a Revenue cruiser, hail her, and in a derisive manner ordered the commander to send his boat aboard. We spoke just now of the superior sailing qualities which these smuggling craft frequently possessed over the Revenue cruisers, and on one occasion, in the North Sea, the master of a smuggling shallop, when being pursued, impudently lowered his lugsail--that would be his mizzen--to show that the cruiser could not come up and catch him. And lest that dishonourable incident previously mentioned, of a cruiser being ordered out of Saltburn Bay, may be thought a mere isolated event, let us hasten to add that the cruiser _Mermaid_ was lying at anchor off Dunstanburgh Castle, on the Northumbrian coast, when Edward Browning came alongside her in an armed shallop named the _Porcupine_, belonging to Sandwich. He insisted on the _Mermaid_ getting up her anchor and leaving that region: "otherwise he would do him a mischief." Indeed, were these facts not shown unmistakably by actual eye-witnesses to be the very reverse of fiction, one might indeed feel doubtful as to accepting them. But it is unlikely that cruiser-commanders would go out of their way to record incidents which injured their reputation, had these events never in reality occurred. Some idea of the degree of success which smuggling vessels attained during this eighteenth century may be gathered from the achievements of a cutter which was at work on the south coast. Her name was the _Swift_, and she belonged to Bridport. She was of 100 tons burthen, carried no fewer than 16 guns and a crew of fifty. During the year 1783 she had made several runs near Torbay, and on each occasion had been able to land about 2000 casks of spirits, as well as 4 or 5 tons of tea. Afterwards the whole of this valuable cargo had been run inland by about 200 men, in defiance of the Revenue officers. Then there was the _Ranger_, a bigger craft still, of 250 tons. She carried an enormous crew for her size--nearly 100--and mounted 22 guns. She had been built at Cawsand, that village which in smuggling days attained so much notoriety, and stands at the end of a delightful bay facing the western end of Plymouth Breakwater. This vessel had a successful time in landing cargoes to the east of Torbay without paying the lawful duty. And there were many fishing-boats of from 18 to 25 tons, belonging to Torbay, which were at this time accustomed to run across the Channel, load up with the usual contraband, and then hover about outside the limits of the land. When they were convinced that the coast was clear of any cruisers they would run into the bay and land, sink or raft their cargoes, according to circumstances. And now, leaving for the present actual skirmishes and chases in which the Revenue cruisers were concerned, let us look a little more closely into their organisation. From the report by the Commissioners appointed to examine the Public Accounts of the kingdom, and issued in 1787, it is shown that the Custom House cruisers were of two classes: (1) Those which were owned by the Board, and (2) Those which were hired by contract. And as to this latter class there was a further subdivision into two other classes; for one section of these vessels was furnished by the Crown, no charge being made for the hire. But her outfit, her future repairs, in addition to the wages and victualling of the crew, and all other expenses, were paid out of the produce of the seizures which these cruisers effected. After this, if anything remained beyond these deductions, the residue was to be divided between the Crown and the contractor. Very often, of course, when a fine haul was made of a £1000 worth of cargo, there was quite a nice little sum for both parties to the contract, and a few other, smaller, seizures during the year would make the business quite a profitable undertaking. But when the amount of seizures was not sufficient to defray the expenses the deficiency was supplied by the contractor and Crown in equal proportions. That, then, was one of these two subdivisions of contracted cruisers. But in the second of these the contractor provided the vessel, for which he was paid the sum of 4s. 6d. a ton per lunar month. It may seem at first that this was poor remuneration, especially when one recollects that to-day, when the Government hires liners from the great steamship companies, the rate of payment is £1 per ton per month. In the case of even a 10,000-ton liner there is thus a very good payment for about thirty days. But in the case of a cutter of 100 tons or less, in the eighteenth century, 4s. 6d. per ton may seem very small in comparison. However, we must bear in mind that although for this money the contractor was to find the outfit of the vessel, and be responsible for all repairs needed, yet the aforesaid contractor might make a good deal more in a lucky year. It was done on the following basis. From the produce of the seizures made by this subdivision of cruisers all remaining charges additional to those mentioned above were paid, but the surplus was divided between the Crown and contractor. Thus the latter stood to gain a large sum if only a moderate number of seizures had been made, and there was, by this method, every incentive for the hired cruisers to use their best endeavours to effect captures. Still, if there was a deficiency instead of a surplus, this was also shared by both contracting parties. In the year 1784 there were, reckoning all classes, 44 cruisers employed, and 1041 men as crews. Of these cruisers the Commander, the Chief Mate and Second Mate, and, in certain vessels, the Deputed Mariners, were all officers of the Customs. In the case of the first class of cruisers--those which were on the establishment--these officers were appointed by the Board pursuant to warrants from the Treasury. In the case of the second--those which were hired by contract--the officers were appointed by the Customs Board. The captain of the cruiser was paid £50 per annum, the chief mate either £35 or £30, and the crew were each paid £15. But, as we shall see from a later page, the rate of pay was considerably increased some years afterwards. The victualling allowance was at the rate of 9d. per diem for each man on board, and an allowance of 1s. each was made by the lunar month for fire and candle. This last-mentioned allowance was also modified in the course of time. Some idea as to the seriousness, from a financial point of view, of this cruiser fleet may be gathered from the statement that these 44 vessels cost the Government for a year's service the sum of £44,355, 16s. 1d. The largest of these forty-four cruisers was the _Repulse_, 210 tons. She carried 33 men and was stationed at Colchester. Her cost for this year (1784) was £1552, 16s. 8d. She was not one of the hired vessels, but on the establishment. Next in size came the _Tartar_, 194 tons, with 31 men, her station being Dover. She was on the establishment, and her annual cost was £1304, 6s. 2-1/2d. Of the same tonnage was the _Speedwell_, which cruised between Weymouth and Cowes. There was also the _Rose_, 190 tons, with 30 men, stationed at Southampton, being on the establishment likewise. Next to her in size came the _Diligence_, 175 tons, with 32 men. She cruised between Poole and Weymouth. She was one of the hired vessels, and was in 1784 removed from Weymouth to have her headquarters at Cowes. The smallest of all the cruisers at this time was the _Nimble_, 41 tons and a crew of 30. She also was a hired craft. Her station was at Deal, and her annual cost was £1064, 9s. 9d. for the year mentioned. But though there was less expenditure needed at the outset, these contract ships were not altogether satisfactory: or rather it was the method than the cruisers themselves. For if we have any knowledge at all of human nature, and especially of the dishonest character which so frequently manifested itself in the eighteenth century, we can readily imagine that the contractor, unless he was a scrupulously honourable man, would naturally succumb to the temptation to economise too strictly regarding the keeping the ship in the best condition of repair; or he might gain a little by giving her not quite a sufficiently numerous crew, thus saving both wages and victuals. For the Crown allowed a certain number of men, and paid for the complement which they were supposed to carry. Therefore, since this arrangement was marked by serious drawbacks, the contract system was discontinued, and at the beginning of 1788 fifteen contracts were ended, and five other cruisers' contracts were not renewed when they expired in that year. All the cruisers in the employment of the Customs Service were now placed on the establishment, and the practice of paying the charges and expenses out of the King's share of the condemned goods was rescinded. In the year 1797 the number of Customs cruisers was 37, the commanders being appointed by the Treasury; and it may be not without interest to mention the names, tonnage, and guns of some of those which were on the books for that year. There was the _Vigilant_, which was described as a yacht, 53 tons, 6 guns, and 13 men; the _Vigilant_ cutter, 82 tons, 8 guns. During the winter season she cruised with ten additional hands off the coasts of Essex, Kent, and Sussex. There was another, the _Diligence_, given as of 152 tons; the _Swallow_, 153 tons and 10 guns; the _Lively_, 113 tons, 12 guns, and 30 men. The _Swift_, 52 tons and 8 men, used to cruise between the Downs and the Long Sand (to the North of the North Foreland at the mouth of the Thames). Some of the old names under the former dual system are seen to be commemorated in the _Nimble_ (41 tons, 2 guns, 15 men). Her station was Deal, and she used to cruise between the Forelands. The _Tartar_ of this period was of 100 tons, had 10 guns and 23 men. But the _Greyhound_, probably one of the fastest cruisers, was of 200 tons, mounted 16 guns, and carried 43 men. Her cruising ground was between Beachy Head and the Start, and her station at Weymouth. A much smaller craft was the cruiser _Busy_ (46 tons and 11 men). Her cruising was in a much smaller area--around Plymouth Sound and Cawsand Bay. Owing to the fact that commanders had been wont too often to run into port for real or imaginary repairs, the Commissioners decided that in future, when a cruiser put in, she was to inform the Collector and Controller of that port by means of her commander, and both to give his reasons for coming in, and to estimate the length of time he was likely to remain in port, before his being able to sail again. With regard to the prize-money which these cruisers were able to make; before the year 1790 there had been a diversity of practice in the method of sharing. In allotting rewards to officers for seizing vessels which afterwards had been taken into the Revenue Service, it had formerly been the practice to deduct the whole of the charges out of the officers' moiety of the appraised value. But from April 14, 1790, "for the encouragement of the seizing officers," the charge was deducted from the total appraised value, and the seizing officers were to be paid a moiety of the net produce, if any. It had also been the custom to allow the commanders of Admiralty cruisers permission to use seized vessels as tenders. But from May 6, 1790, this practice was also discontinued by the Board, who ordered that in case any such vessels were so employed at the different ports, the commanders were to deliver them up "with their tackle, apparel, and furniture," to the Collector and Controller of Customs. We referred some time back to the fact that these Revenue cruisers at times were mobilised for war, and also that to them were granted Letters of Marque. In this connection there is to be noted an interesting warrant, under the King's sign-manual, dated June 11, 1795, which reads:-- "Whereas the Commissioners of our Treasury have represented unto us that the cutters in the service of our Revenues of Customs have captured several Ships and Vessels belonging to the enemy, and have recommended it unto us to issue our warrant to grant the proceeds of the Prizes that have been or shall be taken by the cutters in the service of our Customs, granted to the cutters capturing such prizes respectively, and the expenses of the proceedings, in regard thereto, among officers and crews of the vessels in the search of our Customs, who made the said captures, together with the head-money, in all cases where head-money is or may be due by law.... "Our will and pleasure is that the proceeds of all such Prizes as have been or shall be taken from the enemy in the course of the present war, by the cutters in the service of our Revenue of Customs, after deducting all expenses of the Letters of Marque granted to the cutters capturing such Prizes respectively, and the expenses of the proceedings in regard thereto, together with the head-money in all cases where head-money is or may be due by law, shall be distributed in the manner following; that is to say":-- The Commander 14/32 ds. Mate 7/32 ds. Deputed Mariner, or deputed } 3/32 ds., exclusive of their mariners if more than one } shares as Mariners. Other Mariners 8/32 ds. If there is no deputed Mariner, The Commander 1/2 The Mate 1/4 Mariners 1/4 It may be mentioned, in passing, that a "deputed" mariner was one who held a deputation from the Customs Board. Another warrant, similar to the above, and to the same effect, was issued on July 4, of that memorable year 1805. In July of 1797, the Customs Commissioners drew attention to the third article of the "Instructions for the Commanders and Mates of the Cruisers employed in the service of this Revenue," reminding them that the commanders, mariners, and mates were in no case to be allowed to participate in the officers' shares of seizures made by the crews of the cruisers unless the first-mentioned had been actually present at the time when the seizure was made, or could afford satisfactory proof that they were necessarily absent on some duty. Therefore the Board now directed that, whenever the crews of the cruisers made a seizure, a list of the officers who were not actually on board or in the boats of the cruisers at that time was to be transmitted to the Board with the account of the seizure. Then follows the other instruction which has already been alluded to. In order that the station of the aforesaid cruisers may never be left unguarded by their coming into port for provisions, or to be cleaned and refitted, or for any other necessary purpose, the commanders were instructed to arrange with each other "that nothing but absolute necessity shall occasion their being in Port at one and the same time." It will be recognised that the object of this was, if possible, to keep the officers of the cruisers on board their vessels, and at sea, instead of ever running into port. For it would seem that by more than one of these gentlemen the work of cruising on behalf of the Revenue Service was regarded too much in the light of a pleasant, extended yachting trip, with an occasional chase and seizure of a smuggling craft to break the monotony of their existence and to swell their purses. But such a pleasant life was not that contemplated by the Customs authorities. FOOTNOTES: [9] "Shallop, a sort of large boat with two masts, and usually rigged like a schooner."--MOORE. CHAPTER VII CUTTERS AND SLOOPS We have spoken during the preceding chapters of the revenue cruisers sometimes as cutters and sometimes as sloops. For the reason that will quickly become apparent let us now endeavour to straighten out any confusion which may have arisen in the mind of the reader. Practically, sloops and cutters of these days were one and the same, with very minor differences. In a valuable French nautical volume published in 1783, after explaining that the cutter came to the French from England, the definition goes on to state that in her rigging and sail-plan she resembles a sloop, except that the former has her mast longer, and inclined further aft, and has greater sail-area. The cutter also has but little freeboard, and in order to carry her large sail-area she draws more water. This authority then goes on to mention that such craft as these cutters are employed by the smugglers of the English Channel, "and being able to carry a good deal of sail they can easily escape from the guardships. The English Government, for the same reason, maintain a good many of these craft so as to stop these smugglers." Our English authority, Falconer, described the cutter as having one mast and a straight-running bowsprit that could be run inboard on deck. But for this, and the fact that the cutter's sail-area was larger, these craft were much the same as sloops. Falconer also states that a sloop differs from a cutter by having a fixed steeving bowsprit and a jib-stay. Moore, who was also a contemporary, makes similar definitions in almost identical language. The real difference, then, was that the cutter could run her bowsprit inboard, but the sloop could not. Now, in the year 1785, a very interesting matter occupied the attention of the Board of Customs in this connection. It appeared that in an important trial concerning a certain vessel the defence was set up that this vessel had changed her character by so altering her "boltsprit" that it became fixed and could not be run inboard. It was found that all which her owners had done was to pass an iron bolt through the bits and heel of the bowsprit, clenching it. The defendant insisted that thus he had rendered it a complete standing "boltsprit," and not a running one: and that, therefore, by such alteration, his vessel became transformed from a cutter to a sloop. And, according to the definitions which we have just brought forward, one would have thought that this was a good defence. However, the Crown thought otherwise, and contended that the alteration was a mere evasion of the Act in question, and that the vessel remained a cutter because such fastening could be removed at pleasure, and then the "boltsprit" would run in and out as it did before the alteration. The jury also took this view, and the cutter, which thought herself a sloop, was condemned. The Revenue officers and commanders of Admiralty sloops were accordingly warned to make a note of this. For a number of years the matter was evidently left at that. But in 1822 the Attorney and Solicitor-General, after a difficult case had been raised, gave the legal distinction as follows, the matter having arisen in connection with the licensing of a craft: "A cutter may have a standing bowsprit of a certain length without a licence, but the distinction between a sloop and a cutter should not be looked for in the rigging but in the build and form of the hull, and, therefore, when a carvel-built vessel corresponds as to her hull with the usual form of a sloop, she will not merely, by having a running bowsprit, become a cutter within the meaning of the Act of the 24 Geo. III. cap. 47, and consequently will not be liable to forfeiture for want of a licence." From this it will be seen that whereas Falconer and other nautical authorities relied on the fixing of the bowsprit to determine the difference, the legal authorities relied on a difference in hull. The point is one of great interest, and I believe the matter has never been raised before by any modern nautical writer.[10] As to what a Revenue cutter looked like, the illustrations which have been here reproduced will afford the reader a very good idea. And these can be supplemented by the following description which Marryat gives in _The Three Cutters_. It should be mentioned that the period of which he is speaking is that which we have been contemplating, the end of the eighteenth century. "She is a cutter," he writes, "and you may know that she belongs to the Preventive Service by the number of gigs and galleys which she has hoisted up all round her. She looks like a vessel that was about to sail with a cargo of boats: two on deck, one astern, one on each side of her. You observe that she is painted black, and all her boats are white. She is not such an elegant vessel as the yacht, and she is much more lumbered up.... Let us go on board. You observe the guns are iron, and painted black, and her bulwarks are painted red; it is not a very becoming colour, but then it lasts a long while, and the dockyard is not very generous on the score of paint--or lieutenants of the navy troubled with much spare cash. She has plenty of men, and fine men they are; all dressed in red flannel shirts and blue trousers; some of them have not taken off their canvas or tarpaulin petticoats, which are very useful to them, as they are in the boats night and day, and in all weathers. But we will at once go down into the cabin, where we shall find the lieutenant who commands her, a master's mate, and a midshipman. They have each their tumbler before them, and are drinking gin-toddy, hot, with sugar--capital gin, too, 'bove proof; it is from that small anker standing under the table. It was one that they forgot to return to the Custom House when they made their last seizure." In 1786, by the 26 Geo. III. c. 40, section 27, it was made lawful for any commander of any of his Majesty's vessels of war, or any officer by them authorised, to make seizures without a deputation or commission from the Commissioners of the Customs. Those were curious times when we recollect that apart altogether from the men-of-war of varying kinds, there were large numbers of armed smuggler-cutters, Custom-House cutters with letters of marque, privateers, and even Algerine corsairs from the Mediterranean, in the English Channel. It is to-day only a hundred and fifty years ago since one of these Algerine craft was wrecked near Penzance in the early autumn. We mentioned just now the Act of George III. which required craft to be licensed. This was another of the various means employed for the prevention of smuggling, and since the passing of this Act those luggers and cutters which engaged in the running of goods endeavoured to evade the Act's penalties by possessing themselves of foreign colours and foreign ship's papers. Now, as a fact, by far the greater part of such craft belonged to Deal, Folkestone, and other south-coast ports of England. Their masters were also from the same localities, and very few of them could speak Dutch or French. But for the purpose of evading the English law they got themselves made burghers of Ostend, and notwithstanding that their crews were for the most part English they designated their craft as foreign. During the year 1785 it happened that two of these pseudo-foreign smuggling craft were chased by an English frigate. Owing to the fact that the frigate had no pilot on board, one of these vessels escaped, but the other, after a chase lasting five hours, realised that she would soon be overhauled. Her master, therefore, threw overboard his cargo as the frigate fast approached, and in company with a number of his crew took to his large boat. The lugger, after no fewer than twenty shots had been fired at her, hove-to. On taking possession of the lugger and examining her papers it appeared that her master's name was the very English-sounding Thomas March, and yet he described himself as a burgher of Ostend, the vessel being owned by a merchant. The master's excuse was that he was a pilot-boat cruising with a number of pilots on board, and for this reason it was decided to give him the benefit of the doubt and not detain him. But the frigate's captain had noticed that before the lugger had hove-to during the evening a part of the cargo had been thrown overboard. The following morning, therefore, he proceeded on board a Revenue cutter, "went into the track where the cargo was thrown overboard," and was able to find just what he had expected, for he located and drew out of the sea no fewer than 700 half-ankers of foreign spirits. This precedent opened up an important question; for if a neutral vessel, or indeed any craft similarly circumstanced as the above, were to anchor off the English coast it was hardly possible to detect her in running goods, as it seldom took more than an hour to land a whole cargo, owing to the great assistance which was given from the people on the shore. For, as it was officially pointed out, as soon as one of these vessels was sighted 300 people could usually be relied on with 200 or more carts and waggons to render the necessary service. Therefore the commanders of the cutters sought legal advice as to how they should act on meeting with luggers and cutters without Admiralty passes on the English coast but more or less protected with foreign papers and sailing under foreign colours. The matter was referred to the Attorney-General, who gave his opinion that vessels were forfeitable only in the event of their being the property in whole or part of his Majesty's subjects; but where the crew of such a vessel appeared all to be English subjects, or at any rate the greatest part of them, it was his opinion that there was a sufficient reason for seizing the vessel if she was near the English coast. She was then to be brought into port so that, if she could, she might prove that she belonged wholly to foreigners. "A British subject," continued the opinion, "being made a burgher of Ostend does not thereby cease to be a subject. Vessels hovering within four leagues of the British coast, with an illicit cargo, as that of this vessel appears to have been, are forfeited whether they are the property of Britons or foreigners." It was not once but on various occasions that the Customs Board expressed themselves as dissatisfied with the amount of success which their cruisers had attained in respect of the work allotted to them. At the beginning of the year 1782 they referred to "the enormous increase of smuggling, the outrages with which it is carried on, the mischiefs it occasions to the country, the discouragement it creates to all fair traders, and the prodigious loss the Revenue sustains by it." The Board went on to state that "diligent and vigorous exertions by the cruising vessels employed in the service of the Customs certainly might very much lessen it." The Commissioners expressed themselves as dissatisfied with the lack of success, and ordered that the officers of the Waterguard were especially to see that the commander and mate of every Revenue vessel or boat bringing in a seizure were actually on board when such seizure was made. A few days later--the date is January 16, 1788--the Board, having received information that great quantities of tobacco and spirits were about to be smuggled in from France, Flanders, Guernsey, and Alderney, warned the Preventive officers of the various ports, and directed the commanders of the Admiralty cruisers, which happened to be stationed near the ports, to be especially vigilant to intercept "these attempts of the illicit dealers, so that the Revenue may not be defrauded in those articles to the alarming degree it has hitherto been." And the officers were bluntly told that if they were to exert themselves in guarding the coast night and day such fraudulent practices could not be carried on in the shameful manner they now were. "And though the Riding officers may not always have it in their power to seize the goods from a considerable body of smugglers, yet if such officers were to keep a watchful eye on their motions, and were to communicate early information thereof to the Waterguard, they may thereby render essential service to the Revenue." When the soldiers assisted the Revenue officers in making seizures on shore it was frequently the case that the military had difficulty in recovering from the Revenue men that share of prize-money which was their due. The Collector of each port was therefore directed in future to retain in his hands out of the officers' shares of seizures so much as appeared to be due to the soldiers, and the names of the latter who had rendered assistance were to be inserted in the account of the seizures sent up to headquarters. But the jealousy of the military's aid somehow never altogether died out, and ten years after the above order there was still delay in rendering to the army men their due share of the seizures. The commanders of the Revenue cruisers were told to keep an especial watch on the homeward-bound East Indiamen to prevent "the illicit practices that are continually attempted to be committed from them." Therefore these cruisers were not only to watch these big ships through the limits of their own station, but also to keep as near them when under sail as possible, provided this can be done with safety and propriety. But when the East Indiamen come to anchor the cruisers are also to anchor near them, and compel all boats and vessels coming from them to bring-to in order to be examined. They are "then to proceed to rummage such boats and vessels. And if any goods are found therein they are to be seized, together with the boats in which they are found." The importance of this very plain instruction is explained by the further statement that "some of the commanders of the cruisers in the service of the Revenue endeavour to shun these ships, and thereby avoid attending them through their station." On Christmas Eve of 1784 the Customs Commissioners sent word to all the ports saying that they suspected that there were a good many vessels and boats employed in smuggling which were thus liable to forfeiture. Therefore, within forty-eight hours from the receipt of this information sent by letter, a close and vigorous search was to be made by the most active and trusty officers at each port into every bay, river, creek, and inlet within the district of each port, as well as all along the coast, so as to discover and seize such illegal vessels and boats. And if there were any boats quartered within the neighbourhood of each port, timely notice of the day and hour of the intended search was to be sent by the Collector and Controller in confidence to the commanding officer only, that he might hold his soldiers in readiness. Yet, again the Board exhorted the Revenue officers "to exert yourselves to the utmost of your power ... and as it is very probable that the places where such boats and vessels are kept may be known to the officers who have long resided at your port, you are to acquaint such officers that if they value their characters or employments, or have any regard to the solemn oath they took at their admission, we expect they will, on this occasion, give the fullest and most ample information of all such places, and will cheerfully afford every other aid and assistance in their power, to the end that the said vessels and boats may be discovered and seized. "And to prevent them from being launched into the water, and carried off by the smugglers after seizure, you are to cause one of the streaks (= strakes) or planks to be ripped off near the keel, taking care at the same time to do as little other injury to each boat as possible." We now come to witness the reappearance of an old friend of whom we last made mention in the North Sea. The year we are now to consider is 1788, and the 15th of July. On that day H.M. cutter _Kite_ was sailing from Beachy Head to the westward. She passed to the southward of the Isle of Wight without sighting it, as the weather was thick. Later in the day it cleared as they got near to the Dorsetshire coast, and about 7.30 P.M., when they were between Peveril Point (near Swanage) and St. Alban's Head, and it was clearer and still not night, the ship's surgeon discovered a vessel some distance away on the weather bow. The weather had now cleared so much that the house on the top of St. Alban's Head was quite visible. The surgeon called the attention of a midshipman on board to the strange vessel. The midshipman, whose name was Cornelius Quinton, took a bearing, and found that the stranger bore W.S.W. from the cutter, and was steering E.S.E. He also took a bearing of Peveril Point, which bore N.1/2W., and judged the smuggler to be about 9 miles from Peveril Point. About 8 o'clock the cutter began to give chase, and this continued until 11 P.M., the course being now S.E. After a time the lugger hauled up a point, so that she was heading S.E. by S., the wind being moderate S.W. During the chase the lugger did her best to get away from the cutter, and set her main topsail. The cutter at the time was reefed, but when she saw the lugger's topsail going up she shook out her reefs and set her gaff topsail. It was some little time before the _Kite_ had made up her mind that she was a smuggler, for at first she was thought to be one of the few Revenue luggers which were employed in the service. About 11 o'clock, then, the _Kite_ was fast overhauling her, notwithstanding that the lugger, by luffing up that extra point, came more on the wind and so increased her pace. It was at first a cloudy night--and perhaps that may have made the _Kite's_ skipper a little nervous, for he could hardly need to be reefed in a moderate breeze--but presently the sky cleared. As the _Kite_ approached she hoisted her signals and fired a musket shot. (As there is a good deal of confusion existing concerning the signals of the old Revenue cutters, it is worth noting that although it was night these signals were displayed. I make this statement on the unimpeachable sworn evidence of the _Kite's_ crew, so the matter cannot be questioned.) But in spite of these signals, which every seafaring man of that time knew very well meant that the pursued vessel was to heave-to, the lugger still held on and took no notice. After that the _Kite_ continued to fire several times from her swivel guns. Later still, as the _Kite_ came yet closer, the latter hailed her and requested her to lower her sails, informing her at the same time that she was a King's cutter. Still the lugger paid no heed, so the cutter now fired at her from muskets. It was only after this that the lugger, seeing her chance of escape was gone, gave up, lowered sail, wore round, and came under the _Kite's_ stern. The cutter hoisted out a boat, the midshipman already mentioned was sent aboard the lugger, and the latter's master was brought to the _Kite_, when whom should they find to be their prisoner but David Browning, better known as "Smoker," of North Sea fame? When the _Kite's_ captain asked for his papers "Smoker" replied that he had no papers but a bill of sale. He was afterwards heard to remark that if he had understood the log line he would not have been so near the land as he was, and admitted he had been bound for Flushing, having doubtless just landed a cargo on the beach. The lugger was found to be decked and clinker-built with a running bowsprit on which she set a jib. Six carriage guns were also found on board, mounted on her deck. Four of these guns were observed to be loaded, three with powder and one with shot, and they were 4-pounders. After the capture was made the two vessels lay for a time hove-to on the heaving sea under the star-specked sky. The lugger was then put in charge of the midshipman and a prize crew from the cutter, the prisoners being of course taken on board the _Kite_. Both lugger and cutter then let draw their sails, and set a course N.E. for the Isle of Wight until 2 A.M. As it then came on thick the vessels hove-to until daylight, when sail was made again, the lugger being sent on ahead to sound, so as to see how near they were approaching the Isle of Wight. Later on they found themselves in 12 fathoms and judged themselves to be near the Owers. Eventually, having steered about N.N.E. and sighted Chichester Church in the distance, they went about and stood south, the wind having veered to W.N.W., and at 3.30 P.M. let go anchor in Spithead. Browning in due time appeared in Court, and a verdict was given for the King, so that at last this celebrated smuggler had been caught after many an exciting chase. It was not many years after this incident that a 70-ton cutter named the _Charming Molly_ arrived at Portsmouth. A Customs officer went on board her and found a man named May, who produced the key of the spirit-room, saying he was master of the ship. In the spirit-room the Customs officer found a hogshead of gin containing 62 gallons. May was anxious to show that this was quite legitimate, as there were sixteen men aboard and the contents of this cask were for their use. The Customs officer now inquired if there was any more liquor on the ship, and May replied in the negative, at first. The officer then said he would search the cabin, whereupon May added that there was a small cask which he had picked up at sea and had kept for the crew's use. This cask was found in May's own state-room, and contained about three gallons of brandy, though it was capable of holding another gallon and no doubt recently had so done. However, May now said that that was the entire lot, and there was not a drop of anything else on board. Yet again the officer was not to be put off, and found in the state-room on the larboard side a place that was locked. May then explained that this locker belonged to a man named Sheriff, who was at present ashore, and had the key with him. However May volunteered, if the officer saw fit, to open it, but at the same time assured him there was no liquor therein. The officer insisted on having it broken open, when there were discovered two new liquor cases containing each twelve bottles of brandy, making in all eight gallons, and two stone bottles of brandy containing five gallons. Even now May assured the officer that he had no more in the ship, but after a further search the officer found twelve dozen bottles of wine in a locked locker in the cabin. We need not follow this case any further, but as a fine example of deliberate lying it is hard to beat. Throughout the exciting career of a smuggler, when chased or captured, in running goods by night or stealing out to get clear of the land before the sun came up, this one quality of coolness in action or in verbal evasion ever characterised him. He was so frequently and continuously face to face with a threatening episode that he became used to the condition. FOOTNOTES: [10] See also Appendix I. CHAPTER VIII PREVENTIVE ORGANISATION We have already frequently referred to the Riding officers who were attached to practically all the chief ports of England. For the reasons already given the south-east coast had especially to be well provided in this respect. And, because of the proximity to the Isle of Man, the Solway Firth had also to be protected efficiently by these officers, additional, of course, to the aid rendered by the cruisers. Wales, however, seems to have been left practically unprotected. In the year 1809 there was inaugurated what was known as the Preventive Waterguard in order to supplement the endeavours of the cruisers and Riding officers. Under this arrangement the coast of England and Wales was divided into three districts, each of which was under an Inspecting Commander, the Revenue cruisers being now included in the Preventive Waterguard. The three districts with the three Inspecting Commanders were as follows:-- District 1.--Land's End to the Port of Carlisle inclusive. Inspecting Commander, Captain John Hopkins. District 2.--North Foreland to Land's End. Inspecting Commander, Captain William Blake. District 3.--North Foreland to the Port of Berwick inclusive. Inspecting Commander, Captain John Sayers, "whose duty it is constantly to watch, inspect, and report to us [the Customs Board] upon the conduct of the Commanders of Cruisers and the Sitters of Preventive Boats along the district." For it was because they required a more effectual control and inspection of the officers employed in preventing and detecting smuggling that this fresh organisation was made. Certain stations were also allotted to the commanders of the cruisers, within each district--two to each station--and the stations and limits were also appointed for Preventive boats. The "sitters" of the Preventive boats were those who sat in the stern of these open, rowed craft and acted in command of them. The Collector and Controller were also addressed in the following terms, which showed that the Board were still doing their utmost to rid the service of the inefficiency and negligence to which we have had occasion to draw attention. "You are to observe," wrote the Commissioners, "that one material object of the duty imposed upon the Inspecting Commanders is to see that the cruisers are constantly and regularly on their stations, unless prevented by some necessary and unavoidable cause, and with their proper complements of men and boats, and if they are off their station or in port personally to examine into the occasion of their being so, and that they are absent from their station no longer than is essentially requisite." At the end of every year the Inspecting Commanders were to lay before the Board of Customs the conduct of the several officers within their district and the state in which smuggling then was, and "whether on the progress or decline, in what articles, and at what places carried on." For the Board was determined "to probe the conduct of the Preventive officers and punish them" for any laxity and negligence, for which faults alone they would be dismissed. And in order that the vigilance and faithful duty in the commanders and officers on board the cruisers "may not be deprived of fair and due reward" their rate of pay was now increased, together with some addition made to the allowance for victualling, "and also to provide for the certainty of an annual emolument to a fixed amount in respect to the commanders and mates, by the following regulations":-- INSPECTING CRUISERS Commander, each per annum, £200 to be made up to £500 net. 1st Mates, each per annum, £75 to be made up to £150 net. 2nd Mates, each per annum, £50 to be made up to £75 net. But these increases were conditional on their salaries, shares of seizures and penalties, and all other emoluments of that description not having amounted to the salaries now offered. The deputed mariners were to have £5 or £3 each, per lunar month. Mariners who had no deputation were to have £3 a month, boys on the cruisers £10 per annum. As to victualling, the commanders and mates were to have 3s. each per diem, mariners 1s. 6d. each per diem. Fire and candle for each person were to be allowed for at the rate of 1s. 6d. per lunar month. Under each Inspecting Commander were to be two tenders in each district, and the mates who were acting as commanders of these were to have their existing £75 a year raised to £150 net in case their salaries, shares of seizures, and other emoluments of that description should not amount to these sums. Deputed mariners, mariners, boys, victualling, fire, and candle were all to be paid for just as in the case of the inspecting cruisers above mentioned. This was to date from October 10, 1809. A few months later a like improvement was made in the salaries of cruisers in general, for from the 5th of January 1810, commanders of these were to have their £100 per annum raised to £250 net--the above conditions "in case their salaries, shares of seizures, &c." did not make up this amount being also here prevalent--whilst first mates were to be raised from £60 to £100 net. If second mates were carried they were to have £50 per annum, deputed mariners £5 per annum and £2, 10s. per lunar month. Mariners were to have £2, 10s. per lunar month each, boys £10 per annum. Victualling, fire, and candle to be as already stated. The early years of the nineteenth century showed that the evil of the previous hundred years was far from dead. The Collector at Plymouth, writing to the Board three days before Christmas of 1804, reported that there was a good deal of smuggling done, but that the worst places in his neighbourhood were two. Firstly, there was that district which is embraced by Bigbury, the Yealm, and Cawsand. In that locality the smuggling was done in vessels of from 25 to 70 tons. But in summer time the trade was also carried on by open spritsail boats of from eight to ten tons. These craft used to run across from Guernsey loaded with spirits in small casks. Up the river Yealm (just to the east of Plymouth Sound) and at Cawsand Bay the goods were wont to be run by being rafted together at some distance from the shore and afterwards "crept" up (_i.e._ by means of metal creepers or grapnels). The local smugglers would go out in their boats at low water during the night when the weather and the absence of the cruisers permitted and bring to land their booty. It appeared that 17,000 small casks of spirits were annually smuggled into Cawsand and the Yealm. Secondly, the district to the west of Plymouth embracing Polperro and Mevagissey. The smuggling craft which brought goods to this locality were fast sailers of from 80 to 100 tons. But the goods which came into the general district of Plymouth were not carried far inland. Those whose work it was to carry the goods after being landed were known as "porters," and were so accustomed to this heavy work that they could carry a cask of spirits six miles across the country at a good rate. When it is remembered that these casks were made necessarily strong of stout wood, that they contained each from 5 to 7-3/4 gallons, making a total weight of from 70 to 100 lbs. at least, we can realise something of the rude physical strength possessed by these men. During this same year the Collector at Dartmouth also reported that smuggling had increased a good deal recently in the counties of Devon and Cornwall. The cutters and luggers from Guernsey carried their cargoes consisting of from 400 to 800 ankers of spirits each, with a few casks of port and sherry for the wealthier classes, who winked at the illicit trade, and some small bales of tobacco. During the summer the goods were landed on the north side of Cornwall, between Land's End and Hartland Point, and thence distributed by coasters to Wales and the ports of the Bristol Channel, or carried inland on the backs of twenty or thirty horses, protected by a strong guard. But in the winter the goods were landed on the shores of the Bristol Channel, the farmers coming down with horses and carts to fetch the goods, which were subsequently lodged in barns and caves. Clovelly, Bideford, Combe Martin, and Porlock were especially notorious in this connection. These goods were also regularly conveyed across Exmoor into Somersetshire, and other goods found a way into Barnstable. Coasters on a voyage from one part of England to another frequently broke their voyages and ran over to Guernsey to get contraband. The Island of Lundy was a favourite smuggling depôt in the eighteenth century. From Ireland a good deal of salt was smuggled into Devonshire and Cornwall, the high duties making the venture a very profitable one--specially large cargoes of this commodity being landed near to Hartland Point. And this Dartmouth Collector made the usual complaint that the Revenue cruisers of that period were easily outsailed by the smugglers. The reader will recollect those regrettable incidents on the North Sea belonging to the eighteenth century, when we had to chronicle the names of Captains Mitchell and Whitehead in that connection. Unhappily there were occasional repetitions of these in the early part of the nineteenth century on the south coast. It happened that on the 19th of March in the year 1807 the _Swan_ Revenue cutter, a vessel of considerable size (for she had a burthen of 154 tons, a crew of twenty-three men, and was armed with twelve 4-pounders, two 9-pounders, and a chest of small arms) was cruising in the English Channel and found herself off Swanage. It should be added that at that time there was a kind of volunteer Preventive Guard at various places along the coast, which was known as the "Sea Fencibles." The Swanage "Fencibles" informed Mr. Comben, the cruiser's commander, that there were three luggers hovering off the coast, and these volunteers offered a number of their men to reinforce the _Swan's_ crew so that the luggers might be captured. To this Comben replied with a damper to the volunteers' enthusiasm: "If I was to take them on board and fall in with the enemy we could not do anything with them." So the _Swan_ sailed away from Swanage Bay to the eastward and at midnight made the Needles. It now fell calm, but the luggers hove in sight and approached by means of their sweeps. As they came on, the cutter, instead of preparing to receive them in the only way they deserved, did nothing. But one of the _Swan's_ crew, whose name, Edward Bartlett, deserves to be remembered for doing his duty, asked Comben if he should fetch the grape and canister from below. Comben merely replied: "There is more in the cabin than we shall want: it will be of no use; it is all over with us." Such was the attitude of one who had signed into a service for the prevention of smuggling craft. Instead of taking any definite action he waited despairingly for the enemy to come on. He then issued no orders to his crew to prepare to engage; he just did nothing and remained inactive under the white cliffs. But if their commander was a coward, at any rate his crew were determined to make a contest of it. They had actually to urge him to fight, but the luggers were right close on to the cutter before Comben had given the word. After that for three-quarters of an hour the crew fought the ship, and were at their respective quarters when Comben actually turned to the luggers and shouted to them: "Leave off firing; I have struck." During the engagement he had shown great signs of fear and never encouraged his crew to fight. Seeing that they were led by a coward, the _Swan's_ crew also took fright and thought it best to flee. They therefore jumped into the cutter's boats and rowed ashore, leaving their valiant commander to look after the _Swan_ as best he might. She was of course immediately captured by the luggers, and as for Comben, he was taken prisoner, carried to France, detained there, and did not return to England till after seven years, when an investigation was made into his conduct by the Surveyors-General of the Customs, his defence being that "his men had deserted him." As for the latter, they reached the shore safely and were again employed in the Preventive Service. It is quite clear that the Customs Board sometimes lent their cutters to the Admiralty; and there is a letter dated October 10, 1809, from the Admiralty, in which permission is given for the cutters in the service of that Revenue to be released from their station at Flushing under the command of Rear-Admiral Sir Richard Strachan, and there is also a Customs House minute of July 7, 1806, to the effect that the _Swan_ and _Hound_ Revenue cutters might be placed under the orders of Lord Keith in the room of the _Stag_ and _Swallow_, for use at Cowes and Shoreham, where these cruisers were to be stationed. And it was in this same year that the Board again emphasized the importance of the Revenue Service being supported by the Navy and Army, and that to this end the most effectual encouragement should be held out to both branches, so that they might co-operate vigorously in the suppression of smuggling. They further expressed themselves as of the opinion that "nothing will more effectually tend to encourage them to exert themselves than the certainty of receiving a speedy reward." And yet, again, were the Revenue officers enjoined "to be particularly careful to secure the men employed in smuggling vessels whenever it may be possible to effect it, as their lordships have the strongest reasons for believing that the apprehension of being detained and impressed into his Majesty's service will have a great effect in deterring the persons engaged in these illegal pursuits from continuing their pernicious habits." It was also part of the duty of the Customs officers to attend to the Quarantine, and the Customs Board resolved "that it is fit to direct a distinguishing flag to be used on board all boats employed in the Quarantine service." At Sandgate Creek, Portsmouth, Falmouth, Bristol, Milford, Hull, Liverpool and Plymouth, by the advice of the Surveyor for Sloops, a flag was deposited in the Custom House at every port of the kingdom, and it was resolved that in the above ports there should be two, except Plymouth, which should have three. Cruisers were also employed in the Quarantine Service. We have already seen something of the conditions of service and the pay of the cruisers' crews. He who was responsible for the upkeep and supervision of these cruisers was known as the Surveyor