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Author: 
 
 Higgs, Henry 
 
 Title: 
 
 A primer of national 
 finance 
 
 Place: 
 
 London 
 
 Date: 
 
 [1919] 
 
COLUMBIA UNIVERSITY LIBRARIES 
 PRESERVATION DIVISION 
 
 BIBLIOGRAPHIC MICROFORM TARGET 
 
 MASTER NEQATIVE i 
 
 ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOQRA 
 
 BusizieBS 
 D694.2 
 
 H53633 
 
 Higgs, Henry, 1864- 
 
 A primer of national finance 
 Methuen glQlSj 
 
 vii, 168 p. 20c]D« 
 
 ORD 
 
 • • • 
 
 London, 
 
 •"Bote on further reading:" p. 164-X65. 
 
 Contents.— Financial statistics.— The expend 
 ture of government . —The revenue of government 
 
 — The national debt. — ^Locea finance. The 
 
 budget of 1919. 
 
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Cobntttna HHmmntp 
 
 THE LIBRARIES 
 
 Gtaduate 
 
 SCHOOL OF BUSINESS 
 Library 
 
 THE SELIGMAN LIBRARY OF ECONOMICS 
 
 PURCHASED BY THE UNIVESSITY 
 J929 
 
A PRIMER OF 
 NATIONAL FINANCE 
 
 \ 
 
A NEW SERIES ON 
 ECONOMICS 
 
 Cnwn 8v0. 
 
 The following are the first of a set of volumes dealing wbh 
 the fundamental principles and method of Political Boon* 
 omy ui a concise and simple manner. 
 
 Their object is to explain the essential facts and theories 
 of that science, and its important bearing upon human 
 welfare in language not too technical or abstract, and 
 thereby to stimulate an interest in economic doctrine, and 
 to foster a study of the problems of wealth and poverty 
 production and consumption, and of the causes whidi 
 govern the welfare of nations. 
 
 The series is edited by G. Armitagb-Smitii, D.Ut.,li.A. 
 
 A PRIMER OF NATIONAL FINANCE. 
 
 By Henry Higgs, C.B. 
 
 THE ORGANIZATION OF LABOUR. 
 By T. Saimmr, ILA 
 
 PORBIGN TSADB. 
 
 By W. HBin»B90K PriIiglb. M.A, LL.B. 
 
 A PRIMER OF 
 NATIONAL FINANCE 
 
 BY 
 
 HENRY HIGGS, C.B. 
 
 MEtH b EN '& -eo/'htb.i 
 36 Essex; ^.THfeE-.Tji^x. 
 
 LONDON " • • . 
 
r 3C33 
 
 PREFACE 
 
 PROFESSOR BASTABLE concludes the 
 Preface to the third edition of his well- 
 known volume on Public Finance with the 
 words: " A better-informed and more reasonable 
 pubHc opinion is an essential prerequisite of 
 financial as of all other reforms in the modem 
 State." 
 
 In many and not miimportant particulars of 
 finance there is not yet agreement even among 
 experts as to what is a reasonable opinion. The 
 first qualification for forming such an oiMnion 
 is a knowledge of the facts. 
 
 This primer is intended for those who have 
 not previously given any attention to the subject. 
 It will fulfil its purpose if it enables them to 
 understand the annual Budget speech of the 
 Chancellor of the Exchequer, and if it encourages 
 them to read every year a full report of the 
 Budget. Those who do so are not unlikely to 
 feel a desire for further knowledge, and a note for 
 their assistance is added at the end of the volume 
 
 H. H. 
 
CONTENTS 
 
 I. Introductory 
 II. Financial Statistics 
 
 III. The Expenditure of Government 
 
 IV. The Revenue of Government 
 
 V. The National Debt 
 
 VI. Local Finance - . . 
 VII. The Budget of 1919 
 
 Appendix - - - . 
 Note on Furtheh Reading 
 Index - . . . 
 
 vii 
 
A PRIMER OF 
 NATIONAL FINANCE 
 
 I 
 
 INTRODUCTORY 
 
 FINANCE deals with money matters and 
 their management. It may be Pubkc or 
 Privaie-^PubUc when it has to do with 
 the finance of Government, and Private when it 
 refers to that of individuals or groups of persons 
 other than Government. PubUc and Private 
 Finance have important effects upon each other, 
 but are easily distinguished. What we pay to 
 Government, for example, belongs to Public 
 Fmance. What we do with the rest of our 
 money is a question of Private Finance. 
 
 It is weU to begin with this distinction, and 
 to keep it always in mind, because it shows us the 
 foUy of acting as if Government were a fairy 
 godmother, able to endow us with all kinds of 
 good gifts without our paying for them. Govwu- 
 ment can only spend what it takes from us, and 
 this is limited by the capacity, and (in a country 
 
2 NATIONAL FINANCE 
 
 like ours) by the consent, of the people at large 
 to pay taxes. 
 
 Public Finance, in so far as it refers to Govern- 
 ments in general and the principles upon which 
 good finance is founded, is sometimes described 
 as the Science of Finance. The thorough study 
 of this science requires a good knowledge of 
 economic thcjory, a sound training in the use of 
 statistics, an acquaintance with financial history 
 and financial literature, and with so much of law 
 and public administration as is necessary to 
 understand fiscal legislation and constitutional 
 law and practice, specially in their bearing upon 
 financial control. The subject is so vast that 
 Professor Jdze of Paris is preparing twelve bulky 
 volumes upon it. His elementary treatise alone 
 consists of over i,ioo large octavo pages. A 
 lifetime is required to master the history and 
 literature of Finance, the ideas, systems, methods, 
 and expedients of the past and present, the facts 
 and figures relating to the revenue, expenditure, 
 debt, currency, etc., of our own and other coun- 
 tries. All that is attempted in this Uttle book 
 is to give some help to those who wish to under- 
 stand the main facts of our own finance as it 
 now is. 
 
 Even in this limited field we must make a 
 further distinction between National Finance, 
 
 INTRODUCTORY 3 
 
 which relates to the Central or Supreme Govern- 
 ment, and Local Finance, which relates to local or 
 subordinate governments like County and County 
 Borough Councils, Corporations, Urban and Rural 
 District Councils, and Parish Councils. We 
 shall be concerned mainly with the National 
 Finance of the United Kingdom, but shall find it 
 necessary to touch briefly upon the general 
 principles of finance and upon Local Finance. 
 
 Finance is one of the most important of the 
 duties of Government. Government is in our 
 country representative of the people, who elect 
 the members of the House of Commons. Upon 
 this election depends the question what persons 
 are to form the Government. A Government 
 which does not command the confidence of the 
 electors cannot long remain in office, but must 
 give place to a new Government which has the 
 support of the people. 
 
 It is, therefore, highly desirable that every 
 citizen who wishes to do his duty to his country 
 should know as much of financial matters as will 
 enable him to follow the financial actions or 
 proposals of Government, and that when a 
 question arises or a discussion takes place as to 
 the spending of public money or changes of 
 taxation, he should be able to understand what 
 it is all about and to cast an intelligent vote upon 
 
4 NATIONAL FINANCE 
 
 the subject. Apart from this coUective interest 
 which we should all feel in the weMare of the 
 community, we have a personal and individual 
 stake at issue. The Central Government of the 
 United Kingdom in the last year before the War 
 spent nearly 200 miUions, and the local govern- 
 ments rather more. Statisticians are agreed that 
 in this way the peopled the country paid about 
 one-sixth of their total income in rates and taxes. 
 In other words, they were free to spend ten 
 months of thdr actual incomes, but were called 
 upon to hand over the other two months' income 
 to be used on their behalf by the constituted 
 authorities. It is not suggested that so large a 
 proportion was contributed by all alike. The 
 wealthy paid more— in Some cases very much 
 more— than one-sixth of their income, and the 
 poorest members of society paid less; but on the 
 average throughout the country the result was 
 as stated. In return for this contribution very 
 useful services were rendered to the people, 
 and if the mcmey was aU wisely spent we have 
 had value for it just as much as, and probably 
 much more than, if we had been left to spend 
 it at our own choice. But if you were asked to 
 surrender one-sixth of aU you receive to a com- 
 mittee of persons who proposed to spend it for 
 your benefit, it is hardly conceivable that you 
 would take no interest in their proceedings. 
 
 INTRODUCTORY 
 
 5 
 
 You would desire to know what they w^e doing 
 with the money: whether they were spes^ng it 
 
 for purposes of which you disapproved, or, if you 
 approved of the purpose, whether they were 
 spending more than was necessary to obtain the 
 results you desired; whether the same results 
 could be secured at less expense or better results 
 at the same expense; and wheth^ they wm 
 neglecting to lay out money upon necessary or 
 urgent services, and practising a false economy 
 to your ultimate detriment. Government is the 
 steward of the public. A man who does not keep 
 an eye upon the financial operations of his steward 
 has only himself to thank if his pocket does not 
 suffer from waste, inefficiency, or neglect. And 
 every one of us is affected in pocket by National 
 Finance. 
 
 The matter is put in a much stronger light if 
 we take into account the fact that people have 
 to Uve before they can pay tasces, and that the 
 cost of living has first to be met. The total 
 income of the country before the War, if divided 
 equally between all the inhabitants, men, women, 
 and children, would have been about 3s. a day. If 
 we allow 2s. of this for housing, food, clothes, 
 fuel, and other necessary expenses, what may be 
 called the free income would average only is. a 
 head. And if 6d. a day, or one-sixth of the total 
 income, is paid to Government, this amounts to 
 
6 
 
 NATIONAL FINANCE 
 
 one-half of our free income. The cost of Govern- 
 ment will be much higher after the War, and it 
 ioUows that unless the total free income of the 
 country is increased to a corresponding extent, 
 either by increased production or by a lower cost 
 of living, the pressure of taxation will be greatly 
 intensified. 
 
 Many people appear to think that Finance is 
 so dry and difficult, so compHcated and technical, 
 that they had better not bother their heads about 
 it, but leave it, like the command of the Grand 
 Fleet, to those whose business it is to understand 
 and attend to it. This is a great mistake. 
 Ignorance of financial matters does not produce 
 indifference, or mean that we leave a free hand 
 to Government. On the contrary, while failing 
 to keep Government up to the mark in efficiency, 
 it seriously hampers its action. Is new taxation 
 proposed ? The man in the street sees no harm 
 in it so long as it falls upon other people, though 
 it may in the long-run recoil upon himself. But as 
 soon as it touches his own pocket he finds objec- 
 tions and difficulties ; and if the proposal, however 
 good in itself, is sufficiently unpopular because 
 it is not understood. Government is obliged to 
 abandon it. Robespierre, one of the leaders of 
 the French Revolution, protested vigorously 
 against the idea that the purest part of humanity 
 (which from his point of view was the poorest 
 
 INTRODUCTORY 
 
 7 
 
 part of humanity) should suffer the humiliation 
 of being denied the privilege of contributing its 
 
 share towards the needs of the country. An 
 ill-informed electorate is in danger of suffering 
 not only this humiliation, but the material loss 
 which follows upon a failure to carry out, for 
 lack of funds, some measure which would be 
 highly beneficial to the country at large. People 
 are generally ready with reasons why they should 
 not be called upon to pay more taxes. They will 
 say that they already pay more than their fair 
 share, though they have never studied the 
 question of what is fairness in taxation. Or they 
 will take refuge in such statements as Govern- 
 ment is wasting a great deal of money. If it 
 would only stop this waste it would have enough 
 without asking for more. Let it first make a 
 good use of what it has got." The assertion may 
 or may not be well founded, but it comes with 
 an ill grace from those who have no idea how 
 much Government spends upon its different 
 smrices, and who would be puzzled to say in 
 ^at direction it should economise. The great 
 French writer M. Leroy-Beaulieu says that there 
 are some sciences so lofty and serene that they 
 leave in peace those who know nothing about 
 them. Finance is not one of this number. 
 Neither is it a mere affair of tact and intuition, 
 but of aev^ science and miditiiMi, and has a 
 
8 
 
 NATIONAL FINANCE 
 
 terrible fashion of avenging itself upon individuals 
 and Governments which tgnoie or defy it. 
 
 Statesmen and officials have been too much 
 accustomed in the past to think of finance as 
 a matter merely of paying the Government's 
 way from day to day and from year to year, and 
 of raising taxation in such amounts and by such 
 methods as will not arouse too much opposition 
 among the pubhc or among the supporters of the 
 Government. It is now beginning to be seen 
 that the real touchstone of good finance is the 
 question whether it tends to promote or to injure 
 the wealth and happiness of the country. The 
 wealth must be produced before the financier 
 can make use of it, and in a poor country good 
 finance can only make the best of a bad job. 
 But the richest of countries may be reduced to 
 poverty by bad finance injuring the sources of 
 wealth. There are in round numbers 13 millions of 
 men who are Parliamentary electors, and to these 
 have recentiy been added about Si miUions of 
 women electors, making a total of 21^ millions, 
 as compared with less than 8* millions a year ago! 
 The need for difhising an elementary knowledge 
 of the finances of the country, and sound views as 
 to the amount and the justice of taxation, was 
 never so pressing as at the iHresent time. ' Our 
 taxation has for many years been so small in 
 comparison with our wealth that no great abiUty 
 
 INTRODUCTORY 
 
 9 
 
 has been needed to enable the Government to 
 pay its way. But the future has in store for us 
 problems of a more serious character, and it will 
 require all our wisdom and patriotism to find 
 the best solution. The better our citizens are 
 instructed the easier it will be for Government 
 to manage our money mattm in the best interest 
 of the country. 
 
 If, on the other hand, the great masses of the 
 people who have the power to make and unmake 
 Governments are so ign<»ant <^ finance as to 
 press Government to do ever more and more — 
 which means increased expense— while, at the 
 same time, they reject any proposal to increase 
 their own share of taxation, the result will sooner 
 or later be calamitous, not only to Government 
 and to finance, but to the country at large. 
 
 In order to carry on its business Govmm^t 
 must spend money, or incur Expenditure. To 
 meet this necessity it must have an income, or 
 Revenue. If the revenue is not sufficient to meet 
 the expenditure — ^as usually happens in case o^ 
 great emergency like a costly war— it can only 
 make both ends meet by borrowing, or running 
 into Debt. We have here three great divisions of 
 our subject. Various economic questions arise 
 out of these three topics, which we will examine 
 in turn, first pausing to offer some general remarks 
 upon financial statistics. 
 
II 
 
 FINANCIAL STATISTICS 
 
 WHEN we enter into the details of 
 National Finance we require the use 
 of Statistics, which may be defined as 
 organised figures. The first figures which we 
 need in studying the financial position of an in- 
 dividual, a company, a corporation, or a Govern- 
 ment, are an accoimt of Income and Expendi- 
 tme, and a statement of Assets and liaUlities. 
 Our national accounts show the amounts received 
 and paid by Government, and give some informa- 
 tion as to its assets and liabilities. But as we 
 shall see this is a good deal short of what is 
 wanted to comply with the requirements of a 
 properly constructed balance-sheet. 
 
 The most convenient siunmary of financial 
 statistics for our purpose is the annual Statistical 
 Abstract for the United Kingdom. It begins 
 with a table of Imperial Revenue and Expenditure 
 of the United Kingdom, the word " Imperial " 
 being used because Local Finance is not included 
 
 ID 
 
 FINANCIAL STATISTICS ii 
 
 in the figures. Such statistics as we shall need 
 will be found in an Appendix at the end of this 
 volume. 
 
 Our national finance has been so violently 
 disturbed by the Great War that the figures 
 during the War are wholly abnormal. The 
 details of these figures have not been fully 
 pubUshed, and it will be convenient to select 
 for explanation by way of example those of 
 the last year before the War. The financial 
 year begins on the ist of April, and therefore 
 runs into two calendar years. The usual practice 
 is to refer to " the year ending the 31st March, 
 1914," or" the financial year 1913-14," but I pro- 
 pose throughout to describe the financial year 
 by the single date of the year in which it begins 
 and in which the greater portion of it falls. 
 Instead of 19 13-14, I shall therefore say 19 13. 
 
 We start, then, with the figures for 1913: 
 
 Revenue, Expenditure. Surplus. 
 
 ^198.242*897 ;ii97.492,969 ji749.928. 
 
 In a later table the aggr^ate gross liabilities 
 of the State are shown as £707,654,110, and the 
 estimated assets as £38,279,578, on the 31st of 
 March, 1914. 
 
 The first point to be noticed is that the figure 
 of Revenue is not the true Income of the year. 
 
12 
 
 NATIONAL FINANCE 
 
 but is the revenue received into the Exchequer^ 
 i.e., into the Accounts kept for Government 
 under that name at the Bank of England and the 
 Bank of Ireland — between the opening of the 
 Banks on the ist of April, 1913, and their closing 
 at 4 p.m. on the 31st of March, 1914. It is 
 hardly necessary to explain to anyone who keeps 
 a banking account that in any year income 
 proper to the year is one thing and payments into 
 the Bank another, usually very different, thing. 
 The Revenue so paid in is not even the actual 
 Revenue collected in the year. In his Budget 
 speech in 1893 Sir W. Harcourt thought it 
 necessary to say: "I should like to state to the 
 Committee what, perhaps, everyone is not fami- 
 liar with — ^the distinction between Exchequer 
 Receipts and Net Receipts, The Exchequer 
 Receipts are the sums which the Exchequer 
 receives in the course of the year, and the Ex- 
 chequer may receive some money belonging to 
 last year. But if honourable Members wish to 
 ascertain the yield of taxes they must take the 
 net receipts, and examine what is the actual 
 amount of taxation which properly belongs to 
 each year." We may supplement this by ex- 
 plaining that, as the Revenue Departments col- 
 lect their receipts aD over the country, a certain 
 time is occupied in remitting the revenue to 
 
 FINANCIAL STATISTICS 
 
 13 
 
 headquarters. The Departments pay in their 
 revenue to the Exchequer in round sums day 
 by day, and the total amount collected by their 
 officers during the year is only ascertainable after 
 the close of the year, when the accounts of the 
 local offices have been examined. The taxes 
 actually collected within the year include arrears 
 of previous years, but from the total or gross 
 receipts is deducted the amount of tax refunded, 
 etc., within the year. The balance or net receipt 
 necessarily differs Somewhat from the payments 
 into the Exchequer in the same year. While, 
 on the one hand, as Sir W. Harcourt points out, 
 the Exchequer receives money belonging to last 
 year, it has not yet received all the money be- 
 longing to (and actually collected in) the current 
 year. If these amounts were nearly equal, the 
 account would not be much affected, but the 
 variations in both directims are considorable. 
 The revenue is paid in sooner or later, and if there 
 is underpayment in some years, there is in other 
 years a larger payment to the Exchequer than 
 the net receipts f m: the year. But these fluctua- 
 tions exert a distinctly distiu-bing effect upon 
 comparisons — a short pajnnent of a million in 
 one year compensated in the following year 
 producing a variation of double its amount when 
 we make a comparison between the two years. 
 
H NATIONAL FINANCE 
 
 The term Net Receipts must not mislead us 
 into thinking that the cost of coUection is de- 
 ducted from the gross receipts. All that is 
 meant is that certain allowances, repayments, 
 drawback of duties, etc., are subtracted from 
 the gross receipts to arrive at the amount due 
 to the Exchequer as net receipts from the taxes. 
 The broad principle is that all revenue must be 
 paid into the Exchequ^ and all the expense 
 of Government paid out of the Exchequer, and 
 not out of the receipts. There are, however, 
 some monejrs which form an exception to this 
 rule. They are said to be appropriated in aid of 
 votes, and are known as Appropriations in Aid, 
 Examples are fees paid by suitors; fines and 
 costs recovered; fees for admission to Museums, 
 Art Galleries, the Tower of London, etc.; fees 
 paid for inmates of the Naval College at Osborne, 
 of the military colleges at Sandhurst and Wool- 
 wich, and of reformatory schools; fees on ad- 
 mission to honours and dignities; fees for pass- 
 ports, proceeds of rents, sales of timber and old 
 materials, the proceeds ol work of prisoners, 
 licences to put chairs in the parks or to open 
 refreshment kiosks, harbour dues, payments for 
 searches and copies of the records of births, 
 marriages, deaths, and wills, sales of maps, 
 Blue-books, and Government publications 
 
 FINANCIAL STATISTICS 
 
 15 
 
 generally, advertisements in the London and 
 Dublin Gazettes, and a great number of miscel- 
 laneous items. There are also contributions 
 from overseas for repayments to the Army and 
 Navy. The amounts so appropriated in aid in 
 1913 were— for the Army, £3,724,294; for the 
 Navy, £2,086,528; for the Civil Service and 
 Revenue Departments, £3>i43,245— in all, 
 ^8,954.067, or in round figures 9 millions. In 
 addition to this must be noted the payments made 
 by the Woods, Forests, and Land Revenues for 
 surveys, repah^, etc., and for costs of collection 
 of rent and other revenues. These amount to 
 about ;£i9o,ooo a year, and are paid out of receipts. 
 If all these appropriations had been paid in to 
 the Exchequer, the revenue for 1913, instead of 
 £198,242,000, would have been £207,386,000. 
 
 The precise nature of an Appropriation in 
 Aid may be made clear by an example. If we 
 suppose that I have a salary which is received 
 monthly, and I pay this into my bank and 
 draw cheques against my account in favour of 
 various tradesmen, my bank-book reveals my 
 income and expenditure to that extent. But if 
 I receive various small cheques for literary work 
 and change these cheques at my club, using the 
 proceeds for petty expenses, my bank account 
 will not contain any entry either of the receq>t 
 
i6 NATIONAL FINANCE 
 
 or expenditure of these amotmts. I have appro- 
 priated them in aid of my petty cash; but they 
 do not figure in my pass book either as receipts 
 into or issues out of my account at the bank. 
 
 The propriety of intercepting receipts on their 
 way to the Exchequer and appropriating them 
 to meet expenses has been much discussed. They 
 are mentioned h^e only to make dear their 
 effect upon our financial statistics. 
 
 Yet another disturbing influence in the figures 
 showing the receipts as apart from the true 
 income of the year is found either in delayed 
 clearances or in forestalments of dutiable articles. 
 As the end of the year approaches, the returns 
 published weekly in the London Gazette of 
 Exchequer receipts and payments throw before 
 them the shadow of a probable surplus or deficit. 
 If there is likely to be a substantial surplus and a 
 probable reduction of the income tBX, experi^ce 
 points to the probability of a simultaneous 
 reduction of duty upon beer or spirits, tea or 
 tobacco. In that event merchants delay the 
 clearance and payment of duty upon new stocks 
 until the Budget proposals have been adopted. 
 Conversely, any expectation of increased duty 
 leads to their taking as much as possible out of 
 the warehouses before the increased duty comes 
 into e^ect. The true revenue of the year as 
 
 FINANCIAL STATISTICS 
 
 17 
 
 it would be if based upon consumption is thus 
 obscured, and the real figures are best obtained 
 by taking an average over a longer period— say 
 for three years. It is possible for the authcmties 
 after the event-^d, indeed, in a very short time 
 after the event — to put a figure upon the abnormal 
 clearances, and to estimate the amount pf revenue 
 which has been gained or lost to a particular 
 year by the precautionary measures of the 
 merchants. But unless such a figure happens 
 to be mentioned in the Budget statement, it is 
 not available, until of late years supplied in 
 the Reports of the Revenue Departments which 
 appear long after the close of the year. 
 