for Sloops. For some time the Customs Board had been deliberating as to the adoption of some regulations for ascertaining the qualifications of those who desired to be commanders and mates of the cruisers. That some improvement was essential must already have been made clear to the reader from the type of men who sometimes were placed in such positions of responsibility. The following regulations were therefore adopted in the year 1807, "which appear to the Commissioners highly necessary for the safe conduct of the Service, as also for the safety of the vessels and crews committed to their charge." They resolved accordingly:-- "That all persons who shall be hereafter nominated to the situation of Commander or Mate of a Cruiser in the service of this Revenue, do attend the Surveyor of Sloops, &c. in London for the purpose of being examined on the several points submitted in the report of the said Surveyor, as essential for the qualification of officers of that description, namely, whether he understand navigation, is competent to lay off and ascertain courses and distances on the charts, can work a day's work and find the time of high and low water in any port of great Britain, and understand the use of a quadrant." It was also further resolved:-- "That no person be admitted to either of those situations who shall not be certified by the said Surveyors to be fully qualified in the particulars above referred to, which certificate is to be laid before the Board for their consideration, whether in case such person does not possess a competent knowledge of the coast on which he is to be stationed, or is not sufficiently acquainted with the sailing and management of cutters and luggers tho' generally qualified, it may not be fit to direct him to repair on board some cruiser, whose station is contiguous to that to which he is nominated, and cruise in such vessel for the space of one month, or until the commander thereof shall certify that he is thoroughly acquainted with that part of the coast, and also be fully competent to take charge of a cutter, or lugger, as the case may be, such a certificate to be referred to the Surveyor for Sloops, &c. for his report previous to such commander's or mate's commission being ordered to be made out." And the commanders of the cutters who shall be ordered to instruct such persons are to be acquainted that they are at liberty to crave the extra expense they shall incur for victualling such persons for the Board's consideration. "And the Surveyor for Sloops, &c. is to report more particularly the nature and objects of enquiry as to the qualification of persons nominated Sitters of Boats and by what officers in the outports those enquiries are made and the qualification of such persons certified: for the Commissioners' further consideration, as to any additional regulations in respect of persons so nominated." It was, no doubt, because of such incidents as those which we have seen occurring in the Channel and North Sea that the Commissioners tightened up the regulations in the above manner. That these incidents were not confined to any particular locality let us show by the two following examples. The first had reference to William Horn, the Deputed Mariner and Acting Mate of the Revenue cutter _Greyhound_, whose station was at Weymouth. On the 5th of March 1806 he was in charge of the cutter whilst on a cruise to the westward. Off Portland the cutter fell in with a French lugger, which was a privateer. Horn gave chase, gradually overhauled her, and even came up with her. For a time he also engaged her, but because he subsequently gave up the fight, bore up and quitted her, allowing the privateer to escape, he was deemed guilty by the Customs Board of not having used his utmost endeavours to effect a capture, and was ordered to be superseded. The second incident was of a slightly more complicated nature, and occurred on October 20, 1805, about midnight. The two men implicated were a Captain Riches, who was in command of the Revenue cutter _Hunter_, and his mate Oliver. This vessel, whose station was Great Yarmouth, was on the night mentioned cruising in the North Sea. Presently the cutter sighted what turned out to be the Danish merchant ship, _The Three Sisters_, Fredric Carlssens master, from Copenhagen bound for St. Thomas's and St. Croix. Oliver got into the cutter's boat and boarded the Dane. He also demanded from the latter and took from him four cases of foreign Geneva, which was part of _The Three Sisters'_ cargo. In spite of Carlssen's opposition, Oliver put these into his boat and rowed off with them to the _Hunter_. Riches was obviously party to this transaction, and was accused "that contrary to the solemn oath taken at his admission into office, he did not only neglect to report to the Collector and Controller of Yarmouth or to the Board the misconduct of his Mate, in unlawfully taking from the said ship the four cases of Geneva in question, but did take out of them for his own use, and by so doing did connive at and sanction the aforesaid unproper conduct of his Mate." It was also brought against Riches that he had not entered any account of this incident into his ship's journal, or made any record of the mate boarding the Dane. In the end Riches was adjudged by the Board guilty of not giving information regarding his mate's conduct and of receiving one case of Geneva for his own use, but he was acquitted of connivance for want of evidence. He was found guilty also of not having entered the incident in his journal. Oliver was acquitted of having boarded the Danish ship for want of proof, but found guilty of having failed to keep a complete journal of his proceedings. But a further charge was made that Riches caused a case of foreign spirits, which had been taken out of the Danish ship, to be brought ashore from the cutter and taken to his home at Yarmouth without paying the duty thereon. Oliver was also accused of a similar crime with regard to two cases. Riches was acquitted for want of proof of having caused the gin to be taken to his house, but found guilty of having received it, knowing the duty had not been paid. Oliver was also found guilty, and both were accordingly dismissed. And there was the case of a man named Thomas Rouse, who was accused of having been privy to the landing of a number of large casks of spirits and other goods from a brig then lying off the Watch-house at Folkestone. This was on the night of May 20 and the early hours of May 21, 1806. He was further accused of being either in collusion with the smugglers in that transaction or criminally negligent in not preventing the same. It was still further brought against him that he had not stopped and detained the master of the brig after going on board, although the master was actually pointed out to him by a boat's crew belonging to the _Nimble_ Revenue cutter. Rouse was found guilty of the criminal negligence and ordered to be dismissed. And, in addition, the chief boatmen, five boatmen, and two riding-officers of the Preventive Service at that port were also dismissed for failing to do their utmost to prevent this smuggling, which had, in fact, been done collusively. Those were certainly anxious times for the Customs Commissioners, and we cannot but feel for them in their difficulties. On the one hand, they had to wrestle with an evil that was national in its importance, while on the other they had a service that was anything but incorruptible, and required the utmost vigilance to cause it to be instant in its elementary duties. One of the reforms recommended towards the end of 1809 had reference to the supply of stores and the building and repairing of Custom House boats in London. The object aimed at was to obtain a more complete check on the quantities and quality of the stores required for cruisers and Preventive boats. And the example of the outports was accordingly adopted that, when articles were required for these craft that were of any value, the Collector and Controller of the particular port first sent estimates to the Board, and permission was not allowed until the Surveyor of Sloops had certified that the estimates were reasonable. Nor were the bills paid until both the commander and mate of the cruiser, or else the Tide Surveyor or the Sitter of the Boat, as the case might be, had certified that the work was properly carried out. And the same rule applied to the supply of cordage and to the carrying out of repairs. As one looks through the old records of the Custom House one finds that a Revenue officer who was incapable of yielding to bribery, who was incorruptible and vigilant in his duty, possessed both courage and initiative, and was favoured with even moderate luck, could certainly rely on a fair income from his activities. In the year we are speaking of, for instance, Thomas Story, one of the Revenue officers petitioned to be paid his share of the penalty recovered from William Lambert and William Taylor for smuggling, and he was accordingly awarded the sum of £162, 2s. It was at this time also that the salaries of the Collectors, Controllers, and Landing Surveyors of the outports were increased so that the Collectors were to receive not less than £150 per annum, the Controller not less than £120, and the Landing Surveyor not less than £100. And in addition to this, of course, there were their shares in any seizures that might be made. Sometimes, however, the Revenue officers suffered not from negligence but from excess of zeal, as, for instance, on that occasion when they espied a rowing-boat containing a couple of seafaring men approach and land on the beach at Eastbourne. The Revenue officials made quite certain that these were a couple of smugglers and seized their boat. But it was subsequently discovered that they were just two Portuguese sailors who had escaped from Dieppe and rowed all the way across the Channel. The Admiralty interfered in the matter and requested the release of the boat, which was presently made. But two other Revenue officers, named respectively Tahourdin and Savery, in August of 1809 had much better luck when they were able to make a seizure that was highly profitable. We have already referred to the considerable exportation which went on from this country in specie and the national danger which this represented. In the present instance these two officials were able to seize a large quantity of coin consisting of guineas, half guineas, and seven shilling pieces, which were being illegally transported out of the kingdom. When this amount came to be reckoned up it totalled the sum of £10,812, 14s. 6d., so that their share must have run into very high figures. CHAPTER IX CUTTERS' EQUIPMENT In an earlier chapter we quoted from Marryat a passage which showed that the mariners of a Revenue cutter were dressed in red flannel shirts and blue trousers, and also wore canvas or tarpaulin petticoats. The reason for the last-mentioned was appreciated by smuggler and Preventive men alike, and if you have ever noticed the Thames River Police dodging about in their small craft you will have noticed that at any rate the steersman has in cold weather some sort of apron wrapped round his legs. But in the period of which we are now speaking the attached apron or petticoat was very useful for keeping the body warm in all weather, especially when the sitter of the Preventive boat had to be rowed out perhaps in the teeth of a biting wind, for several miles at night. And the smugglers found their task of landing tubs through the surf a wet job, so they were equally glad of this additional protection.[11] The period to which Marryat referred was the end of the eighteenth century. As to the uniform of the Revenue officers we have the following evidence. Among the General Letters of the Customs Board was one dated June 26, 1804, from which it is seen that the commanders of the cruisers petitioned the Board for an alteration in their uniform and that also of the mates, this alteration to be made at the expense of the officers. The commanders suggested for their own dress:-- "A silver epaulette, the button-holes worked or bound with silver twist or lace, side-arms, and cocked hats with cockades, and the buttons set on the coat three and three, the breeches and waistcoats as usual: "For the undress, the same as at present. "For the mates, the addition of lappels, the buttons set on two and two, and cocked hats with cockades." The Board consented to these alterations with the exception of the epaulettes, "the adoption of which we do not approve, lest the same should interfere with His Majesty's Naval Service." Now in reading this, it is important to bear in mind that between the Revenue and Navy there was a great deal of jealousy.[12] It went so far, at least on one occasion, as to cause a Naval officer to go on board a Revenue cutter and haul the latter's flag down. The reason these epaulettes were disallowed may be explained by the fact that it was only nine years before the above date that epaulettes had become uniform in the Navy, for notwithstanding that epaulettes had been worn by officers since 1780, yet they were not uniform until 1795, although they were already uniform in the French and Spanish navies.[13] Since, therefore, these adornments had been so recently introduced into the Navy, it was but natural that with so much jealousy existing this feature should not be introduced into the Revenue service. Just what "the undress, the same as at present" was I have not been able to discover, but in the Royal Navy of that time the undress uniform for a captain of three years' post consisted of a blue coat, which was white-lined, with blue lappels and cuffs, a fall-down collar, gold-laced button-holes, square at both ends, arranged regularly on the lappels. For a captain under three years the uniform was the same, except that the nine buttons were arranged on the lappels in threes. For master or commander it was the same, except that the button-holes were arranged by twos.[14] It was in January 1807 that the Customs Board took into consideration the appointment of several Revenue cruisers and the expediency of one general system for manning them according to the tonnage and construction of the vessel, the service and station on which she was to be employed. They therefore distinctly classed the different cruisers according to their tonnage, description, and number of men originally allowed and since added, whether furnished with letters of marque or not. And believing that it would be beneficial to the service that the complement of men should be fixed at the highest number then allotted to cutters in each respective class, they accordingly instructed the commanders of the different cruisers to increase their respective complements "with all practicable dispatch." We now come to an important point concerning which there exists some little uncertainty. By a letter dated July 17, 1807, Revenue officers were reminded that they were by law bound to hoist the Revenue colours and fire a gun as a signal "before they in any case fire on any smuggling vessel or boat." "We direct you to convene the officers of the Waterguard belonging to your port," write the Commissioners to the Collector and Controller at each station, "including the officers and crew of the cruiser stationed there, and strictly to enjoin them whether on board cruisers or boats in no instance to fire on any smuggling vessel or boat, either by night (whether it be dark or light), or by day, without first hoisting the colours and firing a gun as a signal, as directed by law, and to take care that on any boat being sent out armed either from the shore or from a cruiser, in pursuit of seizures or any other purpose, such boat be furnished with a proper flag." Two years later, on April 11, 1809, it was decided that cruisers could legally wear a pendant "conformable to the King's Proclamation of the 1st January 1801," when requiring a vessel that was liable to seizure or examination to heave-to, or when chasing such a vessel, but "at no other time." It is important to bear in mind that the flags of chase were special emblems, and quite different from the ceremonial flags borne on the Customs buildings, hulks, and vessels not used actually in the chasing of smugglers. In addition to my own independent research on this subject I am indebted for being allowed to make use of some MS. notes on this interesting subject collected by Mr. Atton, Librarian of the Custom House; and in spite of the unfortunate gaps which exist in the historical chain, the following is the only possible attempt at a connected story of the Custom House flag's evolution. We have already explained that from the year 1674 to 1815 the Revenue Preventive work was under a mixed control. We have also seen that in the year 1730 the Board of Customs called attention to the Proclamation of December 18, 1702, that no ships were to wear a pendant except those of the Royal Navy, but that the sloops employed in the several public offices might wear Jacks with the seal of the respective office. From a report made by the Harwich Customs in 1726 it is clear that the King's colours were at that date hoisted when a Revenue cruiser chased a suspect. But as to what the "King's Colours" were no one to-day knows. Among the regulations issued to the Revenue cruisers in 1816 the commanders were informed that they were not to wear the colours used in the Royal Navy, but to wear the same pendants and ensigns as were provided by the Revenue Board. By 24 George III. cap. 47, certain signals of chase were prescribed. Thus, if the cruiser were a Naval vessel she was to hoist "the proper pendant and ensign of H.M. ships." If a Custom House vessel she was to hoist a blue Customs ensign and pendant "with the marks now used." If an Excise vessel, a blue ensign and pendant "with the marks now used." After this had been done, and a gun fired (shotted or unshotted) as a warning signal, she might fire if the smuggler failed to heave-to. And this regulation is by the Customs Consolidation Act of 1876 still in force, and might to-day be made use of in the case of an obstinate North Sea cooper. What one would like to know is what were the marks in use from 1784 to 1815. Mr. Atton believes that these marks were as follows:-- At the masthead: a blue pendant with the Union in canton and the Customs badge of office (a castellated structure with portcullis over the entrance, and two barred windows and two port-holes, one barred and one open, the latter doubtless to signify that through which the goods might enter) in the fly. At the gaff: a blue ensign similarly marked. The English Excise, the Scottish Customs, Scottish Excise, and the Irish Revenue signals of chase were blue pendants and ensigns similarly flown, but as to the badges of office one cannot be certain. The matter of English Customs flags has been obscured by the quotation in Marryat's _The King's Own_, where a smuggler is made to remark on seeing a Revenue vessel's flag, "Revenue stripes, by the Lord." It has been suggested that the bars of the castle port and portcullis in the seal were called "stripes" by the sailors of that day, inasmuch as they called the East India Company's flag of genuine stripes the "gridiron." But to me it seems much more likely that the following is the explanation for calling a Revenue cutter's flag "stripes." The signal flags Nos. 7 and 8, which were used by the Royal Navy in 1746 to order a chase both consisted of stripes.[15] No. 7 consisted of eleven horizontal stripes, viz. six red and five white. Flag No. 8 had nine horizontal stripes, viz. red, white, blue repeated three times, the red being uppermost. I submit that in sailor's slang these signals would be commonly referred to as "stripes." Consequently whatever flags subsequently would be used to signal a chase would be known also as "stripes." Therefore whatever signal might be flown in the Revenue service when chasing would be known as "stripes" also. But by an Order in Council of the 1st of February 1817, the pendant and ensign were to be thus:-- The pendant to have a red field having a regal crown thereon at the upper part next the mast. The ensign to be a red Jack with a Union Jack in a canton at the upper corner next the staff, and with a regal crown in the centre of the red Jack. This was to be worn by all vessels employed in the prevention of smuggling under the Admiralty, Treasury, Customs or Excise. Now during an interesting trial at the Admiralty Sessions held at the Old Bailey in April of 1825, concerning the chasing of a smuggler by a Revenue cruiser, Lieutenant Henry Nazer, R.N., who was commanding the cutter, stated in his evidence that when he came near this smuggling vessel the former hoisted the Revenue pendant at the masthead, which he described as "a red field with a crown next the mast at the upper part of it." He also hoisted the Revenue ensign at the peak-end, the "Union at the upper corner in a red field," the field of the ensign being also red. It had a Jack in the corner. This, then, was exactly in accordance with the Order in Council of 1817 mentioned above. But my own opinion relative to the firing of the _first_ gun is in favour of the proposition that this was not necessarily unshotted. I shall refer in greater detail to the actual incidents, here quoted, on a later page, but for our present purpose the following is strong proof in favour of this suggestion. During a trial in the year 1840 (Attorney-General _v_. William Evans) it transpired that Evans had entered the Medway in a smack without heaving-to, and the following questions and answers respectively were made by counsel and Richard Braddy, a coastguard who at the time of the incident was on duty at Garrison Fort (Sheerness):-- _Question._ "Is the first signal a shot always?" _Answer._ "A blank cartridge we fire mostly." _Q._ "Did you fire a blank?" _A._ "No, because she was going too fast away from me." _Q._ "Did you hit her?" _A._ "No." To me it seems certain from this evidence of the coastguard that though the first signal was "mostly" blank, yet it was not always or necessarily so. It was frequently discovered that smuggling vessels lay off the coast some distance from the shore and unshipped their cargoes then into smaller craft by which they were brought to land, and this practice was often observed by the Naval officers at the signal stations. Thus, these smuggling runs might be prevented if those officers were enabled to apprise the Admiralty and Revenue cruisers whenever observed, so the Treasury put themselves in communication with the Customs Board with regard to so important a matter. This was in the year 1807. The Admiralty were requested to appoint some signals by which Naval officers stationed at the various signal-posts along the coasts might be able to convey information to his Majesty's and the Revenue cruisers whenever vessels were observed illegally discharging cargoes. The Admiralty accordingly did as requested, and these signals were sent on to the commanders of the cutters. This, of course, opened up a new matter in regard to the apportioning of prize-money, and it was decided that when any vessel or goods discharged therefrom should be seized by any of the cruisers in consequence of information given by signal from these stations, and the vessel and her goods afterwards were condemned, one-third of the amount of the King's share was to be paid to the officer and men at the signal-post whence such information was first communicated. The obvious intention of this regulation was to incite the men ashore to keep a smart look-out. The coast signal-stations[16] had been permanently established in the year 1795, and were paid off at the coming of peace but re-established when the war broke out again, permission being obtained from the owners of the land and a code of signals prepared. The establishment of these signal-stations had been commenced round the coast soon after the Revolutionary war. Those at Fairlight and Beachy Head were established about 1795.[17] Each station was supplied with one red flag, one blue pendant, and four black balls of painted canvas. When the Sea Fencibles, to whom we referred some time back, were established, the signal-stations were placed under the district captains. This was done in March 1798, and the same thing was done when the Sea Fencibles had to be re-established in 1803. The signal-stations at Torbay and New Romney (East Bay, Dungeness) had standing orders, says Captain Hudleston, to report all arrivals and departures direct to the Admiralty. The Customs Board advanced another step forward when, in the year 1808, they considered whether "benefit might not arise to the service by establishing certain signals by which the commanders of the several cruisers in the service of the Revenue might be enabled to make their vessels known to each other, on meeting at sea, or to distinguish each other at a distance, and also to make such communications as might be most useful, as well as to detect any deception which might be attempted to be practised by the masters of vessels belonging to the enemy, or of smuggling vessels." They therefore consulted "the proper officers on the subject," and a code of tabular signals was drawn up and approved and sent to the commanders of the cruisers in a confidential manner. Each commander was enjoined to pay the most strict attention to such signals as might be made under the regulations, and to co-operate by every means in his power for the attainment of the objects in view. These commanders were also to apprise the Customs Board of any matter which might arise in consequence thereof "fit for our cognisance." These signals were also communicated to the commanders of the several Admiralty cruisers. And we must remember that although naval signalling had in a crude and elementary manner been in vogue in our Navy for centuries, and the earliest code was in existence at any rate as far back as 1340, yet it was not till the eighteenth century that it showed any real development. During the early years of the nineteenth century a great deal of interest was taken in the matter by such men as Mr. Goodhew, Sir Home Popham, Captain Marryat, and others. It was the atmosphere of the French and Spanish wars which gave this incentive, and because the subject was very much in the Naval minds at that time it was but natural that the Revenue service should appreciate the advantage which its application might bestow for the prevention of smuggling. Further means were also taken in the early nineteenth century to increase the efficiency of the cruisers. In 1811, in order that they should be kept as constantly as possible on their stations, and that no excuses might be made for delays, it was decided that in future the Inspecting Commanders of Districts be empowered to incur expenses up to £35 for the repairs which a cutter might need, and £5 for similar repairs to her boats. The commanders of the cruisers were also permitted to incur any expenses up to £20 for the cutter and boats under their command. Such expenses were to be reported to the Board, with information as to why this necessity had arisen, where and by what tradesmen the work had been done, and whether it had been accomplished in the most reasonable manner. At the end of the following year, in order still further to prevent cruisers being absent from their stations "at the season of the year most favourable for smuggling practices, and when illegal proceedings are generally attempted," _i.e._ in the dark days of autumn and winter and spring, and in order, also, to prevent several cutters being in the Port of London at the same time, "whereby the part of the coast within their respective districts would be left altogether without guard," the commanders of these cruisers were to give warning when it was apparent that extensive repairs were needed, or a general refit, or any other cause which compelled the craft to come up to London. Timely notice was to be given to the Board so that the necessity and propriety thereof should be inquired into. It was done also with a view to bringing in the cruisers from their respective stations only as best they might be spared consistent with the good of the service. But they were to come to London for such purposes only between April 5 and September 5 of each year. By this means there would always be a good service of cruisers at sea during the bad weather period, when the smugglers were especially active. In our quotation from _The Three Cutters_ in another chapter we gave the colours of the paint used on these vessels. I find an interesting record in the Custom House dated November 13, 1812, giving an order that, to avoid the injury which cruisers sustain from the use of iron bolts, the decks in future were to be fastened with composition bolts, "which would eventually prove a saving to the Revenue." After ordering the commanders to cause their vessels to be payed twice every year either with paint or bright varnish, and not to use scrapers on their decks except after caulking, and then only to remove the unnecessary pitch, the instruction goes on to stipulate the only paint colours which are to be employed for cruisers. These are such as were then allowed in the Navy, viz. black, red, white, or yellow. But apart from all the manifold difficulties and anxieties, both general and detailed, which arose in connection with these cruisers so long as they were at sea or in the shipwrights' hands, in commission or out of commission, there were others which applied more strictly to their crews. Such an incident as occurred in the year 1785 needed very close attention. In that year the English Ambassador at the Court of France had been informed by Monsieur de Vergennes that parties of sailors belonging to our Revenue cruisers had recently landed near Boulogne in pursuit of some smugglers who had taken to the shore. Monsieur de Vergennes added that if any British sailors or other armed men should be taken in such acts of violence the French Government would unhesitatingly sentence them immediately to be hanged. Of course the French Government were well within their rights in making such representations, for natural enough as no doubt it was to chase the smugglers when they escaped ashore, yet the trespass was indefensible. The Board of Customs therefore instructed their cruisers, as well as those of the Admiralty "whose commanders are furnished with commissions from this Board," to make a note of the matter, in order that neither they nor their men might inadvertently expose themselves to the severity denounced against them by the French laws upon acts of the like nature. In 1812 one of the mariners belonging to a cruiser happened to go ashore, and whilst there was seized by the press-gang for his Majesty's Navy. Such an occurrence as this was highly inconvenient not only to the man but to the Board of Customs, who resolved that henceforth the commanders of cruisers were not to allow any of their mariners shore leave unless in case of absolute necessity "until the protections which may be applied for shall have been received and in possession of such mariners." Another matter that required rectification was the practice of taking on board some of their friends and relatives who had no right to be there. Whether this was done for pleasure or profit the carrying of these passengers was deemed to be to the great detriment of the service, and the Board put a stop to it. It was not merely confined to the cruisers, but the boats and galleys of the Waterguard were just as badly abused. The one exception allowed was, that when officers of the Waterguard were removing from one station to another, they might use such a boat to convey their families with them provided it did not interfere with the duties of these officers. So also some of the commanders of the cruisers had even taken on board apprentices and been dishonest enough to have them borne on the books as able seamen, and drawn their pay as such. The Board not unnaturally deemed this practice highly improper, and immediately to be discontinued. No apprentices were to be borne on the books except the boy allowed to all cruisers. After a smuggling vessel's cargo had been seized and it was decided to send the goods to London, this was done by placing the tobacco, spirits, &c., in a suitable coaster and despatching her to the Thames. But in order to prevent her being attacked on the sea by would-be rescuers she was ordered to be convoyed by the Revenue cutters. The commander of whatever cruiser was in the neighbourhood was ordered "to accompany and guard" her to the Nore or Sea Reach as the case might be. Every quarter the cruisers were also to send a list of the seizures made, giving particulars of the cruiser--her name, burthen, number of guns, number of men, commander's name, number of days at sea during that quarter, how many days spent in port and why, the quantity of goods and nature of each seizure, the number and names of all smuggling vessels captured, both when and where. There was also to be sent the number of men who had been detained, how they had been disposed of, and if the men had not been detained how it was they had escaped. "Their Lordships are induced to call for these returns," ran the instruction, "in order to have before them, quarterly, a comparative view of the exertions of the several commanders of the Revenue cruisers.... They have determined, as a further inducement to diligence and activity in the said officers, to grant a reward of £500 to the commander of the Revenue cruiser who, in the course of the year ending 1st October 1808, shall have so secured and delivered over to his Majesty's Naval Service the greatest number of smugglers; a reward of £300 to the commander who shall have secured and delivered over the next greatest number, and a reward of £200 to the commander who shall be third on the list in those respects." That was in September of 1887. During the year ending October 1, 1810, Captain Gunthorpe, commander of the Excise cutter _Viper_, succeeded in handing over to his Majesty's Navy thirteen smugglers whom he had seized. As this was the highest number for that year he thus became entitled to the premium of £500. Captains Curling and Dobbin, two Revenue officers, were together concerned in transferring six men to the Navy, but inasmuch as Captain Patmour had been able to transfer five men during this same year it was he to whom the £300 were awarded. Captain Morgan of the Excise cutter and Captain Haddock of the Custom House cutter _Stag_ each transferred four men during that year. "But my Lords," states a Treasury minute of December 13, 1811, "understanding that the nature of the service at Deal frequently requires the Revenue vessels to co-operate with each other, do not think it equitable that such a circumstance should deprive Messrs. Curling and Dobbin of a fair remuneration for their diligence, and are therefore pleased to direct warrants likewise to be prepared granting to each of those gentlemen the sum of £100." In spite of the above numbers, however, the Treasury were not satisfied, and did not think that the number of men by this means transferred to the Navy had been at all proportionate to the encouragement which they had held out. They therefore altered the previous arrangement so as to embrace those cases only in which the exertions of the cruisers' commanders had been of an exceptionally distinguished nature. Thus during 1812 and the succeeding years, until some further provision might be made, it was decided that "the sum of £500 will be paid to such person commanding a Revenue cutter as shall in any one year transfer to the Navy the greatest number of smugglers, not being less than twenty." The sum of £300 was to be paid to the persons commanding a Revenue cutter who in any year should transfer the next greatest number of smugglers, not being less than fifteen. And £200 were to be paid to the commander who in one year should have transferred the third largest, not being less than ten. This decision was made in January of 1812, and in the following year it was directed that in future the rewards granted to the commanders of the Revenue cruisers for delivering the greatest number of smugglers should be made not exclusively to the commanders but distributed among the commander, officers, and crew according to the scale which has already been given on an earlier page in this volume. At the end of the year 1813 it was further decided that when vessels and boats of above four tons measurement were seized in ballast and afterwards broken up, not owing to their build, their construction, or their denomination, but simply because they had been engaged in smuggling, the seizing officers should become entitled to 30s. a ton. There was also a system instituted in the year 1808 by which the widows of supervisors and surveyors of Riding officers and commanders of cruisers were allowed £30 per annum, with an additional allowance of £5 per annum for each child until it reached the age of fifteen. The widows of Riding officers, mates of cutters, and sitters of boats specially stationed for the prevention of smuggling were allowed £25 per annum and £5 for each child until fifteen years old. In the case of the widows of mariners they were to have £15 a year and £2, 10s. for each child till the age of fifteen. And one finds among those thus rewarded Ann Sarmon, the widow, and the three children of the commander of the _Swan_ cutter stationed at Cowes; the one child of the mate of the _Tartar_ cutter of Dover; the widow of the mate of the _Dolphin_ of St. Ives; the widow of the Riding officer at Southampton; the widow and children of the commander of the cutter _Hunter_ at Yarmouth; and likewise of the _Hunter's_ mate. After the 10th of October 1814 the allowance for victualling the crews of the Revenue cruisers was augmented as follows:--For victualling commander and mate, 3s. a day each and 1s. 6d. per lunar month for fire and candle. For victualling, fire, and candle for mariners, 1s. 10d. a day each. The daily rations to be supplied to each mariner on board the cruisers were to consist of 1-1/2 lbs. of meat, 1-1/2 lbs. of bread, and two quarts of beer. If flour or vegetables were issued the quantity of bread was to be reduced, and if cheese were supplied then the amount was to be reduced in proportion to the value and not to the quantity of such articles. And, in order to obtain uniformity, a table of the rations as above was to be fixed up against the fore side of the mast under the deck of the cruiser, and also in some conspicuous place in the Custom House. Very elaborate instructions were also issued regarding the use of the tourniquet, which "is to stop a violent bleeding from a wounded artery in the limbs till it can be properly secured and tied by a surgeon." The medicine chest of these cruisers contained the following twenty articles: vomiting powders, purging powders, sweating powders, fever powders, calomel pills, laudanum, cough drops, stomach tincture, bark, scurvy drops, hartshorn, peppermint, lotion, Friar's balsam, Turner cerate, basilicon (for healing "sluggish ulcers"), mercurial ointment, blistering ointment, sticking-plaster, and lint. In short, with its fleet of cruisers well armed and well manned, well found in everything necessary both for ship and crew; with good wages, the offer of high rewards, and pensions; with other privileges second only to those obtainable in the Royal Navy; the Customs Board certainly did their best to make the floating branch of its Preventive service as tempting and efficient as it could possibly be. And that there were not more captures of smugglers was the fault at any rate not of those who had the administration of these cutters. [Illustration: H.M. CUTTER _WICKHAM_ Commanded by Captain John Fullarton, R.N. From a contemporary painting in the possession of Dr. Robertson-Fullarton of Kilmichael.] A very good idea as to the appearance of a nineteenth century Revenue cruiser may be obtained by regarding the accompanying photographs of his Majesty's cutter _Wickham_. These have been courteously supplied to me by Dr. Robertson-Fullarton of Kilmichael, whose ancestor, Captain Fullarton, R.N., had command of this vessel. The original painting was made in 1806, and shows a fine, able vessel with ports for seven guns a-side, being painted after the manner of the contemporary men-of-war. To facilitate matters the central portion of the picture has been enlarged, and thus the rigging and details of the _Wickham_ can be closely examined. It will be observed that this cutter has beautiful bows with a fine, bold sheer, and would doubtless possess both speed and considerable seaworthiness essential for the west coast of Scotland, her station being the Island of Arran. In the picture before us it will be seen that she has exceptionally high bulwarks and appears to have an additional raised deck forward. The yard on which the squaresail was carried when off the wind is seen lowered with its foot-ropes and tackle. The mainsail is of course loose-footed, and the tack is seen well triced up. Two things especially strike us. First, the smallness of the yard to which the head of the gaff-topsail is laced; and secondly, the great size of the headsail. She has obviously stowed her working jib and foresail and set her balloon jib. When running before a breeze such a craft could set not merely all plain sail, but her squaresail, square-topsail and even stun'sls. Therefore, the smuggling vessel that was being chased must needs be pretty fleet of foot to get away. [Illustration: H.M. Cutter Wickham This shows an early Nineteenth Century King's Cutter (_a_) running before the wind with square sails and stuns'ls set, (_b_) on a wind with big jib set.] Campbeltown in those days was the headquarters of no fewer than seven large Revenue cruisers, all being commanded by naval officers. They were powerful vessels, generally manned by double crews, each having a smaller craft to act as tender, their chief duties being to intercept those who smuggled salt, spirits, and tea from the Isle of Man. The officers and men of the cutters made Campbeltown their home, and the houses of the commanders were usually built opposite to the buoys of the respective cutters. The merits of each cutter and officer were the subject of animated discussion in the town, and how "old Jack Fullarton had carried on" till all seemed to be going by the board on a coast bristling with sunken rocks, or how Captain Beatson had been caught off the Mull in the great January gale, and with what skill he had weathered the headland--these were questions which were the subjects of many a debate among the enthusiasts. This Captain John Fullarton had in early life served as a midshipman on a British man-of-war. On one occasion he had been sent under Lord Wickham to France on a certain mission in a war-vessel. The young officer's intelligence, superior manners, and handsome appearance so greatly pleased Lord Wickham, that his lordship insisted on having young Fullarton alone to accompany him ashore. After the mission was over Lord Wickham suggested procuring him some advancement in the service, to which Fullarton replied, "My lord, I am sincerely grateful for your undesired kindness, and for the interest you have been pleased to show in regard to my future prospects. Since, however, you have asked my personal views, I am bound to say I am not ambitious for promotion on board a man-of-war. I have a small property in Scotland, and if your lordship could obtain for me the command of one of his Majesty's cutters, with which I might spend my time usefully and honourably in cruising the waters around my native island of Arran, I should feel deeply indebted to you, and I should value such an appointment above all others." Soon afterwards, the cutter _Wickham_ was launched, and Mr. Fullarton obtained his commission as captain, the mate being Mr. Donald Fullarton, and most of the crew Arran men.[18] FOOTNOTES: [11] The use of the petticoat as a seaman's article of attire dates back to the time of Chaucer: "A Shipman was ther, woning fer by weste: For aught I woot, he was of Dertemouthe. He rood up-on a rouncy, as he couthe, In a gowne of falding to the knee." "Falding" was a coarse cloth. [12] See Appendix VIII. [13] See Captain Robinson's, _The British Fleet_, p. 503. [14] _Ibid._, p. 502. [15] I am indebted to a suggestion made on p. 183, vol. i. No. 7 of _The Mariner's Mirror_. [16] See article by Captain R. Hudleston, R.N., in _The Mariner's Mirror_, vol. i. No. 7. [17] _Victoria County Hist.: Sussex_, vol. ii. p. 199. [18] For these details I am indebted to the kindness of Dr. Robertson-Fullarton, who has also called my attention to some information in an unlikely source--_The Memoirs of Norman Macleod, D.D._, by Donald Macleod, 1876. CHAPTER X THE INCREASE IN SMUGGLING By an Order in Council, dated September 9, 1807, certain rewards were to be paid to the military for aiding any officer of the Customs in making or guarding any seizure of prohibited "or uncustomed goods." It was further directed that such rewards should be paid as soon as possible, for which purpose the Controllers and Collectors were to appraise with all due accuracy all articles seized and brought to his Majesty's warehouse within seven days of the articles being brought in. The strength of all spirits seized by the Navy or Military was also to be ascertained immediately on their being brought into the King's warehouse, so that the rewards might be immediately paid. The tobacco and snuff seized and condemned were ordered to be sold. But when these articles at such a sale did not fetch a sum equal to the amount of the duty chargeable, then the commodity was to be burnt. Great exertions were undoubtedly made by the soldiers for the suppression of smuggling, but care had to be taken to prevent wanton and improper seizures. The men of this branch of the service were awarded 40s. for every horse that was seized by them with smuggled goods. Everyone is aware of the fact that, not once but regularly, the smugglers used to signal to their craft at night from the shore as to whether the coast were clear, or whether it were better for the cutter or lugger to run out to sea again. From a collection of authentic incidents I find the following means were employed for signalling purposes:-- 1. The commonest signal at night was to wave a lantern from a hill or some prominent landmark, or from a house suitably situated. 2. To take a flint and steel and set fire to a bundle of straw near the edge of a cliff. 3. To burn a blue light. 4. To fire a pistol. 