 Without entering into further detail we may 
 say briefly that scnne of the revenue proper to 
 the year has been used to meet expenses without 
 passing into the Exchequer account; that some 
 of the Exchequer receipts are arrears due in 
 former years, but not coUected in the proper 
 year, or, if collected, not fully paid in; and that 
 various sums due to the Exchequer for the year 
 are still outstanding. 
 
 We have so far been considering only the 
 Revenue receipts, but a good deal of other money 
 comes into the Exchequer account. Money is 
 borrowed by Government for longer or shorter 
 periods, and recoveries are made of money 
 
NATIONAL FINANCE 
 
 which has been advanced by Government, so 
 that the Exchequer really received in 1913 about 
 
 jf45 m.* more than the revenue proper, and 
 on the other side of the account i/^ m. was 
 issued out of the Exchequer over and above 
 the expenditure chargeable against the revenue. 
 These ''other Exchequer issues" were mainly 
 for capital purposes-^advances, repa3raents of 
 borrowed monies. Sinking Fund, etc. Expenditure 
 is defined as issues out of the Exchequer exclusive 
 of expenditure not chargeable against Revenue — 
 that is, exclusive of the "other Exchequer 
 issues " to which we have just referred. Here, 
 again, we must note that our ^£197 m., though 
 issued from the Exchequer, was not all spent. 
 A certain amount of money was in the hands of 
 various financial officials who need working 
 balances with which to carry on, and some money 
 had been paid out to authorities Uke the Road 
 Board and to special accounts not closed at the 
 end of the year. In a word, the issues from the 
 Exchequer are not the true expenditure of the 
 year. The account is a cash account, or a receipts 
 
 ♦ The symbol "m." is used to represent a million. 
 Mr. Gladstone was accustomed in his memoranda to use 
 "m." lor thousands and m) for millions. In the present 
 magnitiide of our national finance thousands may usuaUy 
 be neglected in a general survey. 
 
 FINANCIAL STATISTICS 19 
 
 and payments account, and not an income and 
 expenditure account. 
 
 A cash account, or even an income and ex- 
 penditure account, is evidently incomplete with- 
 out a capital account or statement of debt and 
 assets outstanding. Our infonnaticm upon this 
 subject is meagre. The Aggregate Gross Lia- 
 bilities of the State on the 31st of March, 1914,. 
 were £707>654>iio. The Estimated Assets are 
 shown as Suez Canal Shareg; estimated market 
 value £34*929*000, and Other Assets £3,350,578 
 —a total of £38,279,578. We wiU examine these 
 figures in greater detail later. The EjuOiequer 
 Balances at the Banks of England and Ireland 
 were £10,434,519 at the end of 1913, and 
 £6,329,160 on the 31st of March, 1913. 
 
 The gross capital liabilities are in respect of 
 borrowed money, funded and unfunded debt, 
 terminable annuities, etc., and do not include 
 liabilities to trade creditors, to service pensions, 
 and others. The assets of Government are, of 
 course, enormously more valuable than £38 m. 
 Some years ago a Member of the House of 
 Commons complained of the amount of our 
 National Debt. Othwr countries in Europe had, 
 he admitted, larger debts. But he urged that 
 these had been incurred partly in order to nation- 
 alise raUways, lay out eztoosiv^ f onjsts, and con- 
 
ao 
 
 HATIONiUL FINANCE 
 
 stnict industrial and other works productive 
 of Government revenue, and so alleviating the 
 debt burden. "What," he asked, "have we 
 to show for our National Debt ? The retort 
 was instantly forthcoming : "We have the 
 British Empire to show for it ! " There is much 
 force in this. The outlying parts of the Empire 
 are of great direct and indirect material help 
 to the people in these islands. But although 
 in the War they have nobly assisted us both 
 with men and treasure, they do not ordinarily 
 contribute directly to our national Exchequer. 
 The British Empire is not an asset which can be 
 capitalised in a balance sheet, and we cannot put a 
 figure even upon the " goodwill " which it repre- 
 sents to the Mother Country. 
 
 At one of its first meetings, over fifty years 
 ago, the International Congress of Statistics, 
 composed largely oi mBsamt officials, expressed 
 a desire that there should be compiled for each 
 country a Tableau de la Fortune de I'Etat, or 
 Schedule of State Properties. But the aspiration 
 has not been fulfilled, the labour in a country 
 like ours would be considerable, and the valuation 
 would ofier many practical difficulties. But 
 there seems no good reason why we should not 
 have some information — even though it be of a 
 summary and approximate kind — ^asto the value 
 
 FINANCIAL STATISTICS 
 
 21 
 
 of land, buildings, etc., which are the property 
 of the nation. The Public Accounts Committee 
 has called attention to the fact that there is not 
 even a proper inventory, to Say nothing of 
 valuation, of the articles in our great national 
 museums. No figures are available as to the total 
 value of ships, stores, machinery, plant, and other 
 Government property. The Post Office does 
 indeed publish a Capital Account, from which 
 it appears that in 1914 the property held by the 
 Post Office was valued at about £14 m. The 
 lands, etc., held by the War Department alone 
 —camps, barracks, parade, recreation, and 
 manoeuvre grounds, artillery and rifle ranges, 
 factories, etc.— are of very great value. The 
 Govemmoit buildings and thefa- sites in London 
 are worth many millions, and even in foreign 
 countries we have valuable Sites and buildings 
 for diplomatic and consular purposes. The 
 valuation of such properties as fortifications and 
 naval yards would not be an easy matter. But 
 as Government pays to local authorities a con- 
 tribution of nearly a milHon and a half annually 
 in Heu of rates upon a great deal of national 
 property, and as Government itself assesses those 
 properties for that purpose, there is in eidstence 
 a considerable nucleus of information which 
 might easily be made available as far as it goes. 
 
32 
 
 NATIONAL FINANCE 
 
 In 1835 a Return was ordered to be presented 
 to the French Chambers shewing the buildings 
 belonging to Government and set apart for the 
 public service. National palaces and the pro- 
 perties of local authorities were not included, 
 and many buildings were entered without any 
 attempt to set a value on them, or were valued 
 at a nominal figure. The schedule contained 
 8,yy8 properties, and the values added up to 
 about 536 millions of francs — a ludicrously small 
 figure in the circumstances. In 1876 a more 
 serious efiort was made in a Table of State 
 Properties printed in two large volumes. This 
 time properties in the Colonies and in foreign 
 countries were included, but the properties of 
 local gov^imient, railways, schools, religious 
 edifices, national monuments, roads, canals, 
 rights of foreshore, riparian rights, and many 
 other Government properties, were omitted. 
 The result was — (a) Properties affected to the 
 public service, 17,899, of the estimated value of 
 1,948 millions of francs ; (6) properties not affected 
 to the public service, 9,098, of the estimated 
 value of 1,650 millions. The second category 
 consisted mainly of woods and forests and vacant 
 lands. Taken together, we have about 3,600 
 millions of francs. 
 
 M. Leroy-Beaulieu, from whom these figures 
 
 FINANCIAL STATISTICS 23 
 
 are quoted, estimated the whole National Domain 
 
 of France in 1906 at 15,000 millions of francs — 
 a figure which he says will be more than doubled 
 when— about the middle of this century — ^the 
 railways fall in to the State. Now, 1,200 millions 
 sterUng is a respectable fortune in State capital. 
 What sort of figure would be arrived at by an 
 inventory of our own State fortune it is impos- 
 sible to say. But we had evidently a great deal 
 more than 38 millions of assets to show for our 
 National Debt in 1913. 
 
 The point of importance for our present 
 purpose is not merely that without a capital 
 account for each Department of Government 
 we are imable to allow for the interest which 
 forms part of its true cost, but that, be the 
 absolute value of State property what it may, 
 changes occtu: in the course of the year in respect 
 of certain assets, and that these changes, which 
 are not revealed in the accounts, may be mis- 
 leading. If a Department starts the year with 
 a great accumulation of stores which is seriously 
 depleted at the end of the year, the amount paid 
 out for new stores is a false guide to the cost 
 of its operations. On the other hand, a great 
 addition to its stores would inflate its expenditure 
 in the year, but not its expenditure for the service 
 of the year. In short« there is no proper capital , 
 
24 
 
 NATIONAL FINANCE 
 
 account to complete our national balance-sheet 
 and to answer the crucial question of the real cost 
 of Government. 
 
 A scientific and systematic basis of public 
 accounting and the presentation of clear and 
 complete financial statwnents are essentials of 
 good financial administration; and as the pressure 
 of taxation increases, as the franchise extends 
 and education improves, the public may be 
 expected to be more and more interested in the 
 large and mcreasmg part of their money which 
 is taken from them to be spent by Government. 
 Accounts which convey a true and predse im- 
 pression not only satisfy curiosity up to a point, 
 but stimulate further interest; and where 
 financial intelligence is well diffused the problems 
 which arise are more easily solved. People who 
 are uninformed or whose information is inaccurate 
 and confused cannot sympathise with difficulties 
 which they fail to understand. In the absence 
 of right impxsessions they wre almost certain to 
 form wrong ones, and instead of co-operating 
 towards the best solution of financial difficulties 
 there is grave danger of their obstructing it, to 
 the injury of society and themselves. This is true 
 of all classes, whether they object to necessary 
 taxation, or, while approving of its purpose, 
 object to its falling upcm thwnselves, or whether 
 
 FINANCIAL STATISnCS 25 
 
 they fail to object to it when they ought to do 
 so. In his Budget speech of i860 lir. Gladstone 
 said: " It was, I think, Lord Londonderry who 
 complained of the people of England as exhibiting 
 an ignorant impatience of taxation; but I think 
 were he to rise from the dead and again take 
 his place in this House, he would be very much 
 more likely to describe them as distinguished by 
 an ignorant patience, of taxation." It is, how- 
 ever, altogether too indiscriminate to regard 
 taxation in itself as an evil to be combated or 
 a blessing to be wdcomed. Whether we do well 
 or ill to be impatient depends upon what we are 
 impatient about, and it is here that ignorance 
 is to be deplored. The first step to dispel 
 ignorance in financial matters is to publish the 
 facts and figures in a proper form. They are 
 even then liable to be misunderstood and mis- 
 used by inexpert persons, but this makes it all 
 the more necessary that they diiould be rendered 
 as intelligible as possible, and that they should be 
 supplemented by such notes and warnings as will 
 safeguard a careful reader against serious pitfalls. 
 
 The Exchequer account includes both current 
 and capital expenditure, both current and capital 
 receipts. In current expenditure is included 
 provision for the purchase of sites and for the 
 erection of buildings, imless the amount is so 
 
26 
 
 NATIONAL FINANCE 
 
 large as to disturb seriously the finances of the 
 year. In that case an Act is usually passed to 
 authorise borrowing. The Land R^try (New 
 Buildings) Act, 1900, for example, authorised 
 the issue of ^^265,000 out of the ConsoUdated 
 Fund, to be raised by terminable annuities for 
 such period not exceeding fifty years as the 
 Treasury may fix. The cost which figures in the 
 course of a year is thus one year's annuity. 
 Similar provision has often been made for Army 
 and Navy works, the Post Office telephones 
 and railway, and for large schemes of public 
 buildings generally. 
 
 Returning for a moment to the Revenue side 
 of the Exchequer account, we find Estate Duties, 
 which in some cases represent the whole amount 
 due in respect of the estate of a deceased person, 
 in other cases an annual instahnent, where the 
 executors have elected to spread the payment 
 over nine years, paying interest on the arrears. 
 The amount of instahnenti not yet paid varies 
 from year to year. In this, as in the former 
 example, the account of receipts and expenditure 
 is, as it were, fortuitously put upon a different 
 basis from what it would be if the whole expendi- 
 ture were brought into account when it occurs 
 and the whole duty paid at once. 
 The question whether the national accounts 
 
 FINANCIAL STATISTICS 
 
 27 
 
 should be presented upon a cash basis (Receipts 
 and Payments) or upm a basis of " accruals " 
 
 (Income and Expenditure) has been much debated. 
 Those who desire to follow the arguments used 
 on both sides may refer to the authorities men- 
 tioned in my lectures on National Economy, 
 and to the Seventh Report of the Select Committee 
 on National Expenditure. Taking our accounts 
 as they stand, and admitting such advantages 
 of promptitude and facility as are claimed for 
 them, it would still seem desirable that they should 
 be supplemoited at a later date than the closing 
 of the present account by some memoranda and 
 figures which would give us a closer approach to 
 a full and accurate picture of the finance of the 
 year. The documents presented to Parliament 
 in 1 9 13 relative to finance are more than fifty 
 in number, and the figures contained in these 
 documents are not always in harm<my with each 
 other or with the Statistical Abstract, although 
 the causes for the discrepancy are frequently not 
 stated. An important step in reform would be 
 the issue once a year of an authoritative balance- 
 sheet of the last year, with a memorandum giving 
 all the essential information upon both sides 
 of the account, with approximate figures when 
 
 amount of arrears of taxes. 
 
 1 
 
 m 
 
 
 
28 
 
 NATIONAL FINANCE 
 
 A statement of public revenue and expenditure 
 from the Exchequer account, which was formerly 
 published only once a quarter, was ordered by 
 Mr. Lowe to be printed weekly in the London 
 Gazette on and from the i6th of February, 1870, 
 and this enables the public to follow its banking 
 account and to note the state of balances in the 
 Exchequer. But it is a long way from this to 
 understanding the inwardness of the figures as an 
 indication of our financial position. " The mere 
 figures of the comparison between one year and 
 another," said Mr. Gladstone in 1863, invariably 
 require to undeigo much careful analysis before 
 they can become the basis of sound conclusions/' 
 but the material which is essential for such an 
 analysis is not supplied. 
 
 If it is difficult to compare the figures of one 
 year with those for its predecessor, the difficulty 
 is enhanced when the comparison is over a term 
 of years. Not only are changes made from time 
 to time in the basis^ and classification of the 
 figures, but the value of money may have under- 
 gone serious changes— a fact to which Mr. Glad- 
 stone himself was not alwa3rs alive. In his 
 Budget speech of 1863 he pointed out that in 
 ten years from 1842 to 1852 the taxable income 
 of the country bad increased by 6 per cent., and 
 in eight years from 1853 to 1861 had again 
 
 FINANCIAL STATISTICS 99 
 
 increased by 20 per cent. " That," he said, '* is 
 a fact so singular and striking as to seem almost 
 incredible. [Sir John Pakington : " AustraUa !"] 
 Australia ! Oh no ! ... My right hon. friend 
 is evidently lost in the depths of hwesy/' Now, 
 it is a mere matter of history and statistics that, 
 as might have been expected from economic 
 reasoning, the Australian gold discoveries were 
 f oUowed by a serious fall in the value of gold — ^in 
 other words, by a rise of prices. In the ten years 
 from 1842 to 1852 the level of prices fell from 
 115 to 100. From 1852 to x86i it rose by 20 
 per cent. A readjustment of values under sudi 
 conditions leaves, of course, many incomes 
 nominally unchanged. But the stimulating efEect 
 upon trade and industry of a steady, coatiauoiis 
 rise of prices is undoubted. The profits liable to 
 income tax tend to show at least an equivalent 
 rise to the range of prices. A mmiinal increase 
 of 20 per cent, in taxable income is in effect 
 no real increase at all when prices generally have 
 risen by 20 per cent., and the heresy " was on 
 the side <^ Mr. Gladstone. 
 
 Financial statistics, like all other statistics, 
 need careful and intelligent handUng. It is easy 
 to compare one figure with another, but we 
 must know what the figures stand for and ifbat 
 they mean before we can be sure that we are 
 
30 
 
 NATIONAL FINANCB 
 
 observing the golden rule of comparing like with 
 like. How many persons, for example, ever 
 give a thought to the difference in fiscal time 
 between one year and another ? To quote again 
 from Mr. Gladstone (1861) : " The revenue of 
 this country is in the gross about £200,000 a day 
 for every paying day in the year; and that part 
 of it which depends strictly upon operations from 
 day to day may be stated at fully 3^100,000 a day. 
 The year 1860-61 was, for every practical purpose, 
 shorter by three days than 1859-60. It was 
 shorter in this way: 1859-60 was a leap year, 
 whidi accounts for one day and 1860-61 was in 
 the predicament — most happy with reference to 
 our other interests, but not favourable to the 
 interests of the Revenue— of both commencing 
 and ending with a Simday. By means of this 
 closing Sunday there was a loss of a clear day's 
 income on the balance-sheet. And the third day 
 is accounted for by the circumstance that in the 
 course of the year 1860-61 there fell two Good 
 Fridays; one of them was at the very close of 
 the year, and the effect of it, with the following 
 Sunday, was to throw some business and some 
 payment of duty forward into the account of the 
 following year." The deduction of these three 
 days, according to Mr. Gladst<»ie, represented 
 revenue to the amount of ;£3oo,ooo, for which 
 
 FINANCIAL STATISTICS 
 
 31 
 
 he made allowance in order to arrive at " a fair 
 and just comparison." Since 1861 we have not 
 only a larger daily revenue, but the Easter holiday 
 has been very generally extended from Good 
 Friday to Easter Tuesday, and the effect of an 
 Easter Monday falling on the 31st of March would 
 on balance be comdderable. Or again, if the last 
 day of the financial year is a Sunday, and pensions 
 or other periodical payments which would have 
 been paid on that date are thrown forward to the 
 next financial year, or if there are fifty-three 
 days for the payment of weekly wages instead 
 of hfty-two, there is a resulting disturbance in 
 OMnparison. And such disturbances do not 
 compensate one another. A national balance- 
 sheet properly drawn would call attention to such 
 points, and enable us to make SOTie allowance 
 for them. 
 
 Just before the War an American Commission 
 visited this country to study our financial system. 
 Their Report, published in 1917, contains a good 
 deal of praise, but singles out as a serious defect 
 the absence of a general consolidated statement 
 of audited expenditure of the Government as a 
 whole, not only by votes, but by individual 
 services, and bringing together all expenditures 
 for the same services or purposes if met partly 
 from the Consolidated Fund Services and partly 
 
32 
 
 NATIONAL FINANCE 
 
 from the Supply Services. They say this " could 
 easily be rmnedied did Parliament so desire. All 
 that would be required would be — (i) The aboli- 
 tion of the system of appropriations in aid; 
 (2) the removal of the inconsistencies now existing 
 in the distribution of charges between the Con- 
 solidated Fund Services and the Supply Services ; 
 and (3) the requirement that the Comptroller and 
 Auditor-General, in additi<Mi to submitting his 
 technical reports on appropriation and other 
 accounts, shall prepare and lay before ParUament 
 a general report on the audited receipts and 
 expenditures of the Goveniment as a whole." 
 
 The object of this chapter ib not to offer 
 criticism upon our financial figures, but to warn 
 the student against running into errors which 
 are often made by those who do not understand 
 with what precautions the figures must be read. 
 
 Ill 
 
 THE EXPENDITURE OF GOVERNMENT 
 
 THE amoimt which is spent by Government 
 depends upon two factors — ^what Govern- 
 ment does or attempts to do, and how 
 it sets about it. The first of these is policy, and 
 the second is administration. If no fault can 
 be found either with the wisdom of policy or the 
 efficiency of administration, then the expenditure 
 is not open to criticism. 
 
 Opinions will always differ as to what Govern- 
 ment ought and ought not to do, and what is 
 (or even whether there is such a thing as) " the 
 im>per sphere of Government." Few people 
 will dispute the statement that the object of 
 Government is to promote the welfare of the 
 people; but in pursuing its object of achieving 
 the good of that portion of mankind which is 
 within its jurisdiction, what are the limits of 
 Government activity? To this question the 
 Anarchist replies that Government is an evil, 
 and that we should do better without it. Others 
 3 33 
 
34 NATIONAL FINANCE 
 
 accept it as for the time a necessary evil, to be 
 kept within the narrowest limits, and to be 
 ultimately stamped out as no longer necessary. 
 Herbert Spencer,in his5octa/S^a/ics, trimnphantly 
 asks: " Have we not shown that government is 
 essentially immoral ? Does not it exist because 
 crime exists, and must government not cease 
 when crime ceases, for very lack of objects on 
 which to perform its functions ?" M. Paul Janet, 
 in his Histoire de la Science politique, sajrs: " The 
 object of government is to prepare men gradually 
 for that perfect state of society in which law and 
 government itself would become unnecessary." 
 And Jules Simon says: "The State ought to 
 render itself useless and to prepare for its own 
 decease." 
 
 At the opposite extreme come those who 
 desire that the functions of Government should 
 be, not minimised, but maximised, and that 
 Government should, to begin with, own all the 
 land, capital, and productive resources of the 
 country. Without entering into discussion of 
 these views, we must recognise the fact that the 
 advance of civilisation adds to the complexity 
 of our needs and to the multiplicity of our desires, 
 and that many things which are conducive to 
 our health, security, and comfort, can be better 
 assured by Government than by individual effort. 
 
 THE EXPENDITURE OF GOVERNMENT 35 
 
 Communities, like individuals, develop new needs. 
 What collective or Government action should be 
 undertaken is affected by the existence, the 
 consciousness, and the urgency of these needs, 
 and must therefore vary from age to age and 
 from country to country. Whether it is or is not 
 desirable that Government should undertake 
 a particular service depends so much upon the 
 circumstances, that no absolute principle beyond 
 that of expediency can be of practical service to 
 us in this respect. Circumstances are always 
 changing and policy must adjust itself to new 
 conditions from time to time, and have regard to 
 the present and prospective wealth of the country. 
 
 When the questicm has been settled what 
 Government is to do— and it can do very little 
 without expense— the amount which is spent is 
 largely dependent upon the efficiency of adminis- 
 tration. In public as in private life money may 
 be wasted by setting about the right thing in the 
 wrong way. Even if the method be good, its 
 execution may be defective. The organisation of 
 the public service and of its officials may be im- 
 perfect. The agents of Government may be 
 incompetent or non-competent, lacking the special 
 kind of knowledge or the special qualities needed 
 for their particular business. Overlapping, undue 
 elaboration, hfeless routine, ignorance, neglect. 
 
36 
 
 NATIONAL FINANCE 
 
 sometimes even a misguided zeal, are among 
 the causes of waste and extravagance. What 
 Government can undertake with fair prospects of 
 success must depend very much upon the fitness 
 of its servants. In this and other ways pohcy and 
 administration react upon each other, but, taking 
 these as we find them, we will consider the figures 
 of Government expenditure in 1913. 
 
 Table C (Appendix) shows the Imperial Ex- 
 penditure under its principal heads, as issued 
 from the Exchequer. 
 