5. The above were all night-signals, but for day-work the craft could signal to the shore or other craft by lowering and raising a certain sail so many times. There were very many prosecutions for signalling to smuggling craft at many places along our coast. A sentence of six months' imprisonment was usually the result. Similarly, the Preventive officers on shore used to fire pistols or burn a blue light in signalling to themselves for assistance. The pistol-firing would then be answered by that of other Customs men in the neighbourhood. And with regard to the matter of these signals by the friends of smugglers, the Attorney-and Solicitor-General in 1805 gave their opinion to the effect that it was not even necessary for the prosecution to prove that there was at that time hovering off the coast a smuggling craft, or that one was found to have been within the limits; but the justice and jury must be satisfied from the circumstances and proof that the fire was lit for the purpose of giving a signal to some smugglers. By the summer of 1807 smuggling in England and Wales had increased to what the Commissioners of Customs designated an "alarming extent." An Act was therefore passed to ensure the more effectual prevention of this crime, and once again the Revenue officers were exhorted to perform their duty to its fullest extent, and were threatened with punishment in case of any dereliction in this respect, while rewards were held out as an inducement to zealous action. Under this new Act powers were given to the Army, Navy, Marines, and Militia to work in concert with each other for the purpose of preventing smuggling, for seizing smuggled goods, and all implements, horses, and persons employed or attempting to bring these ashore. The lack of vigilance, and even the collusion with smugglers, on the part of Revenue officials was still too real to be ignored. Between Dover and Rye, especially, were tobacco, snuff, spirits and tea run into the country to a very considerable extent. And the Government well knew that "in some of the towns on the coast of Kent and Sussex, amongst which are Hastings, Folkestone, Hythe, and Deal, but more especially the latter, the practice of smuggling is carried on so generally by such large gangs of men, that there can exist no hope of checking it but by the constant and most active vigilance of strong military patrols, with parties in readiness to come to their assistance." So wrote Mr. W. Huskisson, Secretary of the Treasury, to Colonel Gordon in August 1807. The Deal smugglers went to what Mr. Huskisson called "daring lengths," and for this reason the Treasury suggested that patrols should be established within the town of Deal, and for two or three miles east and west of the same. And the Treasury also very earnestly requested the Commander-in-chief for every possible assistance from the Army. It was observed, also, that so desperate were these smugglers, that even when they had been captured and impressed, they frequently escaped from the men-of-war and returned to their previous life of smuggling. To put a stop to this the Treasury made the suggestion that such men when captured should be sent to ships cruising at distant foreign stations. Some idea of the violence which was always ready to be used by the smugglers may be gathered by the incident which occurred on the 25th of February 1805. On this day the cutter _Tartar_, in the service of the Customs, and the Excise cutter _Lively_ were at 10 P.M. cruising close to Dungeness on the look-out for smuggling craft. At the time mentioned they saw a large decked lugger which seemed to them indeed to be a smuggler. It stood on its course and eventually must run its nose ashore. Thereupon a boat's crew, consisting of men from the _Tartar_ and the _Lively_, got out their oars and rowed to the spot where the lugger was evidently about to land her cargo. They brought their boat right alongside the lugger just as the latter took the ground. But the lugger's crew, as soon as they saw the Revenue boat come up to her, promptly forsook her and scrambled on to the beach hurriedly. It was noticed that her name was _Diana_, and the Revenue officers had from the first been pretty sure that she was no innocent fishing-vessel, for they had espied flashes from the shore immediately before the _Diana_ grazed her keel on to the beach. Led by one of the two captains out of the cutters, the Revenue men got on board the smuggler and seized her, when she was found to contain a cargo of 665 casks of brandy, 118 casks of rum, and 237 casks of Geneva. Besides these, she had four casks, one case and one basket of wine, 119 bags of tobacco, and 43 lbs. of tea--truly a very fine and valuable cargo. But the officers had not been in possession of the lugger and her cargo more than three-quarters of an hour before a great crowd of infuriated people came down to the beach, armed with firearms and wicked-looking bludgeons. For the lugger's crew had evidently rushed to their shore friends and told them of their bad luck. Some members of this mob were on horseback, others on foot, but on they came with oaths and threats to where the lugger and her captors were remaining. "We're going to rescue the lugger and her goods," exclaimed the smugglers, as they stood round the bows of the _Diana_ in the darkness of the night. The Revenue men warned them that they had better keep off, or violence would have to be used to prevent such threats being carried out. [Illustration: "A great crowd of infuriated people came down to the beach."] But it was impossible to expect reason from an uncontrolled mob raging with fury and indignation. Soon the smugglers had opened fire, and ball was whistling through the night air. The _Diana_ was now lying on her side, and several muskets were levelled at the Revenue men. One of the latter was a man named Dawkins, and the smugglers had got so close that one villainous ruffian presented a piece at Dawkins' breast, though the latter smartly wrested it from him before any injury had been received. But equally quickly, another smuggler armed with a cutlass brought the blade down and wounded Dawkins on the thumb. A general engagement now proceeded as the smugglers continued to fire, but unfortunately the powder of the Revenue men had become wet, so only one of their crew was able to return the fire. Finding at length that they were no match for their aggressors, the crews were compelled to leave the lugger and retreat to some neighbouring barracks where the Lancashire Militia happened to be quartered, and a sergeant and his guard were requisitioned to strengthen them. With this squad the firing was more evenly returned and one of the smugglers was shot, but before long, unable to resist the military, the smugglers ceased firing and the beach was cleared of the mob. The matter was in due course reported to the Board of Customs, who investigated the affair and ordered a prosecution of the smugglers. No one had been captured, however, so they offered a reward of £200. That was in the year 1805; but it was not till 1813 or 1814 that information came into their hands, for no one would come forward to earn the reward. In the last-mentioned year, however, search was made for the wanted men, and two persons, named respectively Jeremiah Maxted and Thomas Gilbert, natives of Lydd, were arrested and put on their trial. They were certainly the two ringleaders of that night, and incited the crowd to a frenzy, although these two men did not actually themselves shoot, but they were heard to offer a guinea a man to any of the mob who would assist in rescuing the seized property. Still, in spite of the evidence that was brought against these men, such was the condition of things that they were found not guilty. But it was not always that the Revenue men acted with so much vigour, nor with so much honesty. It was towards the end of the year 1807 that two of the Riding officers stationed at Newhaven, Sussex, attempted to bribe a patrol of dragoons who were also on duty there for the prevention of smuggling. The object of the bribe was to induce the military to leave their posts for a short period, so that a cargo of dutiable goods, which were expected shortly to arrive, might be smuggled ashore without the payment of the Crown's duties. For such a suggestion to be made by Preventive men was in itself disgraceful, and showed not merely a grossly dishonest purpose but an extraordinary failure of a sense of duty. However, the soldiers, perhaps not altogether displeased at being able to give free rein to some of the jealousies which existed between the Revenue men and the Army, did not respond to the suggestion, but promptly arrested the Riding officers and conducted them to Newhaven. Of these two it was afterwards satisfactorily proved that one had actually offered the bribe to the patrol, but the other was acquitted of that charge. Both, however, were dismissed from the Customs service, while the sergeant and soldiers forming the patrol were rewarded, the sum of £20 being sent to the commanding officer of their regiment, to be divided among the patrol as he might think best. It was not merely the tobacco, spirits, and tea which in the early years of the nineteenth century were being smuggled into the country, although these were the principal articles. In addition to silks, laces, and other goods, the number of pairs of gloves which clandestinely came in was so great that the manufacture of English gloves was seriously injured. In the year 1811 so ineffectual had been the existing shore arrangements that an entirely new plan was inaugurated for suppressing smuggling. The Riding officers no doubt had a difficult and even dangerous duty to perform, but their conduct left much to be desired, and they needed to be kept up to their work. Under the new system, the office of Supervisor or Surveyor of Riding officers was abolished, and that of Inspector of Riding officers was created in its stead. The coast of England was divided into the following three districts:-- No. I. London to Penzance. No. II. Penzance to Carlisle. No. III. London to Berwick. There were altogether seven of these Inspectors appointed, three being for the first district, two for the second, and two for the third. The first district was of course the worst, because it included the English Channel and especially the counties of Kent and Sussex. Hence the greater number of Inspectors. Hence, also, these three officers were given a yearly salary of £180, with a yearly allowance of £35 for the maintenance of a horse. The Inspectors of the other two districts were paid £150 each with the same £35 allowance for a horse. In addition, the Inspectors of all districts were allowed 10s. a day when upon inspections, which were not to last less than 60 days in each quarter in actual movement, "in order by constant and unexpected visitations, strictly to watch and check the conduct of the Riding officers within their allotted station." Under this new arrangement, also, the total number of Riding officers was to be 120, and these were divided into two classes--Superior and Inferior. Their salaries and allowances were as follows:-- FIRST DISTRICT Superior Riding Officer £90 Inferior " " 75 Allowance for horse 30 SECOND AND THIRD DISTRICTS Superior Riding Officer £80 Inferior " " 65 Allowance for horse 30 The general principle of promotion was to be based on the amount of activity and zeal which were displayed, the Superior Riding officers being promoted from the Inferior, and the Inspectors of Districts being promoted from the most zealous Superior Riding officers. And there was, too, a difficulty with regard to the smugglers when they became prisoners. We have already remarked how ready they were to escape from the men-of-war. In the year 1815 there were some smugglers in detention on board one of the Revenue cutters. At that time the cutter's mate was acting as commander, and he was foolish enough to allow some of the smugglers' friends from the shore--themselves also of the same trade--to have free communication with two of the prisoners without anyone being present on behalf of the Customs. The result was that one of the men succeeded in making his escape. As a result of this captive smugglers were not permitted to have communication with their friends except in the presence of a proper officer. And there was a great laxity, also, in the guarding of smugglers sent aboard his Majesty's warships. In several cases the commanders actually declined to receive these men when delivered by the Revenue department: they didn't want the rascals captured by the cutters, and they were not going to take them into their ship's complement. This went on for a time, until the Admiralty sent down a peremptory order that the captains and commanders were to receive these smugglers, and when an opportunity arose they were to send them to the flagship at Portsmouth or Plymouth. As illustrative of the business-like methods with which the smugglers at this time pursued their calling, the following may well be brought forward. In the year 1814 several of the chief smuggling merchants at Alderney left that notorious island and settled at Cherbourg. But those small craft, which up till then had been wont to run across to the Channel Isles, began instantly to make for the French port instead. From Lyme and Beer in West Bay, from Portland and from the Isle of Wight they sailed, to load up with their illicit cargoes, and as soon as they arrived they found, ready awaiting them in the various stores near the quays, vast quantities of "tubs," as the casks were called, whilst so great was the demand, that several coopers were kept there busily employed making new ones. Loaded with spirits they were put on board the English craft, which soon hoisted sail and sped away to the English shores, though many there must have been which foundered in bad weather, or, swept on by the dreaded Alderney Race and its seven-knot tide, had an exciting time, only to be followed up later by the English Revenue cutters, or captured under the red cliffs of Devonshire in the act of taking the tubs ashore. For the Customs Board well knew of this change of market to Cherbourg, and lost no time in informing their officers at the different outports and the cruiser-commanders as well. A large number of the merchant-smugglers from Guernsey at the same time migrated to Coniris, about eight miles from Tregner, in France, and ten leagues east of the Isle of Bas, and twelve leagues S.S.W. from Guernsey. Anyone who is familiar with that treacherous coast, and the strength of its tides, will realise that in bad weather these little craft, heavily loaded as they always were on the return journey, must have been punished pretty severely. Some others, doubtless, foundered altogether and never got across to the Devonshire shores. Those people who had now settled down at Coniris were they who had previously dealt with the smugglers of Cawsand, Polperro, Mevagissey, and Gerrans. To these places were even sent circular letters inviting the English smugglers to come over to Coniris, just as previously they had come to fetch goods from Guernsey. And another batch of settlers from Guernsey made their new habitation at Roscore (Isle of Bas), from which place goods were smuggled into Coverack (near the Lizard), Kedgworth, Mount's Bay, and different places "in the North Channel." Spirits, besides being brought across in casks and run into the country by force or stealth, were also frequently at this time smuggled in through the agency of the French boats which brought vegetables and poultry. In this class of case the spirits were also in small casks, but the latter were concealed between false bulkheads and hidden below the ballast. But this method was practically a new departure, and began only about 1815. This was the smuggling-by-concealment manner, as distinct from that which was carried on by force and by stealth. We shall have a good deal more to say about this presently, so we need not let the matter detain us now. Commanders of cruisers were of course on the look-out for suspected craft, but they were reminded by the Board that they must be careful to make no seizures within three miles of the French and Dutch coasts. And that was why, as soon as a suspected vessel was sighted, and a capture was about to be made, some officer on the Revenue cutter was most careful immediately to take cross-bearings and fix his position; or if no land was in sight to reckon the number of leagues the ship had run since the last "fix" had been made. This matter naturally came out very strongly in the trials when the captured smugglers were being prosecuted, and it was the business of the defending counsel to do their best to upset the officers' reckoning, and prove that the suspected craft was within her proper and legitimate limits. Another trick which sprang up also about 1815, was that of having the casks of spirits fastened, the one behind the other, in line on a warp. One end of this rope would be passed through a hole at the aftermost end of the keel, where it would be made fast. As the vessel sailed along she would thus tow a whole string of barrels like the tail of a kite, but in order to keep the casks from bobbing above water, sinkers were fastened. Normally, of course, these casks would be kept on board, for the resistance of these objects was very considerable, and lessened the vessel's way. Any one who has trailed even a fairly thick warp astern from a small sailing craft must have been surprised at the difference it made to the speed of the vessel. But so soon as the Revenue cutter began to loom big, overboard went this string of casks towing merrily below the water-line. The cutter would run down to her, and order her to heave-to, which she could afford to do quite willingly. She would be boarded and rummaged, but the officer would to his surprise find nothing at all and be compelled to release her. Away would go the cruiser to chase some other craft, and as soon as she was out of the range of the commander's spy-glass, in would come the tubs again and be stowed dripping in the hold. This trick was played many a time with success, but at last the cruisers got to hear of the device and the smugglers were badly caught. I shall in due season illustrate this by an actual occurrence. What I want the reader to bear in mind is, that whilst the age of smuggling by violence and force took a long time to die out, yet it reached its zenith about the middle or the last quarter of the eighteenth century. Right till the end of the grand period of smuggling violence was certainly used, but the year 1815 inaugurated a period that was characterised less by force and armed resistance than by artfulness, ingenuity, and all the inventiveness which it is possible to employ on a smuggling craft. "Smugglers," says Marryat in one of his novels, "do not arm now--the service is too dangerous; they effect their purpose by cunning, not by force. Nevertheless, it requires that smugglers should be good seamen, smart, active fellows, and keen-witted, or they can do nothing.... All they ask is a heavy gale or a thick fog, and they trust to themselves for success." It was especially after the year 1816, when, as we shall see presently, the Admiralty reorganised the service of cruisers and the Land-guard was tightened up, that the smugglers distinguished themselves by their great skill and resource, their enterprise, and their ability to hoodwink the Revenue men. The wars with France and Spain had come to an end, and the Government, now that her external troubles allowed, could devote her attention to rectifying this smuggling evil. This increased watchfulness plus the gradual reduction of duties brought the practice of smuggling to such a low point that it became unprofitable, and the increased risks were not the equivalent of the decreased profits. This same principle, at least, is pursued in the twentieth century. No one is ever so foolish as to try and run whole cargoes of goods into the country without paying Customs duty. But those ingenious persons who smuggle spirits in foot-warmers, saccharine in the lining of hats, tobacco and cigars in false bottoms and other ways carry out their plans not by force but by ingenuity, by skill. CHAPTER XI THE SMUGGLERS AT SEA Had you been alive and afloat in June of 1802 and been cruising about near Falmouth Bay, or taken up your position on the top of one of those glorious high cliffs anywhere between St. Anthony and the Dodman, and remembered first to take with you your spyglass, you would have witnessed a very interesting sight; that is to say, if you had been able to penetrate through the atmosphere, which was not consistently clear throughout the day. For part of it, at any rate, was hazy and foggy just as it often is in this neighbourhood at that time of year, but that was the very kind of conditions which the smuggler loved. Between those two headlands are two fine bays, named respectively Gerrans and Veryan, while away to the south-west the land runs out to sea till it ends in the Lizard. A whole history could be written of the smuggling which took place in these two bays, but we must content ourselves with the one instance before us. On this day it happened that his Majesty's frigate _Fisgard_ was proceeding up Channel under the command of Captain Michael Seymour, R.N. The time was three in the afternoon. In spite of the haziness it was intermittent, and an hour earlier he had been able to fix his position by St. Anthony, which then bore N. by W. distant six or seven miles. He was then sailing by the wind close-hauled lying S.S.E.1/2E., in other words, standing away from the land out into mid-channel, the breeze being steady. By three o'clock the _Fisgard_ had only travelled about another six or seven miles, so that she was now about 12-1/2 miles from St. Anthony or just to seaward of the Lizard. It was at this time that the frigate sighted a smaller craft, fore-and-aft rigged and heading N.N.W., also on a wind, the breeze being abaft her port, or, as they called it in those days, the larboard-beam. This subsequently turned out to be the cutter _Flora_, and the course the cutter was taking would have brought her towards the Dodman. The haze had now lifted for a time, since although the _Flora_ was quite eight miles away she could be descried. Knowing that this cutter had no right to be within a line drawn between the Lizard and Prawl Point, the _Fisgard_ starboarded her helm and went in pursuit. But the _Flora's_ crew were also on the look-out, though not a little displeased that the fog had lifted and revealed her position. When she saw that the _Fisgard_ was coming after her she began to make off, bore up, and headed due North. But presently she altered her tactics and hauled round on the starboard tack, which would of course bring her away from the land, make her travel faster because her head-sails would fill, and she hoped also no doubt to get clear of the Prawl-to-Lizard line. Before this she had been under easy sail, but now she put up all the canvas she could carry. But unfortunately the _Flora_ had not espied earlier in the day another frigate which was also in the vicinity. This was the _Wasso_, and the haze had hidden her movements. But now, even though the weather was clearing, the bigger ship had been hidden from view because she had been just round the corner in Mevagissey Bay. And at the very time that the _Flora_ was running away from the _Fisgard_ and travelling finely with every sail drawing nicely and getting clear of the cliffs, the _Wasso_ was working her way round the Dodman. As soon as the latter came into view she took in the situation--the cutter _Flora_ foaming along out to sea and the _Fisgard_ coming up quickly under a mountain of canvas. So now there were two frigates pursuing the cutter, and the _Flora's_ skipper must have cursed his bad luck for being caught in this trap. But that unkind haze was favouring the King's ships to-day, for ere the chase had continued much longer, yet a third frigate came in sight, whose name was the _Nymph_. This was too much for the _Flora_ to be chased by three ships each bigger and better armed than herself. The _Nymph_ headed her off, and the cutter seeing it was all up reluctantly hove-to. On examination she was found to have a cargo of gin, brandy, and tobacco, which she would have succeeded in running ashore had the haze not played such tricks. However, she had done her best for three exciting hours, for it was not until six on that wintry evening that she was captured by the _Nymph_, and if she had been able to hold on a little longer she might have escaped in the night and got right away and landed her cargo elsewhere before the sun came out. But, as it was, her skipper James Dunn had to take his trial, when a verdict was given in favour of the King, and Dunn was fined £200. [Illustration: The _Flora_ with the _Fisgard_, _Wasso_, and _Nymph_.] We must pass over the next two years and travel from one end of the English Channel to the other till we find ourselves again in Kentish waters. The year is 1804, and the 14th of June. On this summer's day at dawn the gun-brig _Jackal_, commanded by Captain Stewart, R.N., was cruising about to the Nor'ard of the Goodwins. As day broke he was informed that three smuggling vessels had just been espied in the vicinity. The latter certainly was not more than three miles from the land, and it was fairly certain what their intention was. When Captain Stewart came on deck and convinced himself of their identity he ordered out his boats, he himself going in one, while one of his officers took command of another, each boat having about half-a-dozen men on board. We mentioned just now how important it was in such cases as this that the position should be defined as accurately as possible. Immediately the boats had left the _Jackal_ the pilot of the latter and one of the crew on board took bearings from the North Foreland and found the _Jackal_ was about 7-3/4 miles from this landmark. They also took bearings of the position of the three smuggling luggers, and found these were about three or four miles off and bore from the _Jackal_ E. by S. To return to Captain Stewart and the two boats: for the first twenty minutes these oared craft gained on the luggers owing to the absence of wind, and the smugglers could do nothing. The dawn had revealed the presence of the _Jackal_ to the smugglers no less than the latter had been revealed to the gun-brig. And as soon as the illicit carriers realised what was about to happen they, too, began to make every effort to get moving. The early morning calm, however, was less favourable to them than to the comparatively light-oared craft which had put out from the _Jackal_, so the three luggers just rolled to the swell under the cliffs of the Foreland as their canvas and gear slatted idly from side to side. But presently, as the sun rose up in the sky, a little breeze came forth which bellowed the lug-sails and enabled the three craft to stand off from the land and endeavour, if possible, to get out into the Channel. In order to accelerate their speed the crews laid on to the sweeps and pulled manfully. Every sailorman knows that the tides in that neighbourhood are exceedingly strong, but the addition of the breeze did not improve matters for the _Jackal's_ two boats, although the luggers were getting along finely. However, the wind on a bright June morning is not unusually fitful and light, so the boats kept up a keen chase urged by their respective officers, and after three hours of strenuous rowing Captain Stewart's boat came up with the first of these named the _I.O._ But before he had come alongside her and was still 300 yards away, the master and pilot of this smuggler and six of her crew was seen to get into the lugger's small boat and row off to the second lugger named the _Nancy_, which they boarded. When the _Jackal's_ commander, therefore, came up with the _I.O._ he found only one man aboard her. He stopped to make some inquiries, and the solitary man produced some Bills of Lading and other papers to show that the craft was bound from Emden to Guernsey, and that their cargo was destined for the latter place. The reader may well smile at this barefaced and ingenuous lie. Not even a child could be possibly persuaded to imagine that a vessel found hovering about the North Foreland was really making for the Channel Isles from Germany. It was merely another instance of employing these papers if any awkward questions should be asked by suspecting Revenue vessels or men-of-war. What was truth, however, was that the _I.O._ was bound not to but from Guernsey, where she had loaded a goodly cargo of brandy and gin, all of which was found on board, and no doubt would shortly have been got ashore and placed in one of the caves not far from Longnose. Moreover, the men were as good as convicted when it was found that the spirits were in those small casks or tubs which were only employed by the smugglers; and indeed never had such a cargo of spirits to Guernsey been carried in such small-sized kegs, for Guernsey always received its spirits in casks of bold dimensions. It was further pointed out at the trial that the luggers could not have been bound on the voyage alleged, for they had not enough provisions on board. The Solicitor-General also demonstrated the fact that when these luggers were approached in deep water--that is, of course after the three hours' chase--they could not possibly have been making for Guernsey. The farther they stood from the shore the greater would be their danger, for they would be likely at any hour to fall in with the enemy's privateers which were known to be cruising not far off. But to return to the point in the narrative when we digressed. Captain Stewart, a quarter of an hour before finally coming up with the _I.O._, had fired several times to cause her to heave-to, but this they declined to do, and all her crew but one deserted her as stated. Leaving one of his own men on board her the naval officer, after marking her with a broad arrow to indicate she had been seized, went with his four remaining men in pursuit of the second lugger, which was rowing away with all haste, and alongside which the _I.O.'s_ boat was lying. But, as soon as Stewart began to approach, the men now quitted the lugger and rowed back to the _I.O._ He opened fire at them, but they still persisted, and seeing this he continued to pursue the second lugger, boarded her and seized her, the time being now about 6.30 A.M. Afterwards he waited until his other boat had come up, and left her crew in charge of this second lugger, and then rowed off to the first lugger again, but once more the _I.O.'s_ people deserted her and rowed towards the shore. Undaunted he then went in pursuit of the third lugger, but as a breeze came up she managed to get away. Presently he was able to hail a neutral vessel who gave him a passage back, and at midday he rejoined the _I.O._, which was subsequently taken captive into Dover, and at a later date ordered to be condemned. She had belonged to Deal and was no doubt in the regular smuggling industry. Then there was the case of the lugger _Polly_, which occurred in January of 1808. Because vessels of this kind were, from their construction, their size, and their rig especially suitable for running goods, they were now compelled to have a licence before being allowed to navigate at all. This licence was given on condition that she was never to be found guilty of smuggling, nor to navigate outside certain limits, the object of course being to prevent her from running backwards and forwards across the English and Irish Channels. In the present instance the _Polly_ had been licensed to navigate and trade, to fish and to carry pilots between Bexhill and coastwise round Great Britain, but not to cross the Channels. To this effect her master, William Bennett, had entered in a bond. But on the date mentioned she was unfortunately actually discovered at the island of Alderney, and it was obvious that she was there for the purpose of loading the usual cargo of goods to be smuggled into England. Six days later she had taken on board all that she wanted, but just as she was leaving the Customs officer examined her licence; and as it was found that she was not allowed to "go foreign," and that to go to Alderney had always been regarded a foreign voyage, she was promptly seized. Furthermore, as there was no suggestion of any fishing-gear found on board it was a clear case, and after due trial the verdict was given for the King and she was condemned. There is existing an interesting application from the boat-masters and fishermen of Robin Hood's Bay (Yorkshire) in connection with the restrictions which were now enforced regarding luggers. These poor people were engaged in the Yarmouth herring-fishery, and prayed for relief from the penalties threatened by the recent Act of Parliament, which stipulated that luggers of a size exceeding 50 tons burthen were made liable to forfeiture. As their North Sea craft came under this category they were naturally in great distress. However the Customs Board pointed out that the Act allowed all vessels and boats of the above description and tonnage "which were rigged and fitted at the time of the passing thereof and intended for the purpose of fishing" to be licensed. Whenever those tubs of spirits were seized from a smuggling craft at sea they were forwarded to the King's warehouse, London, by those coasting vessels, whose masters were "of known respectability." And by a different conveyance a sample pint of every cask was to be transmitted to the same address. The bungs of the casks were to be secured with a tin-plate, and under a seal of office, each cask being branded with the letters "G.R.," and the quantity given at the head of each cask. But those spirits which were seized on land and not on sea were to be sold by public auction. All smuggling transactions of any account, and all seizures of any magnitude, and especially all those which were attended by any attempt to rescue, were to be reported separately to the Customs Board. Small casks which had contained seized spirits were, after condemnation, sometimes allowed to fall into the hands of the smugglers, who used them again for the same purpose. To put a stop to this it was ordered that these tubs were in future to be burnt or cut to pieces "as to be only fit for firewood." Even as early as 1782 considerable frauds were perpetrated by stating certain imports to be of one nature when they were something entirely different. For instance a great deal of starch had been imported under the denomination of flour from Ireland. The Revenue officers were therefore instructed to discriminate between the two articles by the following means. Starch "when in flour" and real flour could be differentiated by putting some of each into a tumbler of water. If the "flour" were starch it would sink to the bottom and form a hard substance, if it were real flour then it would turn into a paste. Starch was also much whiter than flour. And a good deal of spirits, wine, tea, and tobacco brought into vessels as ship's stores for the crew were also frequently smuggled ashore. Particularly was this the case in small vessels from Holland, France, Guernsey, Jersey, and Alderney. One day in the month of May, 1814, a fine West Indian ship named the _Caroline_ set sail from the Island of St. Thomas with a valuable cargo of dutiable goods, and in due time entered the English Channel. Before long she had run up the coast and found herself off Fairlight (between Hastings and Rye). The people on shore had been on the look-out for this ship, and as soon as the _Caroline_ hove in sight a boat put off to meet her. Some one threw down a line which was made fast to the boat, and from the latter several men clambered aboard. After the usual salutations they accompanied the master of the ship and went below to the cabin, where some time was spent in bargaining. To make a long story short, they arranged to purchase from the _Caroline_ 25 gallons of rum and some coffee, for which the West Indiaman's skipper was well paid, the average price of rum in that year being about 20s. a gallon. A cask of rum, 3 cwt. of coffee in a barrel and 2 cwt. in a bag were accordingly lowered over the ship's side into the boat and away went the little craft to the shore, having, as it was supposed, cheated the Customs. The _Caroline_ continued her course and proceeded to London. The Customs authorities, however, had got wind of the affair and the matter was brought to a conclusion before one of his Majesty's judges. [Illustration: "The _Caroline_ continued her course and proceeded to London."] But East Indiamen were just as bad, if not a great deal worse, for it was their frequent practice to arrive in the Downs and sell quantities of tea to the men who came out from Deal in small craft. The commodity could then be kept either for the use of their families and sold to their immediate friends, or sent up to London by the "duffers" in the manner we spoke of in an earlier chapter. In the instances when spirits were smuggled into the country there was usually some arrangement between the publicans and the smugglers for disposing of the stuff. But, you may ask, how did the Deal boatmen manage to get the tea to their homes without being seen by the Customs officers? In the first place it was always difficult to prove that the men really were smugglers, for they would be quite wide-awake enough not to bring obvious bales ashore; and, secondly, the Deal men had such a reputation as desperate characters that no officer, unless he was pretty sure that a smuggling transaction was being carried on and could rely, too, on being well supported by other Customs men and the soldiers, would think of meddling in the matter. But, lastly, the men who came ashore from the East Indiamen had a smart little dodge of their own for concealing the tea. [Illustration: How the Deal Boatmen used to Smuggle Tea Ashore.] The accompanying picture is no imaginary instance, but is actually taken from an official document. The figure is supposed to represent one of these Deal boatmen, and the numerals will explain the methods of secreting the tea. (1) Indicates a cotton bag which was made to fit the crown of his hat, and herein could be carried 2 lbs. of tea. He would, of course, have his hat on as he came ashore, and probably it would be a sou'wester, so there would be nothing suspicious in that. (2) Cotton stays or a waistcoat tied round the body. This waistcoat was fitted with plenty of pockets to hold as much as possible. (3) This was a bustle for the lower part of the body and tied on with strings. (4) These were thigh-pieces also tied round and worn underneath the trousers. When all these concealments were filled the man had on his person as much as 30 lbs. of tea, so that he came ashore and smuggled with impunity. And if you multiply these 30 lbs. by several crews of these Deal boats you can guess how much loss to the Revenue the arrival of an East Indiamen in the Downs meant to the Revenue. Another old dodge, though different in kind, was employed by a smuggling vessel when at sea and being chased towards evening, or on one of those days when the atmosphere is hazy or foggy. To prevent her canvas being a mark against the horizon, the lugger would lower her sail, and her black hull was very difficult to distinguish in the gathering gloom. This happened once when the smuggling cutter _Gloire_, a vessel of 38 tons burthen belonging to Weymouth, was being chased about midnight in January of 1816 by the Revenue cutter _Rose_. The smuggler had hoped to have been able to run his goods ashore at Bowen Bottom, Dorset, but the _Rose_ was too smart for him, launched her galley, and seized her with a full cargo of half-ankers. CHAPTER XII THE WORK OF THE CUTTERS If the reader will carry his mind back to 1787 he will recollect that in this year we saw a reformation in the system of the Revenue cruisers, and the practice of employing hired craft was discontinued. This reformed system went on until the year 1816, when a highly important change occurred in the administration of these vessels. On the 5th of April in that year all the Revenue cruisers which previously had been under the control of the Board of Customs now passed into the hands of the Admiralty. The general object was to adopt more effectual means for putting a stop to the smuggling, and these vessels were of course to be employed in co-operation with the ships of his Majesty's Navy afloat and the Revenue officers on shore. Due notice was accordingly sent from the Customs office informing the commanders of cruisers that they were to place themselves under the orders of the Admiralty in the future. But the cost of these cruisers was still to be borne by the Customs as before. It may seem a little curious that whereas the Board of Customs had controlled these vessels for about a hundred and fifty years this sudden change should have been made. But, primarily, any customs organisation must belong to the shore. The employment of cruisers was in its origin really an afterthought to prevent the Crown being cheated of its dues. In other words, the service of sloops and cutters was a kind of off-shoot from the service on land. It was only because the smuggling was so daring, because the Crown was so regularly robbed that some means of dealing with these robbers on sea and on even terms had to be devised. But, of course, with the Admiralty the case was quite different. For long centuries that department had to deal with ships and everything therewith connected. Therefore to many it seemed that that department which controlled the Navy should also control that smaller navy comprised by the Revenue cruisers. At this date we must recollect that the Battle of Waterloo had been won only a few months, that once and for all Napoleon had been crushed and broken, that at last there had come peace and an end of those wars which had seemed interminable. From this return of peace followed two facts. Firstly, the European ports were now opened afresh not merely to honest traders, but to the fleets of smugglers who could go about their work with greater safety, with less fear of being captured by privateers. Thus it was most probable that as the English Channel was now practically a clear sphere there would be a renewed activity on the part of these men. But, secondly, it also followed that the Admiralty, charged no longer with the anxiety and vigilance which a naval war must bring with it, was free to devote its manifold abilities, most especially in respect of organisation, for the benefit of the Revenue department. At one and the same time, then, there was the chance of greater smuggling activity and a more concentrated effort to put down this smuggling. Furthermore, inasmuch as the wars had ended the Navy needed fewer men. We know how it was in the case of Naval officers, many of whom found themselves unemployed. But it was not less bad for the seamen, many of whom had drifted into the service by the way we have seen--through being captured smuggling and then impressed. Returned once more to their native haunts after long separation, was it likely that having done so much roving, fought so many battles, sailed so many miles, passed through so many exciting incidents that they would quietly take to tilling the fields or gathering the crops? Some, no doubt, did; others applied themselves to some other industries for which they were fitted. But there were very many who went back to the occupation of the smuggler. They had heard the call to sea, and since fishing was in a bad way they must resume running illicit cargoes again. Agriculture and the like have few fascinations for men who have fought and roamed the sea most of their lives. So when some enterprising rascal with enough ready capital came along they were more than prepared to take up the practice once more. That was how the matter was viewed from their side. But the Government were determined that an evil which had been a great worry for at least a century and a half of English history should be stamped out. The only way was to make the smuggling unprofitable. Inasmuch as these men for the most part made their profits through being able to undersell the fair trader (because there were no Custom duties paid) the most obvious remedy would have been to lower the rates of import duties. But since that was not practicable, the only possible alternative was to increase the dangers and risk to which a smuggler must expose himself. And instantly the first step, then, must be towards establishing "such a system of discipline and vigilance over the Revenue cruisers and boats as shall give the country the benefit of their constant and active services." These smuggling pests must be sought out, they must never be allowed to escape, to laugh defiantly at the Crown's efforts, and they must be punished severely when captured. It was therefore deemed by the Treasury that there would be a greater efficiency in these cruisers if "put under naval watchfulness and discipline, controlled by such authority as the Department of the Admiralty may think fit." The change came about as stated, and the Admiralty retained in the service those officers and crews of the Revenue cruisers as by length of service and in other ways had shown that they were fit and efficient. Those, however, who had grown too old for the work were superannuated. Similarly, with regard to the Preventive boatmen, these were also taken over by the Admiralty, but here, again, only those who were capable were accepted, while for the others "some moderate provision" was made. On the last day of July in that year were sent out the regulations which the Admiralty had drawn up respecting the salaries, wages, victualling, &c., of the Revenue cruisers. These may be summarised as follows, and compared with rates which have been given for previous years. They were sent addressed in each case to the "Commander of His Majesty's Cruiser employed in the prevention of smuggling." And first as to payment: (I.) CRUISERS OF THE FIRST CLASS, _i.e._ of 140 tons burthen and upwards. Commander to have £150 per annum 1st Mate " 80 " 2nd Mate " 45 " (II.) CRUISERS OF THE SECOND CLASS, _i.e._ of 100 tons and upwards but under 140 tons. Commander to have £130 per annum 1st Mate " 70 " 2nd Mate " 40 " (III.) CRUISERS OF THE THIRD CLASS, _i.e._ of less than 100 tons. Commander to have £110 per annum 1st Mate " 60 " (No 2nd Mate) The wages of the following persons were to remain the same in all classes, viz.: Deputed Mariners £2 8s. per lunar month Seamen 2 0 " " Boys 10 0 per annum Muster books were ordered to be kept regularly, and the sum of 1s. 6d. was allowed to the commander a day for each man borne on the books and actually victualled, to provide for the following proportion of provisions:--1-1/2 lbs. of meat, 1-1/2 lbs. of bread, 1/2 gallon of beer. The commander was also allowed 3s. a day for his own victuals, and a like sum for each of his mates. Allowance was made for a medicine chest to the extent of £3 annually. All expenses of pilotage were to be paid by the Navy, "but the commanders and mates are to make themselves acquainted with the coasts, &c., and no general pilot will be allowed for more than two months after a cruiser's arrival on any new station." And there is now a notable innovation, which marked the advent of a new age. Instead of the prevailing hempen cables with which these cruisers had been supplied and had been in use for centuries among our ships, these cutters were ordered to be furnished with chain cables "in order that the vessels may have the less occasion for going to a King's Port to refit or make purchases." If a man were injured or became sick whilst in the service so as to need surgical aid, the expense was to be allowed. And in order still further to make the cruisers independent of the shore and able to offer no excuse for running into harbour they were ordered never to proceed to sea without three weeks' provisions and water. As to the widows of mariners, they were to receive £10 per annum. So much, then, for the new conditions of service in these Revenue craft as undertaken by the Admiralty. Let us now obtain some idea of the duties that were attached to these officers and vessels. The commanders were directed by the Admiralty to make themselves familiar with the Acts of Parliament for the prevention of smuggling, Orders in Council, Proclamations, &c., and to obey the instruction of whatever admiral they were placed under, as also the commanders of any of his Majesty's ships whom they might fall in with "diverting you from the cruise on which you are employed." Each commander was assigned his own particular station for cruising, and he was never to lie in any harbour, bay, or creek unless by stress of weather or other unavoidable necessity. He was to keep a look-out for vessels of a suspicious appearance, which, in respect of size and build, appeared to be adapted for smuggling. Especially was he to look out for French craft of this description. Having arrested them he was to hand them over to the nearest man-of-war. He was also to keep a smart look-out for the smugglers' practice of sinking goods and afterwards creeping for them. The cruisers were to visit the various creeks and bays; and whenever weather permitted the commander was to send a boat and crew to examine such places at night. And, if necessary, the crew were to remain there until the cruiser came to fetch them back in the morning. Care was to be taken that the smugglers themselves no less than their craft and goods were to be captured, and the commanders of these cruisers were to co-operate with the Land-guard and keep in close touch with the Riding officers ashore as well as the Sitters of Preventive boats, and to agree upon a code of signals between them, as, for example, by making false fires at night or the hoisting of proper colours in the different parts of the vessel by day, so that the shore officers might be informed of any suspicious vessels on the coast. These cruisers were also to speak with all the ships with which they fell in, and to direct any ships subject to quarantine to proceed to quarantine stations. And if they came across some merchantman or other vessel, which they suspected of smuggling, the cruiser was to accompany such craft into port. And they were enjoined to be particularly careful to guard East India ships to their moorings, or until, the next station having been reached, they could be handed over to the next cruiser. The commanders of the cruisers were also to be on their guard against the practice in vogue among ships that had been to Holland and France with coals, for these craft were especially prone on their return to putting dutiable goods into light craft from London, or on the coast, but chiefly into cobbles or small fishing craft at sea. And even when it should happen that a cruiser had to be detained in port for repairs, the commander was to spare as many officers and seamen as possible and to employ these in keeping a regular watch on the high grounds near the sea, so as to watch what was passing, and, if necessary, despatch a boat and part of the cruiser's crew. The commanders were reminded that the cruisers were not to wear the colours used in the Royal Navy, but to wear the same ensigns and pendants as provided by the Revenue Board under 24 Geo. III. c. 47, sect. 23. On a previous page we went into the matter of firing at the smuggling craft with shotted or with unshotted guns. Now among the instructions which were issued by the Admiralty on taking over these Revenue cruisers was the clear order that no officer of a cruiser or boat was justified in shooting at a suspected smuggling vessel until the former shall have first hoisted his pendant and ensign, nor unless a gun shall have been first fired as a signal. The date of this, of course, was 1816. But among the documents preserved at the Swansea Custom House there is an interesting letter dated July 1806, written by the Collector to Mr. Hobhouse, stating that a Mr. Barber, the sailing-master of the _Cleveland_, had been committed for trial on a charge of wilful murder, he having fired a shot to cause a boat to bring-to and thus killed a man. This, taken in conjunction with the testimony of the Sheerness Coastguard, to which I alluded by anticipation and shall mention again, seems to me fairly conclusive that in _practice_ at least there was no fixed rule as to whether the first gun were shotted or unshotted. At the same time the above quoted instruction from the Admiralty, although loosely worded, would seem to have meant that the first gun was merely to be of the nature of a warning signal and no shot fired in this first instance. And then, again, among these instructions cropped up the reminder that in times past commanders of cruisers had not been wont to keep the sea in bad weather--a period when the conditions were most favourable for smugglers--but now the Admiralty remarked that if the commander should be deficient in "this most essential part of your duty" he would be superseded. On the west coasts of England and Scotland especially some of the commanders had been accustomed in former years to pass the night in some harbour, bar, or creek instead of cruising on their station and counteracting the designs of the smugglers, "who will always prefer the night time for carrying on his operations." Consequently the Admiralty now strictly charged the commanders to cruise during the night, and no matter of private concern must serve as a pretext for any intermission. They were also to maintain a regular communication with the commander of any other vessel with which they had been instructed to cruise in concert. And cruisers were to be furnished with the laws relative to smuggling and not to exceed the powers vested in the commanders by law. As to any un-Customed or prohibited goods these were to be secured in the King's Warehouse at the next port, and care was to be taken that these goods remained undamaged or pilfered by the crew. And after the goods had been thus put ashore both the commander and mate were carefully to search the smuggling vessel, the boxes, and bedding of her crew to see if anything had been kept back. Whenever a vessel was seized at sea precautions must be taken to ascertain the distance from the shore "by causing two points of land to be set, and the bearings thereof to be noted by two or more of your officers and mariners who are acquainted with those points of land, so that each of them may be in condition to swear to the bearings from the note taken by him at the time, to be produced by him upon the trial of the vessels." Any papers found on board the smuggling craft were immediately to be initialled by the persons present, and no cruiser or any of her boats should be employed in carrying passengers or pleasure parties. The commander and mate were to keep separate journals of all the proceedings of the cruiser relating to wind and weather, bearings, and distances from the land, soundings, &c., every twenty-four hours so that the admiral could tell whether the cruisers had used every exertion to suppress smuggling, or had been negligent and slack in their duties. For this purpose the twenty-four hours were divided into three parts thus:--Midnight to 8 A.M., 8 A.M. to 4 P.M., and 4 P.M. to midnight. In each of these three divisions the commander was to fix his position by cross-bearings and soundings if in less than 30 fathoms. This was to be done a little before sunrise, at noon, and a little before sunset, provided that if the land were not seen or the cruiser be chasing a vessel, this fact was to be noted in the journal, and the bearings and soundings were to be taken whenever the land should be seen. An exact copy of this journal was to be sent after the end of each month to the admiral under whose command the cruiser happened to be placed. The table on p. 228 is an example of the journal of one of these craft, and will show instantly the kind of record which was kept. On the 1st of January, 1817, the Preventive boats were put under the control of Captain Hanchett, R.N., who was known as the Controller-General of the Preventive Boat Service. There was an effort made also in this department to obtain increased efficiency. And the following articles were ordered to be supplied to each Preventive boat:--one small flat cask to hold two gallons of fresh water, one small water-tight harness cask to hold provisions, one chest of arms and ammunition, one Custom House Jack, two "spying-glasses" (one for the watch-house, the other for the boat), one small bucket for baling, one "wall piece," forty rounds of cartridges, thirty muskets or carbines, preference being given to carbines with musket-ball bore where new ones are to be purchased, twenty light pistols, balls in proportion to the above, bayonets, cutlasses, pouches, tucks, small hand hatchets for cutting away rigging, musket flints, pistol flints, a set of implements for cleaning arms, a set of rummaging tools, and a dark "lanthorn." With this full inventory these open, oared boats could go about their work for long spells in bays, up creeks and estuaries, on the prowl for the smugglers by night. JOURNAL OF HIS MAJESTY'S REVENUE CRUISER THE "VIGILANT," JOHN SMITH, COMMANDER, FOR THE MONTH OF JULY 18-- -------+------+--------+------+--------------------+---------+-------------- | | | | Observation made. | | Day of | | | +----------+---------+ | the | | | | |Bearings | | Week | | |At Sea| | and |Soundings|Occurrences and | | | or in| Land |Distances| in | and Month | Wind.|Weather.| Port.| Seen. |in Miles | Fathoms | Remarks. -------+------+--------+------+----------+---------+---------+-------------- July |E.S.E.|Moderate|At sea|Red Head |W.N.W. |Above 30 |Cruising in Monday | | | | |9 miles | |station spoke 1st., | | | | | | |a vessel from Morning| | | | | | |the Baltic or | | | | | | |laden with first | | | | | | |hemp, &c., but part | | | |Light, |S.W. by | |sea running | | | |Bell Rock |S. 12 | |high, did not | | | | |miles | |board her. Saw | | | | | | |H.M. sloop | | | | | | |_Cherokee_ to | | | | | | |the N.E. at | | | | | | |9 A.M. -------+------+--------+------+----------+---------+---------+-------------- Noon or| | | |Fifeness |W.N.W. 5 | 23 |Nothing second | | | | |miles | |remarkable part | | | |Isle of |S.W. by | |occurred. | | | |May |W. 6 | | | | | | |miles | | -------+------+--------+------+----------+---------+---------+-------------- Evening| | | |Fifeness |S. by E. | 12 |Lost sight of or | | | | |8-1/2 | |the _Cherokee_ third | | | | |miles | |standing off part | | | | | | |and on in St. | | | |Light, |E. by S. | |Andrews Bay. | | | |Bell Rock |9 miles | |Sent out the | | | | | | |boat with Mr. | | | | | | |Jones, second | | | | | | |mate, to visit | | | | | | |the creeks. -------+------+--------+------+----------+---------+---------+-------------- Whenever any vessels were seized and condemned a full, descriptive account was sent to London regarding their size, breadth, depth, burthen, age, where built, draught, scantlings, the nature of the wood, how fastened, whether the craft appeared strained, how many guns she carried, what was the probable expense of having her refitted, how long she would last when this had been done, whether she had the reputation for rowing or sailing quickly, and what was her value. If it was recognised that she was a serviceable vessel she was not to be destroyed but employed in the Preventive service. Among the names of the Revenue cutters about this time were the _Scorpion_, _Enchantress_, _Jacobus_, and _Rattlesnake_. There was a good deal of smuggling now going on in Essex, and the last-mentioned was employed to watch the river Blackwater in that district. Lieutenant Neame, R.N., was also ordered to proceed to the Blackwater with the lugger _Fortune_, and arrived there to take charge of the _Rattlesnake_. This was in September 1818; and here let us remark that although the Preventive Water-guard originally had charge of the whole coast of England, yet a few months before the above date--it occurred actually in July 1817--the staff between the North and South Forelands was withdrawn, and this part of the coast was placed under the charge of the Coast Blockade. Under the arrangement of 1816, when the cruisers had been put under the care of the Admiralty, the Preventive Waterguard had come under the authority of the Treasury, but now, in 1817, came the change mentioned. Towards the close of 1818 this Coast Blockade, instead of being confined merely to that coast between the two Forelands, was extended till it reached on the one side Shellness by the mouth of the East Swale, and on the other right away down Channel to Cuckmere Haven (between Newhaven and Beachy Head). The history of this change may be summed up as follows. It was suggested in the year 1816 by Captain M'Culloch of H.M.S. _Ganymede_ (which was one of the vessels employed in the prevention of smuggling between Dungeness and North Foreland) that it would be advantageous to land the crews of the vessels employed on the cruisers and Naval ships engaged in preventing smuggling. The men were to be put ashore every day just after sunset and so form a guard along the coast during the night. In the morning, just before sunrise, the men were to be put on board their ships once more. So the experiment was tried and was found to be so successful that this method of guarding the coast was adopted by a Treasury Minute of June 19, 1817. The district between the Forelands was assigned to Captain M'Culloch, who had with him the officers and crew of H.M.S. _Severn_. Those boats and men which had belonged to the Preventive service stationed between the Forelands were withdrawn, and the entire protection of this district was left to Captain M'Culloch's force. This was known as the Coast Blockade, and was afterwards extended as just mentioned to Sheppey and Seaford. If we may anticipate for a moment in order to preserve continuity, let us add that in the year 1821 this span of coast was divided into three, each division being subdivided into four districts. The divisions were under the superintendence of a senior lieutenant, a midshipman, one petty officer of the first class and one of the second. The districts, on the other hand, were under the superintendence of a junior lieutenant. The men were divided into parties of ten, each party having about a mile of coastline, and guard-houses were established along the coast at a distance of about every four miles. The seamen volunteered into the service, and, if found effective, of good character, but had no relatives in the neighbourhood, they were accepted. The object of this last condition was to prevent their showing any sympathy with the smugglers of the district. These men undertook to serve for three years, and for payment of wages they were borne on the books of any of his Majesty's ships. We can thus see how gradually the influence of the Admiralty had been exerted over the Preventive work which had been carried on by the Customs. There are then three steps. First in assisting the Revenue cruisers, and, lastly, by taking charge of the Land-guard. The proof of the wisdom of this change was seen in results, for the Revenue derived better protection because of the Admiralty influence. There was better discipline, greater activity, and a smarter look-out was kept. Thus it came about that in that very south-eastern district which had been for so long a time notorious for its nefarious trade, the smugglers found their calling a very difficult one. And both these changes in respect of cruisers and Land-guard had been made certainly not with the enthusiastic support of the Board of Customs, who had indeed expressed their doubts as to whether such a transformation were prudent. Some idea of the number of his Majesty's ships and vessels which were employed in the prevention of smuggling in the year 1819 may be gathered from the following list. It should, however, be mentioned that these did not include the numbers of Custom House cruisers which the Admiralty had begun to control, but were actually the Naval ships which aided those of the Revenue:-- Plymouth supplied 10 ships and 4 tenders Portsmouth " 8 " 3 " Sheerness " 8 " 2 " Leith " 7 " 1 tender Ireland " 12 " 1 " at a total cost of £245,519. But it should also be borne in mind that these ships of the Navy, or at any rate by far the greater number of them, would have been in commission whether employed or not in the prevention of smuggling, and in certain cases these ships were employed in the Preventive service for only a part of the year. Without the Revenue cutters the Navy could not possibly have dealt with the smugglers, and this was actually admitted in a Treasury Minute of January 15, 1822. The total number of Revenue cruisers employed in Great Britain and Ireland during the year 1819, as distinct from the ships of the Royal Navy, amounted to 69. The following year this number had increased to 70. These were apportioned thus:-- 20 under the Commander-in-Chief at Sheerness 11 " " " " Portsmouth 14 " " " " Plymouth 12 " " " " Leith 11 were employed in Ireland 2 were employed by the Commissioners of Customs -- 70 == To sum up then with regard to the Preventive Water-guard, let us state that this had been constituted in 1809 to supplement the efforts of the cruisers and Riding officers, the coast of England and Wales being divided into three parts, and placed under the control of Inspecting Commanders. Under this arrangement were included the Revenue cruisers themselves. Then in 1816 the Admiralty had taken over these cruisers from the Preventive Water-guard, and the following year the Coast Blockade had taken over that portion of the coast between the Forelands, to be extended in 1818 to Shellness and Seaford respectively. The sphere of activity on the part of the Preventive Water-guard was thus by the year 1819 considerably curtailed, and from the instructions which were now issued to the Inspecting Commanders we can see how the rest of the coastline other than that section just considered was dealt with. Each station consisted of one chief officer, one chief boatman, two commissioned boatmen, and four established boatmen. There was a six-oared boat with her rudder and wash-boards--"wash-streaks" they are officially called--a five-fathom rope as a light painter, eight good ash oars, two boat-hooks. She was a sailing craft, for she was provided with a fore-mast, main-mast, and mizzen-mast, with "haul-yards," travellers, down-hauls, sheets, &c. Her canvas consisted of foresail, mainsail, and mizzen with a yard for each. She carried also a jib, the casks for water and provisions, a boat's "bittacle" (= binnacle), with compass and lamp. She was further furnished with a couple of creeping irons for getting up the smugglers' kegs, a grapnel, a chest of arms and ammunition, the Custom House Jack and spy-glass as already mentioned. This vessel was rigged as a three-masted lugger with a jib. There is no mention of a bowsprit, so either one of the oars or a boat-hook would have to be employed for that purpose. In addition to this larger boat there was also on the station a light four-oared gig fitted with mast, yard (or "spreet"), a 7 lb. hand lead, 20 fathoms of line for the latter, as well as ballast bags to fill with stones or sand. If the established crews were inadequate during emergency extra men could be hired. The boats were painted twice a year, but "always to be completed before the bad weather sets in, and the colours to be assimilated as near as possible to those used by the natives and smugglers which frequent the coast which are least conspicuous." If any of the established boatmen intermarried with families of notorious smugglers the Inspecting Commander was to send information to the Controller-General. Furthermore, no one was to be appointed to any station within twenty miles of his place of birth or within twenty miles of the place where he had resided for six months previous to this appointment. The name, colour, rig, and other description of any vessel about to depart on a smuggling trip or expected to arrive with contraband goods on the coast were to be given by the Inspecting Commander both to the admirals commanding the men-of-war off the coast in that neighbourhood, to the captains and commanders of any men-of-war or Revenue cruisers, and also to the Inspecting Commander of the Preventive Water-guard on either side of him. And in order to keep the men up to their duties the Preventive stations were to be inspected often, and at certain times by day and night. The Inspecting Commanders were to perform their journeys on horseback and to proceed as much as possible by the sea-coast, so as to become well acquainted with the places where the smugglers resort. The officers and boatmen were ordered to reside as near their duty as possible and not to lodge in the houses of notorious smugglers. Officers and men were also to be private owners of no boats nor of shares in public-houses or fishing-craft. The Inspecting Commanders were to report the nature of the coast, the time, the manner, and the method in respect of the smuggling generally carried on in the district. If there were any shoals or rocks, not generally laid down or known, discovered when sounding to possess a different depth of water, or if anything should occur which might be useful for navigating the coasts of the kingdom, then cross bearings were to be taken and noted. These men were also to render every assistance in case of wrecks and to prevent goods being smuggled therefrom into the country. If any of these Preventive boatmen were wounded in fighting with a smuggler they were to be paid full wages for twenty-eight days or longer, and a reasonable surgeon's bill would be also paid. And to prevent any possible excuse for discontinuing a chase, the boat was never to leave the beach without the two-gallon keg of fresh water. And to prevent any obvious possibility, this boat was never to be left by day or night without one of the boat's crew to guard it. The latter was always to have ready some sort of floating buoy, "loaded at one end and a piece of bunting at the other," for marking the place where goods might be thrown overboard in a chase. The Inspecting Commanders were also to be on their guard against false information, which was often given to divert their attention from the real place where the smuggling was occurring. "As night is the time when smugglers generally run their cargoes, it is expected that the boat, or her crew, or the greater part of them will be out, either afloat or on land, as often as circumstances will permit, which must be, at least, five nights a week." They were ordered generally to co-operate with the Revenue cruisers and to keep a journal of all proceedings. When out at night time they were to have a candle and "lanthorn" in the boat as well as the boat's "bittacle," and not to rummage a vessel without the candle being carefully secured in the lanthorn to prevent accident by fire. All suspicious ships were to be rummaged, and whenever the weather would not permit of the boat keeping the sea, the crew and Inspecting Commander were to keep a look-out by land. Even as late as 1819, when the great wars had come to an end, it was found that the transfer of smugglers to the Navy had continued to be the most effectual means of protecting the Revenue. The sum of £20 was granted for each smuggler taken, and this was paid to the individual or individuals by whom or through whose means the smuggler was absolutely secured, and it was not to be paid to the crew in general. But when chasing a smuggling craft, whether by night or day, they were not to fire at the delinquents until the Custom House Jack had been displayed. The salary of each Inspecting Commander, it may be added, was now £200 per annum and £60 for the first cost and upkeep of an able horse. CHAPTER XIII THE PERIOD OF INGENUITY Just as there had been a great improvement in the reorganisation brought about by the advent of the Coast Blockade, so the Preventive service on shore generally was smartened up. That this was so is clear from the existing correspondence. For instance, five more Preventive boats were to be stationed between Shellness and Southwold, and three between Cuckmere Haven and Hayling Island; another boat was sent to Newton (Yorkshire), another to Dawlish (Devonshire), and another to Happisburgh (Norfolk) or, as it was then spelt, Hephisburg. Some idea of the activity of the cruisers may be seen from the number of smugglers which these craft had been able to capture. The reader will recollect that during the year ending October 1, 1810, the highest number of smugglers handed over to the Navy was thirteen, and this was done by Captain Gunthorpe of the Excise cutter _Viper_. He thus became entitled to the sum of £500. It will be remembered also that it was afterwards decided that, beginning in 1812, £500 would be paid only if the number captured was not less than twenty. But now from a Treasury Minute of October 20, 1818, we find that, although the former number of captures was over thirteen, it was just under twenty. And, here again, Captain Matthew Gunthorpe, this time commanding the Excise cutter _Vigilant_, and Captain Robert Hepburn of the Excise cutter _Regent_, in the year 1816 seized nineteen smugglers each, or a total of thirty-eight. As neither captain had reached the twenty and both were equal, it was decided to add the second and third rewards together (_i.e._ £300 plus £200) and to give £250 to Captain Gunthorpe, officers and crew, and £250 to Captain Hepburn, officers and crew. And there is on record at this time a memorial from one W. Blake, the son of W. Blake, senior. The last-mentioned had been commander of the cutter _Nimble_, but was drowned in 1816. His son now prayed for the reward of £300 to be paid to the family of the deceased, as he had captured sixteen smugglers. After the Admiralty had taken over the Revenue cruisers they did not neglect to sanction a pension system, and the following scheme was embraced:--Commanders of cruisers on retiring were to have from £91, 5s. to £155, 2s. 6d. per annum, according to their length of service; and for any wound received they were to have an additional £91, 5s. per annum. First mates were pensioned after five years' service at the rate of £35 a year, but after thirty years' service they were to have £85 a year as pension. And so it was arranged for all ratings down to the boys. The widow of a commander killed or drowned in the service was allowed £65 a year. And now that we are in that period after the year 1815 we must not fail to bear in mind that this is the epoch when the smugglers were using ingenuity in preference to force. The busiest part had yet to come and did not occur till the third decade of the nineteenth century. But even from the time of the Battle of Waterloo until, say, about 1825 there were ten years in which the smugglers left no device untried which they could conceive to enable them to outdo the Revenue authorities. And we may now proceed to give actual instances of these ingenious attempts. We begin with the early part of 1816. At this time the Tide-Surveyor at one of the out-ports had reason to suspect that the French market-boats which used to sail across to England were in the habit of bringing also a good deal of silks and other prohibited goods. At last he went on board one of these craft and immediately after she had arrived he caused the whole of her cargo to be put ashore. He then searched her thoroughly from deck to keelson, but he found nothing at all. However, he was determined not to give up his quest, and had part of her ceiling examined minutely, and was then surprised to note that some fresh nails had apparently been driven. He therefore caused the ceiling to be ripped off, when he discovered that a large variety of contraband goods had been neatly stowed between the ship's timbers. It was only a few months later in that same year that another Revenue officer boarded a Dutch schuyt which was bound from Amsterdam to London. Her cargo consisted of 500 bundles of bulrushes, but on making his examination these innocent articles were found to conceal between the rushes forty-five boxes of glass in illegal packages, and also some other prohibited goods which had been shipped from the United Kingdom for exportation and were intended to have been again clandestinely relanded. The reader will remember our mentioning the name of Captain M'Culloch just now in connection with the Coast Blockade. Writing on the 2nd of April, 1817, from on board H.M.S. _Ganymede_ lying in the Downs, this gallant officer stated that, although it was known that the smugglers had constructed places ashore for the concealment of contraband goods under the Sand Hills near to No. 1 and No. 2 batteries at Deal, yet these hiding-places were so ingeniously formed that they had baffled the most rigid search. However, his plan of landing crews from his Majesty's ships to guard this district (in the manner previously described) had already begun to show good results. For two midshipmen, named respectively Peate and Newton, commanding the shore parties in that neighbourhood, had succeeded in locating five of those places of concealment. "This discovery," continued the despatch, "I am assured will be a most severe blow to the smugglers, as they were enabled to remove their cargoes into them in a few minutes, and hitherto no person besides themselves could form any idea of the manner in which their store-holes were built. They are generally 4 feet deep, of a square form and built of a 2-inch plank, with the scuttle in the top, into which a trough filled with shingle is fitted instead of a cover to prevent their being found out by pricking; and I understand they were built above two years ago. I have ordered them to be destroyed, and parties are employed in searching for such concealments along the other parts of the beach." Thus, thanks to the Navy, the smugglers had been given a serious repulse in the most notorious district. Then there was also the danger of collusive smuggling. For instance, when a smuggler had been frustrated from successfully landing a cargo of spirits from a small foreign vessel or boat he might go and give information to a Custom officer so that he might have the goods seized by the latter, the arrangement being that the smuggler should be paid a fair portion of the reward which the officer should receive for the seizure. Inasmuch as the officers' rewards were by no means inconsiderable this method might fully indemnify the smuggler against any loss. Just before Christmas of 1819 the Custom officers at Weymouth seized on board a vessel named _The Three Brothers_ sixteen half-ankers and seven small kegs or flaggons of foreign spirits. These were found to be concealed under a platform of about nine feet in length fitted on either side of the keelson, and of sufficient height for one cask. Its breadth was such as to allow of two casks and a flaggon. When full this secret hiding-place would contain about thirty casks in all. The whole concealment was covered with stone and iron ballast. The platform was fitted with false bulkheads and filled up with large stones so as to avoid suspicion, the entrance to which was made (after removal of the ballast) from the bottom of the forecastle through two bulkheads about two feet apart. Another instance was that of a consignment of four cases which had come over from France. These cases contained plaster figures and appeared to be hollow. However, the Custom officers had their suspicions and decided to perforate the plaster at the bottom with an auger. After making still larger holes there were extracted from inside the following amazing list of articles:--Two clock movements, six pieces of bronze, thirty-two pieces of porcelain, and two small paintings. A certain other French craft was boarded by the Revenue officers who, on measuring her range of deck and also under it including the bulkheads, found a greater difference than the rake would fairly account for. They were naturally highly suspicious and proceeded to take down part of the bulkhead aft, when they discovered that this bulkhead was not single but double, being between the cabin and the hold. This bulkhead was made of solid oak planking and was 2 feet 10 inches thick. It was securely nailed, and the cavity thus made extended from one side of the hull to the other, giving a breadth of 7 feet 2 inches, its length being about 2 feet 2 inches, and the height 3 feet 6 inches. It will thus be readily imagined that a good quantity of spirits, wine, and plums from France could easily therein be contained and brought ashore when opportunity presented itself. At another port a vessel was actually discovered to have false bows. One might wonder how it was that the officer ever found this out, but he was smart enough to measure the deck on the port side, after which he measured the ship below. He found a difference of over a foot, and so he undertook a thorough search of the ship. He first proceeded to investigate the forepeak, but he was unable to discover any entrance. He therefore went to the hold, examined the bulkhead, and observed that the nails of the cleats on the starboard side had been drawn. He proceeded to force off the cleats, whereupon one of the boards of the bulkhead fell down, and a quantity of East India silk handkerchiefs came tumbling out. Needless to say, this proved a serious matter for the vessel's skipper. Sometimes too, cases used to come over from France containing carton boxes of artificial flowers. These boxes, it was found, were fitted with false bottoms affording a space of not more than a quarter of an inch between the real bottom and the false. But into this space was squeezed either a silk gauze dress or some parcels "very nicely stitched in," containing dressed ostrich feathers. The flowers were usually stitched down to the bottom of the boxes to prevent damage, so it was difficult to detect that there was any false bottom at all. However, after this practice had been in vogue for some time it was discovered by the Revenue officers and the matter made generally known among the officials at all the ports, so that they could be on the alert for such ingenuity. Sometimes when a Revenue officer was on her station she would come across a sailing craft, which would be found to have quite a considerable number of spirits in small casks together with a number of other prohibited goods. If the master of such a craft were told by the cruiser's officer that they would have to be seized as they were evidently about to be smuggled, the master would reply that they were nothing of the kind, but that whilst they were on the fishing grounds working their nets they happened to bring these casks up from the sinkers and warp which had kept them below water; or they had found these casks floating on the sea, and had no doubt been either lost or intentionally thrown overboard by some smuggling vessel while being chased by a Revenue cruiser. It became a very difficult matter to ascertain under such circumstances whether the master were speaking the truth or the reverse, for it was not altogether rare for the kegs to be picked up by fishermen in the manner indicated. So the only way out of this dilemma was for the commanders of the cruisers to bring such craft as the above to the nearest Custom House, where the master could be brought ashore and subjected to a cross-examination as to where they found these casks and what they proposed doing with them. A seizure was made at Deal about the year 1818 consisting of thirty-three packages of China crape and silk. These had been very artfully concealed in the ballast bags of a lugger called the _Fame_, belonging to London. One package was found in each bag completely covered up with shingles or small stones, so that even if a suspicious officer were to feel the outside of these bags he would be inclined to believe that they contained nothing but ballast, and if he opened them he would think there was nothing else but stones, for the goods were carefully squeezed into the centre of the bags and surrounded with a good thickness of shingle. Another dodge which was discovered at Shoreham on a vessel which had come from Dieppe was to have the iron ballast cast in such a form that it was not solid but hollow inside. By this means a good deal of dutiable stuff could be put inside the iron and then sealed up again. There was a ship, also, named the _Isis_, of Rye, which fell into disgrace in endeavouring to cheat the Customs. She was a smack of 26-16/94 tons burthen, her master being William Boxhall. It was while she was lying at her home port that one of the Revenue officers discovered a concealment under her ballast, the entrance to which was obtained by unshipping two bulkhead boards forward. There was one concealment on each side of the keel, and each contained enough space to hold from twenty to twenty-four ankers of spirits. Along the Kentish coast a good deal of smuggling used to go on by means of galleys which were rowed by six, ten, and even twelve oars. As these were navigated by foreigners and sailed under foreign papers, the Customs officers were a little puzzled as to what exactly could be done. Could such craft be seized even when found with no cargoes on board, when they were either hauled up the beach or were discovered hovering off the coast? After applying to the Board of Customs for guidance they were referred to the Act,[19] which provided that any boat, wherry, pinnace, barge, or galley that was built so as to row with more than four oars, if found within the counties of Middlesex, Surrey, Kent, or Essex, or on the river Thames, or within the limits of the Port of London, Sandwich, or Ipswich, or the creeks thereto belonging, should be forfeited together with her tackle. The object of this was clearly to prevent the shortest cross-Channel route being traversed from Holland or France by big, seaworthy but open, multiple-oared craft, with enough men to row them and enough space to carry cargo that would make the smuggling journey worth while. The following fraud was detected at one of the out-ports in 1819. An entry had been made of twenty-seven barrels of pitch which had been imported in a ship from Dantzic. But the Revenue officers discovered that these casks were peculiarly constructed. Externally each cask resembled an ordinary tar-barrel. But inside there was enclosed another cask properly made to fit. Between the cask and the outside barrel pitch had been run in at the bung so that the enclosure appeared at first to be one solid body of pitch. But after the affair was properly looked into it was found that the inner cask was filled with such dutiable articles as plate glass and East India china. Sometimes tubs of spirits were packed up in sacks and packs of wool and thus conveyed from the coast into the interior of the country; and in the seizing of some goods at Guernsey it was found that tea had been packed into cases to resemble packages of wine which had come out of a French vessel belonging to St. Malo. Nor was the owner of a certain boat found at Folkestone any novice at this high-class art. Of course those were the days when keels of iron and lead were not so popular as they are to-day, but inside ballast was almost universal, being a relic of the mediæval days when so much valuable inside space was wasted in ships. In this Folkestone boat half-a-dozen large stones were used as ballast, which was a very natural thing for such a craft. But when these stones came to be examined they were found to have been hollowed out and to have been fitted with tin cases which were filled with spirits. One cannot acquit the owner of any fraudulent intent, but one certainly can admire both his ingenuity and the great patience which must have been necessary to have hollowed a cavity from such an unyielding material as stone. This was equalled only by the cargo from Guernsey. Four sacks said to contain potatoes from the Channel Isles were opened by the Revenue officers at a certain port, and, on being examined, it was found that these were not potatoes at all. They were so many rolls of tobacco which had been fashioned to resemble the size and form of the vegetable, and then covered artfully over with a thin skin and finally clayed over so cleverly that they had every appearance of the potatoes they pretended to be. But the Channel Isles were still notorious. In twelve sacks of flour imported from Jersey were found hidden in the middle twelve bales of tobacco weighing 28 lbs. each. A few weeks later three boxes of prunes also from Jersey were opened, when it was discovered that the prunes were not more than three inches deep at the top and three inches deep at the bottom. But between there was a space in which were concealed--in each box--a paper parcel of silk, some scarves and gloves, &c. But in order to make the total weight of the box approximate to that which would have existed had it been full of prunes a square piece of lead was placed above and another underneath these dutiable articles. But to me the most ingenious method of all was that which was employed in 1820 for smuggling tobacco. The offending ship was one of the vessels employed in the transport service, and the man who thought of the device was not far from being a genius. He first of all obtained the quantity of tobacco which he proposed--no doubt with the assistance of more than one confederate--to smuggle ashore. He then proceeded to divide this into two, each of which formed one strand. Afterwards he made these strands into a rope, every bit of it being tobacco. But then he took a three-strand hawser and laid this over the tobacco, so that when the hawser was finished no one could suspect the tobacco without first cutting or unlaying the rope. I have not been able to discover how this trick was ever suspected. Nothing less than an accident or the information of a spy could possibly lead to detection in such a clever case. There were all sorts of varieties of concealments now practised since the "scientific" period of smuggling had come in. And since those wicked old days have passed, and with them a good many of the old-fashioned types of craft, it may be well that examples of these misdirected efforts should be collected herewith. There was a smack, for instance, which was found to have under her ballast a large trunk that was divided into four separate compartments each about 15 feet long and could contain twelve half-ankers. One end of the trunk was fixed against the bulkhead of the cabin, and extended the whole length of the hold opening at the forward end close to the keelson by unshipping two pieces of the bulkhead. Another instance of the employment of false bows to a craft was found on searching the fishing smack _Flower_, of Rye, whose master's name was William Head. It was observed that this false section would hold as much as forty to fifty half-ankers, the entrance being on the port side of the false bow, where a square piece took out, being fastened by a couple of screws, the heads of which were concealed by wooden bungs imitating treenails. The _Flower_ was further discovered to have a false stern, the entrance to this being by means of the upper board of this stern on the port side in the cabin. She was a vessel 39 feet 2-1/2 inches long, 12 feet 1-1/2 inches beam, 5 feet 9-1/2 inches deep, and of 23-1/2 tons burthen, being fitted with a standing bowsprit and sloop-rigged. An almost identical set of concealments was found in the smack _Albion_ at Sandwich, a vessel of over 42 tons burthen. The entrance to her false stern was through a small locker on the port and starboard sides. She was further fitted with a false stern-post and false timbers. A considerable amount of ingenuity must have been exercised in the case of an open four-oared boat which was seized at Dover together with twelve ankers of spirits. The device was as follows:--Across the bow end of the boat was the usual thwart on which an oarsman sat. At the after end where the stroke sat was another thwart. Under each of these thwarts was an ordinary stanchion for supporting the thwart. But each of these two stanchions had been made hollow. Thus, through each a rope could be inserted, and inasmuch as the keel had also been pierced it was possible to pass one rope through at the bow-thwart and another at the stern-thwart, these ropes penetrating the boat from thwart to keel. The inboard ends of these two ropes were carelessly lashed round the thwarts or covered with gear, so there was no untoward appearance. But at the other ends of the ropes were fastened the twelve ankers, which were thus towed along under the keel of the craft, and not trailing out astern as was sometimes done in the case of bigger boats. Thus because the whole body of the boat covered the floating casks it was very unlikely that their presence would be suspected. The smack _Strawberry_ of Deal, on being searched, was found to have a false bottom, capable of containing a considerable quantity of goods. This bottom was constructed by two leaden cases fixed on the timbers the whole length of the hold, one on each side of the keelson, and ceiled over with the usual ceiling, having the ballast placed over it. The cases opened on each side of the hold by taking out a plank from the temporary ceiling. In the case of the lugger _Fox_ (as usual belonging to Rye), a vessel over 16 tons, John Souden, master, there were found to be double bottoms underneath the bed cabins, the entrance being made from underneath the cabins, and then unshipping a small piece of board about a foot square, each concealment being able to hold from fifty to sixty pieces of bandana silks. Another smuggling device in vogue during this ingenious period had to be employed in such places as Ramsgate harbour, where it would have been utterly impossible to have employed ordinary methods. It resembled very much the method employed at Dover, mentioned just now. A rowing-boat would come into the harbour, apparently with nothing in her nor anything towing astern. But there were fifteen or so half-ankers underneath her hull, spirits of course being contained in these casks. Now the latter were all fastened to a long iron bar, the ropes to the boat being fastened to this bar. Consequently, after the boat had reached her corner of Ramsgate harbour, all she had to do was to let go the ropes and the iron bar would keep the kegs on the sandy bottom and prevent them from disclosing their identity by floating. At low water the smugglers could have gone to get them up again, for they would not move far even with the ebb tide. Unfortunately, however, the Revenue Tide Surveyor at this port preceded the smugglers, and by creeping for the bar and tubs with grapnels succeeded in locating what he wanted. On another occasion at one of the out-ports, or rather along the neighbouring beach, thirty-three gallons of spirits, contained in nineteen small casks, were recovered in a startling manner. Going along the beach were noticed among the chalk rocks and stones of the neighbourhood some other objects. These were the casks, but they had been so cleverly covered over with a cement of chalk, to which was fastened seaweed in the most natural manner, that seeing them there among the rocks of the shore they would never have been discovered by the Revenue men, had not it been (as one may guess) for a hint given by an informer. Otherwise there they would have remained until the smugglers found it convenient to come and fetch them. We called attention just now to the concealing of tobacco in rope. This device evidently became a fine art, and had succeeded on many an occasion. At any rate in Flushing tobacco was openly on sale in the shops ready for smuggling into England already made up into ropes. You could get anything as big as a hawser and as small as a sail-tyer done up so ingeniously as to deceive almost any one. In fact on washing these slightly with a little rum they had every appearance of hempen rope. FOOTNOTES: [19] 8 George I. cap. 18. CHAPTER XIV SOME INTERESTING ENCOUNTERS Rowing about on the night of Lady Day, 1813, a six-oared boat, which had been launched from the Custom House cutter _Lion_, was on the prowl in that bay which extends all the way from Dungeness to Folkestone. When the watchers in this craft were off Hythe, and only about a quarter of a mile from the shore, they saw coming along over the dark waters a lugsail boat with foresail and mizzen making towards Dymnchurch, which is just to the west of Hythe. It was about an hour before midnight, and as this suspicious craft did not come near to the _Lion's_ boat the latter rowed towards her and hailed her. "What boat is that?" they asked. "A Folkestone boat," came back the answer. Thereupon John Wellar, a deputed mariner in the Customs boat, shouted to the lugger to heave-to, for he guessed what the game was. "Heave-to!" roared the lugger's master. "We'll see you d----d first!" But the rowing-boat was not to be put off with mere insults, and quickly pulled up alongside the craft. One of the men in the Customs boat then stood up and looked into the lugger and remarked that she was full of kegs. Wellar therefore immediately jumped into her, followed by three or four of his men, and seized her. On board he found three men, and them also he secured. He further discovered 144 half-ankers of spirits, consisting of brandy and gin from across the Channel, which were subsequently taken to the Custom House at Dover. A little more than a year later, Robert Baker, the lugger's master, was brought before the judge and fined £100. There was an interesting incident which occurred a few years later in the eastern corner of England, which led to trouble for a man named Henry Palmer of Harwich. This man was master and owner of a yawl named the _Daisy_, which belonged to Ipswich. About midday on the 22nd of March 1817, one of the Preventive officers, named Dennis Grubb, observed the _Daisy_ sailing up the Orwell, which flows from Ipswich past Harwich and out into the North Sea. Grubb was in a six-oared galley, and about three-quarters of a mile below Levington Creek, which is on the starboard hand about a third of the way up the river between Harwich and Ipswich. With Grubb was another man, and on seeing the _Daisy_ they began rowing towards her. Whether Grubb had any reason for suspecting her more than any other craft, whether he had received warning from an informer, cannot be stated. But what is true is that he was determined to have her examined. However, notwithstanding that Palmer must have known perfectly well that this was a preventive boat, and that he was in duty bound to stop when hailed, it was obvious that, as soon as the galley came near, the _Daisy_ instantly went about on the other tack and stood away from the boat. The latter in turn pulled after the yawl and was again approaching when the _Daisy_ once more tacked and ran away. But at last the galley came up, and just as Grubb was in the act of stepping aboard, Palmer coolly remarked that he had some tubs aboard, following this up by the explanation that he had got them on the trawling ground. This was too obvious a lie to be believed for a moment. Grubb accordingly inquired how it was that Palmer had come past Harwich since the latter was his home, to which he answered that he was bound for Ipswich, as there his vessel was registered. But inasmuch as there were two of the Revenue cutters as well as a guardship lying at the entrance to the river, how was it that he had not stopped to hand the tubs over to them? For either the Customs cutter _Griper_, or the Excise cutter _Badger_, would have been the ordinary receptacle, instead of waiting till a Preventive galley overtook the _Daisy_. When Grubb asked how Palmer had come by all these tubs he said that he had caught them in his trawl, whereupon the preventive man examined the net and found it damp but certainly not wet, as it would have been had Palmer's version been the truth. Furthermore, if these tubs had been caught in the trawl there would have been a number of holes torn, but Grubb found there to be no holes. There were no fewer than forty-eight of these tubs found on the _Daisy_--all half-ankers, and fitted with slings ready for landing--and inasmuch as it was clear that the net had not been lately used Palmer was obviously lying. The iron which, had it been dragged along the sea-bed, would have been polished bright with the sand, was actually not bright but rusty, thus proving that it had not been recently used. Grubb therefore felt justified in arresting the yawl, and taking her and her tubs to the Custom House. Later on he made a thorough search of her, and found a creeping-iron which had five prongs and a long shank. The reader is well aware that such an implement was used by the smugglers but never found on board a genuine fishing-craft. For getting up sunken tubs it was essential, and for that purpose it was evidently on board the _Daisy_. Moreover, it was found to be both wet and polished bright as to its prongs, and there was still some wet mud sticking thereto. The case, of course, duly came on to be tried, and the Attorney-General suggested that at that time, in nine cases out of every ten, the tubs of smuggled spirits were not brought directly to port but sunk at different places in the sea, located by landmarks and buoys, fishing-boats being sent out later on to get them by these creepers, and to bring them in by small quantities as opportunity permitted. Palmer's defence was that they had found the tubs just outside Harwich harbour, opposite to Landguard Fort, at about seven o'clock the previous evening. But it was a somewhat strange fact that though this fishing-vessel should have been out all night not a single fish was found on board. And when Palmer was asked how it was that if he had found these tubs, and had intended to hand them over to the Customs authorities, he had been so careful to stow them all below and not leave them on deck to be visible to the _Griper_ and _Badger_ as he passed? His reply, that he had put the tubs below lest a puff of wind might blow them overboard, somehow did not convince the judge, and the verdict went against him. A curious instance of an abuse of office was seen in the occurrence which centred round a certain Mr. Thomas Moore Slade. Mr. Slade was Agent Victualler for the Chatham Victualling Office, and from his connection with that department he had the power of employing some of his Majesty's vessels belonging to the department. This gentleman got to know that a splendid collection of pictures was about to be dispersed in France. They were of great value both artistically and intrinsically, and had belonged to the late Duke of Orleans. Slade therefore, quite unjustifiably, determined to make use of one of the craft under his charge for the purpose of fetching these pictures into the country, and thus cheating the Government of its dues, which would have been very heavy in this transaction. The way he went about it was to direct a man named Thomas Cheney, who commanded the sloop _Grace_ (belonging to the King's Victualling Office), to get under way and proceed a certain distance from Chatham. After he had come out of the Medway and had reached the Nore he was to open a letter which Slade had given him, wherein he would find his instructions. The _Grace_ in due course hoisted sails and anchor and found herself out by the Nore. On opening the letter, Cheney was surprised to find he was directed to proceed to Calais. He informed the crew, who were very indignant, as they had all thought they were bound for Deptford. So that night they put back to Sheerness and let go anchor. The following day, with a reluctant company on board, they started off again and reached Ramsgate, where they lay all night. On the third day they crossed the Channel and got into Calais Roads, anchored, and remained there all night. It should be added that Slade had taken the precaution to put on board this sloop before she left England a Mr. Thomas Aldridge, an expert judge of pictures, his exact description for this voyage being as supercargo, a term which signifies an officer in a trading vessel whose duty it is to manage the sales and superintend all the commercial concerns of the voyage. Having arrived, then, off Calais, Cheney, Aldridge, and some of the crew proceeded ashore and, guided by the art expert, went to a certain Monsieur Dessein, who kept an hotel in that town. From him they obtained a large number of cases containing the Orleans collection, and brought them off to the _Grace_. Altogether there were no less than fifteen of these cases, and although the _Grace_ was a vessel of some thirty-two tons burthen, yet the weight of these paintings was sufficiently great to lower her water-line a good six inches. After this valuable cargo had been got aboard and stowed, a gale of wind sprang up and detained them for a few days, but at length they cleared from the French coast and steered for the Downs. From there they rounded the North Foreland, and after running up the Thames entered the Medway and let go at Gillingham until it was dark. But as soon as night had fallen they got going once more, and ran alongside the Victualling Wharf at Chatham. The pictures were brought up from the sloop and taken ashore by means of a crane, and then quietly carried into Mr. Slade's house. By this he had thus saved the cost both of carriage and of duty, the pictures being afterwards sold for a very large sum. However, this dishonest business at length leaked out, an action was brought against Slade, and a verdict was given for the King and for six pictures of the single value of twenty guineas. On the evening of a November day in the year 1819, the Revenue cutter _Badger_, under the command of Captain Mercer, was cruising in the English Channel between Dungeness and Boulogne. About seven o'clock it was reported to the commander that about a quarter of a mile away there was a lugger steering about N.W. by W. towards the English coast. The _Badger_ thereupon gave chase, but as she drew nearer and nearer the lugger altered her course many times. Carrying a smart press of canvas, the _Badger_, which was one of the fastest vessels employed in the Revenue, came up rapidly. As usual she fired her warning gun for the lugger to heave-to, but all the notice taken by the chased ship was to go about on the other tack and endeavour still to escape. But presently the cutter, running with the wind on her quarter and doing her eight knots to the lugger's four or five, came up to her foe so quickly as to run right past her. But before the _Badger_ luffed up she hailed the lugger (whose name was afterwards found to be the _Iris_ of Boulogne) and ordered her to heave-to. "I be hove-to," answered back one of the lugger's crew in unmistakable English. [Illustration: "The _Badger_ was hoisting up the galley in the rigging."] Meanwhile the _Badger_ was hoisting up the galley in the rigging preparatory to launching, and the crew stood by ready to get in. As soon as the _Badger_ had shot past, down went her helm and she came alongside the _Iris_ as the galley was dropped into the leaden waters. But just at that moment the _Badger's_ people overheard some men on the lugger exclaim, "Now's your time," whereupon the crew of the lugger also launched their boat, forsook the _Iris_, and began to row off as fast as they could. The _Badger_ called to them--among whom was a man named Albert Hugnet--ordering them under pain of being shot to come alongside the cutter. They replied that they were coming, but that they could not find their thole-pins, saying that they had only two oars on one side and one oar on the other. This was said in English, and was obviously a mere excuse to gain time. Meanwhile the cutter's galley and men had come alongside the lugger, in which they found 110 half-ankers, containing 382 gallons of brandy, and 157 half-ankers of Geneva, 55 bags of tea, and 19 bags containing 355 lbs. of manufactured tobacco. As the men of the _Iris_ showed no signs of coming back, the prize-crew on the lugger hailed the _Badger_, giving information that the smugglers were escaping. "Lie close," came the command, so the cutter trimmed her sheets and went in pursuit, and fired some shots in the direction of the retreating boat. But it was no use, for the boat was quickly lost from sight among the waves and disappeared entirely. There was some sea on at the time, so no one among the Revenue men envied the _Iris's_ crew their task of rowing across to Boulogne, a distance of somewhere about twenty-seven miles, in that weather and athwart very strong tides, with the certainty of having a worse time as the Ridens and the neighbourhood of Boulogne was approached. In fact the chief mate of the cutter remarked, some time after, though he had seen these tub-boats go across the sea in all weathers, and were splendidly seaworthy, yet he considered it was not very wise of the _Iris's_ crew to risk it on such a night as that. Convinced, then, that the men were making for France, the lugger, with her prize crew on board, presently sailed up after the cutter, hoping to come across their captives. But neither cutter nor lugger could find the men, and concluded, no doubt, that the tub-boat had foundered. But, at a later date, Albert Hugnet was arrested, and in the following June was brought to trial and punished. It then came out that the whole boat-load had escaped with their lives. For Andres Finshaw was called as evidence for the defence. He had been one of the lugger's crew, and showed that after rowing away that night they had not fetched across to the French coast, but having the good luck to find a French fishing-craft only a quarter of a mile away, they were taken aboard her and thus returned to France. It was also brought out very clearly by the other side that when first seen the _Iris_ was within nine miles of the English coast, and afterwards the _Badger_ steered N.W. by W. towards the south of Dungeness, and after five and a half miles saw the Dungeness light and the South Foreland light, took cross-bearings of these, and having marked them off on the chart, fixed their position as about three miles from the coast. Thus when the lugger was first encountered the latter was about nine miles from the land. The date of that incident, then, was the 12th of November, and Hugnet was not then captured. We may now pass over the next four weeks till we come to the 10th of December in that same year. At eight o'clock in the morning the Revenue cutter _Eagle_ was cruising off the coast of Kent when she observed a lugger bearing about N.W. by N. from them. The lugger was under all sail and heading S.E. for Boulogne, having come out from East Dungeness Bay. The weather was thick, it was snowing, and no land