 The Consolidated Fund Services are fixed by 
 permanent Acts of Parliament, unlike the Supply 
 Services which are settled annually by Parlia- 
 ment. 
 
 The National Debt services amoimted to 
 
 24i m. They are discussed in Chapter V. 
 
 In 1913 no issue was made for the Development 
 Fund, but some explanation of this Fund is 
 necessary. It was establMed in 1909 under the 
 control of the Treasury, and Development Com- 
 missioners were appointed to consider apphca- 
 tions, made by bodies not trading for profit, for 
 money for any purpose calculated to promote the 
 economic development of the United Kingdom. 
 The moneys are provided by Parliament, and are 
 granted by the Treasury, upon the advice of the 
 Commissioners, either as a gift or a loan. In 1913 
 
 THE EXPENDITURE OF GOVERNMENT 37 
 
 the Commissioners recommended grants of 
 £615,000 and loans of £152,000 for Agriculture 
 and Fisheries, Forestry, Land Drainage and 
 Reclamation, Rural Transport, Inland Naviga- 
 tion, etc. Receipts by way of repayment or 
 profit are paid into the Fund, and the amount 
 standing to its credit in cash and investments 
 on the 31st of March, 1914, was over £2^ m. An 
 account of the operations of the Commission is 
 presented annually to Parliament. 
 
 The Road Improvement Fund, under a Road 
 Board, was also set up in 1909. It received out 
 of the Exchequer in 1913 the sum of £1,394,951. 
 Of this, £7Sg,yo^ came from the duties on motor 
 spirits, £605,248 from carriage licences. The 
 expenditure of the Board was £15,698 for ad" 
 ministration, £16,950 grants for construction of 
 new roads, £622,763 grants for improvements of 
 roads, and £296,892 loans for improvements of 
 roads, or £952,295 in all. The receipts include 
 repayments of loan and interest on dividends* 
 and the Board had thus improved its balance 
 in hand by nearly half a million in the year — an 
 example of the difference between Exchequer 
 issues and true annual expenditure. The Ex- 
 chequer was, moreover, in arrear in payment of 
 the net proceeds of motor spirit duty and 
 carriage licences. The amount due to the Board 
 
38 
 
 NATIONAL FINANCE 
 
 in respect of 1913 was ^£1,434,711, and a sum of 
 £107,865 in arrear on 31*1 of March, 1913, had 
 become ^147, 625 a year later. In other words, 
 the Exchequer had still nearly £150,000 to pay 
 to the Board. 
 
 Payments to the Local Taxation Account, 
 £9734»I28. The figures are discussed in 
 Chapter VI. 
 
 The Civil List, now £470,000 a year, is fixed 
 by Act of Parliament on the accession of the 
 Sovereign, who surrenders his life interest in 
 Crown lands, which yielded in 1913 £530,000 net, 
 in return for a settled annuity. It would, how- 
 ever, be a great mistake to suppose that the whole 
 £470,000 is available for His Majesty's private use. 
 The charges upon it for salaries, woiics, Royal 
 bounty, etc., leave only £xio,ooo a year for Th^ 
 Majesties' Privy Purse. The pensions, salaries, 
 etc., charged on the Consolidated Fund are chiefly 
 those of persons whose independence is supposed 
 to be better secured by withdrawing their salaries 
 from the discussions of ParUament year by year« 
 The Speaker, the Comptroller and Auditor-G^ieral 
 and his Assistant, and the Judges, including 
 County Court Judges, are paid in this way. 
 
 The Consolidated Fund is nothing more or less 
 than the amount standing to the oredit of Govern- 
 ment in the Exchequer Account; and when an 
 
 THE EXPENDITURE OF GOVERNMENT 39 
 
 Act of Parhament directs that certain charges 
 are to be paid out of the ConsoHdated Fund, this 
 means that GovmuBent must find and pay the 
 money somehow without reference to the state 
 of business in ParUament. Where, on the other 
 hand, charges have to be. paid out of " moneys 
 provided by Parliament," the House of Gnnnions 
 must vote the money out of the Consolidated 
 Fund, and the payment cannot be made until 
 the money is voted. Parliamrat has at different 
 times granted perpetual or hereditary pensions 
 for real or supposed services to the nation. It 
 has entered into a bargain with the Sovereign for 
 an annual Civil List, and with the boldm of the 
 National Debt for the payment of their interest, 
 and it is thought that nothing is gained by 
 bringing such matters, whidi cannot fairly be 
 set aside by one of the parties, uiuier annual 
 discussion. 
 
 The grand total for the Consolidated Fund 
 Services is £37.322,969. The most economical 
 Government has no means of reducing these 
 charges — which, owing to the vast debt now 
 created, will amount for some time to a great 
 part of the annual expenditure— except by the 
 extinction of debt as opportunity offers. The 
 same thing is to a great extent true of the salaries 
 of permanent officials who have vested interests 
 
NATIONAL FINANCE 
 
 in their appointments. To large amounts of 
 expenditure upon contracts, leases, etc.. Govern- 
 ment is committed in advance, and cannot go 
 back upon them, however much it may deplore 
 the original decision to embark upon particular 
 enterprises. 
 
 We turn now to the Supfdy Sendees, so called 
 because they are voted annuaUy in Committee of 
 Supply in the House of Commons. We will 
 enter into detaU in the first item. Army Services, 
 as an illustration. 
 
 The Appropriation Accounts made up at the end 
 of the year, and audited by the Comptroller and 
 Auditor-General, show the total amount expended 
 and how it was divided between certain heads. 
 The sum issued from the Exchequer for the 
 Army amounted to ^28,346,000. The actual 
 gross ejcpenditure was ^32*090,397, met as to 
 £3724>295 by receipts or appropriations in aid, 
 leaving a net expenditure of £28,366,102. The 
 heads or divisions of net expenditure are— Pay, 
 £^,457*378; Medical Establishments (including 
 Pay, etc.), £446,819; Special Reserve, £687,084; 
 Territorial Forces, £2,820,452; MiUtary Education 
 (Establishments for), £154,962; Quartering, 
 Transport, and Remounts, £1,817,644, Supphes 
 and Clothing, £4,576,343; Ordnance, £735,419; 
 Armaments, Aviation, and Engineering Stores 
 
 THE EXPENDITURE OP GOVERNMENT 41 
 
 £1,809,343; Works and Buildings, £2,435,164; 
 Miscellaneoas Effective Services, £62,062; War 
 Office, £442,284; Non-effective Pay {i.e. pensions, 
 etc.) for Officers, £1,827, y ^2; Ditto for Men, 
 £if 950*4^7; Civil Ditto, £137,464; Balances 
 irrecoverable and Claims abandoned, £5,445. 
 
 Before the money for the Army was voted 
 an Estimate was laid before Parliament showing 
 how much was required under each of these heads. 
 The Appropriation Account reproduces these 
 figures, shows the amount actually spent under 
 each head, and gives an explanation of any 
 considerable variatum from the estimate. The 
 account also states the amount appropriated in 
 aid under each of the same heads. For the most 
 part, the receipts are payments made by India, 
 Egypt, and the overseas parts of the Empire for 
 the services of British troops or materials supplied 
 by the Army. A similar contribution is made for 
 pension charges. Other recdpts are derived from 
 the sale of properties, cast animals, and articles 
 no longer required, grazing rents on remount 
 farms, purchases of discharge, ^oppages for 
 quarters, barrack damages, etc. 
 
 ParUament lays down every year a maximum 
 number of men for the Army and the Navy. 
 The total authorised for the Army in 1913 was 
 185,000. Deducting 3,036 permanent staff of 
 
NATIONAL FINANCE 
 
 the Territorial establishments, 1,151 for staff and 
 departments, and 1,480 for misceliandous Services, 
 the authorised r^iimental establishments were 
 I79>933- The actual number never amounted 
 in the year to 172,000 and was in some months 
 below 167,000. 
 
 The Ordnance Factories Department spent 
 about £3 m. in the year, but as it sells its products 
 to the Army and Navy for such amounts as will 
 cover its expenditure, it does not figure separately 
 in the account of Exchequer issues. A nominal 
 or token Vote is laid before Parliament to give 
 an opportunity for discussion, and an account 
 of its business is annually presented. Its capital 
 in land, buildings, and machinery was valued 
 at about £2^ m., and it had in hand cash, stores, 
 and material of the value of over £2 m. on 
 31st March, 19 14. 
 
 Separate accounts are also presented for the 
 Army Clothing Factory, for Mihtary Works out 
 of borrowed money, for Chelsea Hospital, for 
 the Military Savings Banks, and for the Finances 
 of the Territorial Forces. 
 
 The issues for the Navy amounted to 
 £4^,833*000, the gross expenditure to £50,819,150, 
 the appropriations in aid to £2,086,529, leaving a 
 net actual expenditure of £48,732,621. The 
 maximum number of men voted was 146,000. 
 
 THE EXPENDITURE OF GOVERNMENT 43 
 
 Separate accounts are presented for Dockyard 
 Expenses, the Victualling Yard, the Royal Naval 
 
 Torpedo Factory, the Naval Savings Banks, and 
 Greenwich Hospital. 
 
 The issues lor Civil Services amounted to 
 £53*90i»ooo. The gross expenditure was 
 £55»oo5>72i, appropriations in aid £2,335,087, 
 actual net expenditure £52,670,654. The issues 
 for Revenue Departmmits £29,090,000, gross ex- 
 penditure £29,460,754, appropriations in aid 
 £808,158, actual net expenditure £28,652,596. 
 The two services onnbined recmved £82,991,000 
 from the Exchequer, but spent only £81,323,230 
 of this amount. The apparent expenditure, as 
 judged by Exchequer issues, is thus £1,667,770 
 greater than the real expoiditure for the year. 
 
 Details of all Civil expenditure under 124 votes 
 are given in the Appropriation Accounts as already 
 described. The total issues for the Supply 
 Services amounted to £160,170,000, and this, 
 with the Consolidated Fund Services already 
 referred to, amounted to a total of £197,492,969 
 chargeable against Revenue. But in additicm 
 to this must be taken into account issues out of 
 the Exchequer to meet capital expenditure. 
 Though there is no proper capital account of 
 Government, there is some attempt, far from 
 logical or complete, to treat certain capital 
 
44 
 
 NATIONAL FINANCE 
 
 expenditure specially. The amount is advanced 
 out of the Exchequer as required, and is repaid 
 by annual instalmmits spread over a number of 
 years, the amounts being repaid in most cases 
 by Votes of Parliament. It is hardly neces- 
 sary to point out that in a properly drawn 
 balance-sheet of the year's finance the effect 
 of these capital operations would be clearly 
 brought out. The total issues to meet capital 
 expenditure were £4,220,749, exclusive of 
 £380,000 worth of Exchequer Bonds issued to 
 the National Telephone Company in part payment 
 of the purchase money of their umtetaking. 
 
 The expenditure for Civil Services is divided 
 into a number of classes or blocks in the accounts. 
 The classification is amended year by year by 
 transfer of items from om class to another, and, 
 as the amounts are sometimes considerable, 
 there are serious pitfalls in comparing the classes 
 from year to year. Within each class come 
 numerous Votes for separate Services or Depart- 
 ments. And the detailed expenditure under 
 each Vote and its subdivisions is set out in the 
 Appropriation Accounts, which are audited and 
 reported upon by the Comptroller and Auditor- 
 General, whose report is referred by the House 
 of Commons to a Public Accaunis CommiUee 
 which calls before it and questions witnesses 
 
 THE EXPENDITURE OF GOVERNMENT 45 
 
 from the Departments concerned as to any 
 matters which arise out of the accounts wliere 
 
 irregularity or waste is suspected. 
 