was in sight, Dungeness being the nearest portion of the English coast. It did not take long for the _Eagle's_ commander to guess what was happening, especially when that bay was so notorious, and the cutter began to give chase, the wind being roughly N.W. But as the _Eagle_ pursued, the lugger, as was the approved custom, hauled up and came on a wind, hoping to get away and outpace the cutter. But in this the smugglers were not successful, and eventually the _Eagle_ overhauled her. The cutter's galley was now launched, and after having been for three-quarters of an hour rowed quickly by the aid of her eight men, the lugger was reached and hailed. The usual warning signal was fired from a musket in the boat and colours shown. The lugger, however, declined to heave-to as requested. "If you don't heave-to," roared the chief mate of the _Eagle_, as he looked towards the helmsman, "we'll fire right into you." On this the lugger lowered her sails, the galley bumped alongside, and the chief mate and crew, pistols in hand, leapt aboard. "Where are you from?" asked the chief mate. The answer came in French, which the latter did not understand, but he thought they said they were bound from Bordeaux to Calais. If so, it was an obvious and foolish lie. Mr. Gray--for that was the mate's name--then inquired how many men were aboard, and the answer returned that there were seven. Gray then called the lugger's men aft, and separated the English from the foreign, and found there were five French and two English. The two latter, said the Frenchman (who was none other than Albert Hugnet, whom we spoke of just now), were just passengers. A few minutes later, the skipper contradicted himself and said there were not seven but nine, all told. Gray then proceeded to look for the other two, and jumped down forward into the forepeak. As the place was dark he put his cutlass in first and rummaged about. In a moment the cutlass brought up against something soft. Gray had struck a man, hiding there, on the legs and thighs. He was called upon by the cutter's mate to come out, and instantly obeyed, fearing no doubt that the cutlass would assail him again if he didn't. As he emerged he was followed by another man, and another, and yet another; in fact from that dark hole there came out a procession of seven, all of whom were found to be Englishmen. It was noticeable that most, if not all, were dressed in short jackets and petticoat trousers. They were clearly sailors, and not landsmen--passengers or anything else. In plain language they were out-and-out smugglers. What was especially to be noted was the fact that their trousers were quite wet right up to their middles. In some cases their jackets were also wet up to their elbows. All this clearly pointed to the fact that they had not long since put off from the shore, where they had succeeded in landing a contraband cargo by wading from the lugger to the beach; and such a thick atmosphere as there was on the previous night must have made it highly convenient for them. Nevertheless, even for these weather-hardened seamen, it cannot have been altogether pleasant penned up in sopping clothes in a dark forepeak with an unseen cutlass waving about in their midst and seizure pending. These men also Gray ordered to go aft, and put them together so that he might see how many altogether were English and how many French. It was found that there were nine of them English and five French. Taking possession of the helm, Gray let the sails draw and ran down to the _Eagle_, telling his prisoners he was going to get further instructions from his commander. There were no tubs found on the lugger, which was as might be expected, but there was a solitary hoop which had evidently come off whilst these tubs were being hauled out, and there were also found two pairs of slings which were universally employed for getting the half-ankers ashore. These slings were made of small line, and were passed round the circumference of the cask at its "bow" and "stern," sufficient line being left so that there were two lines, one to pass over each of a man's shoulders. These two lines could be joined to other two on another cask, and so each smuggler could land with one tub on his back and another on his chest, in much the same way as you see a sandwich-man carrying boards in the street. On examining this lugger there was no bilge-water found in the forepeak, so those seven shivering men could not have made the excuse that the vessel was damp in that portion. To cut a long story short, the lugger was eventually taken into Harwich, having been discovered seventeen miles from the French coast and eleven from the English shore. Assuming the lugger had travelled at about four knots an hour, this would mean that she had started off from the English beach on her return journey about 5 A.M., the previous hours of the night having doubtless been spent in unloading the tubs somewhere between Folkestone and Dungeness or perhaps Rye. Thus Hugnet, having at last been caught, had to stand his trial for both this and the occurrence of the previous month. And a verdict in each case having been returned against him, his activities in running backwards and forwards across the English Channel were, for a time at least, considerably modified. These tub-boats, which we have had cause to mention more than once, were usually not towed but carried on the lugger's deck. A tub-boat got its name from the fact that when the lugger was too big to run her nose on the beach the tubs were landed in these boats. For that reason they were made very deep, with plenty of high freeboard, and were accordingly wonderfully good sea-boats, though they were somewhat heavy to row even without their spirituous cargoes. As one looks through the gaol-books and other smuggling records, one finds that there was a kind of hereditary custom that this running of contraband goods should pass on from father to son for generations. Thus there are constant repetitions, in different ages, of men bearing the same surname engaged in smuggling and becoming wonderfully notorious in this art. Among such family names must be mentioned that of Rattenbury. The man of whom we are about to speak was flourishing during the second decade of the nineteenth century, and his christian name was John. In November 1820--it is significant how often this dark month crops up in the history of smuggling, when the weather was not likely to tempt those Revenue cruisers' commanders, who preferred the snug shelter of some creek or harbour--John Rattenbury happened to find himself at Weymouth. Into that port also came a vessel named the _Lyme Packet_, which was accustomed to trade between Lyme and Guernsey. But on this occasion the ship had just received the misfortune of carrying away her bowsprit--possibly in the Portland Race--and her master, John Cawley, decided to run into Weymouth for repairs. Whilst these were being taken in hand what should be more natural than that the _Lyme Packet's_ master should drift into a local public-house? Having brought up comfortably in that haven of rest, he was promptly discovered by his old friend Rattenbury, who had also made for the same house of refreshment. The usual greetings took place, and Rattenbury inquired how it was that Cawley came to be there, and an explanation of the accident followed. According to the skipper's own version, they got into conversation, and, over a glass of grog, Rattenbury volunteered the remark that if Cawley would be willing to sail across to Cherbourg to fetch a cargo of spirits he would pay him at a rate that would make it much more profitable than trading between Lyme and Guernsey. In fact he was willing to pay Cawley as much as twelve shillings a cask, adding that in one voyage this skipper, who happened also to be owner, would make more money thereby than in the regular course of trade in a twelvemonth. Such a proposition was more than a tempting one, and Cawley gave the matter his attention. Unable to resist the idea, he acquiesced, it being agreed that Rattenbury should accompany him to France, where they would take in a cargo of spirits, Cawley to be paid his twelve shillings for every cask they were able to bring across. So, as soon as the bowsprit was repaired and set in its place, the _Lyme Packet_ cast off her warps and ran out of Weymouth harbour. She made direct for Cherbourg, where they anchored in the roadstead. Rattenbury now went ashore and returned accompanied by 227 casks of spirits made up in half-ankers. These were put on board and the voyage back to England commenced, the intention being to make for West Bay and land the goods somewhere near Sidmouth. Having arrived off the Devonshire coast, Rattenbury took the _Lyme Packet's_ boat and rowed himself ashore, landing at Beer Head, his object being to get assistance from the men of Sidmouth for landing his goods. It was then about 1 A.M. The captain of the _Lyme Packet_ kept his ship standing off and on during the night, and hovered about that part of the coast till daybreak. But as Rattenbury had not returned by the time the daylight had come back, Cawley became more than a little nervous and feared lest he might be detected. Before very long--the exact time was 6.30 A.M.--Robert Aleward, a mariner on the Revenue cutter _Scourge_, on turning his eye into a certain direction not more than three miles away, espied this _Lyme Packet_, informed his commander, and a chase was promptly begun. Cawley, too, saw that the _Lyme Packet_ had been observed, and began to make preparations accordingly. He let draw his sheets, got the _Lyme Packet_ to foot it as fast as she could, and as the three intervening miles became shorter and shorter he busied himself by throwing his casks of spirits overboard as quickly as he and his crew knew how. The distant sail he had noticed in the early morning had all too truly turned out to be the Revenue cutter, but he hoped yet to escape or at any rate to be found with nothing contraband on board. It was no good, however, for the cruiser soon came up, and as fast as the _Lyme Packet_ had dropped over the half-ankers, so quickly did the _Scourge's_ men pick them up again in the cutter's boats. Having come up alongside, the cutter's commander, Captain M'Lean, went on board, seized Cawley and his ship as prisoners, and eventually took both into Exmouth. Judicial proceedings followed with a verdict for the King, so that what with a broken bowsprit and the loss of time, cargo, ship, and liberty the voyage had in nowise been profitable to Cawley. CHAPTER XV A TRAGIC INCIDENT And now we must turn to an occurrence that was rather more tragic than the last, though the smugglers had only themselves to blame. The reader is already aware of the practice existing at this time of actually rowing contraband across from France to England in large boats pulling four or more oars. As one who have myself rowed a craft most of the way from Calais to Dover in a flat calm, I cannot altogether envy the smugglers their job. However, on May 11, 1818, Captain Hawtayne, commanding H.M.S. _Florida_, was cruising in the English Channel on the look-out for contraband craft. Evidently he had received certain information, for at eight o'clock that evening he ordered Mr. Keith Stewart, master's mate, to man one of the ship's boats and to intercept any boat that might leave the French coast that looked at all of a suspicious nature. This order was duly obeyed. A galley was observed some time before, which had no doubt aroused Captain Hawtayne's suspicions. This galley had been seen to come out of Calais harbour and to be rowed towards the westward. But she must have spotted the _Florida_, for she very shortly put back. But before long Mr. Stewart's boat fell in with another craft--a long white galley named the _St. Thomas_. This was now about 1 A.M., and for a time the _St. Thomas_ had the impudence to pretend she was a French police boat. When descried she was about five or six miles to the N.N.W. of Cape Blanc Nez, and was steering to the westward. The night was dark, for the moon had disappeared behind a cloud as Mr. Stewart's boat came up alongside and hailed the strange craft. He began by asking what boat she was. The steersman replied by inquiring what boat Mr. Stewart's was. The latter answered that it was the King's boat. At that time the _St. Thomas's_ sails were up, and now Mr. Stewart ordered the steersman to lower them. He made no answer, but, turning round to his crew exhorted them to pull quickly, saying, "Give way, my boys, give way." Thereupon the smugglers cheered and pulled as hard as they could. Mr. Stewart again ordered the steersman to lower sail, adding that should he fail to do so he would fire at him. But this did not awe the _St. Thomas_. "Fire and be damned," answered the steersman. "If you fire, I will fire. We are as well armed as you are." Stewart held his hand and did not fire, but ordered his men to pull closer. Coming alongside, he addressed the steersman, saying it was absolutely essential that he should examine the _St. Thomas_ and that he knew they were Englishmen, adding that he was unwilling that there should be any bloodshed by firing into the boat. [Illustration: "Fire and be damned."] With this the _Florida_'s boat pulled up on the other's quarter, and the bowmen hooked on with the boat-hook. The _St. Thomas's_ steersman knocked the boat-hook away and threatened to shoot the bowman if he did not let go. For a short time thereafter the boats separated and drifted apart. But a second time his Majesty's boat pulled up alongside, and Mr. Stewart jumped forward into the bows and ordered one of his own men to stand by ready to accompany him on board. The steersman of the other, however, was determined, and resisted Stewart's attempt, at the same time presenting a pistol and threatening to shoot the officer if he advanced one step further. On that the men of _St. Thomas_ ceased rowing, drew in their oars, and rushed aft to where the steersman was standing in the stern. Matters began to look ugly, and being convinced that these men were bent on desperate resistance, Mr. Stewart was compelled to fire with his pistol at the steersman, who immediately fell. Stewart instantly leapt aboard, but was nearly jostled into the sea by two of the enemy. He ordered the whole of this crew to go forward, but they declined to obey, and followed this up by threatening that if they still refused he would have to use his sword and cut them down. The only member of his own crew who had already got aboard as well was his coxswain, and owing either to himself or the action of the coxswain in stepping from one boat to the other, the two craft had drifted apart, and for a time there was considerable risk that the men, who were obvious smugglers, would fall on these two. But the naval officer had already cut down two of their number with his sword, and after that the rest went forward and were obedient. The _St. Thomas_ was rather a large craft of her kind. Additional to her sails, she rowed five on one side, six on the other, and also had a steersman, the additional oarsman being no doubt placed according to the tide so that his work might in some measure counteract the great leeway which is made by small vessels crossing the strong tidal stream of the English Channel. As all was now quiet on board, Mr. Stewart searched her and found she was laden with kegs, which, said the crew, were filled with tea and tobacco, these kegs being as usual already slung for putting ashore or sinking. Later on it was found that out of this crew no less than six were English, besides one man who had been born at Flushing of English parentage, though he called himself a Dutchman. The rest were all foreigners. No one can read such an incident as this without regretting that they should have ever led to slaughter. It is a serious thing to take any man's life when there is no warfare, and it is still more dismal if that man is of the same nationality as the one who deals death. If the whole of the _St. Thomas's_ crew had been killed there could have been no blame on Mr. Stewart, for he was only carrying out his orders and acting in self-defence. The smugglers were fully aware they were in the wrong, and they were responsible for any consequences that might accrue. The officer had given them ample warning, and he had only used severe measures when absolutely compelled. But there is a more satisfactory side to this regrettable incident, which one is only too glad to be able to record. The man who had been so badly wounded desired to speak to Mr. Stewart, and when the latter had approached him he turned to him and said: "You've killed me; sir, I'm dying." Mr. Stewart saw that this was perfectly true, and that the man was in no sense exaggerating. "Well, I'm sorry for it," he said, "but it was your own fault." "Yes," answered the dying man, "I know that, but I hope you won't make things worse than they are. I freely forgive you." This was the steersman who had so strenuously opposed the boarding of the _St. Thomas_. We can quite sympathise with the feelings of Mr. Stewart, and be thankful that those lawless days of violence have long since passed. If you talk with any of the Revenue officers still living who were employed in arresting, lying in wait for, receiving information concerning, and sometimes having a smart fight with the smugglers, you will be told how altogether hateful it was to have to perform such a duty. It is such incidents as the above which knock all romance out of the smuggling incidents. An encounter with fisticuffs, a few hard blows, and an arrest after a smart chase or a daring artifice, whilst not lessening the guilt of smuggling, cannot take away our interest. Our sympathies all the time are with the Revenue men, because they have on their side right, and in the long-run right must eventually conquer might. But, as against this, the poorer classes in those days were depressed in ignorance with low ideals, and lacking many of the privileges which no thinking man to-day would refuse them. And because they were so daring and so persistent, because they had so much to lose and (comparatively speaking) so little really to gain, we extend to them a portion of our sympathy and a large measure of our interest. They were entirely in the wrong, but they had the right stuff in them for making the best kind of English sailormen, the men who helped to win our country's battles, and to make her what she is to-day as the owner of a proud position in the world of nations. Ten of these twelve men were taken as prisoners to the _Florida_, and the _St. Thomas_ with her cargo still aboard were towed by the _Florida_ into Yarmouth Roads, and there delivered to the Collector of Customs. She was found to be a 54-foot galley--a tremendous length for an oared craft--with no deck, and rigged with three lugsails and jib, her size working out at about 11 tons burthen. On delivering the cargo at Yarmouth it was found that there were altogether 207 kegs. The ten uninjured prisoners were taken before the Yarmouth magistrates, and the two whom the officer had cut down were sent on shore immediately the _Florida_ arrived in that port. The English steersman, to whose case we call special attention, died, two others were fined £100 each, two were sent to gaol, and one, who was the son of the man who died, was liberated, as it was shown that he had only been a passenger. The man who had been born of English parents at Flushing was also set free, as the magistrates had not sufficient proof that he was a British subject. A few months prior to the above occurrence Lieutenant John Wood Rouse was in command of his Majesty's schooner _Pioneer_. On the 11th of January 1817 he was cruising between Dungeness and Point St. Quintin, when his attention was drawn to a lugger whose name we may state by anticipation was the _Wasp_. She appeared to be making for the English coast on a N.W. bearing, and was distant about six miles. In order to cut her off and prevent her from making the shore Lieutenant Rouse sent one of his men named Case with a galley to cross her bows. At the same time he also despatched another of his boats under the care of a Mr. Walton to make directly for the lugger. This occurred about 10 A.M., and the chase continued till about 3.45 P.M., when the schooner came alongside the lugger that had, by this time, been seized by Mr. Case. Lieutenant Rouse was then careful to take bearings of the land, and fixed his position so that there should be no dispute as to whether the lugger were seized within the legal limits. On capturing the lugger, only two persons were found on board, and these were at once transferred to the _Pioneer_. To show what liars these smugglers could become, one of these two said he was a Frenchman, but his name was the very British-sounding William Stevenson. The other said he was a Dutchman. Stevenson could speak not a word of French, but he understood English perfectly, and said that part of the cargo was intended for England and part for Ireland, which happened to be the truth, as we shall see presently. He also added that of the crew of eight three were Dutchmen and five English, for he had by now forgotten his own alleged nationality. Prior to the arrival of Mr. Case's boat the lugger had hoisted out her tub-boat and rowed away as fast as the waves would let her, with all the crew except these two. She was found to have a cargo of tobacco and tea, as well as Geneva, all being made up into suitable dimensions for landing. On examining the ship's papers it was indicated that she was bound for Bilbao in Spain. But these papers had evidently been obtained in readiness for such an occurrence as the advent of the schooner. When it is mentioned that this lugger was only a large galley with absolutely no deck whatever, and capable of being rowed by ten men, it was hardly credible that she would be the kind of craft to sail round Ushant and across the Bay of Biscay. "Was she calculated to carry a cargo to Spain?" asked counsel at the trial two years later. "I will risk my experience as a sailor," answered one of the witnesses, "that I would not have risked my life in a boat of that description." But, unfortunately for the smugglers, there was discovered on board a tin box which absolutely gave their case away. In this tin box was found an instructive memorandum which it requires no very great ingenuity to decipher, and ran something as follows:-- "For B. Valden. From Tusca Tower to Blackwater Hill, allowing half a point for the tide. For W. Martensons Glyn. From Tusca N.E. until Tara Hill bears N.W. 10 pieces of chocolate 10 gulders. 10 pieces of gays[20] 10 ditto. A proportion of G., say one-third, and let it be strong as possible. A vessel coming in the daytime should come to anchor outside the banks. At Clocker Head, Bryan King. At the Mountain Fort, Henry Curran. And Racklen, Alexander M'Donald." Now anyone on consulting a chart or map of the south-west and west of the British Isles can easily see that the above was just a crude form of sailing directions to guide the ship to land the goods at various places in Ireland, especially when the box also contained a paper to the following effect:-- "The Land's End to Tusca 135 miles N.N.E. A berth off Scilly 150 N.E.3/4N." The ship was to take such goods as mentioned to the above individuals, and here were the landmarks and courses and the division of the goods. "A proportion of G," of course, referred to the amount of Geneva, but the gentleman for whom it was intended did not get it "as strong as possible." Not one of these places mentioned was within hundreds of miles of Bilbao, but all the seamarks were to guide the mariners to Ireland. Tara Hill, Tuscar Rock and so on were certainly not Spanish. But these instructions were by no means uncommon. They were technically known among smugglers as "spot-notes," that is to say, indications of the spots where the goods were to be landed. When Stevenson found that his captors had become possessed of these papers he was considerably confused and embarrassed, even going so far as to ask for them to be given back to him--a request which was naturally declined. The lugger was taken captive into Dover, and Stevenson, being an Englishman, was committed to gaol in the Dover town prison, from which he succeeded in escaping. The Dutchman was let off, as he was a foreigner. The men who had rowed away in the tub-boat escaped to France, having taken with them out of the galley one parcel of bandanna handkerchiefs. The rule in these cases was to fine the culprit £100 if he was a landsman; but if he was a sailor he was impressed into the Navy for a period of five years. There must be many a reader who is familiar with some of those delightful creeks of Devonshire and Cornwall, and has been struck with the natural facilities which are offered to anyone with a leaning for smuggling. Among these there will rise to the imagination that beautiful inlet on whose left bank stands Salcombe. Towards the end of June in the year 1818 William Webber, one of the Riding officers, received information that some spirits had been successfully run ashore at the mouth of this harbour, "a place," remarked a legal luminary of that time, "which is very often made the spot for landing" this class of goods. Webber therefore obtained the assistance of a private in the 15th Regiment, and early in the evening, as he had been informed that the goods were not yet carried away, but still were lying deposited somewhere near the beach, proceeded to the spot. He and the hussar arrived at the place about nine o'clock on this June evening and managed to conceal themselves behind a hedge. They had not very long to wait before they heard the sound of some men talking, and a man named James Thomas was observed to remark: "We couldn't have had a better time for smuggling if we had lain abed and prayed for it." Through the openings in the hedge Webber and the hussar could see the outline of the delinquent, and the voice was more than familiar to the Riding officer. We can readily appreciate Thomas's ecstasy when we remark that it had now become rather dark and a sea-haze such as frequently comes up in fine weather after a hot day was beginning to spread itself around. For some time longer the two men continued to remain in their hiding-place, and then heard that Thomas and his accomplice had become joined by a number of other people. The sound of horses' hoofs being led down to the beach was also distinctly heard, and there were many signs of accelerated activity going on. Presently there came upon the ears of the Riding officers the noise which proceeds from the rattling of casks, and from some convenient hiding-place, where they had remained, these were at last brought forth, slings were prepared, and then the load was placed on the backs of the several horses. At this point, deeming that the time had come to interfere, the Riding officer and the hussar crept out from their place of concealment and advanced towards the band of smugglers. But, alert as hares, the latter, so soon as they realised their own danger, took to their heels and ran helter-skelter away. Thomas, however, was too wrath to hasten, and began to curse his men. He began by complaining that the kegs which had been brought forth were wonderfully "slack," that is to say they were not as full as they might have been, hinting that someone had been helping himself to their contents of spirits. "If you had brought these a little sooner," referring doubtless to both horses and casks, "we should have been three miles on our way home." But scarcely had he finished his sentence than the last of his band had fled, leaving him behind with both horses and casks. He was promptly arrested and eleven months later prosecuted by the Attorney-General. Because the smugglers were so frequently assisted in their work by those night signals to which we alluded some time back it had been made a penal offence to show a light for the purpose of signalling within six miles of the coast. Arising out of such an offence, John Newton and another found themselves prosecuted for an incident that occurred about the middle of December 1819. The comparative seclusion of that big bight which extends from the Bill of Portland to the promontory well known to many readers as Hope's or Pope's Nose, was much favoured by the smuggling fraternity. This West Bay was well out of the English Channel and the track of most of his Majesty's ships, and there were plenty of hills and high ground from which to show friendly signals to their comrades. Rattenbury and Cawley, as we related, had in vain tried to land their cargo hereabouts, though there were many others who, before the Revenue cutters became smarter at their duty, had been able to run considerable quantities of dutiable goods in the vicinity of Sidmouth and Lyme. On the afternoon of this winter's day two small sailing craft had been noticed by the Preventive shore officers to be tacking about near the land, but did not appear to be engaged in fishing. It was therefore reasonably supposed they were about to run some contraband ashore after dark. A Mr. Samuel Stagg and a Mr. Joseph Pratt, stationed at Sidmouth in the Preventive service, were all the time keeping a smart look-out on these boats, and somewhere about five o'clock in the evening launched their oared-cutter and rowed off towards them. After a chase they came alongside the first, which was named the _Nimble_, and boarded her. They found therein three men consisting of John Newton, John Bartlett, and Thomas Westlake; but as they searched her and found no trace of any casks or packages of tobacco, the Preventive men left her to row after the other craft. It was now, of course, quite dark, and there was blowing a nice sailing breeze. Scarcely had they started to row away before the _Nimble_ hoisted sail and by means of flint and steel began to make fire-signals, and kept on so doing for the next half hour. This was, of course, a signal for the second boat, and as soon as the latter observed these signs she also made sail and hurried away into the darkness of the bay. It was impossible for the officers to get up to her, for they would stand every chance of losing themselves in the vast expanse of West Bay, and the craft might take it into her head to run down Channel perhaps into Cornwall or eastwards round to Portland, where goods often were landed. Therefore deeming one craft in arrest to be worth two sailing about in West Bay, they went back and seized the _Nimble_. The three men, whose names we have given, were taken ashore, tried, and found guilty. But as illustrative of the times it is worth noting that John Bartlett had before this occurrence actually been engaged for some time as one of the crew of that Revenue cutter about which we spoke some time back in this very bay. And so, now, "for having on the high seas, within six miles of the coast, made a certain light on board a boat for the purpose of giving a signal to a certain person or persons," he was, in company with his two colleagues, condemned. That the age of lawless mobs was by no means past, may be seen from the incident which now follows. It had been thought that the Act which had been passed, forbidding any boat built to row with more than four oars, would have put a considerable check to activities of the smugglers. But these boats not only continued to be built, but also to be navigated and used for the contraband purposes. The Revenue officers of the district of Christchurch, Hants, had reason in April of 1821 to believe that a boat was being constructed in their neighbourhood of such dimensions and capable of being rowed with such a number of oars as made her liable to seizure. Therefore, taking with them a couple of dragoons, two of these Revenue officers proceeded on their way to the district near Milton, which is, roughly speaking, the centre of that bay which is bounded on one side by Christchurch Head, and on the other by Hurst Point. They had not arrived long at their destination before it was found that about thirty men had concealed themselves in an adjoining wood. The officers had found the boat they were looking for in a meadow, and were about to seize it. It was found to be covered over with sails, having been hidden in the meadow for safety's sake, for since it was made to row seven aside it was clearly liable to forfeiture. One of the two officers now went off to fetch assistance, and whilst he was away two of the smugglers came forth and fraternising with the two dragoons, offered them some brandy which they drank. In a short while both soldiers had taken such a quantity of the spirits that they became utterly intoxicated and helpless. One of the two smugglers then gave a whistle, and about thirty men issued forth from the wood, some of them in various forms of disguise. One had a deer's skin over his face, others had their faces and hands coloured with blue clay and other means. These men angrily demanded from the solitary officer the sails which he had removed from the boat, but their requests were met by refusal. The mob then seized hold of the sails, and a tussle followed, whereupon the officer threatened to shoot them. He managed to retain hold of one sail, while the mob held the other and took it away. About three o'clock in the afternoon the other officer returned with the Lymington Preventive officer, two Custom House men, and three dragoons. They found the intoxicated soldiers, one of whom was lying prostrate on the field, while the other was ludicrously and vainly endeavouring to mount his horse. The seven men now united, and got a rope by which they began to remove the boat from its hiding-place, when a great many more people came on to the scene in great indignation. As many as fifty, at least, were now assembled, and threats and oaths were bandied about. During this excitement some of the crowd cut the rope, while a man named Thomas Vye jumped into the boat, and rather than see her fall into the hands of the enemy, endeavoured to stave her in. The remainder of the story is but brief. For, at last, the seven men succeeded in pulling the boat away in spite of all the crowd's efforts, and dragged it even across a couple of fields, where there was a road. Here a conveyance was waiting ready, and thus the boat was taken away, and at a later date Vye was duly prosecuted by the Crown for his share in the proceedings. FOOTNOTES: [20] "Gays" was evidently trade slang to denote bandanna silk handkerchiefs, which were frequently smuggled, and some of which were found on board. CHAPTER XVI ADMINISTRATIVE REFORMS By an Order in Council of May 5, 1821, it was directed that henceforth all sums which were awarded for arrests on shore of any person concerned in smuggling should be paid in the following proportions. He who made the arrest was to have three-quarters of the reward, which was to be divided into equal proportions if there were more than one person. If there were any officer or officers present at the time of arrest, these were to have one quarter of the reward. The officer commanding the party was to have two shares, each of the other officers having one share. The reward payable for a smuggler convicted and transferred to the Navy amounted to £20. And here let it be added that the persons liable to arrest in regard to smuggling were: (1) Those found on smuggling vessels; (2) Those found unloading or assisting to unload such craft; (3) Those found to be carrying away the landed goods or concerned in hiding the same. But before conviction it was essential to prove that the seized spirits were foreign; that the vessel had come from foreign parts; that the party who detained the smugglers was a Customs Officer; and that the offenders were taken before a proper magistrate. We now come to the year 1821, when the Commissioners of Inquiry made an important report touching the Revenue service. They suggested that the Riding Officers were not valuable in proportion to their cost, and so it came about that the Inspectors and superior officers, as well as a large number of the inferior classes, were dispensed with, but a small percentage of the lowest class was retained as a Preventive Mounted Guard, the annual cost of this being only the modest sum of £5000. This Preventive Guard was to be employed in watching for any gatherings of smugglers, and whenever any goods might be landed and carried up into the country, they were to be followed up by the members of this guard. They were also to maintain a communication between the different stations. Up to the year 1821, from those early days of the seventeenth century and earlier, the Revenue cruisers were the most important of all the means employed for suppressing smuggling. But the same inquiry which had made its recommendations regarding the Riding Officers also reported that the efficacy of the vessels employed in protecting the Revenue was not proportionate to the expense incurred in their maintenance. They advised, therefore, that their numbers should be reduced, and that whereas they had in 1816 come under the care of the Admiralty, they should now be restored to the control of the Customs. But the officers and crews of these cruisers were still to be selected by the Admiralty. And thus in the year 1822 these recommendations were carried into effect, and a new order inaugurated. It was by a Treasury Minute of February 15, 1822, that it was directed that the whole of the force employed for the prevention of smuggling "on the coast of this kingdom," was to be consolidated and transferred, and placed under the direction of the Customs Board. This force was to consist of the cruisers, Preventive Water-guard, and Riding Officers. And henceforth the commanders of cruisers were to receive their orders from the Controller-General of the Coastguard, who was to be responsible to the Board of Customs. The one exception to this change was that the Coast Blockade on the coast of Kent and Sussex, which had shown itself so satisfactory that it was left unaltered. The Preventive Water-guard became the Coastguard, and this--rather than the cruisers--should form the chief force for prevention of smuggling, the Riding Officers, or Preventive Mounted Guard, being merely auxiliary by land, and the cruisers merely auxiliary by sea. To what extent the number of cruisers were reduced can be estimated by stating that whereas there were forty-seven of these Revenue craft employed in England in 1821, there were only thirty-three two years later, these consisting of the _Mermaid_, _Stag_, _Badger_, _Ranger_, _Sylvia_, _Scout_, _Fox_, _Lively_, _Hawk_, _Cameleon_, _Hound_, _Rose_, _Scourge_, _Repulse_, _Eagle_, _Tartar_, _Adder_, _Lion_, _Dove_, _Lapwing_, _Greyhound_, _Swallow_, _Active_, _Harpy_, _Royal George_, _Fancy_, _Cheerful_, _Newcharter_, _Fly_, _Seaflower_, _Nimble_, _Sprightly_, _Dolphin_. The first-class cruisers were of 140 tons and upwards, the second class of from 100 to 140 tons, and the third class were under 100 tons. In 1824 the cruisers on the Irish coast and the Scotch coast were also transferred to the Customs Board, and from that date the entire Coastguard service, with the exception of the Coast Blockade, was directed, as stated, by the Controller-General. In the year 1829, the instructions were issued to the Coastguard. Afloat, these applied to the commanders, mates, gunners, stewards, carpenters, mariners, and boys of the cruisers. Ashore, they were applicable to the Chief Officers, Chief Boatmen, Mounted Guard, Commissioned Boatmen, and Boatmen, both sections being under their respective commanders. Each member of the Mounted Guard was provided with a good horse and sword, with an iron scabbard of the Light Cavalry pattern, as well as a couple of pistols and ammunition. The cruiser commanders were again enjoined to keep the sea in bad weather and at night, nor were they permitted to come to harbour except when really necessary. In 1831 came the next change, when the Coastguard took the place of the Coast Blockade, which had done excellent duty for so many years in Kent and Sussex. The aim was to make the Coastguard service national rather than departmental. To promote the greatest efficiency it was become naval rather than civil. It was to be for the benefit of the country as a nation, than for the protecting merely of its revenues. Thus there was a kind of somersault performed; and the whole of the original idea capsized. Whereas the Preventive service had been instituted for the benefit of the Customs, and then, as an after-thought, became employed for protection against the enemy across the Channel, so now it was to be exactly the other way on. The Revenue was to be subservient to the greater and national factor. In this same 1831, the number of cruisers had risen to thirty-five in England, but many of them had tenders. There were altogether twenty-one of these latter and smaller craft, their tonnage varying from twenty-five to sixty. And the next year the Mounted Guard was reorganised and the Riding Officers disappeared. With the cordon of cruisers afloat, and the more efficient Coastguard service ashore, there was a double belt round our coasts, which could be relied upon both for national and Revenue services. By this time, too, steam was invading the domain of the ship, and in 1839, besides the old-fashioned sailing cutters and tenders, there was a steamer named the _Vulcan_, of 200 tons, taken into the service, her duty being to cruise about and search for suspicious vessels. In some parts of the country, also, there was assistance still rendered by the Mounted Guard for watching the roads leading inland from the beach to prevent goods being brought up. With this increased efficiency it was but natural that a change should come over the character of the smuggling. Force was fast going out of date. Except for a number of rather startling occasions, but on the whole of exceptional occurrence, violence had gone out of fashion. But because of the increased vigilance along the coast the smuggler was hard put to devise new methods of running his goods into the country without being surprised by the officials. Most, if not all, of the old syndicates of French and Englishmen, who made smuggling a roaring trade, had died out. The armed cutters had long since given way to the luggers as the smuggling craft. Stealth had taken the place of violence, concealments and sunken goods were favoured rather than those daring and outrageous incursions which had been in the past wont to take place. And yet, just as a long-standing illness cannot be cured at once, but keeps recurring, so there were periods when the smuggling disease kept breaking out and seemed to get worse. Such a period was that between 1825 and 1843, but it was pointed out to the Treasury that so long as the high duties continued, "Your Lordships must look only to the efficiency of the Coastguard for the continued absence of successful enterprises, and that smuggling would immediately revive upon the slightest symptom of relaxation on the part of the Commissioners of Customs." The service was therefore glad to encourage Naval Lieutenants to serve as Chief Officers of the Coastguard. Among the general instructions issued to the Coastguard of the United Kingdom in 1841, were definite orders to the commanders of cruisers. Thus, if ever a cruiser ran aground the commander was to report it, with full particulars of the case and extent of damage. During the summer season the Inspecting Commanders were to take opportunities for trying the comparative speeds of these cruisers. Whenever cruisers should meet at sea, in any roadstead or in any harbour, they were to hoist their ensigns and pendants as an acknowledgment that each had seen the other; and when both had thus hoisted their colours they might immediately be hauled down. This was also to be done when one cruiser should pass another at anchor. Cruisers were again reminded that they were to wear only the ensigns and pendants appointed for the Revenue service, and not such as are used in the Royal Navy. Nor were salutes to be fired by cruisers except on particular and extraordinary occasions. It was further ordered that no alteration was to be made in the hull, masts, yards, sails, or any fitments of the cruisers, without the sanction of the Controller-General. To prevent unnecessary expense on fitting out or refitting of any of the cruisers, the use of leather was to be restricted to the following: the leathering of the main pendants, runners in the wake of the boats when in tackles, the collar of the mainstay, the nip of the main-sheet block strops, leathering the bowsprint traveller, the spanshackle for the bowsprit, topmast iron, the four reef-earings three feet from the knot. All old copper, copper-sheathing, nails, lead, iron and other old materials which were of any value, were to be collected and allowed for by the tradesmen who perform the repairs. New sails were to be tried as soon as received in order to ascertain their fitness. Both boats and cruisers were also to be painted twice a year, above the water-line, this to be done by the crews themselves. A general pilot was allowed for two months when a cruiser arrived on a new station, and an occasional pilot was permissible in cases of necessity, but only licensed pilots were to be employed. General pilots were paid 6s. a day as well as the usual rations of provisions. The cruisers were provided with charts of the coast off which they were employed. Naval officers holding appointments as Inspecting Commanders of cruisers, Chief Officers of stations and Mates of cruisers were ordered to wear the greatcoat established by any Admiralty regulation in force for the time being, with epaulettes, cap, and side-arms, according to their ranks. Commanders of cruisers, if not naval officers, were to wear a blue lappel-coat, buttoned back with nine Coastguard uniform buttons and notched button-holes, plain blue stand-up collar with gold lace loop and button on each side thereof--the loop to be five inches long, and the lace three-quarters of an inch in breadth. There were also to be three buttons and notched button-holes on each cuff and pocket, as well as three buttons in the folds of each skirt. The waistcoat was to be white or blue kerseymere, with uniform buttons, white or blue pantaloons or trousers, with boots, a blue cloth cap similar in shape to those worn in the Royal Navy, with two bands of gold lace three-quarters of an inch broad, one at the top and the other at the bottom of the headpiece. The sword was to have a plain lace knot and fringe tassel, with a black leather belt. White trousers were worn on all occasions of inspection and other special occasions between April 23 and October 14. Blue trousers were to be worn for the other months. In 1849 the Select Committee on the Board of Customs expressed the opinion that the number of cruisers might be reduced, and the Landguard practically abolished; but it was deemed advisable that these protections being removed, the coastline of defence ought to be strengthened by securing the services of Naval Lieutenants who had retired from the Navy on half-pay. So the number of cruisers and tenders which in 1844 had reached seventy-six, and in 1849 were fifty-two, had now sunk to fifty in the year 1850. In 1854, on the outbreak of war with Russia, 3000 men were drafted into the Navy from the Coastguard, their places being filled by pensioners. During the war considerable service was also rendered by the Revenue cruisers, by capturing the Russian ships in the Northern Seas, for we must recollect that, just as in the wars with France, there were two centres to be dealt with, viz., in the north and south. The war with Russia, as regards the sea service, was prosecuted both in the Narrow Seas and in the Black Sea, and the Russian trade was badly cut up. As many as eleven Russian ships were captured by means of these British cutters, and no less than eight of these prizes were condemned. The fact is worthy of being borne in mind when considering the history of these craft which have long since passed from performing active service. The next modification came in 1856, when it was resolved to transfer the control of the Coastguard to the Admiralty; for in spite of the great change which had been brought about in 1831, all the Coastguard officers and men while being appointed by the Admiralty, were none the less controlled by the Customs. However, this condition was now altered, but in the teeth of opposition on the part of the Customs, who represented to the Treasury that considerable inconvenience would result from this innovation. But on the 1st of October 1856, the control of the Coastguard was transferred to the Admiralty, as it had been foreshadowed. And with that we see practically the last stage in the important development which had been going on for some years past. It was practically the finale of the tendency towards making the service naval rather than civil. For the moment, I am seeking to put the reader in possession of a general idea of the administrative features of the service, which is our subject, during the period between 1822-1856. At the last-mentioned date our period devoted to cutters and smugglers practically ends. But before proceeding to deal with the actual incidents and exciting adventures embraced by this period, it may be convenient just to mention that these changes were followed in 1869, when the services of civilians employed in any capacity in the Coastguard were altogether dispensed with, and since then the general basis of the Coastguard development has been for the better defence of our coasts, so as to be vigilant against any disembarkation by a foreign power, at the same time providing to a certain extent for the manning of the ships of the Royal Navy when required. Thus, the old organisation, with which the Customs Board was so closely and for so long a time connected, changed its character when its sphere became national rather than particular. Its duty henceforth was primarily for the protection of the country than for the prevention of smuggling. But between 1822--when the Admiralty yielded up their responsibilities to the Customs Board--and the year 1856, when again the control was returned to the Admiralty, no material alterations were made in the methods of preventing smuggling, the most important event during that period--apart altogether from the actual smuggling incidents--was the change which had been brought about in 1831. During the different reigns and centuries in which the smuggling evil had been at work, all sorts of anti-smuggling acts had been passed. We can well understand that a certain amount of hasty, panic-driven legislation had from time to time been created according to the sudden increase of contraband running. But all these laws had become so numerous, and their accumulation had made matters so intricate, that the time had come for some process of unravelling, straightening out, and summarising. The systematising and clarification were affected by the Act of January 5, 1826 (6 Geo. IV. cap. 108). And one of the most important features of this was to the effect that any vessel belonging wholly or in part to his Majesty's subjects, found within four leagues of the coast of the United Kingdom, with prohibited goods on board, and not proceeding on her voyage, was to be forfeited. Any vessel or boat, not square-rigged, belonging wholly or in part to his Majesty's subjects, and found in the British (as it was then frequently designated) Channel or Irish Channel, or elsewhere within 100 leagues of the coast, with spirits or tobacco in casks or packages of less size than 40 gallons; or tea, tobacco, or snuff, in any package containing less than 450 lbs. in weight--this craft was to be forfeited. And vessels (not square-rigged), if found unlicensed, were also to be forfeited. But whale-boats, fishing-boats, pilot's boats, purely inland boats, and boats belonging to square-rigged ships were exempt. But, of course, smuggling was still very far from being dead, and the Revenue cruisers had always to be on the alert. Some idea of the sphere of activity belonging to these may be gathered from the following list of cruiser stations existing in the early 'twenties. The English cruiser stations consisted of: Deptford, Chatham, Sheerness, Portsmouth, Cowes, Weymouth, Exmouth, Plymouth, Fowey, Falmouth, Penzance, Milford, Berwick, Grimsby, Boston, North Yarmouth, Harwich, Gravesend, Dover, Poole, Brixham, Ilfracombe, Douglas (Isle of Man), Alderney, Dover, Seaford, Dartmouth, Holyhead, Southend (in the port of Leigh). In Scotland there were: Leith, Montrose, Stranraer, Stornoway, Aberdeen, Cromarty, Campbeltown, Greenock. In Ireland there were: Kingstown, Larne, Killibegs, Westport, Galway, Cork, and Dunmore East. It was to such places as the above that the cruisers repaired for their provisions. When smugglers had been captured and taken on board these cruisers they were allowed not to fare as well as the crew, but to have only two-thirds of the victuals permitted to the mariners. In 1825 additional instructions were issued relating to the victualling of his Majesty's Revenue Cruisers, and in future every man per diem was to have:-- One pound of biscuit, 1/3 of a pint of rum (wine measure), until the establishment of the imperial measure, when 1/4 of a pint was to be allowed, the imperial gallon being one-fifth greater than the wine gallon. Each man was also to have 1 lb. beef, 1/2 lb. flour, or in lieu thereof 1/2 pint of oatmeal, 1/4 lb. suet, or 1-1/2 oz. of sugar or 1/4 oz. of tea, also 1 lb. of cabbage or 2 oz. of Scotch barley. They were to be provided with pure West India rum, of at least twelve months old. Further regulations were also taken as to the nature of the men's grog. "As it is considered extremely prejudicial to the health of the crew to suffer the allowance of spirits to be drank raw, the Commanders are to cause the same to be served out to them mixed with water, in the proportion of three parts water and one part spirits, to be so mixed and served out in presence of one of the mates, the boatswain, gunner, or carpenter, and one or two of the mariners." Smugglers detained on board were not to have spirits. Before proceeding to sea each cruiser was to have on board not less than two months' supply of salt beef, spirits; suet or sugar and tea in lieu, as well as Scotch barley. With reference to the other articles of food, they were to carry as large a proportion as could be stowed away, with the exception of fresh beef and cabbages. But two years prior to this, that is to say on April 5, 1823, the Board of Customs had reduced the victualling allowances, so that Commander and mates and superintendents of Quarantine received 2s. 6d. a day each; mariners 1s. 3d.; and mariners of lazarettes (hospitals 1s. for quarantine) 1s. 3d. a day. As to the methods of the smugglers, these continued to become more and more ingenious, though there was a good deal of repetition of successful tricks until the Revenue officers had learnt these secrets, when some other device had to be thought out and employed. Take the case of a craft called the _Wig Box_, belonging to John Punnett. She was seized at Folkestone in the spring of 1822 by a midshipman of the Coast Blockade. There were found on her six gallons of spirits, which were concealed in the following most ingenious manner. She was quite a small vessel, but her three oars, her two masts, her bowsprit, and her bumpkin, had all been made hollow. Inside these hollows tin tubes had been fitted to contain the above spirits, and there can be little doubt but that a good many other small craft had successfully employed these means until the day when the _Wig Box_ had the misfortune to be found out. There is still preserved in the London Custom House a hollow wooden fend-off which was slung when a ship was alongside a quay. No one for a long time ever thought of suspecting that this innocent-looking article could be full of tobacco, lying as it was under the very eyes of the Customs officers of the port. And in 1820 three other boats were seized in one port alone, having concealed prohibited goods in a square foremast and outrigger, each spar being hollowed out from head to foot and the ends afterwards neatly plugged and painted. Another boat was seized and brought into Dover with hollow yards to her lugsails, and a hollow keel composed of tin but painted to look like wood, capable of holding large quantities of spirits. But there was a very notorious vessel named the _Asp_, belonging to Rye, her master's name being John Clark, her size being just under 24 tons. In 1822 she was seized and found to have a false bow, access to which was by means of two scuttles, one on each side of the stem. These scuttles were fitted with bed-screws fixed through false timbers into the real timbers, and covered with pieces of cork resembling treenails. The concealment afforded space for no fewer than fifty flat tubs besides dry goods. But in 1824 another vessel of the same name and port, described as a smack, was also arrested at Rye, and found to have both tobacco and silk goods concealed. This was effected by means of a false bottom to the ship, which extended as far aft as the ballast bulkhead. The entrance to the concealment was by means of a couple of scuttles on each side of her false keelson, these scuttles being screwed down in such a manner as also to be imperceptible. Also on either side of her cabin there were other hiding-places underneath the berths, and so constructed that they deceived more than one Revenue officer who came aboard to rummage her. The latter had bored holes through the lining, so as to try the distance of that lining from the supposed side of the vessel. Finding this distance not to exceed the fair allowance for the vessel's scuttling, the officers had gone ashore quite satisfied. From the number of gimlet-holes in the lining it was clear that the officers had been imposed upon considerably. But what these officers had taken for the side of the ship was only an intermediary planking, the actual concealment being between that and the vessel's side. To get to the entrance of these concealments, the bedding had to be taken out, which they had no doubt omitted to do. But if they had done this they would have been able properly to get to the lining, when two small pieces of wood about an inch square let into the plank made themselves apparent. And these, if removed with the point of a knife or chisel, brought small pieces of cork (circular in shape) to become visible. As soon as these corks were removed, the heads of bed-screws were observable, and these being unscrewed allowed two boards running the whole lengths of the berths to be taken up, by which means were revealed the concealments capable of containing a considerable quantity of dry goods. Somewhat reminiscent of this ship was the French vessel, _St. Antoine_, which was seized at Shoreham. She had come from Dieppe, and her master was named A. Fache. The after part of her cabin was fitted with two cupboards which had shelves that took down, the back of which was supposed to be the lining of the transom. But on taking the same up, timbers showed themselves. On examining the planks closely, it was noticed that they overlapped each other, the timbers being made to act as fastenings. On striking the lower end of the false timbers on one side, it moved round on a bolt, and one plank with a timber was made to shift on each side of the false stern-post, forming a stern-frame with the other. Below the cupboards down to the run of the vessel the same principle was followed. The entrance to this was by taking down the seats and lockers in the cabin, and a false stern-post appeared to be fastened with a forelock and ring, but by unfastening the same, the false stern-post and middle plank could be taken down. Two ingenious instances of the sinking of contraband goods were found out about the year 1823, and both occurred within that notorious south-east corner of England. The first of these belongs to Sandwich, where three half-ankers of foreign spirits were seized floating, being hidden in a sack, a bag of shingle weighing 30 lbs. being used to act as a sinker. Attached to the sack were an inflated bladder and about three fathoms of twine, together with a small bunch of feathers to act as a buoy to mark the spot. When this arrangement was put into use it was found that the bladder kept the sack floating one foot below the surface of the water. The feathers were to mark the spot where the sack, on being thrown overboard, might bring up in case any accident had occurred to the bladder. At spring tides the rush of the water over the Sandwich flats causes a good deal of froth which floats on the surface. The reader must often have observed such an instance on many occasions by the sea. The exact colour is a kind of dirty yellow, and this colour being practically identical with that of the bladder, it would be next to impossible to tell the difference between froth and bladder at any distance, and certainly no officer of the Revenue would look for such things unless he had definite knowledge beforehand. [Illustration: The Sandwich Device. In the sack were three half-ankers. A bag of shingle acted as sinker, and the bladder kept the sack floating.] The second occurrence took place at Rye. A seizure was made of twelve tubs of spirits which had been sunk by affixing to the head of each a circular piece of sheet lead which just fitted into the brim of the cask, and was there kept in its place by four nails. The weight of the lead was 9 lbs., and the tubs, being lashed longitudinally together, rolled in a tideway unfettered, being anchored by the usual lines and heavy stones. The leads sank the casks to the bottom in 2-1/2 fathoms of water, but at that depth they in specific gravity so nearly approximated to their equal bulk of fluid displaced that they could scarcely be felt on the finger. The leads were cast in moulds to the size required, and could be repeatedly used for the same purpose, and it was thought that the smuggling vessels, after coming across the Channel and depositing their cargoes, would on a later voyage be given back these pieces of lead to be affixed to other casks. A clinker-built boat of about 26 tons burthen named the _St. François_, the master of which was named Jean Baptiste La Motte, of and from Gravelines, crossed the North Sea and passed through the Forth and Clyde Canal in the year 1823 to Glasgow. Nominally she had a cargo of apples and walnuts, her crew consisting of six men besides the master. She was able to land part of her cargo of "apples" at Whitby and the rest at Glasgow, and afterwards, repassing safely through the canal again, returned to Gravelines. But some time after her departure from Scotland it was discovered that she had brought no fruit at all, but that what appeared to be apples were so many portions of lace made up into small boxes of the size of apples and ingeniously painted to resemble that fruit. As showing that, even as late as the year 1824, the last of the armed cutters had not been yet seen, we may call attention to the information which was sent to the London Custom House through the Dublin Customs. The news was to the effect that in February of that year there was in the harbour of Flushing, getting ready for sea, whither she would proceed in three or four days, a cutter laden with tobacco, brandy, Hollands, and tea. She was called the _Zellow_, which was a fictitious name, and was a vessel of 160 tons with a crew of forty men, copper-bottomed and pierced for fourteen guns. She was painted black, with white mouldings round the stern. Her boom also was black, so were her gaff and masthead. The officers were warned to keep a look-out for her, and informed that she had a large strengthening fish on the upper side of the boom, twenty cloths in the head, and twenty-eight in the foot of the mainsail. It was reported that she was bound for Ballyherbert, Mountain Foot, and Clogher Head in Ireland, but if prevented from landing there she was consigned to Ormsby of Sligo and Burke of Connemara. In the event of her failing there also she had on board two "spotsmen" or pilots for the coast of Kerry and Cork. There was also a lugger at the same time about to proceed from Flushing to Wexford. This vessel was of from 90 to 100 tons, was painted black, with two white mouldings and a white counter. She carried on her deck a large boat which was painted white also. Tobacco was discovered concealed in rather a curious manner on another vessel. She had come from St. John, New Brunswick, with a cargo of timber, and the planks had been hollowed out and filled with tobacco, but it was so cleverly done that it was a long time before it was detected. All sorts of vessels and of many rigs were fitted with places of concealment, and there was even a 50-ton cutter named the _Alborough_, belonging to London, employed in this business, which had formerly been a private yacht, but was now more profitably engaged running goods from Nieuport in Belgium to Hull. The descriptions of some of these craft sent to the various outports, so that a smart look-out for them might be kept up, are certainly valuable to us, as they preserve a record of a type of craft that has altered so much during the past century as almost to be forgotten. The description of the sloop _Jane_, for instance, belonging to Dumbarton in 1824, is worth noting by those who are interested in the ships of yesterday. Sloop-rigged, and carvel built, she had white mouldings over a yellow streak, and her bulwark was painted green inside. Her cross-jack yards,[21] as they are called, her bowsprit-boom, her gaff and studding-sail boom were all painted white, and she had three black hoops on the mast under the hounds. Her sails were all white, but her square topsail and topgallant-yards were black. The _Jane_ was a 90-tonner. The reader will remember considering some time back an open boat which was fitted with hollow stanchions under the thwarts, so that through these stanchions ropes might pass through into the water below. I have come across a record of a smack registered in the port of London under the singularly inappropriate name of the _Good Intent_. She was obviously built or altered with the sole intention of being employed in smuggling. I need say nothing of her other concealments under the cabin berths and so on, as they were practically similar to those on the _Asp_. But it was rather exceptional to find on so big a craft as the _Good Intent_ a false stanchion immediately abaft the fore scuttle. Through this stanchion ran a leaden pipe about two inches in diameter, and this went through the keelson and garboard strake, so that by this means a rope could be led through and into the vessel, while at the other end a raft of tubs could be towed through the water. By hauling tightly on to this line the kegs could be kept beautifully concealed under the bilge of the vessel, so that even in very clear water it would not be easy to suspect the presence of these tubs. The other end of this pipe came up through the ship until it was flush with the deck, and where this joined the latter a square piece of lead was tarred and pitched so as scarcely to be perceived. There must indeed have been a tremendous amount of thought, as well as the expenditure of a great deal of time and money, in creating these methods of concealment, but since they dared not now to use force it was all they could do. FOOTNOTES: [21] The cro'jack yard was really the lower yard of a full-rigged ship on the mizzen-mast, to the arms of which the clews or lower corners of the mizzen-topsail were extended. But as sloops were fore-and-aft craft it is a little doubtful what is here meant. Either it may refer to the barren yard below the square topsail carried by the sloops of those days--the clews actually were extended to this yard's arms--or the word may have been the equivalent of what we nowadays call cross-trees. CHAPTER XVII SMUGGLING BY CONCEALMENTS Second cousin to the method of filling oars and spars with spirits was that adopted by a number of people whose homes and lives were connected with the sea-shore. They would have a number of shrimping nets on board, the usual wooden handles being fitted at one end of these nets. But these handles had been purposely made hollow, so that round tin cases could be fitted in. The spirits then filled these long cavities, and whether they caught many shrimps or not was of little account, for dozens of men could wade ashore with these nets and handles on their backs and proceed to their homes without raising a particle of suspicion. It was well worth doing, for it was calculated that as much as 2-1/2 gallons of spirit could be poured into each of these hollow poles. Collier-brigs were very fond of smuggling, and among others mention might be made of the _Venus_ of Rye, an 80-ton brig which between January and September one year worked three highly profitable voyages, for besides her ordinary cargo she carried each time 800 casks of spirits, these being placed underneath the coals. There was also the brig _Severn_ of Bristol, which could carry about five keels of coal, but seldom carried more than four, the rest of the space of course being made up with contraband. In 1824 she worked five voyages, and on each occasion she carried, besides her legitimate cargo, as much as eight tons of tobacco under her coals. And there was a Danish-built sloop named the _Blue-eyed Lass_ belonging to Shields, with a burthen of 60 odd tons, also employed in the coal trade. She was a very suspicious vessel, and was bought subsequently by the people of Rye to carry on similar work to the other smuggling craft. All sorts of warnings were sent to the Customs Board giving them information that _The Rose in June_ (needless to say of Rye) was about to have additional concealments added. She was of 37 tons burthen, and had previously been employed as a packet boat. They were also warned that George Harrington, a noted smuggler resident at Eastbourne, intended during the winter months to carry on the contraband trade, and to land somewhere between Southampton and Weymouth. He had made arrangements with a large number of men belonging to Poole and the neighbouring country, and had obtained a suitable French lugger. In 1826 the smacks _Fox_ and _Lovely Lass_ of Portsmouth were seized at that port with kegs of spirits secreted under their bottoms in a thin contemporary casing, as shown in the accompanying diagram. The ingenious part of this trick was that there was no means of communication into the concealment from the interior of the vessel. Thus any officer coming aboard to search would have little or no reason to suspect her. But it was necessary every time this vessel returned from abroad with her contraband for her to be laid ashore, and at low water the kegs could be got at externally. To begin with there were pieces of plank two inches thick fastened to the timbers by large nails. Then, between the planks and the vessel's bottom the tubs were concealed. The arrangement was exceeding simple yet wonderfully clever. Practically this method consisted of filling up the hollow below the turn of the bilge. It would certainly not improve the vessel's speed, but it would give her an efficacious means of stowing her cargo of spirits out of the way. And it was because of such incidents as this last mentioned that orders were sent to all ports for the local craft and others to be examined frequently _ashore_ no less than afloat, in order that any false bottom might be detected. And the officers were to be careful and see that the name of the ship and her master painted on a ship corresponded with the names in her papers. Even open boats were found fitted with double bottoms, as for instance the _Mary_, belonging to Dover. She was only 14 feet long with 5 feet 9-1/2 inches beam, but she had both a double bottom and double sides, in which were contained thirty tin cases to hold 29 gallons of spirits. Her depth from gunwale to the top of her ceiling[22] originally was 2 feet 8-1/2 inches. But the depth from the gunwale to the false bottom was 2 feet 5-3/4 inches. The concealment ran from the stem to the transom, the entrance being made by four cuttles very ingeniously and neatly fitted, with four nails fore and aft through the timbers to secure them from moving--one on each side of the keelson, about a foot forward of the keelson under the fore thwart. Even Thames barges were fitted with concealments; in fact there was not a species of craft from a barque to a dinghy that was not thus modified for smuggling. The name of the barge was the _Alfred_ of London, and she was captured off Birchington one December day in 1828. She pretended that she was bound from Arundel with a cargo of wood hoops, but when she was boarded she had evidently been across to "the other side"; for there was found 1045 tubs of gin and brandy aboard her when she was captured, together with her crew, by a boat sent from the cruiser _Vigilant_. The discovery was made by finding an obstruction about three feet deep from the top of the coamings, which induced the Revenue officer to clear away the bundles of hoops under the fore and main hatchways. He then discovered a concealment covered over with sand, and on cutting through a plank two inches thick the contraband was discovered. The accompanying diagram shows the sloop _Lucy_ of Fowey, William Strugnell master. On the 14th of December 1828 she was seized at Chichester after having come from Portsmouth in ballast. She was found to be fitted with the concealment shown in the plan, and altogether there were 100 half-ankers thus stowed away, 50 being placed on each side of her false bottom. She was just over 35 tons burthen, and drew four feet of water, being sloop rigged, as many of the barges in those days were without the little mizzen which is so familiar to our eyes to-day. [Illustration: The Sloop _Lucy_ showing Concealments.] Cases of eggs sent from Jersey were fitted with false sides in which silks were smuggled; trawlers engaged in sinking tubs of spirits; a dog-kennel was washed ashore from a vessel that foundered off Dungeness, and on being examined this kennel was found to be fitted with a false top to hold 30 lbs. of tobacco; an Irish smack belonging to Cork was specially fitted for the contraband trade, having previously actually been employed as a Coastguard watch-boat. There was a vessel named _Grace_ manned by three brothers--all notorious smugglers--belonging to Coverack (Cornwall). This vessel used to put to sea by appointment to meet a French vessel, and having from her shipped the contraband the _Grace_ would presently run the goods ashore somewhere between Land's End and Newport, South Wales; in fact, all kinds of smuggling still went on even after the first quarter of that wonderful nineteenth century. About the year 1831 five casks imported from Jersey was alleged to contain cider, but on being examined they were found to contain something else as well. The accompanying sketch represents the plan of one of these. From this it will be seen that the central space was employed for holding the cider, but the ends were full of tobacco being contained in two tin cases. In this diagram No. 1 represents the bung, No. 2 shows the aperture on each side through which the tobacco was thrust into the tin cases which are marked by No. 3, the cider being contained in the central portion marked 4. Thus the usual method of gauging a cask's contents was rendered useless, for unless a bent or turned rod were employed it was impossible to detect the presence of these side casks for the tobacco. [Illustration: Cask for Smuggling Cider.] One may feel a little incredulous at some of the extraordinary yarns which one hears occasionally from living people concerning the doings of smugglers. A good deal has doubtless arisen as the result of a too vivid imagination, but, as we have shown from innumerable instances, there is quite enough that is actual fact without having recourse to invention. I know of a certain port in our kingdom where there existed a legend to the effect that in olden days the smugglers had no need to bring the tubs in with them, but that if they only left them outside when the young flood was making, those tubs would find their own way in to one particular secluded spot in that harbour. A number of amateur enthusiasts debated the point quite recently, and a wager was made that such a thing was not possible. But on choosing a winter's day, and throwing a number of barrels into the water outside the entrance, it was found that the trend of the tide was always to bring them into that corner. But, you will instantly say, wouldn't the Coastguard in the smuggling days have seen the barrels as they came along the top of the water? The answer is certainly in the affirmative. But the smugglers used to do in the "scientific" period as follows, and this I have found in a document dated 1833, at which time the device was quite new, at least to the Customs officials. Let us suppose that the vessel had made a safe passage from France, Holland, or wherever she had obtained the tubs of spirits. She had eluded the cruisers and arrived off the harbour entrance at night just as the flood tide was making. Overboard go her tubs, and away she herself goes to get out of the sphere of suspicion. These tubs numbered say sixty-three, and were firmly lashed together in a shape very similar to a pile of shot--pyramid fashion. The tops of the tubs were all painted white, but the raft was green. Below this pyramid of tubs were attached two grapnel anchors, and the whole contrivance could float in anything above seven feet of water. It was so designed that the whole of the tubs came in on the tide below water, only three being partially visible, and their white colour made them difficult to be seen among the little waves. But as soon as they came to the spot where there were only seven feet of water the two grapnels came into action and held the tubs moored like a ship. And as the tide rose, so it completely obliterated them. Some one was of course on the look-out for his spirits, and when the tide had dropped it was easy enough to wade out and bring the tubs ashore, or else "sweep" them ashore with a long rope that dragged along the bottom of the harbour. During the year 1834 smuggling was again on the increase, especially on the south and east coasts, and it took time for the officers to learn all these new-fangled tricks which were so frequently employed. Scarcely had the intricacies of one device been learnt than the smugglers had given up that idea and taken to something more ingenious still. Some time back we called attention to the way in which the Deal boatmen used to walk ashore with smuggled tea. About the year 1834 a popular method of smuggling tea, lace, and such convenient goods was to wear a waistcoat or stays which contained eighteen rows well stuffed with 8 lbs. weight of tea. The same man would also wear a pair of drawers made of stout cotton secured with strong drawing strings and stuffed with about 16 lbs. of tea. Two men were captured with nine parcels of lace secreted about their bodies, a favourite place being to wind it round the shins. Attempts were also made to smuggle spun or roll tobacco from New York by concealing them in barrels of pitch, rosin, bales of cotton, and so on. In the case of a ship named the _Josephine_, from New York, the Revenue officers found in one barrel of pitch an inner package containing about 100 lbs. of manufactured tobacco. [Illustration: The Smack _Tam O'Shanter_ showing Method of Concealment (see Text).] The accompanying plan of the smack _Tam O'Shanter_ (belonging to Plymouth), which was seized by the Padstow Coastguard, will show how spirits were sometimes concealed. This was a vessel of 72 tons with a fore bulkhead and a false bulkhead some distance aft of that. This intervening space, as will be seen, was filled up with barrels. Her hold was filled with a cargo of coals, and then aft of this came the cabin with berths on either side, as shown. But under these berths were concealments for stowing quite a number of tubs, as already explained. A variation of the plan, previously mentioned, for smuggling by means of concealments in casks was that which was favoured by foreign ships which traded between the Continent and the north-east coasts of England and Scotland. In this case the casks which held the supplies of drinking water were fitted with false sides and false ends. The inner casks thus held the fresh water, but the outer casks were full of spirits. After the introduction of steam, one of the first if not the very first instance of steamship smuggling by concealment was that occurring in 1836, when a vessel was found to have had her paddle-boxes so lined that they could carry quite a large quantity of tobacco and other goods. Another of those instances of ships fitted up specially for smuggling was found in the French smack _Auguste_, which is well worth considering. She was, when arrested, bound from Gravelines, and could carry about fifty tubs of spirits or, instead, a large amount of silk and lace. Under the ladder in the forepeak there was a potato locker extending from side to side, and under this, extending above a foot or more before it, was the concealment. Further forward were some loose planks forming a hatch, under which was the coal-hole. This appeared to go as far as the bulkhead behind the ladder, and had the concealment been full, it could never have been found, but in walking over where the coals were, that part of the concealment which extended beyond the locker which was empty sounded hollow: whereupon the officers pulled up one of the planks and discovered the hiding-place. It was decided in 1837 that, in order to save the expense of breaking up a condemned smuggling vessel, in future the ballast, mast, pumps, bulkheads, platforms, and cabins should be taken out from the vessel: and that the hull should then be cut into pieces not exceeding six feet long. Such pieces were then to be sawn in a fore-and-aft direction so as to cut across the beams and thwarts and render the hull utterly useless. The accompanying sketch well illustrates the ingenuity which was displayed at this time by the men who were bent on running goods. What is here represented is a flat-bottomed boat, which perhaps might never have been discovered had it not been driven ashore near to Selsey Bill during the gales of the early part of 1837. The manner in which this craft was employed was to tow her for a short distance and then to cast her adrift. She was fitted with rowlocks for four oars, but apparently these had never been used. Three large holes were bored in her bottom, for the purpose which we shall presently explain. [Illustration: Flat-Bottomed Boat found off Selsey. The sketch shows longitudinal plan, the method of covering with net, and midship section.] Built very roughly, with half-inch deal, and covered over with a thin coat of white paint, she had a grommet at both bow and stern. She measured only 16 feet long and 4 feet wide, with a depth of 2 feet 2 inches. It will be noticed that she had no thwarts. Her timbers were of bent ash secured with common French nails, and alongside the gunwales were holes for lacing a net to go over the top of this boat. Her side was made of three deal planks, the net being made of line, and of the same size as the line out of which the tub-slings were always made. The holes in her floor were made for the water to get in and keep her below the surface, and the net, spreading from gunwale to gunwale, prevented her cargo of tubs from being washed out. It was in order to have ample and unfettered room for the tubs that no thwarts were placed. She would be towed astern of a smack or lugger under the water, and having arrived at the appointed spot the towrope would be let go, and the grapnels attached to both grommets at bow and stern would cause her to bring up when in sufficiently shallow water. Later on, at low tide, the smugglers' friends could go out in their boats with a weighted line or hawser and sweep along the bottom of the sea, and soon locate her and tow her right in to the beach. In order to prevent certain obvious excuses being made by dishonest persons, all British subjects were distinctly forbidden to pick up spirits found in these illegal half-ankers, only officers of the Royal Navy, the Customs, and the Excise being permitted so to do. But it was not always that the Revenue cruisers were employed in catching smugglers. We have pointed out that their duties also included Quarantine work. In the spring of 1837 it was represented to the Treasury that there was much urgent distress prevailing in certain districts of the Highlands and Western Islands of Scotland owing to the failure of the last harvest. Sir John Hill was therefore directed to proceed to Scotland and take such steps as might be necessary for the immediate supply of seed, corn, and potatoes, and the officers and commanders of the Revenue cruisers were directed to afford him every assistance. [Illustration: Plan of the Schooner _Good Intent_ showing Method of Smuggling Casks.] In the previous chapter attention was called to the singular inappropriateness of calling a smuggling vessel the _Good Intent_. That was a smack belonging to the year 1824, which was found at Rye. But this name seems to have had a certain amount of popularity among these ingenious gentlemen, for there was a smuggling schooner named the _Good Intent_ which was seized in the year 1837. How cleverly and effectively she was fitted up for a smuggling voyage can be ascertained by considering the accompanying longitudinal plan. She had a burthen of 72 tons, and was captured by the Revenue cruiser _Sylvia_ in Mount's Bay on the 14th of March. The plan denotes her principal features, including her sail-room and general store right aft. Immediately forward of this was the first concealment on the port side only. Entrance was gained by means of a slide which was nailed up, and here many casks could easily be stored. Next to this came the after bulkhead, but forward of this was also a false bulkhead, the distance between the real and the false being 2-1/2 feet, and affording a space to contain 138 kegs. Under the cabin were coals, and around the coals under the cabin deck were placed some kegs. The fore bulkhead had also a false bulkhead 2 feet 5 inches apart, and this space held as many as 148 kegs. Under the deck of the forepeak were also 21 kegs. The length of these kegs was 17 inches, and they were nearly a foot in diameter. Each cask contained 4-1/2 gallons of French brandy. This vessel was found to have merely limestone ballast in her hold, but her illicit cargo was more valuable to her than if she had been fully laden with the commodity which she usually and legitimately traded in. Later in the same year, and by the same cruiser _Sylvia_, this time off Land's End, the Jersey schooner _Spartan_, a vessel of 36-1/2 tons, was seized, as she was found to be fitted up with similar concealments (see sketch). [Illustration: The Schooner _Spartan_. 1. Hollow beam. 2. Opening for entering No. 3. 3. Place of concealment.] One day about the middle of the last century a 16-ton Grimsby fishing-smack named _Lord Rivers_ left her native port and journeyed south. Her owner and master was in a dismal frame of mind, and complained to his mate that things were pretty bad, and he was becoming remarkably poor. The fishing was not prospering so far as he was concerned, and so after thinking the matter over he was proposing to take the ship over to Boulogne and get a cargo of between thirty and forty gallons of spirits. His mate heard what he had to say and agreed to go with him. So to Boulogne they proceeded, where they purchased the spirits from a dealer, who brought the spirits on board, not in casks but in skins and bladders, making about fifty in all. These were deposited in the smack's hold, and she then cleared out of harbour and went to the fishing-grounds, where, to make matters appear all right, she remained twenty-four hours, for the purpose of obtaining some oysters by dredging. Whilst on the fishing-grounds the spirits were stowed in a neat concealment at the stern of the vessel on both sides abaft the hatchway. Before long the smack got going and ran into Dover with the oysters and her spirits, lowered her sails, and made everything snug. In due course the bladders of spirits were got out of the hold in small numbers, and placed in baskets and covered over with a sufficiently thick layer of oysters to prevent their presence being detected. These baskets were taken to a neighbouring tap-room, the landlord of which bought as much as he wanted, and a local poulterer bought the rest of the spirits and oysters as well. [Illustration: Deck Plan and Longitudinal Plan of the _Lord Rivers_ (see Text).] But the local Coastguard had for a long time been suspicious of this vessel, and evidently this was not her first voyage in the smuggling trade. He had watched and followed the man who took the bladders ashore, and now came on board to see what he could find. The deck plan will clearly convey to the reader the way in which the smack was fitted up with concealments. The letters A and A indicate two portions of the deck planking, each portion being about a couple of feet long. These were movable, and fitted into their places with a piece of spun-yarn laid into the seams, and over this was laid some putty blackened on the top. At first sight they appeared to be part of the solid planking of the deck, but on obtaining a chisel they were easily removed. There was now revealed the entrance to a space on each side of the rudder-case in the false stern capable of containing thirty or forty gallons of spirits. This in itself was conclusive, but when the Coastguard also found that the putty in the seams was soft and fresh, and that a strong smell of spirits emanated from this cavity, it was deemed that there was more than adequate reason for arresting the smack even though the hold was quite empty. Thus the _Lord Rivers_ came to a bad end. FOOTNOTES: [22] The ceiling of a ship signified the inside planks. CHAPTER XVIII BY SEA AND LAND Having now seen the evolution of the smuggling methods from brute force and superiority of ships and crews to the point where the landing of dutiable goods became a fine art, and having been able to obtain an idea of the manifold changes which occurred in the administration of the Preventive service between the years 1674 and 1856, we may now resume our narrative of the interesting encounters which occurred between the smugglers on the one hand and the Preventive force on the other. Up to the year 1822 we have dealt with the different incidents which used to go on around our coast, and we shall now be in a position to appreciate to their full the notable exploits of cruisers and smugglers in that late period between the years 1822 and 1856. This covers the epoch when improved architecture in regard to the craft employed, greater vigilance on the part of the cruisers, and a keener artfulness in the smugglers themselves were at work. Consequently some of these contests represent the best incidents in the whole history of smuggling. But it was not always that the Revenue cruisers and Preventive boats were in the right. There were occasions when the commanders suffered from too much zeal, though certainly these were quite exceptional. There is the case of the _Drencher_ which well illustrates this. She was a Dutch vessel which had been on her voyage to Italy, and was now returning home up the English Channel with a cargo of oil, bound for Amsterdam. Being somewhat square and ample of form, with the characteristic bluff bows much beloved by her countrymen, and being also very foul on her bottom through long voyaging, she was only a dull sailer.[23] And such being the case, when she fell in with head winds her skipper and part-owner, Peter Crook, decided to let go anchor under Dungeness, where many a sailing craft then, as to-day, has taken shelter in similar circumstances. Whilst she was at anchor waiting for a favourable slant, one of the numerous fishing-boats which are always to be seen hereabouts came alongside the _Drencher_[24] and asked the skipper if he required any assistance. Crook replied that if the wind was still ahead, and he was compelled to remain there till the next day, he would want some fuel for his stove. The fisherman sold some of his catch to the Dutchman, and then went on his way. But soon after this a boat in the Preventive service, commanded by a Mr. MacTavish, a midshipman, came alongside and boarded the _Drencher_. The midshipman inquired what the Dutchman had had to do with the fishing-boat, and Crook answered that he had done nothing except to purchase some fish. But this did not satisfy Mr. MacTavish, who proceeded now to examine what was on board. Of course he found some casks of spirits, and asked Crook how they came to be there, to which Crook answered that they had been found floating in a former voyage and he had picked them up. This looked doubtful, but it was quite probable, for often the weights of stones from sunken tubs broke adrift and the tubs floated up to the surface. Especially was this the case after bad weather. We can well understand the midshipman's suspicions, and need not be surprised to learn that he felt justified in seizing the ship because of these tubs found on board. He had the anchor broken out, the sails hoisted, and took her first into Dover, and afterwards from Dover to Ramsgate, where most of her cargo was unloaded. But after a time she was ordered to be released and allowed to proceed to Holland, and later still her skipper brought an action against MacTavish for having been wrongfully detained for thirty days, for which demurrage he claimed four guineas a day, besides damage to her cable and other things, amounting in all to £208. The reader will recollect that in another chapter we saw a couple of sailing craft dodging about suspiciously in West Bay, one of which began to fire signals to the other in order to warn her of the Preventive boat: and we saw that the crew of three men in the offending craft were arrested and found guilty. One of these men, it will be remembered, was John Bartlett, who had at one time been a boy on a Revenue cutter. From the incident which led to his arrest in 1819 let us pass to the 14th of September 1823. The scene is again West Bay, and the old passion is still strong in Bartlett notwithstanding his sentence. A little to the west of Bridport (Dorset) is Seatown, and just beyond that comes Golden Cape. On the night of the above date one of the Seatown Revenue officers about 1 A.M. noticed flashes coming from the cliff between Seatown and Golden Cape. He proceeded to the cliff, which at high-water runs straight up out of the sea. It was a dark night with no moon, a little breeze, and only slight surf on the shore--ideal conditions for any craft bent on smuggling. On the cliff the officer, named Joseph Davey, espied a man. He hailed him, thinking it was some one else, and asked him if he were Joey Foss. "Yes," came back the answer, but when the officer seized him he discovered it was not Foss but the notorious John Bartlett. Up came another Revenue man named Thomas Nines to assist Davey, but in a few minutes Bartlett gave a loud whistle, whereupon Nines looked out seaward and exclaimed, "There's a boat." "I sees him," answered Davey as the craft was approaching the shore. By this time, also, there were ten or twelve men coming towards the officers, and Bartlett managed to run down to the shore, shouting "Keep off!" "Keep off!" as loudly as he could. The officers ran too, but the boat turned round and put off to sea again. In the course of a few minutes there rose up a large fire on the cliff, about a hundred yards from where the officers were. It was another signal of warning to the boat. For Bartlett, having got away from the officers, had doubtless lit this, since it flared up near to where he was seen to run. The officers remained on the coast until daylight, and then launching their boat rowed a little way from the shore, and found a new buoy moored just by the spot where the lugger had been observed to turn round when hailed and warned. It was clear, on examination, that the buoy had not been in the water many hours, and after "creeping" along the sea bottom hereabouts they brought up sixty kegs, which were also quite new, and had evidently only been sunk when Bartlett sung out his warning. The latter was again arrested, and found guilty when subsequently tried. So again Bartlett had to retire from smuggling. It happened only a few weeks before this incident that a seaman named Willis was on shore with his officer. Willis belonged to H.M.S. _Severn_, which was moored off Dover for the prevention of smuggling. The officer was a naval midshipman named Hope, stationed ashore. Whilst on their duty they began to notice a man, whose name was William Clarke, near Chalk Fall, carrying a basket of nets and fishing lines. For a time both Willis and Hope took shelter under the Chalk Cliff as it was raining, but presently Willis separated from his officer to go to his appointed station. It occurred to him that Clarke appeared to be unnecessarily stout, and he was sure that he was trying to smuggle something. Willis went up to him and said he intended to search him, to which Clarke replied, "Certainly." He admitted he had some liquor there, but he hoped Willis would take no notice of it. The seaman insisted that he must take notice, for if it turned out to be foreign spirits he must seize it: whereupon Clarke flung down a couple of half-crowns and asked him to say nothing about it. Willis again protested that he must see what the man had beneath his gabardine. But at this Clarke took a knife from his pocket and cut a large bladder which he had under his clothes, containing half a gallon of spirits, and a spirituous liquor poured out on to the ground. Willis put his finger to it and found that it was foreign brandy. But the amusing legal aspect of this incident was that this foreign liquor could not be seized, nor could the man be prosecuted for having it, and it could not be condemned. But Clarke had indeed destroyed that which he had so early brought safely home. This was just one instance of the good work which the Coast Blockade was performing, Willis and other seamen being landed every night from H.M.S. _Severn_ to act as guard at different points along the coast. In the annals of smugglers and cruisers there are few more notable incidents than that which occurred on the 13th of January 1823, in the English Channel. On this day the Revenue cutter _Badger_ was cruising off the French coast under the command of Lieutenant Henry Nazer, R.N. He was an officer of the Excise, but the cutter at that time was in the service of the Customs, her station being from the South Foreland to Dungeness. About 7.30 A.M. the officer of the watch came below and told him something, whereupon Nazar hurried on deck and observed a suspicious sail on the starboard tack, the wind being E.S.E. The _Badger_ was at that time about nine or ten miles off the French coast, somewhere abreast of Etaples, and about six or seven leagues from the English shore. The craft which was seen was, to use the lieutenant's own language, "a cutter yawl-rigged," which I understand to signify a cutter with a small lug-sail mizzen, as was often found on smugglers. At any rate, he had every reason to believe that this was a smuggling craft, and he immediately made sail after her. At that hour it was just daybreak, and the smuggler was about three or four miles off--to the eastward--and to windward, but was evidently running with sheets eased off in a westerly direction. But when the smuggler saw the _Badger_ was giving chase he also altered his course. It was a fine, clear, frosty morning, and the _Badger_ quickly sent up his gaff topsail and began to overhaul the other, so that by nine o'clock the two vessels were only a mile apart. The _Badger_ now hoisted his Revenue pendant at the masthead, consisting of a red field with a regal crown at the upper part next the mast, and he also hoisted the Revenue ensign (that is to say "a red Jack with a Union Jack in a canton at the upper corner and a regal crown in the centre of the red Jack") at his peak. These signals instantly denoted that the ship was a Revenue cruiser. Lieutenant Nazar also ordered an unshotted gun to be fired as a further signal that the smuggler was to heave-to, but the stranger paid no attention and hoisted no colours. Ten minutes later, as it was perceived that his signals were disregarded, the _Badger's_ commander ordered a shot to be fired at her, and this was immediately returned by the smuggler with one of her stern guns. From this time a running fire was kept up for nearly three hours, but shortly before midday, whilst the cutter was still chasing her and holding on the same course as the other, the _Badger_ came on at such a pace that she ran aboard the smuggler's starboard quarter whilst both ships were still blazing away at each other. The smuggler's crew then cried out for quarter in English. This was granted by the _Badger's_ commander, who had a boat lowered, but whilst in the act of so doing the treacherous smuggling craft recommenced firing. It was a cowardly thing to do, for Reymas, their own captain, had particularly asked the _Badger's_ commander to forgive them and overlook what they had done, whilst other members of the crew cried out to the same effect. This had caused a cessation of fire for about five minutes, and was only reopened by the smugglers' treachery. One of the _Badger's_ mariners named William Cullum, was in consequence shot dead by a musket aimed at him by one of the smugglers. Cullum was standing by the windlass at the time, and died instantly. [Illustration: "The Cruiser's Guns had shot away the Mizzen-Mast."] The _Badger_, therefore, again began to fire into the other ship, but in about another five minutes the smuggler again called for quarter, and this was again granted. The cruiser sent her boat aboard her, and brought off the smuggler's crew, amounting to twenty-three men, though two others had been killed in the affray. The _Badger's_ chief mate, on boarding the smuggler, sent away the latter's crew in their own boat, and seven of these men were found to be wounded, of whom one died the following morning. The name of the vessel was seen to be the _Vree Gebroeders_. She was of 119 tons burthen, and had the previous day started out from Flushing with a cargo of 42 gallons of brandy, 186 gallons of Geneva--these all being in the 3-1/2 gallon half-ankers. But there was also a good deal of other cargo, consisting of 856 bales of tobacco which contained 51,000 lbs., thirteen boxes of tea, and six bags of sugar. All these goods were made up in illegal-sized packages and she had nothing on board except what was contraband. The chests of tea were found all ready slung for landing with small ropes. The _Vree Gebroeders_ was provisioned for three months, and was armed with four carronades, 9-pounders, and two swivel muskets, bayonets, and other arms of different kinds. Her destination had been for Ireland. When the chief mate of the _Badger_ boarded her he found that the cruiser's guns had shot away the mizzen-mast, but the smuggler's skipper remarked to the chief mate that the spare topmast on deck would serve for a mizzen and that the square-sail boom would make an outrigger, and that the trysail would be found below, but so far, he said, this sail had never been bent. Later on the chief mate found also the deck-log of the _Vree Gebroeders_, which had been kept on two slates, and it was a noticeable fact that these were kept in English. They read thus:-- +-------------------------------+ | N.W. by N. | | Remarks, Monday 13th. | | N.W. by W. At 6.30 Ostend | | Light bore S.E. distant | | 12 miles. | | At 4 a.m. Calais Light | | bore E. by S. | +-------------------------------+ So when the _Badger_ first sighted this craft the latter had made her last entry in the log, only three and a half hours before. It was significant that English charts were also found among the ship's papers, though her manifest, her certificate, her bill of lading, and other certificates were all in Dutch. The books found included Hamilton Moore's _Navigation_, another similar work by Norie, the _British Channel Pilot_, and _Navigation of the North Seas_. There was also found a Dutch ensign and a Dutch Jack on board, but there was even an English Prayer-book. The prisoners remained on board the _Badger_ until next day, when they were transferred to H.M.S. _Severn_. The _Vree Gebroeders_ was taken into Dover, and was valued, together with her cargo, at the handsome sum of £11,000, which would have been a fine amount of prize money; but in spite of the clear evidence at the trial, the jury were so prejudiced in favour of the smugglers that they found the prisoners not guilty, their contention being that the ship and cargo were wholly foreign, and that more than half of the crew were foreigners. It had been an unfortunate affair. Besides the death of Cullum and the two smugglers killed and the seven smugglers wounded, Lieutenant Nazer, James Harper, William Poppedwell, Daniel Hannibel, and James Giles were all wounded on the _Badger_, Nazer being wounded on the left shoulder by a musket ball. The smuggler's crew had made ludicrous efforts to pretend they were Dutch. Dutch names were assumed, but witnesses at the trial were able to assign to them their proper appellations, and it was significant that the crew spoke English without a foreign accent. Her commander insisted his name was Reymas, but his real name was Joseph Wills, and he had been foremost in the calling for quarter. Another of the crew, who pretended his name was Jan Schmidt, was found to be an Englishman named John Smith. The vessel herself had been built by a Kentishman, living at Flushing, the previous year. And here is another of those occasions when there was displayed an excess of zeal, though under the circumstances who would blame the Preventive officer for what he did? In February of 1824, a man named Field and his crew of three came out from Rye--that hotbed of smugglers--and intended to proceed to the well-known trawling ground about fifteen miles to the S.W. of Rye, abreast of Fairlight, but about five or six miles out from that shore. Unfortunately it fell very calm, so that it took them some time to reach the trawling ground, and even when with the assistance of the tide they did arrive there, the wind was so scant that it was useless to shoot the trawl in the water. Naturally, therefore, it was a long time before they had obtained their cargo of flat fish, and when a little breeze sprang up they had to get back to Rye, as their provisions had run short. On their way back, when they were only about four or five miles from their harbour, they fell in with a small open sailing-boat named the _Rose_, containing four or five men. Field's bigger craft was hailed by the _Rose_ and asked to be taken in tow, as they also had run short of provisions, and were anxious to get back to harbour at once. Field's boat took one of their crew on board, whilst the rest remained in the _Rose_ and were towed astern. It was now about four or five in the morning, and they had not proceeded more than another couple of miles before they were hailed again, but this time by a boat under the command of a Preventive officer named Lipscomb, who had been sent by Lieutenant Gammon, R.N., from the revenue cruiser _Cameleon_. The cutter's boat bumped alongside Field's craft, which was called the _Diamond_. After making fast, Lipscomb and his boat's crew jumped aboard, and announced that they suspected the _Diamond_ was fitted with concealments, and he wished to examine her. But after rummaging the ship nothing suspicious was found. Lipscomb then explained that he had been ordered by Lieutenant Gammon to take the _Diamond_ and to bring her alongside the _Cameleon_ and then to order Field and his crew to go aboard the cruiser as prisoners. This, of course, did not lead to harmony on board. Lipscomb attempted to seize hold of the tiller, so as to steer the vessel back to Hastings Roads, where the cruiser was lying. But Field turned to him and said-- "I don't know about your having the helm. You don't know where the cutter is any more than I do." With that, Field pushed the man aside, grasped hold of the tiller, and shoved it hard up, and bearing away, ran the vessel out seawards. But after keeping on this course for twenty minutes they fell in with the _Cameleon_, and the two vessels came near to each other. The cruiser's commander shouted to Lipscomb, and ordered him to get into the cruiser's galley, which had been towing astern of the _Diamond_ all this time, and to row to the cruiser. This was done, and then Lipscomb received his orders. He was to return to the trawler and seize the hands and bring them to the _Cameleon_. So the galley returned again and brought the _Diamond's_ crew as ordered. It was now 7 A.M., and they were kept as prisoners on the cutter till 9 A.M. the following day. Lipscomb and his boat's crew of four now took charge of the _Diamond_, and began to trim sheets, and before long the two craft got separated. When Field proceeded on board the _Cameleon_ he took with him his ship's papers at the lieutenant's orders. He then ventured to ask how it was that his smack had been detained, to which Gammon replied that he had received information from the Collector of Customs at Rye. Field, however, was incredulous. "I rather doubt your word," he said, whereupon the officer took out of his pocket a letter, doubled the page down one or two lines, and showed the doubting skipper that it was as the lieutenant had stated. Gammon then went below and took Field's papers with him, and there they remained till the following morning. The _Cameleon_ went jogging along, and having arrived abreast of Hastings, Gammon sent one of his crew ashore in the cutter's boat, and later on fetched him back. The object, no doubt, was to send the _Diamond's_ papers ashore to be examined as to their veracity, though nothing was said to Field on the subject. It is clear that the reply from the authorities came back that the papers were found in order, and that Field was not known as a smuggler; for after the man who had been sent ashore returned, the _Cameleon_ made sail, and stood out to sea for a distance of eighteen miles. She had lost sight of the _Diamond_ and her prize crew, and it was not till about breakfast time the following day that the cruiser found the smack again. When at length the two craft did come together, Lipscomb was called on board the cruiser and summoned below to Gammon. What exactly the conversation was never came out, but from subsequent events it is fairly clear that Gammon asked what opinion Lipscomb had been able to form of the _Diamond_, and that the latter had to admit she was a genuine trawler; for soon after, the lieutenant sent the steward for Field and one of his men to go below. The two men did as they were ordered. "Good morning," said the cruiser's commander as they came into the cabin, "here are your papers, Field." Field hesitated for a moment; then answered-- "I don't know, sir, as to taking them. I'm not altogether satisfied about being detained so long. And had I been aboard the smack, and you had refused to let me have the tiller," he continued, getting angrier every moment, "I would have shot you as sure as you had been a man." "You may do as you please," came the commander's cool reply, "about taking them, but if you do not choose to take them, I shall take you away to Portsmouth and give you up to the Port Admiral, and let him do with you as he thinks proper." Thinking therefore that it were better to be discreet and hold his tongue, Field took the papers, went up again on deck, collected his men, went back to his smack, and the incident ended--for the present. But the Revenue men had clearly made an error this time, and had acted _ultra vires_. About a year later Field, as a master and part-owner of the _Diamond_, brought an action against Gammon for assault and detention, and was awarded a verdict and £5 damages. It is curious to find what sympathy the smugglers sometimes received in a section of society where one would hardly have expected this to exist. There are at least three instances of men of position and wealth showing their feelings undisguisedly in favour of these lawless men. There was a Lieut.