 The checks upon expenditure are numerous. 
 The Treasury must approve the Estimate pre- 
 sented in detail to Parliament, and no increase of 
 numbers or alteration of pay is valid without 
 Treasury approval. Parliament must sanction 
 the expenditure proposed in the Estimates b^ore 
 it can be incurred. The Auditor-General will 
 question any payment unless it is duly authorised, 
 is supported by prodf of paym^t, and is charged 
 to its proper head in the Accounts. Finally, 
 the PubUc Accounts Committee, with the 
 Auditor's Report before it, will follow up any 
 question he has raised, or will raise one of its 
 own, in the effort to discover any improper ex- 
 penditure, though it is restricted from questioning 
 matters of policy which do not arise out of the 
 Accounts. The primary and ultimate responsi* 
 bility for spending the country's money in such 
 a way that full value is received for it rests upon 
 the authmtiesof each Department. But every- 
 body knows that all these precautions fall short 
 of securing the desired result. It is sufficient for 
 a small body of Members of Parliament, who are 
 not experts in the matter, to be formed into a 
 Committee to inquire into expenditure, and for 
 
NATIONAL FINANCE 
 
 them to scratch the surface, to discover irre- 
 gularities of substance as distinct from the 
 irregularities of form which are the primary 
 concern of audi^. 
 
 The Select Committee on National Expenditure 
 in its Seventh Report {Form of Public Accounts), 
 H.C. 98/18, points out that "the total cost of 
 the Services for which they provide is not included 
 either in Estimates or Accounts/' Except in 
 the few cases where Departments cam^e manu- 
 factming or commercial accounts, no Department 
 can render an account of its expenditure, because 
 no Department fully knows it. Its buildings, 
 stationery, rates, pensions, postal, telegraph, and 
 telephone expenses, are all finally recorded as 
 matters of accoimt in the accounts of the Depart- 
 ments administering those Services." A rough 
 estimate is made every year of the amounts 
 which are expected to be paid for services rendered 
 to another Department, but except for this 
 guess, and for sosm tables in the Appropriation 
 Accounts, we are very much in the dark. 
 
 The published figures of Government expendi- 
 ture show us how much money has been issued 
 and under what heads. The accounts of the 
 various Departments show how much has been 
 paid out for salaries, for travelling, for stores, etc. 
 But the question whether the money has been 
 
 THE EXPENDITURE OF GOVERNMENT 47 
 
 well spent cannot be answered from these details. 
 The Select Comndttee concludes that the present 
 form of Accounts and Estimates is " non-signi- 
 ficant ' ' and of little value for purposes of control. 
 It is proposed that the Estimates and Accounts 
 should, in future, be prepared on an income and 
 expenditure basis, and that a beginning should 
 be made forthwith with a new form of Army 
 Estimates. The object aimed at is to show the 
 actual cost of each Service, which, as we have 
 seen, is not the same thing as its actual cash 
 outlay, but will indude the value of services 
 rendered and stores utilised. Statistics will be 
 prepared in greater detail of the cost of various 
 divisions of Servi^, and, where possible, this will 
 be reduced to a cost^per unit. Fcr example, the 
 Royal Military Academy at Woolwich costs so 
 much, has so many cadets, and the cost per 
 cadet will be worked out, making it possible to 
 compare the cost per unit one year with another, 
 to compare the cost per cadet at Woolwich and 
 at Sandhurst, etc. Similarly, the cost of the 
 Hospital Service will be worked out at so much 
 per day for occupied bed. Such statistics, in- 
 telligently handled, will enable useful comparisons 
 to be made between one hospital and another 
 and between Army and Navy or civilian hospitals. 
 This change marks an important step forward 
 
48 
 
 NATIONAL FINANCE 
 
 in scientific administration, and has in it the 
 gieniis of great refonn. A more striking example 
 of the uses and, indeed, the necessity of statistics 
 
 as applied to public affairs could hardly be pro- 
 vided. 
 
 In studying the figures of national income, 
 national expenditure, and national trade, ac- 
 count must be taken of alterations in the value 
 of money as measured by the movements of prices. 
 The purchasing power of the pound sterling 
 varies considerably year by year, and sometimes 
 month by month. The Japanese Government 
 issues tables of trade and fiiumce which contain 
 much interesting information, the value of which 
 is enhanced by an index number showing the 
 movement of prices. If, for example, the value 
 of certain exports has doubled since the outbreak 
 of war, and if we see at once that prices have 
 also doubled, we realise that the quantities 
 exported have remained about the same, and so 
 avoid a dangerous error. The index number of 
 the Economist before the War was at the end of 
 July, 1914, 116 6, taking as the basis the average 
 prices of 1901-1905 as 100. In other words, 
 prices had increased (prices of principal com- 
 modities wholesale) by one-sixth above the 
 average of the first five years of the century. 
 The inctex number at the end of August, X9z8» 
 
 THE EXPENDITURE OF GOVERNMENT 49 
 
 was 284-8 — roughly speaking, two and a half times 
 as high as before the War. In other words, a 
 sovereign would then purchase only as much in the 
 wholesale market as 8s. before the War. But 
 even in peace time the movements of general prices 
 must always be^ watched side by side with the 
 movements of ^expenditure. The Consolidated 
 Fund Services are very little affected, as the 
 debt charge remains unaltered, and fixed salaries 
 and pensions, the Civil List charges, and similar 
 items, remain the same. Even in the Supply 
 Services the pay of the naval and mihtary forces 
 and the Civil Services is not always supplemented 
 by such a peace bonus as will meet a fall in the 
 value of monev. But where materials are 
 concerned for building and arming ships, for 
 machinery and stems, stationery, etc., an in- 
 crease in prices must alwa3;3 be kept in mind. 
 To take a simple example, assume that I spent 
 £3 a year on stationery before the War and now 
 Spend £6. My expenditure on stationery is 
 doubled. But assuming, further, that I use the 
 same kind and quality of stationery, we must not 
 conclude that I have used twice as much. If, 
 in fact, the price has tripled, so that I now pay 
 £6 for what would only have cost £2 before the 
 War, I have actually diminished my consumption, 
 which used to be half as much again in quantity 
 4 
 
50 
 
 NATIONAL FINANCE 
 
 as it is now. Such allowances have seldom been 
 made by critics of Goveniiii«nt expenditure. 
 It has moreover been too usual to regard the 
 quantity of expenditure rather than its quahty. 
 The question. What are you getting for your 
 expenditure? is one which goes to the very 
 roots of efficiency in pubHc finance, and the 
 answer to it is one which demands a much 
 greater use of the statistical faculty than any- 
 thing to which we have yet approached. 
 
 Parliament has attempted to control the 
 national expenditure by a series of steps — ^by 
 limiting the grant to the Crown; by settmg up 
 an Exchequer control, requiring authority before 
 the grants were paid out; by earmarking the 
 grants to specific purposes; by instituting an 
 audit to ensure that the grants were applied to 
 their proper objects and were not exceeded; 
 by entrusting the Public Accounts Committee 
 with the duty of scrutinising the accounts and 
 the report of the auditor upon them; and has 
 tried the experiment of an Estimate Committee 
 to consider the demands of Departments before 
 the Estimates were voted. It is now proposed to 
 apply the principles of cost-accounting to the 
 Estimates so as to bring out the amount re- 
 quired per unit of service. Apart from all this, 
 there are questions and debates in Parliament, 
 and the efforts of the Treasury and of the Depart* 
 
 THE EXPENDITURE OF GOVERNMENT 51 
 
 ments themselves to secure economy, and from 
 time to time Parliament inquires into the details 
 of some section of the public service by means of 
 a Conunittee. But the ccmtrol of expenditure 
 will never be effective and complete until we have 
 what is called an Efficiency Audit, which looks 
 at results obtained and discovers when they 
 were an unsatisfactory return for the money 
 which has been spent. Such an inquiry, con- 
 ducted by permanent experts who devote their 
 whole energies to the work, should provide Par- 
 liament and the country with full and authentic 
 information upon the merits of expenditure, as 
 distinct from its legal and formal propriety. 
 Dealing with the past and going upon accom- 
 plished facts and settled figures, it would put its 
 finger upon waste and mismanagemeiit, would 
 enable saf^[uards to be tsihm against then- 
 recurrence, and would have a bracing and tonic 
 effect upon public administration generally. Oc- 
 casional, limited, and amateur inquiries into 
 particular Services at particular times cannot 
 be so effective as a permanent, continuous, inde- 
 pendent, and all-embracing expert inquiry. Such 
 a searchlight would not interim with the opera- 
 tions of Departments, but it would reveal facts 
 upon which Parliament and the proper authorities 
 could take such action aA might be required to 
 secure value for the expenditure of Government, 
 
IV 
 
 THE REVENUE OF GOVERNMENT 
 
 IT is sometimes said that the difference be- 
 tween private and public finance is that 
 the individual must r^[ulate his expenses 
 by his income, but that Government has to 
 adjust its revenue to its expenditure. This 
 supposes that Government first decides how 
 much it win spend, and then casts about for 
 ways and means to make both ends meet. That 
 this is not necessarily the case is seen from the 
 experience of the United States. The revenue 
 derived from its Customs tariff and other sources 
 was for many years before the War sufficiently 
 large to meet any probable expenditure, and 
 was sometimes so much in excess as to cause 
 embarrassment. The programme of expenditure 
 was settled without any detailed reference to or 
 correlation with the probable revenue, and was 
 in no way adjusted to it except in so far as a 
 sense of proportion restrained Congress from 
 launching out into expenditure on such a scale 
 
 5« 
 
 TiqHBIBNUE OF GOVERNMENT 53 
 
 as would have necessitated increasing the rev^ue. 
 But even in our own country the expenditure 
 
 is always limited to a great extent by similar 
 considerations. The wealth of a country is 
 limited; the amount of that wealth available 
 for taxation is still more limited ; and an eye must 
 always be kept upon the point at which the 
 inconvenience of increased taxation will outweigh 
 the advantages of increased expenditure. 
 
 We will now examine the figures of revenue 
 in 19 13 (Appendix, B). First in order comes 
 the Customs, which yielded to the Exchequer 
 ;f35 ,450,000. The amount collected (net receipts) 
 was £35,568,581. Excise contributed £39,590,000. 
 Net receipts were £391657,957. Customs duties 
 are levied upon dutiable articles brought into or 
 sent out of the country. The export duty on 
 coal, repealed in 1907, was a Customs duty. 
 Excise is collected from certain dutiable articles 
 produced and consumed at home. Both sets 
 of duties are under the management of one Board, 
 the Conmiissioners of Customs and Excise, from 
 whose Report the figures given on p. 54 are 
 compiled. 
 
54 
 
 NATIONAL FINANCE 
 
 N«T Rbcsipts of CusToio Doty for thb Fikanciai, 
 Ymam Bmimnm Apksl tbm m, 1913. 
 
 ■Beer 31.643 
 
 Cocom 341,489 
 
 Coffee and chicory , , , . 120,352 
 
 Dried frnit 513,601 
 
 Rum 2*585,691 
 
 Brandy . . 1,183,830 
 
 Total potable spirit . , . . 4,435,500 
 
 Sugar 3,272,044 
 
 Tea 6,498,816 
 
 Tobacco 18,263.479 
 
 Wine 1,152,291 
 
 Motor spirit 823,623 
 
 Other articiei . , . . . , I5»743 
 
 35.568,581 
 
 The duty on cigars amounted to £457,315 
 (included in tobacco). 
 
 N«i Rbcbipts of Excisb Duty for the Financial 
 Year Bxginning April thb ist, 1913. 
 