-Colonel Chichester, who was called upon for explanations as to his conduct in this respect; there was the case also of the naval officer commanding H.M. sloop _Pylades_ being convicted and dismissed the service for protecting smugglers, and, most interesting of all, was the incident which centred round Sir William Courtenay. The facts of this case may be summarised as follows. On Sunday afternoon, the 17th of February 1833, the Revenue cutter _Lively_ was cruising at the back of the Goodwins, when about three o'clock she descried a vessel about five or six miles off which somehow aroused suspicions. The name of the latter was eventually found to be the _Admiral Hood_. At this time the sloop was about midway between England and France, her commander being Lieutenant James Sharnbler, R.N. The _Admiral Hood_ was a small dandy-rigged fore-and-after, that is to say, she was a cutter with a small mizzen on which she would set a lugsail. The _Lively_ gave chase, and gradually began to gain on the other. When the _Admiral Hood_ was within about a mile of the _Lively_, the former hauled across the latter, and when she had got on the _Lively's_ weather-bow the Revenue craft immediately tacked, whereupon the _Admiral Hood_ put about again and headed for the French coast. After vainly attempting to cause her to heave-to by the usual Revenue signals, the _Lively_ was compelled to fire on her, and one shot was so well placed that it went clean through the dandy's sail, and thinking that this was quite near enough the _Admiral Hood_ hove-to. But just prior to this, Lieutenant Sharnbler had ordered an officer and two men to take spyglasses and watch her. At this time they were about fifteen or sixteen miles away from the North Foreland. One of the men looking through his glass observed that the _Admiral Hood_ was heaving tubs overboard, and it was then that the first musket was fired for her to heave-to, but as the tubs were still thrown overboard for the next three-quarters of an hour, the long gun and the muskets were directed towards her. The two vessels had sailed on parallel lines for a good hour's chase before the firing began, and the chase went on till about a quarter to five, the tide at this time ebbing to the westward and a fine strong sailing breeze. There was no doubt at all now that she was a smuggler, for one of the _Lively's_ crew distinctly saw a man standing in the _Admiral Hood's_ hatchway taking tubs and depositing them on deck, whilst some one else was taking them from the deck and heaving them overboard, the tubs being painted a dark green so as to resemble the colour of the waves. As the _Lively_ came ramping on, she found numbers of these tubs in the wake of the _Admiral Hood_, and lowered a boat to pick them up, and about twenty-two were found a hundred yards from the smuggler, and the _Lively_ also threw out a mark-buoy to locate two other tubs which they passed. And, inasmuch as there was no other vessel within six miles distance, the _Admiral Hood_ beyond a shadow of doubt was carrying contraband. [Illustration: "The _Admiral Hood_ was heaving tubs overboard."] After the vessel was at length hove-to, she was seized and ultimately taken into Rochester, and information was duly laid against the persons who had been engaged in this smuggling adventure. But it is here that Sir William Courtenay comes into the story. This gentleman, who had his seat at Powderham Castle, Devon, came forward and swore positively that the tubs, which the _Lively_ was supposed to have picked up, had been seen floating off the coast. He himself was staying on a visit to Canterbury, and on that Sunday afternoon happened to be sailing about off the Kentish coast, and sighted the _Lively_ about two o'clock. He kept her in sight, he said, until four o'clock. He also saw the _Admiral Hood_, and witnessed her being chased by the _Lively_, but he had seen the tubs for most of the day, as they had come up with the tide from the westward. With his own eyes, and not through a spy-glass, he witnessed the _Admiral Hood_ being captured by the cruiser, and followed up this evidence by remarking that "the tubs I saw picked up did not come out of the _Lord Hood_. I say so sterling and plump." This was exactly the reverse of the testimony as given by the crew of the _Lively_, so it was evident that some one was lying. But to make a long story short, it was afterwards found that Sir William was not only _not_ afloat that afternoon, did not see the tubs, did not see the two crafts, but was miles away from the scene, and at the time of the chase was in church. He was accordingly brought for trial, found guilty, and sentenced to be imprisoned for three calendar months, and after the expiration of this, he was to be "transported to such a place beyond the seas as his Majesty may direct, for the term of seven years." He was convicted on unmistakable testimony of having committed perjury; in fact, Mr. Justice Parke, in giving judgment at the time, remarked that it was the clearest evidence in a perjury case that had ever fallen to his lot to try. As to the motive, it was thought that it was done solely with a desire to obtain a certain amount of popularity among the smugglers. Sir William saw that the case would go against the latter unless some one could give evidence for their side. Therefore, abusing his own position and standing, he came forward and perjured himself. It is a curious case, but in the history of crime there is more than one instance of personal pride and vanity being at the root of wrong-doing. FOOTNOTES: [23] How slow she was may be guessed by the fact that she took seven hours to go from Dover to the Downs even under the expert handling of MacTavish's crew. [24] She was officially described as a dogger. CHAPTER XIX ACTION AND COUNTER-ACTION It is conscience that makes cowards of us all, and this may be said of smugglers no less than of law-abiding citizens. A trial was going on in connection with a certain incident which had occurred in Cawsand Bay, Plymouth Sound. It was alleged that, on the night of November 17, 1831, a man named Phillips had been shot in the knee whilst in a boat, trying with the aid of some other men to get up an anchor. The chief officer of the Preventive service at Cawsand was accused by Phillips of having thus injured him, and the case in the course of time was brought into court. Among the witnesses was one whom counsel believed to be not wholly unconnected with smuggling. Whether or not this was true we need not worry ourselves, but the following questions and answers are well worth recording. Cawsand was a notorious smuggling locality, and its secluded bay, with plenty of deep water almost up to the beach, made it highly suitable for sinking tubs well below the surface of the water. And then there must have been very few people ashore who had never been concerned in this contraband trade. In such villages as this you might usually rely on the local innkeeper knowing as much as anyone in the neighbourhood on the subject of smuggling. Such a man, then, from Cawsand, illiterate, but wideawake, went into the witness-box for counsel to cross-examine, and the following dialogue carries its own conviction:-- _Question._ "You are an innkeeper and sailor, if I understand you rightly?" _Answer._ "Yes!" _Q._ "Is that all?" _A._ "Mariner and innkeeper." _Q._ "Is that all the trades you follow?" _A._ "Fishing sometimes." _Q._ "What do you fish for?" _A._ "Different sorts of fish." _Q._ "Did you ever fish for half-ankers?" _A._ "Half-ankers?" _Q._ "Casks of spirits--is that part of your fishing-tackle?" _A._ "No, I was never convicted of no such thing." _Q._ "I am not asking you that. You know what I mean. I ask whether it is part of your profession." _A._ "No, it was not." _Q._ "You never do such things?" _A._ "What should I do it for?" _Q._ "I cannot tell you. I ask you whether you do it, not what you do it for." _A._ "I may choose to resolve whether I tell you or not." _Q._ "I will not press you if your conscience is tender. You will not tell me whether you do a little stroke in the Fair trade upon the coast? You will not answer me that question?" _A._ "I am telling the truth." _Q._ "Will you answer that question?" _A._ "No." _Q._ "Are you or are you not frequently in practice as a smuggler?" _A._ "No!" And that was all that could be got out of a man who probably could have told some of the best smuggling yarns in Cornwall. The inhabitants so thoroughly loathed the Preventive men that, to quote the words of the man who was chief officer there at the time we are speaking of, "the hatred of the Cawsand smugglers is ... so great that they scarcely ever omit an opportunity of showing it either by insult or otherwise." There was a kind of renaissance of smuggling about the third decade of the nineteenth century, and this was brought on partly owing to the fact that the vigilance along our coasts was not quite so smart as it might have been. But there were plenty of men doing their duty to the service, as may be seen from the account of Matthew Morrissey, a boatman in the Coastguard Service at Littlehampton. About eleven o'clock on the evening of April 5, 1833, he saw a vessel named the _Nelson_, which had come into harbour that day. On boarding her, together with another boatman, he found a crew of two men and a boy. The skipper told him they were from Bognor in ballast. Morrissey went below, got a light, and searched all over the after-cabin, the hold, and even overhauled the ballast, but found nothing. He then got into the Coastguard boat, took his boat-hook, and after feeling along the vessel's bottom, discovered that it was not as it ought to have been. "I'm not satisfied," remarked the Coastguard to her skipper, Henry Roberts, "I shall haul you ashore." One of the crew replied that he was "very welcome," and the Coastguard then sent his companion ashore to fetch the chief boatman. The Coastguard himself then again went aboard the _Nelson_, whereupon the crew became a little restless and went forward. Presently they announced that they would go ashore, so they went forward again, got hold of the warp, and were going to haul on shore by it when the Coastguard observed, "Now, recollect I am an officer in his Majesty's Revenue duty, and the vessel is safely moored and in my charge; and if you obstruct me in my duty you will abide by the consequences." He took the warp out of their hands, and continued to walk up and down one side of the deck while the crew walked the other. This went on for about twenty minutes, when Henry Roberts came up just as the Coastguard was turning round, and getting a firm grip, pushed him savagely aft and over the vessel's quarter into the water. Heavily laden though the Coastguard was with a heavy monkey-jacket, petticoat canvas trousers over his others, and with his arms as well, he had great difficulty in swimming, but at last managed to get to the shore. The chief boatman and the other man were now arriving, and it was found that the _Nelson's_ crew had vanished. The vessel was eventually examined, and found to have a false bottom containing thirty-two tubs of liquor and twenty-eight flagons of foreign brandy. Roberts was later on arrested, found guilty, and transported for seven years. [Illustration: "Getting a firm grip, pushed him ... into the water."] A few pages back we witnessed an incident off Hastings. On the 5th of January 1832, a much more serious encounter took place. Lieutenant Baker, R.N., was cruising at that time in the Revenue cutter _Ranger_ off the Sussex coast, when between nine and ten in the evening he saw a suspicious fire on the Castle Hill at Hastings. Believing that it was a smuggler's signal, he despatched his four-oared galley, with directions to row between Eccles Barn and the Martello Tower, No. 39. At the same time the _Ranger_ continued to cruise off the land so as to be in communication with the galley. About 1 A.M. a report was heard from the Hastings direction, and a significant blue light was seen burning. Baker therefore took his cutter nearer in-shore towards the spot where this light had been seen. He immediately fell in with his galley, which had shown the blue light, and in her he found about two hundred casks of different sizes containing foreign spirits, and also five men who had been detained by the galley. The men of course were taken on board the cruiser, and as the morning advanced, the _Ranger_ again stood into the shore so that the lieutenant might land the spirits at the Custom House. Then getting into his galley with part of his crew, the tubs were towed astern in the cutter's smaller boat. But on reaching the beach, he found no fewer than four hundred persons assembled with the apparent intention of preventing the removal of the spirits to the Custom House, and especially notorious among this gang were two men, named respectively John Pankhurst and Henry Stevens. The galley was greeted with a shower of stones, and some of the Revenue men therein were struck, and had to keep quite close to the water's edge. Stevens and Pankhurst came and deposited themselves on the boat's gunwale, and resisted the removal of the tubs. Two carts now came down to the beach, but the mob refused to allow them to be loaded, and stones were flying in various directions, one man being badly hurt. Lieutenant Baker also received a violent blow from a large stone thrown by Pankhurst. But gradually the carts were loaded in spite of the opposition, and just as the last vehicle had been filled, Pankhurst loosened the bridle-back of the cart which was at the back of the vehicle to secure the spirits, and had not the Revenue officers and men been very smart in surrounding the cart and protecting the goods, there would have been a rescue of the casks. Ultimately, the carts proceeded towards the Custom House pursued by the raging mob, and even after the goods had been all got in there was a good deal of pelting with stones and considerable damage done. Yet again, when these prisoners, Pankhurst and Stevens, were brought up for trial, the jury failed to do their duty and convict. But the Lord Chief Justice of that time remarked that he would not allow Stevens and Pankhurst to be discharged until they had entered into their recognisances to keep the peace in £20 each. But next to the abominable cruelties perpetrated by the Hawkhurst gang related in an earlier chapter, I have found no incident so utterly brutal and savage as the following. I have to ask the reader to turn his imagination away from Sussex, and centre it on a very beautiful spot in Dorsetshire, where the cliffs and sea are separated by only a narrow beach. On the evening of the 28th of June 1832, Thomas Barrett, one of the boatmen belonging to the West Lulworth Coastguard, was on duty and proceeding along the top of the cliff towards Durdle, when he saw a boat moving about from the eastward. It was now nearly 10 P.M. He ran along the cliff, and then down to the beach, where he saw that this boat had just landed and was now shoving off again. But four men were standing by the water, at the very spot whence the boat had immediately before pushed off. One of these men was James Davis, who had on a long frock and a covered hat painted black. Barrett asked this little knot of men what their business was, and why they were there at that time of night, to which Davis replied that they had "come from Weymouth, pleasuring!" Barrett observed that to come from Weymouth (which was several miles to the westward) by the east was a "rum" way. Davis then denied that they had come from the eastward at all, but this was soon stopped by Barrett remarking that if they had any nonsense they would get the worst of it. After this the four men went up the cliff, having loudly abused him before proceeding. On examining the spot where the boat had touched, the Coastguard found twenty-nine tubs full of brandy lying on the beach close to the water's edge, tied together in pairs, as was the custom for landing. He therefore deemed it advisable to burn a blue light, and fired several shots into the air for assistance. Three boatmen belonging to the station saw and heard, and they came out to his aid. But by this time the country-side was also on the alert, and the signals had brought an angry crowd of fifty men, who sympathised with the smugglers. These appeared on the top of the cliff, so the four coastguards ran from the tubs (on the beach) to the cliff to prevent this mob from coming down and rescuing the tubs. But as the four men advanced to the top of the cliff, they hailed the mob and asked who they were, announcing that they had seized the tubs. The crowd made answer that the coastguards should not have the tubs, and proceeded to fire at the quartette and to hurl down stones. A distance of only about twenty yards separated the two forces, and the chief boatman ordered his three men to fire up at them, and for three-quarters of an hour this affray continued. It was just then that the coastguards heard cries coming from the top of the cliff--cries as of some one in great pain. But soon after the mob left the cliff and went away; so the coastguards went down to the beach again to secure and make safe the tubs, where they found that Lieutenant Stocker was arriving at the beach in a boat from a neighbouring station. He ordered Barrett to put the tubs in the boat and then to lay a little distance from the shore. But after Barrett had done this and was about thirty yards away, the lieutenant ordered him to come ashore again, because the men on the beach were bringing down Lieutenant Knight, who was groaning and in great pain. What had happened to the latter must now be told. After the signals mentioned had been observed, a man named Duke and Lieutenant Knight, R.N., had also proceeded along the top of the cliff. It was a beautiful starlight night, with scarcely any wind, perfectly still and no moon visible. There was just the sea and the night and the cliffs. But before they had gone far they encountered that mob we have just spoken of at the top of the cliff. Whilst the four coastguards were exchanging fire from below, Lieutenant Knight and Duke came upon the crowd from their rear. Two men against fifty armed with great sticks 6 feet long could not do much. As the mob turned towards them, Lieutenant Knight promised them that if they should make use of those murderous-looking sticks they should have the contents of his pistol. But the mob, without waiting, dealt the first blows, so Duke and his officer defended themselves with their cutlasses. At first there were only a dozen men against them, and these the two managed to beat off. But other men then came up and formed a circle round Knight and Duke, so the two stood back to back and faced the savage mob. The latter made fierce blows at the men, which were warded off by the cutlasses in the men's left hands, two pistols being in the right hand of each. The naval men fired these, but it was of little good, though they fought like true British sailors. Those 6-foot sticks could reach well out, and both Knight and Duke were felled to the ground. Then, like human panthers let loose on their prey, this brutal, lawless mob with uncontrolled cruelty let loose the strings of their pent-up passion. They kept these men on the ground and dealt with them shamefully. Duke was being dragged along by his belt, and the crowd beat him sorely as he heard his lieutenant exclaim, "Oh, you brutes!" The next thing which Duke heard the fierce mob to say was, "Let's kill the ---- and have him over the cliff." Now the cliff at that spot is 100 feet high. Four men then were preparing to carry out this command--two were at his legs and two at his hands--when Duke indignantly declared, "If Jem was here, he wouldn't let you do it." It reads almost like fiction to have this dramatic halt in the murder scene. For just as Duke was about to be hurled headlong over the side, a man came forward and pressed the blackguards back on hearing these words. For a time it was all that the new-comer could do to restrain the brutes from hitting the poor fellow, while the men who still had hold of his limbs swore that they would have Duke over the cliff. But after being dealt a severe blow on the forehead, they put him down on to the ground and left him bleeding. One of the gang, seeing this, observed complacently, "He bleeds well, but breathes short. It will soon be over with him." And with that they left him. [Illustration: "Let's ... have him over the cliff."] The man who had come forward so miraculously and so dramatically to save Duke's life was James Cowland, and the reason he had so acted was out of gratitude to Duke, who had taken his part in a certain incident twelve months ago. And this is the sole redeeming feature in a glut of brutality. It must have required no small amount of pluck and energy for Cowland to have done even so much amid the wild fanaticism which was raging, and smuggler and ruffian though he was, it is only fair to emphasize and praise his action for risking his own life to save that of a man by whom he had already benefited. But Cowland did nothing more for his friend than that, and after the crowd had indulged themselves on the two men they went off to their homes. Duke then, suffering and bleeding, weak and stunned, crawled to the place where he had been first attacked--a little higher up the cliff--and there he saw Knight's petticoat trousers, but there was no sign of his officer himself. After that he gradually made his way down to the beach, and at the foot of the cliff he came upon Knight lying on his back immediately below where the struggle with the smugglers had taken place. Duke sat down by his side, and the officer, opening his eyes, recognised his man and asked, "Is that you?" But that was all he said. Duke then went to tell the coastguards and Lieutenant Stocker on the beach, who fetched the dying man, put him into Lipscomb's boat, and promptly rowed him to his home at Lulworth, where he died the next day. It is difficult to write calmly of such an occurrence as this: it is impossible that in such circumstances one can extend the slightest sympathy with a race of men who probably had a hard struggle for existence, especially when the fishing or the harvests were bad. The most one can do is to attribute such unreasoning and unwarranted cruelty to the ignorance and the coarseness which had been bred in undisciplined lives. Out of that seething, vicious mob there was only one man who had a scrap of humanity, and even he could not prevent his fellows from one of the worst crimes in the long roll of smugglers' delinquencies. The days of smugglers were, of course, coincident with the period of the stage-coach. In the year 1833 there was a man named Thomas Allen, who was master and part-owner of a coasting vessel named the _Good Intent_, which used to trade between Dover and London. In February of that year Thomas Becker, who happened to be the guard of the night coaches running between Dover and London, came with a man named Tomsett to Allen, and suggested that the latter should join them in a smuggling transaction, telling him that they knew how to put a good deal of money into his pocket. At first Allen hesitated and declined, but the proposal was again renewed a few days later, when Allen again declined, as it was too risky a business. But at length, as "trade was very bad," both he and a man named Sutton, one of his crew, agreed to come into the scheme. What happened was as follows:-- The _Good Intent_ left Dover on February 23, went as far as the Downs about two miles from the coast, and under cover of darkness took on board from a French vessel, which was there waiting by appointment, about forty bales of silk. In order to be ready to deal with these, the _Good Intent_ had been provided with sufficient empty crates and boxes. The silks were put into these, they were addressed to some persons in Birmingham, and, after being landed at one of the London quays as if they had come from Dover, they were sent across to the Paddington Canal, and duly arrived at their destination. Allen's share of that transaction amounted to about £80. He had done so well that he repeated the same practice in April and May; but in June some tea which he brought in was seized, and although he was not prosecuted yet it gave him a fright. But after being entreated by the two tempters, he repeated his first incident, took forty more bales on board, and arrived at the Port of London. But the Custom House officials had got wind of this, and when the _Good Intent_ arrived she was searched. In this case the goods had not been put into crates, but were concealed in the ballast, the idea being not to land them in London but to bring them back under the ballast to Dover. [Illustration: "Under cover of darkness took on board ... forty bales of silk."] The first remark the Customs officer made was, "There is a great deal more ballast here than is necessary for such a ship," and promptly began moving the same. Of course the goods were discovered, and of course Allen pretended he knew nothing about the forty bales being there concealed. They were seized and condemned. Becker got to hear of this disaster and that a warrant was out for his own arrest, so he quickly hopped across to Calais. An officer was sent both to Deal and to Dover to find Tomsett, but found him not, so he crossed over to Calais, and among the first people whom he saw on Calais pier were Tomsett and Becker walking about together. The officer had no wish to be seen by Becker, but the latter saw him, and came up and asked him how he was and what he was doing there. The officer made the best excuse he could, and stated that he had got on board the steam-packet and been brought off by mistake. "Oh, I am here in consequence of that rascal Allen having peached against us," volunteered Becker, and then went on to say that he was as innocent as the child unborn. However, the judge, at a later date, thought otherwise, and imposed a penalty of £4750, though the full penalty really amounted to the enormous sum of £71,000. CHAPTER XX FORCE AND CUNNING A smuggling vessel was usually provided with what was called a tub-rail--that is to say, a rail which ran round the vessel just below the gunwale on the inside. When a vessel was about to arrive at her destination to sink her tubs, the proceeding was as follows. The tubs were all made fast to a long warp, and this warp with its tubs was placed outside the vessel's bulwarks, running all round the ship from the stern to the bows and back again the other side. This warp was kept fastened to the tub-rail by five or seven lines called stop-ropes. Consequently all the smugglers had to do was to cut these stop-ropes, and the tubs and warp would drop into the water, the stone weights immediately sinking the casks. Bearing this in mind, let us see the Revenue cutter _Tartar_, on the night between the 3rd and 4th of April 1839, cruising off Kimeridge, between St. Alban's Head and Weymouth, and a little to the east of where Lieutenant Knight was murdered, as we saw in the last chapter. About 1.40 A.M. Lieutenant George Davies, R.N., the _Tartar's_ commander, was below sleeping with his clothes and boots on, when he heard the officer of the watch call for him. Instantly he went on deck and saw a smuggling vessel. She was then about thirty yards away and within a mile of the shore. Her name was afterwards found to be the French sloop _Diane_. It was rather a warm, thick night, such as one sometimes gets in April when the weather has begun to get finer. By the time that the cruiser's commander had come up on deck, both the cutter and the _Diane_ were hove-to, and the vessels were close alongside. When first sighted by the boatswain the smuggler was standing out from the land. The _Tartar's_ boat was now launched into the water, and the bo'sun and two men pulled off in her and boarded the _Diane_, and then came back to fetch Lieutenant Davies. The instant the latter boarded the _Diane_, he saw one of the latter's crew throwing something overboard. He stooped down to pick something up, when Davies rushed forward and caught him round the body as something fell into the water, and a tub-hoop, new, wet, and green, was taken from him. Davies called to his bo'sun to bring a lantern, so that he might identify the seized man and then proceed to search the vessel. A tub-rail and stop-rope were found on board, and, on going below, the hold was found to be strewn with chips of tub-hoops and pieces of stones for sinking. The upper deck was similarly strewn, while by the hatchway were found sinker-slings. These sinkers in actual employment were accustomed to be suspended and hitched round the warp at about every sixth tub. The _Diane's_ master was asked where his boat was since none was found aboard, but there was no satisfactory answer. Tub-boards for fixing on deck so as to prevent the tubs from rolling overboard were also found, so altogether there was sufficient reason for seizing the vessel, which was now done. She was taken into Weymouth and her crew brought before a magistrate. And in that port the tub-boat was also found, for the smugglers had doubtless sent most of their cargo ashore in her whilst the _Diane_ was cruising about between there and St. Alban's Head. It was significant that only three men were found on board, whereas smuggling vessels of this size (about twenty to thirty tons) usually carried eight or nine, the explanation being that the others had been sent out with the tub-boat. But the rest of the cargo had evidently been hurriedly thrown overboard when the _Tartar_ appeared, and because these casks were thrown over so quickly, fifty-nine of them had come to the surface and were subsequently recovered. But besides these, 154 casks were also found on one sling at the bottom of the sea close to where the _Diane_ had been arrested, for at the time when this occurrence had taken place the _Tartar's_ men had been careful at once to take cross bearings and so fix their position. One of the most interesting of these smuggling events was that which occurred in the Medway. About eight o'clock on the evening of March 27, 1839, a smack called the _Mary_ came running into the river from outside. At this time it was blowing very hard from the N.E., and the tide was ebbing, so that of course wind would be against tide and a certain amount of sea on. But it was noticed by the coastguard at Garrison Point, which commands the entrance to this river, that the _Mary_ had got far too much sail up--whole mainsail as well as gaff-topsail. Considering it was a fair wind and there was a good deal of it, there was far more canvas than was necessary, even allowing for the tide. It was a rule that all vessels entering the Medway should bring-to off Garrison Point, and allow themselves to be boarded and searched, if required by certain signals. In order to compel the _Mary_ so to do, the coastguard at this point fired a shot and rowed off to meet her. But the smack held on. She was steering straight for the Isle of Grain, and showed no intention of starboarding her helm so as to get on a proper course up the Medway. Another shot was fired, and yet she held on. Now there were some of her Majesty's ships lying near the Grain, which is on the starboard hand as you pass up the river, viz. the _Dædalus_ and the _Alfred_. These vessels were of course swung with the tide, and between the _Dædalus_ and the Isle of Grain the smack manoeuvred. [Illustration: "Another shot was fired."] A third shot now came whizzing by from the boat that was rowing hard against the tide, and the smack came round between the _Alfred_ and _Dædalus_. The coastguard then boarded the _Mary_, and the master said he was from Brightlingsea. He pretended that he thought the firing was not from the coastguard, but from a ship at the Little Nore, which is the channel that runs up to Garrison Point from the Nore Lightship. This was curious, for the _Mary_ had been in the habit of going up the Medway, and hitherto had always hove-to off Garrison Point for the coastguard to come aboard. Her skipper excused his action by stating that he was frightened of heaving-to as he might have carried away his mast and gone ashore, if he had hauled up and gybed. But it was pointed out that it was a foolish and unsafe course for the _Mary_ to steer between the _Dædalus_ and the Grain Island, especially as it was a dark night without any moon, and blowing very hard. But on going aboard, the coastguard was not surprised to detect a strong smell of gin, as if spirits had quite recently been removed from the smack. And after making a search there was nothing found on board except that she was in a great state of confusion. None the less it was deemed advisable to place a couple of officers on board her to accompany her up to Rochester. This was on the Friday night, and she arrived at Rochester the same day. On the Sunday it occurred to the officers to search for the spirits which they were sure the _Mary_ had on board, so they proceeded to that spot by the _Dædalus_ where the _Mary_ had luffed round and met the coastguard boat. After sweeping for half-an-hour they found 115 tubs slung together to a rope in the usual manner. At each end of the rope was an anchor, and between these anchors was a number of tubs, and in between each pair of tubs were stones. So the _Mary_ had gone into that little bight in order that she might throw her tubs overboard, which would be sunk by the stones, and the two anchors would prevent them from being drifted away by the tide. The warp, it was thought, had been in the first instance fastened to the tub-rail in the manner we have already described, and at the third gun the stop-ropes were cut, and the whole cargo went with a splash into the water, and the vessel sailed over the tubs as they sank to the muddy bottom. [Illustration: Methods employed by Smugglers for Anchoring tubs thrown Overboard.] The usual way to get these tubs up was of course by means of grapnels, or, as they were called, "creepers." But the spot chosen by the _Mary_ was quite close to the moorings of the _Dædalus_, so that method would only have fouled the warship's cables. Therefore the following ingenious device was used. A large heavy rope was taken, and at each end was attached a boat. The rope swept along the river-bed as the boats rowed in the same direction stretching out the rope. Before long the bight of this rope found the obstructing tubs, stones, warp, and anchor, and that having occurred, the two boats rowed close together, and a heavy iron ring was dropped over the two ends of the rope, and thus sank and gripped the rope at the point where it met with the obstruction. All that now remained, therefore, was to pull this double rope till the obstruction came up from the bottom of the water. And in this manner the articles which the _Mary_ had cast overboard were recovered. She was obviously a smuggler, as besides this discovery she was found to be fitted with concealments, and fourteen tholes were found on board "muffled" with canvas and spun yarn, so as to be able to row silently. Her skipper, William Evans, was duly prosecuted and found guilty; and it was during the course of this trial that the interesting dialogue occurred between counsel and the coastguard as to whether the first warning gun fired was always shotted or not. As we have already discussed this point, we need not let it detain us now. The year 1849 was interesting, as it witnessed the seizing of one of the earliest steamcraft on a charge of smuggling. Very late in the day of May 15 the steam-tug _Royal Charter_, employed in towing vessels in and out of Portsmouth harbour, had been taken to Spithead without the permission of her owner, and information was given to the coastguard. About midnight she was first discovered steaming towards the port with a small boat attached to her stern, being then about half a mile from the harbour. Chase was then made and the vessel hailed and ordered to heave-to. She replied that she would round-to directly, but in fact she held on and steamed at full speed, notwithstanding that several shots were fired at her. As she entered Portsmouth harbour she was pursued by the Customs boat, who asked them to shut off steam and be examined. Of course full speed in those days meant nothing very wonderful, and it was not long before she was boarded. She had a crew of three, and there were ten men in the boat towing astern, most of whom were found to have been previously convicted of smuggling. It seems strange to find a steamboat pursuing the old tactics of the sailing smacks, but in her wake there were found 150 half-ankers within about 300 yards of her and where she had passed. The vessel and boat were seized, and the men taken before the magistrates and convicted. But the following is an instance of steam being employed against smugglers. One Sunday towards the end of October 1849, about nine o'clock in the morning, the local receiver of duties informed the tide surveyor at St. Heliers, Jersey, that there was a cutter which (from information received) he was convinced was loaded with brandy. This cutter was in one of the bays to the N.W. of the island. But as the wind was then blowing from the W.N.W. and a very heavy surf was rolling in, the consent of the harbour-master was obtained to use the steam-tug _Polka_ to go round in search of her, the understanding being that she was to be paid for if a seizure were made. The wind and sea were so boisterous that the Revenue boat could not have been used. Steamer and officers therefore proceeded round the coast till they reached Plemont Bay, about twenty miles from St. Helier, and there they found a small cutter lying at anchor close under the cliff, but with no one on board. The steamer lowered a boat and found the cutter to be the _Lion_ of Jersey, five tons, with four hogsheads and seven quarter casks of brandy. The officers then weighed anchor, and by sailing and towing got her round to St. Helier harbour, where she was dismantled, and the brandy and her materials lodged at the Custom House. This little craft had come from Dielette in France, and as Plemont Bay was a very secluded locality, she would have run her goods there with perfect success, had she not been discovered while her crew were on shore, whither they had probably gone for the purpose of making arrangements for getting the cargo landed. But by the middle of the nineteenth century so thoroughly had the authorities gripped the smuggling evil that these men were actually sometimes afraid to take advantage of what fortune literally handed out to them. The schooner _Walter_ of Falmouth was bound on a voyage from Liverpool to Chichester with a cargo of guano on May 30, 1850. Her crew consisted of Stephen Sawle, master, Benjamin Bowden, mate, Samuel Banister, seaman, and George Andrews, boy. On this day she was off Lundy Island, when Andrews espied a couple of casks floating ahead of the schooner and called to the master and mate, who were below at tea. They immediately came up on deck, and the master looked at the kegs through his glass, saying that he thought they were provisions. The three men then got out the ship's boat, rowed after the casks and slung them into the boat, and brought them on board. In doing so the mate happened to spill one of them, which contained brandy. This gave the skipper something of a fright, and he directed the mate and seaman to throw the casks overboard. They both told him they thought he was a great fool if he did so. He gave the same orders a second time and then went below, but after he had remained there for some time, he said to his crew, "If you will all swear that you will not tell anybody, I will risk it." They all solemnly promised, the master swearing the mate, the seaman, and the boy on the ship's Bible that they would not tell the owner or any living creature. Presently the mate and Banister removed the hatches and handed up about two tiers of guano, sent the casks of brandy below and placed bags on their top. After the master had been below a couple of hours, he asked whether the casks were out of sight. The mate and Banister replied that they were, whereupon the master took a candle, examined the hold, and afterwards the sleeping-berths, but he could not see anything of the brandy. He then went to the boy and said, "Mind you don't let Mr. Coplin [the owner] know anything about this business, for the world." The vessel arrived at Falmouth on Sunday morning, the 2nd of June, and brought up off the Market Strand. At six in the morning the boy went ashore and returned about midnight. The mate was on board and addressed him thus, "You knew very well what was going on and ought to have been on board before this." For at that time both the master and Banister were ashore. On Monday the boy went down to the hold and saw the brandy was gone, and the same night about half-an-hour before midnight the mate and Banister brought four gallons of the brandy to where the boy was lodging, as his share. The youngster complained that it was very little, to which Banister replied that one of the casks had leaked amongst the cargo of guano or he would have had more. Ostensibly the schooner had put into Falmouth for repairs. Later on the Custom House officers got to hear of it, but it was then the month of July, and the schooner had since sailed and proceeded to Liverpool. On the 1st of October of this same year a highly ingenious device was discovered through a hitch, which unfortunately ruined the smugglers' chances. In its broad conception it was but a modification of an idea which we have already explained. In its application, however, it was unique and original. At half-past six on this morning a fore-and-aft-rigged vessel was observed to be sailing into Chichester harbour. When first discovered, she was about a mile from Hayling Island. She was boarded, as smuggled goods were supposed to have been taken by her from a raft at sea. Manned by a master and a crew of two, all English, she was well known in that neighbourhood. She was registered at Portsmouth as the _Rival_. Her cargo was found to consist of a few oysters and thirteen tubs of spirits, but these were attached to the stern in a most ingenious manner. By her stern-post was an iron pipe, and through this pipe ran a chain, one end of which was secured at the top, close to the tiller, the other end running right down into the water below the ship. Attached to the chain in the water were thirteen tubs wrapped in canvas. The theory was this. As the vessel sailed along, the chain would be hauled as tight as it would go, so that the casks were kept under the vessel's stern and below water. Now, having arrived in Chichester harbour, the helmsman had suddenly let go the chain, but the latter had unhappily jammed in the pipe, and the tubs were thus dragged with a large scope of chain. The coastguard in coming alongside used his boat-hook underneath, and thus caught hold of the chain and tubs. The vessel was now soon laid ashore, and when her bottom was examined, the whole device was discovered. It had only quite recently been added, but the crew were notorious smugglers, so they got themselves into trouble in spite of their ingenuity. [Illustration: The _Rival's_ Ingenious Device (see text).] And now let us bring this list of smuggling adventures to an end with the activities of a very ubiquitous French sloop named the _Georges_, which came into prominent notice in the year 1850. Her port of departure was Cherbourg, and she was wont to run her goods across to the south coast of England with the greatest impudence. In piecing together this narrative of her adventures, it has been no easy task to follow her movements, for she appeared and disappeared, then was seen somewhere else perhaps a hundred miles away in a very short time. It appears that on April 19 the _Georges_, whose master's name was Gosselin, cleared from Cherbourg, and two days later was sighted by the commander of the Revenue cutter _Cameleon_ off Bembridge Ledge, about one o'clock in the afternoon, about eight or nine miles E.S.E. After she had come up she was boarded by the _Cameleon_, and was found to have one passenger, whom the _Cameleon's_ commander described as an Englishman "of a most suspicious appearance." But after being searched she was found perfectly "clean" and free from any appearance of tubs or smell of spirits. The Revenue cutter's commander therefore formed the opinion that the _Georges_ was fitted with some concealments somewhere. In order to discover these, it would be essential for the craft to be hauled ashore. He therefore did not detain her, but, as she was bound for Portsmouth, put an officer and a couple of men aboard her till she should arrive at that port. One thing which had aroused suspicions was the finding on board of exceptionally large fend-offs. These were just the kind which were used by smuggling ships accustomed to be met at sea by smaller craft, into which the casks were transferred and then rowed ashore. And what was more suspicious still was the fact that these fend-offs were found wet; so they had most probably been used recently in a seaway when some tub-boats had been alongside the _Georges_. Somehow or other, when she arrived at Portsmouth, although the matter was duly reported, it was not thought necessary to haul her ashore, but she was carefully examined afloat. The English passenger found aboard gave the name of Mitchell, but he was suspected of being Robinson, a notorious Bognor smuggler. And it was now further believed that the _Georges_ had sunk her "crop" of tubs somewhere near the Owers (just south of Selsey Bill), as on the morning of the day when the _Cameleon_ sighted her a vessel answering her description was seen in that vicinity. On that occasion, then, the _Georges_ could not be detained, and we next hear of her on May 3, when again she set forth from Cherbourg. She had no doubt taken on board a fine cargo, for she had a burthen of thirty-one tons, and this she managed in some mysterious manner to land in England. There can be no doubt that she did succeed in hoodwinking the Revenue service for a time, but it is probable that she employed largely the method of sinking the tubs, which were afterwards recovered in the manner already familiar to the reader. At any rate, Lieutenant Owen, R.N., writing on May 9 from the Ryde coastguard station to Captain Langtry, R.N., his inspecting commander, reported that this _Georges_ had arrived off Ryde pier that morning at seven o'clock. She had five Frenchmen on board besides Gosselin. It was found that her tub-boat was a new one, and when she arrived this was on deck, but it had since been hoisted out, and Gosselin, having been brought ashore, crossed by the Ryde steamer to Portsmouth at 9 A.M. What business he transacted in Portsmouth cannot be stated definitely, but it is no foolish guess to suggest that he went to inform his friends at what spot in the neighbourhood of the Isle of Wight he had deposited the casks of spirits a few hours previously. However, Gosselin did not waste much time ashore, for he had returned, got up anchor and sails, and was off Bembridge Ledge by five in the afternoon, at which time the _Georges_ was sighted by Captain Hughes, commanding the Revenue cutter _Petrel_. The _Georges_ was boarded and searched, and there was a strong smell of brandy noticed, and it was clear that her tub-boat had been recently used. Somewhere--somehow--she had recently got rid of her "crop," but where and when could not be ascertained. The _Georges'_ master protested that he was very anxious to get back to Cherbourg as quickly as possible; and as there was nothing definite found on board this foreign craft, Captain Hughes decided to release her. That was on May 9, then. But exactly a week later this same _Georges_ came running into Torbay. On arrival here she was found to have no tub-boat, although in her inventory she was said to have a boat 21 feet long and 9 feet broad. Some of her crew were also absent, which looked still further suspicious. Still more, she was found to have battens secured along her bulwarks for the purpose of lashing tubs thereto. This made it quite certain that she was employed in the smuggling industry, and yet again there was no definite reason for arresting this foreign ship. We pass over the rest of May and June till we come to the last day of July. On that date the lieutenant in charge of the coastguard at Lyme (West Bay) reported that he had received information from Lieutenant Davies of the Beer station that a landing of contraband goods was likely to be attempted on the Branscombe station, which is just to the west of Beer Head. It was probable that this would take place on either the 1st or 2nd of August, and at night. Orders were therefore given that a vigilant look-out should be kept in this neighbourhood. Nothing occurred on the first of these dates, but about twenty minutes past eleven on the night of August 2 reports and flashes of pistols were heard and seen on the Sidmouth station as far as Beer Head. These were observed by Lieutenant Smith and his crew, who were in hiding; but, unfortunately, just as one of the coastguards was moving from his hiding-place he was discovered by a friend of the smugglers, who instantly blazed off a fire on the highest point of the cliff. However, Lieutenant Smith did not waste much time, and quickly had a boat launched. They pulled along the shore for a distance of a mile and a half from the beach, and continued so to do until 2.30 A.M., but no vessel or boat could be seen anywhere. But as he believed a landing was taking place not far away, he sent information east and west along the coast. As a matter of fact a landing did occur not far away, but it was not discovered. An excise officer, however, when driving along the Lyme road, actually fell in with two carts of tubs escorted by fifteen men. This was somewhere about midnight. He then turned off the road and proceeded to Sidmouth as fast as he could, in order to get assistance, as he was unarmed. From there the chief officer accompanied him, having previously left instructions for the coastguard crew to scour the country the following morning. But the excise and chief officer after minutely searching the cross-roads found nothing, and lost track of the carts and fifteen men. [Illustration: "Taken completely by surprise."] That time there had been no capture, and the smugglers had got clean away. But the following night Lieutenant Smith went afloat with his men soon after dark, and about half-past ten observed a signal blazed off just as on the previous evening. Knowing that this was a warning that the smuggling vessel should not approach the shore, Smith pulled straight out to sea, hoping, with luck, to fall in with the smuggling craft. Happily, before long he discovered her in the darkness. She appeared to be cutter-rigged, and he promptly gave chase. At a distance of only two miles from the shore he got up to her, for the night was so dark that the cutter did not see the boat until it got right alongside, whereupon the smugglers suddenly slipped a number of heavy articles from her gunwale. Taken completely by surprise, and very confused by the sudden arrival of the coastguard's boat, Lieutenant Smith was able to get on board their ship and arrest her. It was now about 11.15 P.M. But, having noticed these heavy splashes in the water, the lieutenant was smart enough instantly to mark the place with a buoy, and then was able to devote his attention entirely to his capture. He soon found that this was the _Georges_ of Cherbourg. She was manned by three Frenchmen, and there were still hanging from the gunwale on either quarter a number of heavy stones slung together, such as were employed for sinking the tubs. There can be no doubt that the _Georges'_ intention had been to come near enough to the shore to send her tubs to the beach in her tub-boat, as she had almost certainly done the night before. But hearing the coastguard galley approaching, and being nervous of what they could not see, the tubs were being cast into the sea to prevent seizure. Although no tubs were found _on board_, yet it was significant that the tub-boat was not on board, having evidently been already sent ashore with a number of casks. There was a small 12-feet dinghy suspended in the rigging, but she was obviously not the boat which the _Georges_ was accustomed to use for running goods. Lieutenant Smith for a time stood off and on the shore, and then ran along the coast until it was day, hoping to fall in with the tub-boat. Just as he had captured the _Georges_ another coastguard boat, this time from the Beer station, came alongside, and so the officer sent this little craft away with four hands to search diligently up and down the coast, and to inform the coastguards that the tub-boat had escaped. When it was light, Smith took the _Georges_ into Lyme Cobb, and her crew and master were arrested. She had evidently changed her skipper since the time when she was seen off the Hampshire shore, for the name of her present master was Clement Armel. They were landed, taken before the magistrates, and remanded. But subsequently they were tried, and sentenced to six months' hard labour each in Dorchester gaol, but after serving two months of this were released by order of the Treasury. On the 5th of August the boats from Lieutenant Smith's station at Branscombe went out to the spot where the _Georges_ had been captured and the mark-buoy with a grapnel at the end of it had been thrown. There they crept for a time and found nothing. But it had been heavy weather, and probably the tubs had gone adrift without sinkers to them. At any rate no landing was reported along the shore, so it was doubtful if the tub-boat had managed to get to land. As to the _Georges_ herself, she was found to be almost a new vessel. She was described as a handsome craft, "and very much the appearance of a yacht, and carries a white burgee at her masthead with a red cross in it, similar to vessels belonging to the Yacht Club." The reference to the "Yacht Club" signifies the Royal Yacht Squadron, which was originally called the Royal Yacht Club. In those days the number of yachts was very few compared with the fleets afloat to-day. Some of the Royal Yacht Club's cutters were faster than any smuggler or Revenue craft, and it was quite a good idea for a smuggler built with yacht-like lines to fly the club's flag if he was anxious to deceive the cruisers and coastguards by day. Some years before this incident there was found on board a smuggling lugger named the _Maria_, which was captured by the Revenue cruiser _Prince of Wales_ about the year 1830, a broad red pendant marked with a crown over the letters "R.Y.C.," and an anchor similar to those used by the Royal Yacht Club. One of the _Maria's_ crew admitted that they had it on board because they thought it might have been serviceable to their plans. The point is not without interest, and, as far as I know, has never before been raised. But to conclude our narrative of the _Georges_. As it was pointed out that she was such a fine vessel, and that Lyme Cobb (as many a seafaring man to-day knows full well) was very unsafe in a gale of wind, it was suggested that she should be removed to Weymouth "by part of one of the cutters' crews that occasionally call in here." So on the 7th of September in that year she was fetched away to Weymouth by Lieutenant Sicklemore, R.N. She and her boat were valued at £240, but she was found to be of such a beautiful model that she was neither destroyed nor sold, but taken into the Revenue service as a cutter to prevent the trade in which she had been so actively employed. And so we could continue with these smuggling yarns; but the extent of our limits has been reached, so we must draw to a close. If the smuggling epoch was marred by acts of brutality, if its ships still needed to have those improvements in design and equipment which have to-day reached such a high mark of distinction, if its men were men not altogether admirable characters, at any rate their seamanship and their daring, their ingenuity and their exploits, cannot but incite us to the keenest interest in an exceptional kind of contest. APPENDICES APPENDIX I SLOOPS OR CUTTERS The reputed difference between a sloop and cutter in the eighteenth century is well illustrated by the following, which is taken from the Excise Trials, vol. xxx., 1st July 1795 to 17th December 1795, p. 95. In Attorney-General _v._ Julyan and others there was an action to condemn the vessel _Mary_ of Fowey, brought under the provisions of sec. 4, c. 47, 24 Geo. III., as amended by sec. 6, c. 50, 34 Geo. III. There were several counts, including one with regard to the vessel being fitted with "arms for resistance," but the case turned on the question whether she was cutter-rigged or sloop-rigged. Counsel for the prosecution defined a cutter as "a thing constructed for swift sailing, which, with a view to effect that purpose, is to sink prodigiously at her stern, and her head to be very much out of water ... built so that she should measure a great deal more than she would contain." Such a definition, however satisfactory it may have been to the legal mind, was one that must have vastly amused any seafaring man. The judge, quoting expert evidence, explained the difference between a cutter and a sloop as follows:--A standing or running bowsprit is common to either a sloop or a cutter, and a traveller, he said, was an invariable portion of a cutter's rig, so also was a jib-tack. The jib-sheet, he ruled, differed however; that of a cutter was twice as large as that of a sloop and was differently set. It had no stay. A sloop's jib-sheet was set with a fixed stay. Furthermore, in a cutter the tack of the jib was hooked to a traveller, and there was a large thimble fastened to a block which came across the head of the sail. There were two blocks at the mast-head, one on each side. "A rope passes through the three blocks by which it is drawn up to the halliards." The jib of a cutter "lets down and draws in a very short time." A cutter usually had channels and mortice-holes to fix legs to prevent oversetting. APPENDIX II LIST OF CRUISERS EMPLOYED IN THE CUSTOMS SERVICE FOR THE YEAR 1784 -----------------+---------+------------+---------------------------------+ Name. |Number of|Where | | |Crew. |Stationed. | Remarks. | -----------------+---------+------------+---------------------------------+ _Lively_ and } | 14 | London | These vessels were the property | _Vigilant_ } | | | of the Crown. The _Lively_ | | | | cruised in the winter | | | | half-year, but in the summer | | | | her crew did duty on board | | | | the _Vigilant_. | _Defence_ | 16 |Gravesend | On the Establishment. | _Success_ | 23 |Rochester | " " | _Otter_ | 13 |Rochester | Moored in Standgate Creek to | | | | guard the Quarantine. | _Active_ | 18 |Eaversham | On the Establishment. | _Sprightly_ | 30 |Sandwich | Employed by Contract from May | | | | 27, 1784. | _Greyhound_ | 17 |Sandwich | Employed by Contract from | | | | January 27, 1784. | _Scourge_ | 30 |Deal | Employed by Contract from | | | | January 27, 1784. | _Nimble_ | 30 |Deal | Employed by Contract from | | | | April 23, 1784. | _Tartar_ | 31 |Dover | On the Establishment. | _Assistance_ | 28 |Dover | Employed by Contract. | _Alert_ | 16 |Dover | Employed by Contract from | | | | April 22, 1784. | _Stag_ | 24 |Rye | On the Establishment. | _Hound_ | 30 & 24 |Rye | Contract. Crew reduced to 24 | | | | on October 9, 1784. | _Surprise_ | 28 |Newhaven | Contract. Crew reduced to 24 | | | | on October 9, 1784. | _Enterprise_ | 18 |Shoreham | Establishment in 1784, but | | | | afterwards on Contract. | _Falcon_ | 18 & 28 |Chichester | Establishment. | _Roebuck_ | 21 |Portsmouth | " | _Antelope_ | 11 |Portsmouth | " | _Rose_ | 30 |Southampton | " | _Speedwell_ | 31 |{ Weymouth |{ She was on Contract at | | |{ Cowes |{ Weymouth but was removed to | | | |{ Cowes on June 10, 1784. | _Swan_ | 23 | Cowes | Contract from March 6, 1784 | _Laurel_ | 20 | Poole | " " " | _Diligence_ | 32 |{ Poole |} Contract. Removed from Poole | | |{ Weymouth |} to Weymouth, March 2, 1784. | _Alarm_ | 26 | Exeter | Contract. Removed from Poole | | | | to Weymouth, March 2, 1784. | _Spider_ | 28 | Dartmouth | Contract. Removed from Poole | | | | to Weymouth, March 2, 1784. | _Ranger_ | 21 | Plymouth | Establishment. | _Wasp_ | 20 | Plymouth | Contract. | _Squirrel_ | 20 | Looe | " | _Hawke_ |18 & 26 | Falmouth | " | _Lark_ | 20 | Falmouth | " | _Lurcher_ | 30 | Penryn | " | _Tamer_ | 25 | Scilly | " | _Brilliant_ | 30 | St. Ives | " | _Dolphin_ | 26 | St. Ives | " | _Brisk_ | 19 | Milford | " | _Repulse_ | 33 | Colchester | Establishment. | _Argus_ | 24 | Harwich | " | _Bee_ | 16 | Harwich | Contract. | _Hunter_ | 25 | Yarmouth. | Establishment. | _Experiment_ | 18 | Boston | " | _Swallow_ | 24 | Hull | " | _Mermaid_ | 24 | Newcastle | " | _Eagle_ | 24 | Newcastle | " | -----------------+---------+------------+---------------------------------+ APPENDIX III LIST OF CRUISERS EMPLOYED IN THE CUSTOMS SERVICE FOR THE YEAR 1797 (_up to June 27_) -------------------+------------------------------+---------+------+------+ Vessel. | Commander. | Tonnage.| Guns.| Men. | -------------------+------------------------------+---------+------+------+ _Vigilant_ Yacht |{ Richard Dozell |{ 53 | 6 | 13 | _Vigilant_ Cutter |{ |{ 82 | 8 |10adl.| | | | | | | | | | | _Diligence_ | William Dobbin | 152 | 14 | 32 | | | | | | _Swallow_ | Thomas Amos | 153 | 10 | 32 | _Lively_ | Du Bois Smith | 113 | 12 | 30 | _Defence_ | Geo. Farr (Acting) | 76 | 6 | 18 | _Ant_ | Thomas Morris | 58 | 4 | 15 | _Fly_ | Thomas Gibbs | 52 | 4 | 15 | _Success_ | William Broadbank | 74 | 6 | 24 | _Otter_ | John Matthews | 68 | -- | 13 | _Active_ | Thomas Lesser | 75 | 8 | 18 | | | | | | | | | | | _Swift_ | J. Westbeech (Tide Surveyor) | 52 | -- | 8 | _Nimble_ | William Clothier (Acting) | 41 | 2 | 15 | _Tartar_ | B.J. Worthington | 100 | 10 | 23 | _Stag_ | John Haddock | 153 | 14 | 32 | | | | | | -------------------+------------------------------+---------+------+------+ -------------------+---------------------------------------+ Vessel. | Extent of Cruising Station. | -------------------+---------------------------------------+ _Vigilant_ Yacht | To attend the Honourable Board. | _Vigilant_ Cutter | In the winter season the cutter with | | ten additional hands cruised on the | | coasts of Essex, Ken, and Sussex | _Diligence_ | Milford to Solway Firth, or as the | | Board should direct. | _Swallow_ | As the Board should direct. | _Lively_ | " " " | _Defence_ | Gravesend to Dungeness. | _Ant_ | Gravesend to the Nore. | _Fly_ | " " " | _Success_ | Rochester to North Sand Head. | _Otter_ | Rochester to the Buoy of the Woolpack.| _Active_ | Mouth of Medway to N. Foreland, | | round the Longsand and up the | | Swin to Leigh. | _Swift_ | Downs to the Longsand. | _Nimble_ | Between the Forelands. | _Tartar_ | The Gore to Beachy Head. | _Stag_ | Dover to Brighton, but extended on | | special circumstances. | -------------------+---------------------------------------+ -------------------+------------------------------+---------+------+------+ Vessel. | Commander. | Tonnage.| Guns.| Men. | -------------------+------------------------------+---------+------+------+ _Hound_ | J.R. Hawkins | 111 | 12 | 30 | _Falcon_ | Charles Newland | 131 | 12 | 33 | _Roebuck_ | John Stiles | 104 | 12 | 27 | _Antelope_ | John Case | 97 | 10 | 26 | | | | | | _Rose_ | William Yeates | 114 | 12 | 32 | _Swan_ | |[Building at this date]| _Greyhound_ | Richard Wilkinson | 200 | 16 | 43 | _Alarm_ | Andrew Dealey | 130 | 12 | 36 | _Ranger_ | Nathaniel Cane | 80 | 8 | 25 | _Busy_ | Alexr. Fraser (mate) | 46 | -- | 11 | _Hinde_ | Gabriel Bray | 160 | 12 | 41 | _Dolphin_ | Richard Johns (Junr.) | 139 | 14 | 32 | | | | | | _Racer_ | James Wood (mate) | 40 | -- | 9 | _Speedwell_ | John Hopkins |[Building at this date]| | | | | | _Endeavour_ | Thomas Peregrine | 34 | -- | 11 | _Repulse_ | G.G.H. Munnings | 143 | 14 | 43 | _Argus_ | John Saunders | 135 | 14 | 32 | _Hunter_ | Thomas Ritches | 143 | 14 | 32 | _Bee_ | A. Somerscalls (mate) | 28 | -- | 9 | | | | | | _Eagle_ | George Whitehead |[Building at this date]| _Mermaid_ | John Carr | 112 | 10 | 30 | _Viper_ | John Hudson (mate) | 28 | -- | 9 | | | | | | -------------------+------------------------------+---------+------+------+ -------------------+---------------------------------------+ Vessel. | Extent of Cruising Station. | -------------------+---------------------------------------+ _Hound_ | N. Foreland to Isle of Wight. | _Falcon_ | Beachy Head to Isle of Wight. | _Roebuck_ | Round the Isle of Wight. | _Antelope_ | Round the Isle of Wight, and from | | Needles to Swanage. | _Rose_ | From Lool to Lyme. | _Swan_ | Beachy Head to Lyme. | _Greyhound_ | Beachy Head to the Start. | _Alarm_ | Between Portland and the Start. | _Ranger_ | Land's End to Cape Cornwall. | _Busy_ | Plymouth Sound and Lawsand Bay. | _Hinde_ | Portland to St. Ives and Scilly. | _Dolphin_ | St. Ives to Padstow, round Scilly; | | Land's End to Helford. | _Racer_ | Chepstow to Ilfracombe. | _Speedwell_ | Holyhead, Bristol Channel, and to | | the Land's End. | _Endeavour_ | The whole port of Milford. | _Repulse_ | North Yarmouth to Portsmouth. | _Argus_ | Buoy of the Middle[25] to Lowestoft. | _Hunter_ | Harwich to Cromer. | _Bee_ | Humber, York, and Lincoln, and to | | guard Quarantine. | _Eagle_ | Tynemouth to Yarmouth. | _Mermaid_ | Berwick to the Spurn. | _Viper_ | Isle of Anglesea to St. Bee's Head | | occasionally. | -------------------+---------------------------------------+ [25] _i.e._ doubtless the channel better known as Swin Middle, leading into the estuary of the Thames. APPENDIX IV LIST OF REVENUE CRUISERS BUILT BETWEEN JULY 18, 1822 AND OCTOBER 1, 1838 ----------------------------+---------------+-----+-----------------+ | | | | Name of Cruiser. | When Built. |Ton- | Builders. | | |nage.| | ----------------------------+---------------+-----+-----------------+ | | | | _Fly_ (late _New Charter_) | July 18, 1822 | 44 | Thos. White | _Lion_ | " " | 82 | Th. Inman | _Arrow_ (late _Seaflower_) | " " | 43 | Ransom & Ridley | _Cameleon_ (lost) | " " | 85 | Wm. Hedgcock | _Dolphin_ | " " | 68 | J.B. Good | _Ranger_ | " " | 71 | Chas. Golder | _Tartar_ | " " | 82 | Ransom & Ridley | _Repulse_ | " " | 82 | W. Good & Son | _Nimble_ | " " | 65 | Rd. Graves | _Sprightly_ | " " | 63 | Chas. Miller | _Sealark_ | Oct. 10, 1823 | 42 | Th. White | _Scout_ | Aug. 15, " | 84 | Th. White | _Fox_ | Oct. 10, " | 85 | Th. White | _Endeavour_ | July 16, " | 45 | N. Harvey | _Adder_ (sold) | Oct. 10, " | 73 | T. White | _Vigilant_ | Feb. 10, 1824 | 99 | T. White | _Kite_ | Mar. 21, 1825 | 164 | Ransom & Ridley | _Hound_ (lost) | " " | 169 | T. White | _Experiment_ |April 16, 1825 | 43 | T. White | ----------------------------+---------------+-----+-----------------+ ----------------------------+----------+-----------------+-----------------+ | | Draft. |Rate of sailing | Name of Cruiser. | Where |--------+--------|per hour in knots| | Built. |Forward.| Aft. |and fathoms. | ----------------------------+----------+--------+--------+--------+--------+ | |ft. ins.|ft. ins.| knots | fathoms| _Fly_ (late _New Charter_) |Cowes | 5 � 6 | 7 � 4 | -- | -- | _Lion_ |Lymington | -- | -- | -- | -- | _Arrow_ (late _Seaflower_) |Hastings | 4 � 6 | 9 � 3 | 9 | -- | _Cameleon_ (lost) |Dover | -- | -- | -- | -- | _Dolphin_ |Bridport | 5 � 3 | 9 � 0 | 10 | -- | _Ranger_ |Folkestone| 4 � 6 | 9 � 6 | 8 | -- | _Tartar_ |Hastings | 5 � 2 | 10 � 2 | 8 | 4 | _Repulse_ |Ealing | -- | -- | -- | -- | _Nimble_ |Sandgate | 5 � 0 | 10 � 0 | 10 | -- | _Sprightly_ |Cowes | 5 � 6 | 8 � 6 | 7 | 4 | _Sealark_ |Cowes | -- | -- | -- | -- | _Scout_ |Cowes | 5 � 11 | 8 � 4 | 8 | 4 | _Fox_ |Cowes | 6 � 6 | 10 � 0 | 10 | -- | _Endeavour_ |Rye | 5 � 6 | 9 � 6 | -- | -- | _Adder_ (sold) |Cowes | -- | -- | -- | -- | _Vigilant_ |Cowes | 6 � 8 | 9 � 4 | 9 | 4 | _Kite_ |Hastings | 6 � 8 | 12 � 10| 11 | -- | _Hound_ (lost) |Cowes | -- | -- | -- | -- | _Experiment_ |Cowes | 5 � 0 | 7 � 4 | -- | -- | ----------------------------+----------+--------+--------+--------+--------+ ----------------------------+---------------+-----+-----------------+ | | | | Name of Cruiser. | When Built. |Ton- | Builders. | | |nage.| | ----------------------------+---------------+-----+-----------------+ | | | | _Racer_ | Aug. 10, 1825 | 53 | Ransom & Ridley | _Viper_ (late _Mermaid_) | " 23, " | 43 | T. White | _Stag_ | Feb. 20, 1827 | 130 | T. White | _Diligence_ (lost) | " 4, 1828 | 171 | Ransom & Ridley | _Bee_ | Aug. 18, " | 69 | Ransom & Ridley | _Stork_ | Jan. 5, 1830 | 160 | Ransom & Ridley | _Liverpool_ (now | July 1, " | 28 | T. White | _Speedwell_) | | | | _Victoria_ | Aug. 31, 1831 | 22 | Ransom & Ridley | _Chance_ |April 2, 1832 | 58 | T. White | _Squirrel_ | Jun 21, " | 36 | T. White | _Amphitrite_ | July 4, " | 30 | Th. Inman | _Victoria_ |April 2, " | 114 | Th. Inman | _King George_ | Aug. 3, " | 36 | Ransom & Ridley | _Wickham_ |April 2, " | 150 | T. White | _Adelaide_ | " " | 143 | Ransom & Ridley | _Dolphin_ | " " | 84 | Ransom & Ridley | _Liverpool_ (tender to | Aug. 10 " | 36 | T. White | _Kite_) | | | | _Hornet_ | July 6, " | 143 | Ransom & Ridley | _Prince George_ | Nov. 3, " | 70 | Ransom & Ridley | _Providence_ | Dec. 10, " | 20 | N. & E. Edwards | _Margaret_ | " " | 22 | T. Inman | _Asp_ |April 22, 1833 | 32 | T. White | _Lady of the Lake_ | " 25, " | 22 | T. Inman | _Hind_ | May 25, " | 41 | Ransom & Ridley | _Caroline_ | Jan. 31, 1834 | 36 | Ransom & Ridley | _Frances_ | Feb. 3, " | 40 | T. White | ----------------------------+---------------+-----+-----------------+ ----------------------------+----------+-----------------+-----------------+ | | Draft. |Rate of sailing | Name of Cruiser. | Where |--------+--------|per hour in knots| | Built. |Forward.| Aft. |and fathoms. | ----------------------------+----------+--------+--------+--------+--------+ | |ft. ins.|ft. ins.| knots | fathoms| _Racer_ |Hastings | 4 � 4 | 9 � 8 | 8 | 4 | _Viper_ (late _Mermaid_) |Cowes | -- | -- | -- | -- | _Stag_ |Cowes | 6 � 9 | 10 � 9 | 10 | -- | _Diligence_ (lost) |Hastings | 6 � 9 | 12 � 4 | 12 | -- | _Bee_ |Hastings | 6 � 0 | 10 � 0 | -- | -- | _Stork_ |Hastings | 7 � 4 | 12 � 6 | 11 | 6 | _Liverpool_ (now |Cowes | -- | -- | -- | -- | _Speedwell_) | | | | | | _Victoria_ |Hastings | -- | -- | -- | -- | _Chance_ |Cowes | 6 � 6 | 9 � 6 |9½ to 10| -- | _Squirrel_ |Cowes | -- | -- | -- | -- | _Amphitrite_ |Lymington | -- | -- | -- | -- | _Victoria_ |Lymington | 6 � 6 | 11 � 0 | 11 | -- | _King George_ |Hastings | -- | -- | -- | -- | _Wickham_ |Cowes | 7 � 3 | 11 � 3 | 11 | 4 | _Adelaide_ |Hastings | 7 � 1½ | 12 � 2½| 10 | 6 | _Dolphin_ |Hastings | 7 � 0 | 10 � 3 | 9 | 6 | _Liverpool_ (tender to |Cowes | -- | -- | -- | -- | _Kite_) | | | | | | _Hornet_ |Hastings | 7 � 0 | 12 � 0 |7.6 to 8| -- | _Prince George_ |Hastings | -- | -- | -- | -- | _Providence_ |Scilly | -- | -- | -- | -- | _Margaret_ |Lymington | 5 � 2 | 8 � 4 | 9 | -- | _Asp_ |Cowes | -- | -- | -- | -- | _Lady of the Lake_ |Lymington | -- | -- | -- | -- | _Hind_ |Hastings | -- | -- | -- | -- | _Caroline_ |Hastings | -- | -- | -- | -- | _Frances_ |Cowes | 4 � 6 | 7 � 8 | 8 | 4 | ----------------------------+----------+--------+--------+--------+--------+ ----------------------------+---------------+-----+-----------------+ | | | | Name of Cruiser. | When Built. |Ton- | Builders. | | |nage.| | ----------------------------+---------------+-----+-----------------+ | | | | _Royal George_ | Mar. 27, " | 149 | T. Inman | _Maria_ |Sept. 10, " | 36 | T. Inman | _Vulcan_ (steamer) | Oct. 30, " | 325 | T. White | _Hamilton_ | Jan. 11, 1835 | 59 | T. White | _Cameleon_ | Feb. 21, " | 89 | T. Inman | _Kingstown_ | May 4, " | 21 | T. Inman | _Bat_ | Nov. 20, " | 37 | T. White | _Tiger_ | Mar. 8, 1836 | 18 | T. Inman | _Onyx_ |Sept. 1, " | 36 | T. White | _Flying Fish_ | " " | 41 | T. White | _Gertrude_ | Oct. 26, 1836 | 37 | T. White | _Royal Charlotte_ | " 27, " | 130 | T. White | _Active_ | " 29, " | 101 | T. Inman | _Vixen_ | Feb. 11, 1837 | 56 | T. White | _Ferret_ | Mar. 18, " | 39 | T. Inman | _Desmond_ | June 10, " | 68 | T. Inman | _Harpy_ | Oct. 10, " | 145 | T. White | _Asp_ | Feb. 20, 1838 | 46 | T. Inman | _Rose_ | " " | 53 | T. Inman | _Adder_ | " " | 53 | T. White | _Neptune_ | June 19, 1838 | 42 | T. White | _Kingstown_ | Oct. 1, " | 35 | Pinney & Adams | ----------------------------+---------------+-----+-----------------+ ----------------------------+----------+-----------------+-----------------+ | | Draft. |Rate of sailing | Name of Cruiser. | Where |--------+--------|per hour in knots| | Built. |Forward.| Aft. |and fathoms. | ----------------------------+----------+--------+--------+--------+--------+ | |ft. ins.|ft. ins.| knots | fathoms| _Royal George_ |Lymington | 6 � 8 | 11 � 3 | 11 | 2 | _Maria_ |Lymington | -- | -- | -- | -- | _Vulcan_ (steamer) |Cowes | -- | -- | -- | -- | _Hamilton_ |Cowes | 5 � 6 | 9 � 6 | 9 | 4 | _Cameleon_ |Lymington | 6 � 6 | 10 � 6 | 10 | -- | _Kingstown_ |Lymington | -- | -- | -- | -- | _Bat_ |Cowes | -- | -- | -- | -- | _Tiger_ |Lymington | -- | -- | -- | -- | _Onyx_ |Cowes | -- | -- | -- | -- | _Flying Fish_ |Cowes | 5 � 3 | 8 � 3 | 8 | 4 | _Gertrude_ |Cowes | -- | -- | -- | -- | _Royal Charlotte_ |Cowes | 6 � 5 | 10 � 9 | 10 | 6 | _Active_ |Lymington | 6 � 2 | 11 � 1 | 10 | 6 | _Vixen_ |Cowes | 5 � 3 | 8 � 4 | 10 | -- | _Ferret_ |Lymington | -- | -- | -- | -- | _Desmond_ |Lymington | 4 � 9 | 8 � 6 | 9 | -- | _Harpy_ |Cowes | 6 � 7 | 11 � 3 | 11 | -- | _Asp_ |Lymington | -- | -- | -- | -- | _Rose_ |Lymington | 5 � 6 | 9 � 3 | 10 | -- | _Adder_ |Cowes | 5 � 2 | 8 � 3 | [Never Tried] | _Neptune_ |Cowes | -- | -- | -- | -- | _Kingstown_ |Poole | 6 � 4 | 9 � 4 | -- | -- | ----------------------------+----------+--------+--------+--------+--------+ _N.B._--There is no information to show how the rate of sailing was assessed. We know not (a) whether the vessel was sailing on a wind or off; whether close-hauled or with the wind abeam; (b) whether the distance was taken from a measured mile reckoned between two fixed objects ashore; (c) what sail was set; whether reefed or not; (d) whether the speed was estimated by means of the old-fashioned log. It is probable that the last mentioned was the method employed, but in any one of these cases the rate given can only be approximate unless we know the force and angle of the wind at each trial trip. The non-nautical reader may be reminded in considering the rates given above that a knot is equivalent to 1000 fathoms or, more exactly, 6086 English feet. APPENDIX V SPECIFICATION FOR BUILDING A CUTTER FOR THE REVENUE SERVICE OF THIRTY-FIVE TONS (_As built in the year 1838_) LENGTH.--From Stem to Sternpost, 44 feet. Keel for tonnage, 41 feet. BREADTH.--Extreme from outside the Plank, 14 feet 5 inches. DEPTH.--From the upper-part of the Main Hatch-Beam to the Ceiling alongside the Keelson, 7 feet 8 inches. KEEL.--The Keel to be of good sound Elm, in not more than two pieces, with Hook and Butt Scarphs 6 feet long, sided 6-1/2 inches. Depth aft 12 inches, forward 14 inches, with a false Keel. STEM.--To be of sound English Oak, clear of Sap and all other defects, sided 5-1/2 inches, and to be sufficiently thick at the head to admit of a hole for the Main Stay. STERN POST.--To be of sound English Oak, clear of Sap and all other defects, sided 5-1/2 inches. DEAD WOOD.--The Dead Wood both forward and aft to be of Oak, clear of Sap and all defects, except the two lower pieces which may be Elm, and secured by a Knee well bolted through the Sternpost, and Dead Wood aft, and Stem and Dead Wood forward. FLOORS AND FUTTOCKS.--To be sided 5-1/2 and not more than 6 inches apart. The lower Futtocks sided 5-1/2 inches, second Futtocks 5, third Futtocks 5, and Toptimbers 4-1/2, Stantions 4 inches. The heels of the lower Futtocks to meet on the Keel, all the Timber to be well grown and seasoned, clear of Sap and other defects;--of English Oak. KEELSON.--The Keelson to run well forward and aft, of sound Oak, clear of Sap, sided 7 inches and moulded 9 inches Midships. The ends moulded 7 inches and sided 6 inches. To be bolted through the floors and Keel with 3/4 inch Copper Bolts well clenched on a ring, under the Keel. STANTIONS.--Stantions sided 4 inches at the Gunwale and 3-1/2 inches at the Head, and so spaced as to form 4 ports, each side 20 inches in the clear, and the port lids hung with composition hooks and hinges to roughtree rail and one Stantion between each port, or more if necessary. COUNTER-TIMBERS.--To be sided from 4-1/2 to 4 inches and the Transoms well kneed. BREAST-HOOKS.--To have 3 Breast-Hooks, one under the Bowsprit sided 4 inches, the others sided 4-1/2 inches, all of the best English Oak, with arms not less than 3 feet long, clear of Sap and other defects; the two lower ones to be bolted with Copper Bolts. The Throat Bolt to be 3/4 inch diameter, to go through the stem and clenched, and three in each arm of 5/8, all well clenched on a ring. BEAMS.--The Beams to be good sound Oak, clear of all defects, to round up 5-1/2 inches. The Beam before and the Beam abaft the Mast to be sided 6 inches, and moulded 6 inches, and not more than 4 feet apart, and to have two Wood lodging Knees to each, also one Iron hanging Knee to each; the remainder of the Beams to be sided 5 inches, and moulded 5 inches, and regularly spaced, and not more than three feet from Centre to Centre, with two 1 inch dowels in each end, instead of dovetailing into the shelf-piece, with a 5/8 inch bolt through each dowel, and an inch and quarter hole bored in the end of all the Beams 10 inches in, and another from the under side to meet it, then seared with a hot Iron to admit Air. CARLINGS AND LEDGERS.--To have 2 fore and aft Carlings between each Beam 4 inches by 3-1/2, and a Ledge 3-1/2 by 3 inches between the Beams where required. The Mast Carlings to be good English Oak, 4 inches thick, and 10 inches broad. WALES AND BOTTOM PLANK.--The Wales to be of English well-seasoned Oak, 3 inches thick, clear of all defects, with one strake of 2-1/2 inches thick next under the Wales, and one bilge strake of 2-1/2 inch each side. The remainder of the Bottom to be full 2 inches thick when worked, all of sound English Oak, except the Garboard and one next to it which may be of Elm; Plank to work 16 feet long with 6 feet shifts, and two strakes between each Butt: the first strake above the Wales to be 2 inches thick, the remainder 2 inches, paint strake 2 inches. SPIRKETTING.--The Spirketting to be 2 inches thick. WATERWAYS.--The Waterways to be of English Oak, 3 inches thick, clear of Sap and strakes, and not less than 6 inches broad in any part. PLANSHEER.--The Plansheer of good English Oak, full 2 inches thick when worked, and to form the lower Port Sills. SHELF PIECES.--The Shelf Pieces to be fitted to the Timbers instead of working it over the Clamp, as heretofore, to be of good sound English Oak, 6 inches broad, 3-1/2 inches thick, and bolted with 5/8 inch bolts, two feet apart, well clenched. CLAMPS.--The Clamps to be of good sound Oak, 8 inches broad and 2 inches thick, fitted up to the under side of the Shelf Pieces. CEILING.--To have two strakes of 2 inch Oak on the Floor and lower Futtock Heads, both sides, and the Ceiling to be of 1-1/4 inch Oak, all English, as high as one foot above the lower Deck; the remainder as high as the clamp, to be of Red Pine, clear of Sap and other defects, 3/4 inch thick. CHANNELS.--The Main Channels to be of the best English Oak, of sufficient breadth, to convey the rigging clear of the Weather Cloth Rail, and 3-1/2 inches thick with 4 substantial Chainplates with Iron bound Dead-eyes complete, on each side. The two lower bolts in each plate to be 1 inch in diameter. No Bolt in the Chainplate through the Channel as usual. The Chainplates to be let their thickness into the edge of the Channel, and an Iron plate 3 inches broad, and 3/8 inch thick, secured over all by Small Bolts 4-1/2 inches long. PORTS.--To have 4 Ports on each side properly spaced, and the Port Lids hung with Copper Hooks and Hinges. BULWARK.--The Bulwark to be of Baltic Red Pine 1 inch thick, to be worked in narrow strakes about 5 inches broad. The edges grooved and tongued together, and not lined as usual, except from forward to bow port. ROUGHTREE RAIL.--To be of good clean, straight grained Oak 4-1/2 inches broad, and 2-1/4 deep, to be fitted with a sufficient number of Iron Stantions 2-6/8 inches long, with Oak Rail 2 inches square for Weather Cloths. The Roughtree Rail to be 2 feet high from Deck. DECK.--The Upper Deck to be of the best Baltic Red Pine, full 2 inches thick when worked, clear of Sap, strakes, &c., and not more than 5 inches broad each plank. The plank under, and between the Bitts Knees, to be English Oak 2-1/2 inches thick, the whole to be fastened with Copper Nails of sufficient length. BITTS.--The Bowsprit Bitts to run down to the Ceiling, with a Bolt in the Keel of each, and so placed that the Bowsprit may be run aft clear of the Mast Larboard Side. Size of the Bitts at the head fore and aft 7 inches, thwartships 6 inches, and to be the same size at lower part of Deck, with a regular taper to heel. The Windlass Bitts to be sided 7 inches, and left broad and high enough above the Deck to admit of a Patent Pinion Cog, and Multiplying Wheels to be fitted to Windlass, with Crank, Handles, &c. To have good and sufficient Knees to all the Bitts. The Bowsprit Bitt Knees sided 6 inches, Windlass Bitt Knees sided 5 inches. WINDLASS.--The Barrel of the Windlass to be of good sound English Oak, clear of all defects, diameter in the middle 10 inches, and fitted with Patent Iron Palls, with two hoops on each end, and seasoned Elm Whelps 2-1/2 inches thick, hollowed in the middle for Chain Cable 14 inches long, taking care that it leads far from the Hawse Holes, to have 6 Iron Plates let into the Angles of the Whelps. The Iron Spindle to be 2 inches Diameter, and to let into the Barrel of the Windlass 12 inches, and to be fitted with Pinion, Cog, and Multiplying Wheels and Crank Handles, to have two Windlass ends not more than a foot long each; care must be taken not to cut the Handspike holes where the Chain Cable works. SCUPPERS.--To have 2 oval Lead Scuppers, each side, 3 by 1-3/4 inch in the clear. EYE PLATES.--To have two stout Iron Eye Plates, both sides forward for Bowsprit, Shrouds, &c. with two Bolts in each, and three Plates both sides for Runners and Tackles aft, the Eyes to reach up to the top of Roughtree Rail, and to have a good strong Iron Hanging Knee each side to the Beams abreast the Runners. HATCHWAYS.--The Main Hatchway to be 4 feet broad and 3 feet fore and aft in the clear. The Combins 3 inches thick and 11 inches broad, let down on Carlings 3 inches thick and 4-1/2 inches broad. SKYLIGHTS.--To be fitted with two Skylights with Plate Glass and Copper Guard, Commanders to be 3 feet long and 2 feet broad; Mates Skylight 2 feet square, with Plate Glass, Copper Bars 3/8 diameter. ILLUMINATORS.--To have 10 oblong 4 inch Illuminators let into the Deck where most required, and a 5 inch Patent one over the Water Closet. WINCH.--To have a Patent Winch round the Mast, and the Mast to be wedged in the partners. PUMPS.--To be fitted with two Metal Bilge Pumps 3-1/2 inch chamber and everything complete; also one Metal Pump amidships with 6 inch chamber, and two sets of Brass Boxes, and everything requisite; also a Wash Deck Pump fitted aft. RUDDER.--To have a good and sufficient Rudder with two sets of Metal Pintles and Braces, and one Iron Pintle and Brace at the head of the Sternpost above the Deck, and to be fitted with two good Tillers. COMPANION.--To be fitted with a Companion and Bittacle complete. HAWSEPIPES.--To have two stout cast Iron Hawsepipes for Chain Cable 4 inches in the clear, also two Cast Iron Pipes in the Deck with Bell Mouth, to conduct the Chain Cable below. LOWER DECK.--The Lower Deck Beams to be regularly spaced and not more than 4 feet apart, the Deck to be 1-1/4 inches thick, of good Red Pine, the Midships part 3 feet broad, to be fastened to the Beams, also some of the side plank, the remainder made into Hatches, the edges bolted together with 1/2 inch Iron, the Deck and Cabin Floor abaft, Main Hatch to be 1 inch thick, and made into Hatches where required. MAGAZINE.--To have a Magazine abaft, properly fitted and lined on the inside with 5 lb. Lead, and Double Doors with Copper Hinges and Lock to the outside Door. BREAD ROOM.--To have Bread Rooms and Flour Bins lined with Tin as usual. GALLEY.--The Galley under the Fire Hearth to be coppered with 32 oz. Sheet Copper 5 feet square, and the under part of the Upper Deck, Beams, &c.; over the Boilers 4 feet square, to be leaded with 6 lb. Lead. LOCKERS AND BINS.--To be fitted with Store Bins and Lockers from the Bows to the Cabin Bulkheads between Decks. BULKHEADS.--To have Bulkheads between Decks for Commander's Cabin, State Room, and all other Bulkheads, as is customary for a Revenue Cruiser of the 3rd class, with all Drawers, Cupboards, Bed-places, Tables, Wash-stands, &c. complete. The Cabin Bulkheads to be framed in Panels, all Hinges to be Brass with Brass Pins. BULKHEADS, HOLD.--To have Bulkheads in the Hold, for Coals, Stores, Casks, Chain Cables, &c., and an opening of one inch left between each Plank to give air, except the Coal-hole which must be close. LADDERS.--To have a Main Hatch, Fore Hatch, and Cabin Ladder complete. CLEATS.--To be fitted complete, with all Cleats, Cavels, Snatch Cleats with Shieves, Brass coated Belaying Cleats, and Racks with Belaying Pins, &c., and an Iron Crutch on Taffrail for the Boom. FASTENINGS.--The whole of the Plank to be fastened with good well seasoned Treenails, and one 1/2 inch Copper Bolt in every Butt from the Keel up to the Wales, to go through and clench on a Ring on the Ceiling, and the Treenails drove through the Ceiling, wedged on the inside and caulked outside. RING AND EYE BOLTS.--To be fitted with all necessary Ring and Eye Bolts, as customary for a Revenue Cruiser. LEGS.--To have 2 substantial Oak Legs properly fitted. PAINT.--The whole of the Wood Work inside and out to have three coats of the best Paint, well put on. HULL.--The Hull to be completed in every respect as a Revenue Cruiser of the 3rd Class, and all Materials found by the Contractor, except Copper Sheathing for the Bottom and Water-Closets, with all Shipwrights', Caulkers', Joiners', Blacksmiths', Copper-smiths', Braziers', Glaziers', Plumbers' and Painters' work. CATHEAD.--To have an Iron Cathead with two Shieves strong enough to cat the Anchor, and fitted both sides. COCK.--To have a Stop Cock fitted forward under the Lower Deck, to let in Water occasionally. WATER-CLOSET.--To have a Patent Water-Closet of Danton's fitted below, and a Round-house on Deck, aft Starboard side complete, with a Pantry for meat, the Larboard side to correspond with the Round-house, and a Poop Deck between both, nailed with Copper Nails; also a seat of ease on the Larboard side forward for the Crew, with Lead Pipe to water edge; the whole of the Locks throughout to be Brass and Brass Works. AIR OPENINGS.--An inch opening to be left all fore and aft under the Clamp both sides, also in the Ceiling between the Lower Deck Beams, and another in the upper part of the Bins, and one inch auger hole bored between the Timbers in the run aft and forward where lists cannot be left out, also a hole of one inch in all the Timbers, fore and aft, to admit air, and those holes seared with a hot iron; all Chocks for securing the frame Timbers together are to be split out before the bottom Plank is worked. The Cutter to remain in frame for one Month before closed in, then when the outside Plank is worked and all the Sap taken off the Timbers, and before the Ceiling is worked, to give the Timbers a good coat of Stockholm Tar. Should there be any omission or want of more full statement in this Specification, the Contractor is to understand that the Hull of the said Vessel is to be fitted and completed fit for Sea in every respect as is usual for a Revenue Vessel of her Class, the Board finding the Copper Sheathing and Water-Closet. DEFECTS TO BE AMENDED.--Any defects discovered in the Timbers or Plank, &c., by the Officer or Overseer appointed by the Honourable Board of Customs to survey and inspect the same, or insufficient workmanship performed to the said Cutter during her building, the said defect or deficiency both in the one and in the other, shall upon notice thereof to the Contractor be forthwith amended, and the said Overseer shall not at any time have any molestation or obstruction therein. _Note._--For a 150-ton Revenue Cutter the following dimensions were employed:-- Length.--(Stem to Sternpost) 72 feet. Keel for Tonnage, 68 feet. Breadth.--(Extreme) 22 feet 10 inches. Depth.--10 feet 3 inches. Beams to be 7 inches. Deck to be 2 inches thick. Four Oak Legs to be supplied APPENDIX VI DIMENSIONS OF SPARS OF REVENUE CUTTERS The following list shows the length and thickness of mast, boom, bowsprit, gaff, topmast, and spread-yard [_i.e._ the yard on which the square-sail was set] as used in the Revenue Cutters of different sizes from 150 to 40 tons. The dimensions given below were those in vogue in the year 1838. --------------+----------+----------+----------+----------+----------+ Spar. | 150 Tons.| 130 Tons.| 100 Tons.| 90 Tons.| 80 Tons.| --------------+----------+----------+----------+----------+----------+ | ft. ins. | ft. ins. | ft. ins. | ft. ins. | ft. ins. | Mast | 75 � 20 | 72 � 18 | 68 � 17 | 65 � 16½ | 63 � 15¾ | Boom | 61 � 13¼ | 59 � 13 | 54 � 12 | 51 � 11½ | 49 � 10¾ | Bowsprit | 55 � 16¾ | 53 � 15½ | 49 � 14 | 47 � 13¼ | 44 � 12½ | Gaff | 45 � 8¾ | 40 � 8½ | 38 � 7¾ | 33 � 7½ | 32 � 7¼ | Topmast | 52 � 9¾ | 48 � 8½ | 45 � 7¾ | 42 � 7½ | 40 � 7¼ | Spread-Yard | 58 � 9¼ | 56 � 8½ | 48 � 8¼ | 47 � 7¾ | 46 � 7½ | --------------+----------+----------+----------+----------+----------+ --------------+----------+----------+----------+----------+ Spar. | 70 Tons. | 60 Tons. | 50 Tons. | 40 Tons.| --------------+----------+----------+----------+----------+ | ft. ins. | ft. ins. | ft. ins. | ft. ins. | Mast | 60 � 15 | 56 � 14 | 55 � 13½ | 50 � 12 | Boom | 47 � 10½ | 45 � 10 | 43 � 8¾ | 42 � 8½ | Bowsprit | 43 � 12 | 38 � 11¼ | 37 � 10¾ | 32 � 10 | Gaff | 31 � 7 | 28 � 6¾ | 30 � 6½ | 26 � 6 | Topmast | 39 � 7 | 35 � 6¾ | 35 � 6½ | 30 � 6 | Spread-Yard | 44 � 7 | 42 � 6¾ | 38 � 6¼ | 32 � 6 | --------------+----------+----------+----------+----------+ APPENDIX VII LIST OF THE CRUISERS IN THE REVENUE COASTGUARD OF THE UNITED KINGDOM IN THE YEAR 1844 -----------------------+----------+----------------------+----------+ Name of Cruiser | Number | Name of Cruiser | Number | | of Crew. | | of Crew. | -----------------------+----------+----------------------+----------+ _Shamrock_ | 45 | _Badger_ | 16 | _Kite_ | 34 | _Skylark_ | 16 | _Swift_ | 34 | _Petrel_ | 16 | _Prince of Wales_ | 34 | _Racer_ | 15 | _Wickham_ | 33 | _Hamilton_ | 23 | _Greyhound_ | 33 | _Chance_ | 16 | _Prince Albert_ | 33 | _Harriett_ | 14 | _Royal George_ | 33 | _Rose_ | 14 | _Mermaid_ | 33 | _Adder_ | 14 | _Adelaide_ | 30 | _Rob Roy_ | 14 | _Wellington_ | 33 | _Eliza_ | 13 | _Harpy_ | 30 | _Jane_ | 13 | _Royal Charlotte_ | 29 | _Experiment_ | 10 | _Stag_ | 29 | _Albatross_ | 13 | _Defence_ | 29 | _Asp_ | 10 | _Eagle_ | 29 | _Frances_ | 10 | _Lapwing_ | 29 | _Arrow_ | 10 | _Sylvia_ | 29 | _Viper_ | 10 | _Victoria_ | 27 | _Neptune_ | 10 | _Lively_ | 23 | _Sealark_ | 10 | _Vigilant_ | 23 | _Hind_ | 10 | _Active_ | 23 | _Liverpool_ | 10 | _Cameleon_ | 21 | _Maria_ | 12 | _Fox_ | 21 | _Sylph_ | 8 | _Dolphin_ | 21 | _Gertrude_ | 8 | _Scout_ | 21 | _Governor_ | 8 | _Tartar_ | 21 | _Nelson_ | 7 | _Hawke_ | 21 | _Princess Royal_ | 7 | _Ranger_ | 20 | _Ann_ | 7 | _Nimble_ | 17 | _Fairy_ | 7 | _Desmond_ | 17 | _Ferret_ | 7 | _Sprightly_ | 17 | _Lady of the Lake_ | 5 | _Lion_ | 16 | _Vulcan_ (steamer) | 31 | -----------------------+----------+----------------------+----------+ _Note_.--The size of the above varied from 25 tons to 164 tons. But the ss. _Vulcan_ was of 325 tons. APPENDIX VIII No better instance of the strained relationship existing between the Royal Navy and the Revenue Service could be found than the following. It will be seen that the animosity had begun at any rate before the end of the seventeenth century and was very far from dead in the nineteenth. The first incident centres round Captain John Rutter, commander of "one of the smacks or sloops in the service of the Customs about the Isle of Wight." He stated that on April 24, 1699, about eight o'clock in the evening, he went on board to search the ship _Portland_ at Spithead, the latter having arrived from France with a cargo of wine. At the same time there put off the long boat from Admiral Hopson's _Resolution_ demanding four hogsheads and four tierces, which (said Rutter) "I denied, but however they took it out by force and carried it on board." Rutter then went on to the _Resolution_ and there found the wine lying on deck. The Admiral sent for him aft, and said that he would see the wine forthcoming, for he would write to the Commissioners of Customs. Some time afterwards Rutter was ashore at Portsmouth in company with Captain Foulks, who was one of the officers stationed on land. The latter informed Rutter that he was a rogue for having informed against the Admiral. Foulks drew his sword, and, had he not been prevented, would have murdered Rutter. Apparently Admiral Hopson never forgave Rutter. For, some months later, Rutter was riding off Portsmouth "with my Pendent and Colours flying, rejoicing for the happy arrival of His Maty." Hopson was being rowed ashore, and when near "my yacht ordered my pendent to be taken down. I being absent, my men would not do it without my order, whereon he sent his boat on board and one of his men took it down. I coming on board to goe upon my duty ordered it to be hoysted again and imediately he sent his boat with one of his Lieutenants to take it down again with a verball order which I refused to lett him do, but by strength overpowered me and my company and took it down by force, and beat us to ye degree yat I know not whether it may not hazard some men's lives, which I acknowledge I did not wear it in contempt, and if he had sent another time I would readily have obeyed his Order. Now I humbly conceive that it was merely out of malice as I can prove by his own mouth." Arising out of this incident, a letter was sent from the Admiralty to the Portsmouth Custom House and signed by "J. Burchett." The latter opined that it was not a fault for the Custom House smacks to wear a pendant, but pointed out that the Proclamation of 1699 obliged the Custom House smacks to wear such a pendant as was distinct from the King's "as well as their Jacks and Ensigns." Furthermore he suggested that it had always been customary to strike such pendant when in sight of an Admiral's flag, especially if demanded. The second incident occurred on February 4, 1806. The commanding officer of H.M. Armed vessel _Sentinel_ was lying in Shields harbour. He sent word to a man named Stephen Mitchell, who caused the watch of the Revenue cutter _Eagle_ to hoist the _Eagle's_ pendant half-mast. Mitchell naturally replied that he dared not do so without his captain's orders. Mitchell, therefore, sent to his captain, George Whitehead, but before the latter's arrival the pendant was hauled down and carried on board the _Sentinel_ with threats that Whitehead should be prosecuted for wearing a pendant. Whitehead accordingly wrote to the Collector and Controller of the Customs at Newcastle to lodge a complaint. The latter, in turn, wrote to Lieut. W. Chester, R.N., commanding this _Sentinel_ gun-brig asking for an explanation. The naval officer replied by referring them to Articles 6 and 7 of the Admiralty Instructions regarding ships or vessels in the service of any public office, by which it was ordered that they should wear the same Ensign and Jack as ships having Letters of Marque, except that in the body of the Jack or Ensign there should be likewise described the seal of the office they belonged to. All vessels employed in the service of any public office were forbidden to wear pendants contrary to what was allowed, and officers of ships-of-war were permitted to seize any illegal colours. Chester contended that the _Eagle_ was hailed and requested to lower her colours half-mast, as an officer of the Navy was being interred at South Shields, and all the other vessels in the harbour "had their colours half staff down" except the _Eagle_. Because the latter refused, Chester requested her mate to come on board the _Sentinel_, as the former wished to explain why the colours should be lowered. An officer was thereupon sent on board the _Eagle_ to haul them down. Chester demanded an apology for the disrespect to the deceased officer. And one could easily quote other similar instances between H.M.S. _Princess_ and the Revenue cutter _Diligence_: and H.M. gun-brig _Teazer_ and the Revenue cruiser _Hardwicke_. Printed by BALLANTYNE, HANSON & CO. Edinburgh & London * * * * * Typographical errors corrected in text: Page 94: seizurss replaced by seizures. Page 99: "waved us to keep of" replaced with "waved us to keep off"