 Beer 13,622,971 
 
 ^v^^ . . 19,539.777 
 
 Railway duty 288,368 
 
 Glucose and saccharin . . . . 56,491 
 
 Patent medicines 360,377 
 
 Playing-cards 33.343 
 
 Liquor licences (including club duty 
 
 and monopoly values) . . . . 4,516,679 
 
 Other licences . . . . . , 1,200,603 
 
 Other receipts .. 39.148 
 
 39.657,957 
 
 THB RBVENUE OF GOVERNMENT 55 
 
 Motor-car licences yielded £674,174 of the 
 above. Liquor licences do not include the yield 
 
 (over ;f4oo,ooo) of brewers* licences, which are 
 included under the head of Beer. 
 
 Taking Customs and Exdse together, it will be 
 seen that alcoholic drink produced nearly 43^ m., 
 tobacco 18 J m., tea, coffee, and cocoa over 7 m., 
 sugar 34 m. — ^in all 72 out of 75 m. 
 
 When an article liable to Customs duty is . 
 imported and the duty has been paid, it is said 
 to be cleared," and passes out of the Customs 
 control. But large quantities of imports get no 
 further than the docks, whence tliey are shipped 
 again to foreign countries. Arrangements are 
 made under which such articles may, under 
 Customs supervision, be deposited in a Bonded 
 Warehouse, the owners entering into a bond to 
 pay the Customs duties upon the goods if they 
 pass into internal rnniinmntiijj No duty is 
 paid if the articles are re-exported from the 
 bonded warehouse. Or, again, an article which 
 has paid duty may be exported either in its 
 original form or after it has been worked up, 
 and in such cases a Drawback or repayment in 
 respect of the duty received may be allowed. 
 Finally, we must note that certain allowances 
 are made in respect of bonded articles to com- 
 pensate for loss of quantity while they are in 
 
56 
 
 NATIONAL FINANCE 
 
 bond — e.g., for evaporation of spirits, leakages, 
 bottling of wines and spirits, the roasting of 
 coffee, the mixing of tea, etc. The quantities 
 imported differ from the quantities which are 
 retained for home consumption/' partly because 
 of re-exports and partly because of this loss in 
 bond. 
 
 . The quantities (ooo's omitted) retained for 
 home consumption in the calendar year 19 13, 
 and the average consumption per head of popu- 
 lation, were as follows: 
 
 
 
 Per head. 
 
 Beer 
 
 34,988 barrels. 
 
 or 27*36 gall. 
 
 Cocoa 
 
 78,273 lb. 
 
 „ 1701b. 
 
 Coffee and chicOTy 
 
 319 cwt. 
 
 0.781b. 
 
 Currants 
 
 1,243 cwt. 
 
 M 3*03 lb. 
 
 
 725 cwt. 
 
 „ I •76 lb. 
 
 
 3,320 proof gall. 
 
 0K)7 gall. 
 
 Brandy 
 
 1,504 proof gall. 
 
 B» 0*03 gall. 
 
 Total potaUe spirit im- 
 
 
 
 portsed 
 
 5,629 proof gall. 
 
 „ o»i2gall. 
 
 Spirits home made 
 
 26,163 IM^oofgall. 
 
 „ o*57gall. 
 
 
 33,918 cwt. 
 
 „82«52 lb. 
 
 Molasses and glucose .. 
 
 3»943 cwt. 
 
 „ 9*6olb. 
 
 Tea , , , , , , 
 
 305*489 lb. 
 
 „ 6^4 lb. 
 
 Tobacco 
 
 96,110 lb. 
 
 „ 2-09 lb. 
 
 Wine 
 
 11.3^ gall. 
 
 „ 0*25 gall. 
 
 Figures of consumption " per head of popu^ 
 latioQ " are not of much absolute significance in 
 the case of alcohol and tobacco, of which the 
 consumption is mainly confined to adult males. 
 
 THE REVENUE OF GOVERNMENT 57 
 
 but, assuming the age-distribution and the habits 
 of consumption to rc»nain the same, they are 
 
 serviceable for comparisons. 
 
 The Customs tariff begins with the words: 
 " Beer of the descriptions called Mum, Spruce 
 or Black Beer, and Berlin White Beer, and other 
 preparations, whether fermented or not fermented, 
 of a character similar to Mum, Spruce, or Black 
 Beer," etc. — a tj^ical example of the jargon 
 which disfigures our legislation. Mr. Gladstone 
 once asked the Revenue authorities what Mum 
 is, but they were unable to dkcover. Some 
 statutory distinction is needed between herb 
 beers, ginger-beer, and other so-called beers, 
 and those which are of sufficient alcoholic 
 strength to come within the duty, but it does 
 not appear that any useful purpose is served 
 by the perpetuation of an enumeration not 
 understood even by the Revenue officers. 
 
 The beer which pays Customs duty is, of 
 course, imported or foreign beer, and the amount 
 collected is very small compared with the yield 
 of Excise on home-made beer. The taxation of 
 chicory would not by itself be worth while, but 
 for the fact that it is frequently mixed with 
 coffee. The revenue from cocoa and coffee 
 could not be abandoned without seriously affec- 
 ting the revenue from tea, which is much more 
 considerable. When one article is a substitute 
 
5« NATIONAL FINANCB 
 
 for anothm*, or what economists call a " rival 
 commodity," a tax upon one necessitates, for 
 obvious reasons, a tax upon the othwr. The 
 taxation of sugar, therefore, leads to the taxation 
 of molasses, glucose, and saccharin. 
 
 A curious feature in the revenue from dried 
 fruits is that apricots, if dried, crystallised, or 
 glac4, are charged as plums; but if imported 
 in pulp or tinned or bottled in syrup or water, 
 are charged as sugar in respect of the fruit, 
 while the syrup is charged with its proper duty 
 unless the merchant chooses to pay duty on 
 the whole weight at the fruit rate. AU other 
 dutiable fruit in syrup water is charged the 
 fruit duty on its weight of fruit without squeezing 
 out the syrup or water, and the syrup is separ- 
 ately charged. The merchant may, if he chooses, 
 pay on the whole weight at the fruit rate. It 
 follows that apricots alone of all fruits may be 
 charged as sugar, while some syrup is charged, not 
 as sugar, but as fruit. The net effect upon the 
 true figures is not stated, but is probably incon- 
 Mderable. Railway duty has steadily diminished, 
 about 19 per cent, in the ten years 1903 to 1913, 
 owing mainly to the gradual abolition of second- 
 class fares, the duty applying only to passenger 
 fares exceeding one penny per mile. It does not 
 extend to Ireland. The rate of duty is 2 per cent, 
 cm arbaii traflfc and 5 per cent, on other traffic. 
 
 THS RSVEKUS OF GOVERNMENT 59 
 
 The Other Licences" are for appraisers and 
 house agents^ auctioneers, hawkers, makers or 
 vendors of patent medicines, motor-spirit dealers, 
 pawnbrokers, plate-dealers, keepers of refresh- 
 ment houses, tobacco manufacturers and dealers; 
 the so-called BsMUskmm^ Lk$9ice$ ic^ mate ser- 
 vants, motor carriages and cars. Hackney car- 
 riages (including motors), and armorial bearings; 
 gun licences, game licences, game dealers, and 
 dogs. The total amount paid by the public in 
 respect of these " Other Licences " was nearly 
 3 miUions; but, as we shall see in Chapter VI., the 
 proceeds were largely devoted to Local Finance. 
 (See also Appendix, Table C, note, p. 154.) 
 
 Estate duties. Exchequer receipts, £27,359,000 
 (net receipts £27,165,123). Details are given in 
 the Report of the Conmdssioners of Inland 
 Revenue. In round figures 21J m. were received 
 from Estate duty, 4^ m. from Legacy duty, and 
 j(900,ooo from Succession duty. As Corpora- 
 tions never die, a duty of 5 per cent, is levied 
 yearly on the net annual value, income, or 
 profits, of all their real or personal property 
 liable to duty. The amount produced in 1913 
 was a little over £59,000. 
 
 The .gross capital of which the Commissioners 
 had notice in 1913 as passing at death amounted 
 to £327,701,824 gross and (after deduction of 
 debts, etc.) 3^296,432,158 net. In addition, are 
 
^ NATIONAL FINANCE 
 
 estates exempt from duty as not exceeding 
 ^100 net value, amounting to £1,768,928. Of 
 the Estate duty, i8im. wm in respect of 
 personal and 3 m. of real property. The capital 
 paying Succession duty was about 29 m. 
 
 Stamps (exclusive of Fee and Patent stamps) 
 paid into the Exchequer, £9,966,000. The net 
 receipts were £9»983,363> made up as follows 
 (ooo's omitted): 
 
 Deeds, bonds, contract notes (above id. duty) ^ 
 Foc^ign certificates and share warrants . . 5 603 
 
 Companies' capital duty and loan capital duty '726 
 Bills of exchange, bankers' notes, and compo- 
 tion for duty on bills and notes .. .. 1,160 
 
 Life and marine insurances 
 
 Receipts, drafts, and other penny stamps * 2 016 
 Licences and certificates 
 
 9,9»3 
 
 The net receipts from Land Tax were £690,007. 
 £700,000 was paid into the Exchequer. The 
 tax does not extend to Ireland. The aggregate 
 of the unredeemed Quotas, or annual Habilities, 
 to Land Tax on the 25th of March, 1914, was 
 £929,208. Remissions are made annually to 
 owners with small incomes, and £2,273 was 
 written off as bemg charged on Government 
 property. 
 
 Inhabited House duty : Net receipts, £1,994,400 ; 
 payment into the Exchequer, £2,000,000. 
 
 THE (REVENUE OF GOVEHNMENT 61 
 
 Property and Income Tax: Payment to 
 Exchequer, £47,249,000; net receipts,£47,240,77i. 
 
 (ooo's omitted.) 
 
 Schedule A. Ownership of lands, honaes, etc. . . 10,304 
 
 Scbedtde B. Occapatk»i8 of lands, etc. (mainly 
 i^umers' profits) •• •• •• 
 
 Sdie4ule C. Pn^ts from Britisli. Indian, 
 Colonial and Foreign Government securities 2,867 
 
 Schedule D. Business, professions, and employ- 
 ments except E 27,293 
 
 Schedule E. Salaries of Government, Corpora- 
 tion, and public company officials .. 3'223 
 
 Super Tax 3*339 
 
 £47*240 
 
 The total gross income brought under review 
 was in 1913 £i,iii,456,4i3- AUowing for ex- 
 emptions for income under £160, charities, 
 hospitals, friendly societies, etc., foreign dividends 
 belonging to foreign residents, allowances for 
 repairs to lands and houses, empty property, 
 wear and tear of machinery or plant, and other 
 reductions, the taxable income was £907,151,813. 
 From this were abated £i33>i95»o66 under the 
 graduated scale, £12,518,938 on life insurance 
 premiums, and £5,860,262 relief in respect of 
 children. The total income on which tax was 
 received was therefore £755»577>547- 
 
 Land Value Duties: £715,000 paid into the 
 Exchequer; net receipts, £734*^3. of which (ooo's 
 omitted) — 
 
^ NATIONAL VIKAMCB 
 
 Increment Value Duty , . 
 
 Reversion Duty " gj 
 
 Undeveloped Land Duty . . " ±*fA 
 
 Mineral iUghts Duty ^ V. [l 
 
 754 
 
 The Postal Service contribution to the Ex- 
 chequer, ^20,300,000, compares with net receipts 
 of £21.220,105. The Tel^ph Service Exchequer 
 payment, £3,100,000; net receipts, £3,071,170. 
 
 TelephoneServiceExchequerpayment,£5,775,'ooo; 
 net receipts, £6,563,316. 
 
 Crown Lands (net receipts) : £530,000 paid to 
 Exchequer; gross receipts, £730,319. Amount due 
 to Exchequer after deducting expenses (seep. 15), 
 £543.658. 
 
 Receipts from Suez Canal Shares and Sundry 
 
 Loans, £i,579.972, is made up as follows (ooo's 
 omitted) : 
 
 Sue* Canal shares dividends . . , * .it 
 
 Cunard Steamship Company, interest on ' 
 
 acivanoes _^ 
 Greek Loan, 1832, repayment [[ 
 
 rli/^r''^ l"" ""'^^ repayment . . c 
 
 Crold Coast, repayment d advances . . m 
 
 Libenan Government . . * ' ^ 
 Persian Loan repa)na[ient . . 
 Northern Nigeria repayment 
 
 Uganda Railway repayment .J 
 
 British East African Protectofatt, intemt it 
 
 Nyasaland, interest .... " 
 
 THE S£V£NUS OF GOVfiRMMfiKI ^ 
 
 The Miscellaneous Revenue paid into the 
 Exchequer was £z,078»ooo from Fee and Patent 
 stamps and £1,225,925 receipts by Gvil Depart- 
 ments, etc. 
 
 The net receipts for Fee and Patent stamps 
 were £1,084,203. The great bulk of the stamps 
 
 is for legal business, but over £100,000 was 
 received for company registration and over 
 £60,000 for district audit. The Patent stamps 
 yW<ied £335,349. 
 
 The Miscellaneous Revenue received in cash 
 comprised £800,675 from the Mint, being the 
 excess of its receipts over and above the amount 
 appropriated to meet its expenses for the year; 
 £187,047 paid by the Bank of England mainly 
 out of prohts of its note issue; inteiest on deposit 
 funds invested by the Paymaster-General, 
 £12,610; £15,000 in respect of escheated estates; 
 and various small sums rec^ved by public 
 Departments and not appropriated In aid. 
 
 The grand total of Exchequer Revenue is 
 thus £198,242,897. Of this, Customs and Excise 
 account for £75 miUions; Inccnne Tax, Estate 
 Duty, Taxes on land and houses, and stamps 
 (excluding Fee and Patent stamps), for £88 m. 
 Fee and Patent stamps another million; Posts. 
 Tel^[raphs, and Telephcmes, £32 m. • Oown Lands 
 half a million; Suea Canal Shares over a million; 
 
64 
 
 NATIONAL FINANCE 
 
 the Mmt and the Bank of England another 
 million. The division in the accounts is intended 
 to suggest that only £163 m. is in the nature of 
 taxation, the remaining ^35^ m. consisting chiefly 
 of special payments by the public for special 
 services (Posts, Telegraphs, Telephones, Crown 
 Lands, etc.), sometimes described in Government 
 Returns as " non-tax revenue." 
 
 A caution must again be given here against 
 extracting figures from a work of reference, even 
 though it be so good and authoritative as the 
 Statistical Abstract, and using them as a basis of 
 deduction, and especially for comparisons, with- 
 out first understanding how the figures are arrived 
 at and what they really mean. The Reports of 
 the Revenue authorities contain much excellent 
 statistical material and sometimes illuminating 
 comment for which we should look elsewhere in 
 vain. Thus we learn, for example, that in com- 
 paring the Customs and Excise revenue for 19 13 
 with that of the year before we must make 
 allowance for abnormal features accounting for 
 £3^ m. The great national coal strike in the 
 spring of 1912 checked the consumption of the 
 chief dutiable articles, and the revenue of 19 12 
 further suffered by postponed clearances of 
 tea, sugar, and tobacco at the end of that year. 
 On the other hand, the revenue of 1913 profited 
 
 THE REVENUE OF GOVERNMENT 65 
 
 not only by this postponement, which was made 
 good when the Budget was announced, but by 
 forestalments or abnormal clearances at the end 
 of 19 13 in anticipation of increased taxation, 
 especially on alcohohc drinks. In this way the 
 revenue of 1913 included some of the revenue 
 on articles which would normally have paid 
 duty in 1912 and in 1914. The figures given 
 are— Spirits, £1,367,000; Beer, £428,000; Wine, 
 £42,000; Tea, £347*000; Sugar, £220,000; and 
 Tobacco, £1,010,000. If revenue from consump- 
 tion were taken it would be more nearly uniform. 
 The revenue paid differed considerably from the 
 true revenue belonging to each year. A hot 
 and dry summer in 1913 stimulated, as usual, 
 the consumption of beer; a cold and wet winter 
 stimulates the consumption of spirits. 
 
 We have already seen that the expenditure 
 is elaborately accounted for. First we are told 
 how much is required for each service, and, so 
 far as the Supply Services are concerned, how 
 much is estimated or forecast as the probable 
 expenditure for each Department under a number 
 of subdivisions. The accounts show the actual 
 expenditure in the same detail, with explanations 
 of differences between the estimated and the 
 actual expenditure. We have nothing com- 
 parable to this in regard to revenue. In many 
 5 
 
66 NATIONAL FINANCE 
 
 countries the Budget figures of revenue are 
 stated in detail, and not merely in bulk, and at 
 the end of the year it is possible to see where 
 the revenue has exceeded or fallen short of the 
 forecast, and to learn the reason why the yield 
 of revenue was not in accordance with expecta- 
 tion. 
 
 Taking merely the instances mentioned above, 
 a report upon the Finance of 1913 would show 
 that the Exdiequer issues differed considerably 
 from the real expenditure, as in the case of the 
 Road Board, to which nearly £1,200,000 was 
 issued, though it spent less than half this amount 
 and lent a sum of less than ^^300,000. The 
 Exchequer receipts from the three great Revenue 
 Departments were £2 m. less than the net 
 receipts. How far the assets of Government 
 were increased by the purchase of lands, build- 
 ings, increased stores, etc., out of revenue, or 
 decreased by sales treated as revenue, etc., and 
 the figures of income tax, death duties, etc., in 
 arrear at the beginning and end of the year, 
 would be stated, with other information which 
 is essential to an understanding of the true 
 change in our financial position. 
 
 It has been seen that the great bulk of our 
 revenue is derived from taxation. We cannot 
 here enter into discussion of what are called the 
 
 THE REVENUE OP GOVERNMENT 67 
 
 principles of taxation. The revenue must be 
 sufficient, but it is the highest importance that 
 it should be raised by methods which are not 
 injurious to the ultimate interests of the country 
 and that the amount to be raised should be 
 fairly adjusted as between different classes of 
 taxpayers. It is now generally agreed that 
 fairness requires a larger proportion of their 
 incomes to be taken from the richer than from 
 the poorer classes. If Government required 20 
 per cent, of the national income and taxed every- 
 body at that rate, it is evident that the man 
 earning 30s. a week would be harder hit than the 
 man whose income is ^^30 a week, who could 
 spare £6 a week much more easily than the 
 labourer could spare 6s. Admitting this principle 
 it can only be carried out satisfactorily if we 
 have trustworthy information as to the amount 
 of, and the distribution of, the wealth of the 
 country. Until we know how many people fall 
 into each group in the scale of wealth, and how 
 much is contributed by each group in the taxa- 
 tion, we can only grope after an approach to 
 justice. What is called direct iaxoHon, like the 
 income tax, is paid once for all by the person 
 from whom it is collected, and the t^x is not 
 passed on to another person. Indirect taxation, 
 like the Customs duties on tea and tobacco, is 
 
68 
 
 NATIONAL FINANCE 
 
 first paid by the importer, but -is passed on by 
 
 him to the merchant who buys from him, and 
 so on from one dealer to another until we come 
 to the final purchaser. Even here a question 
 arises whether the duty on, for example, the tea, 
 sugar, and beer which their employers supply to 
 domestic servants is borne by these servants or 
 by their masters. And some of the problems 
 of the effects of taxation, usually called its 
 incidence, are of the greatest difficulty, depending 
 largely, as they do, upon questions of fact not 
 easily ascertained as to the bargaining powers of 
 the parties to take advantage of any rise or fall 
 in the taxej^. As indirect taxes cannot be 
 graduated with reference to the wealth of the 
 taxpayer, it follows that taxes upon articles of 
 general consumption like tea, tobacco, sugar, and 
 beer, press more severely upon the less wealthy 
 sections of the community. 
 
 Before the War the German Empire, like the 
 United States, rehed mainly upon Customs 
 duties for its revenue. Some German economists 
 and poHticians not only denounced this arrange- 
 ment because of its effect upon the prices of 
 articles of general consumption, but went so far 
 as to assert that since Government was the 
 greatest purchaser of stores of all kind, and 
 since the increased cost of living necessitated 
 
 1 
 
 THE REVENUE OF GOVERNMENT 69 
 
 higher wages and salaries to the army of officials, 
 the Government really derived no financial 
 benefit from the Customs tariff, the expenditure 
 of Government being increased, as they main- 
 tained, by at least the amount of the Customs 
 revenue. 
 
 The supporters of indirect taxation, apart 
 from those who desire it as a protection of native 
 industry, point out that so long as large numbers 
 of people are ex:empt from income tax and con- 
 tribute little or nothing to death duties, it is 
 only by indirect taxation that some assistance 
 to the cost of Government is derived from them. 
 It is also claimed that such taxes are optional 
 in the sense that people who do not choose to 
 smoke tobacco or drink alcohol escape taxation 
 upon these articles. Some writers urge that 
 indirect taxation is of a relatively painless 
 character, the tax being concealed in the price 
 of the article. Others insist that this is a 
 condemnation of the tax; that taxation ought 
 to be open and evident, and that the taxpayer 
 should realise the fact and the amount of taxation 
 when he pays it. The ultimate effect of privation 
 is the same in either case. It is also- objected 
 that indirect taxation takes more out of the 
 pocket of the consumer than finds its way into 
 the Exchequer, seeing that each dealer adds 
 
NATIONAL FINANCE 
 
 some percentage of profit to what he pays for 
 an article, and the original tax charge grows with 
 each transaction of purchase and sale. A change 
 in the income tax is less disturbing both to 
 the operations of trade and commerce and to the 
 cost of collection than a change in indirect taxa- 
 tion, and, finally, indirect taxation adds to the 
 difficulties of ascertaining and adjusting the 
 effects of taxation upon different classes. The 
 administrative difficulties attendant upon the 
 collection of income tax from people of small 
 incomes appear less serious since the National 
 Insurance scheme of collection by stamps affixed 
 by the employer has come into operation. 
 
 Direct taxation is not without its critics, and 
 the income tax is roundly abused for its lack of 
 simpUcity, the irritation and waste of time which 
 results from controversy over its application, and 
 from numbers of anomalies and unfair features. 
 The Income Tax Act of 1918, a consolidation of 
 existing law and practice, extends to 190 pages. 
 An expert lawyer, financier, and accountant 
 would be needed to understand it. A Royal 
 Commission is now sitting to consider the income 
 tax in all its aspects, and to report what reforms 
 are desirable. 
 
 It was for a long time, and imtil recent years, 
 a superstition of British finance that the yield 
 
 THE REVENUE OF GOVERNMENT ft 
 
 of direct and indirect taxation should be approxi- 
 mately equal, and a raising or lowering of the one 
 was accompanied by a corresponding movement 
 of the other. The following figures have been 
 given to Parliament on behalf of Government: 
 In 1903-04 indirect taxation produced 50*7 per 
 cent, of the revenue, and direct taxation 49 3 
 per cent. In 1913-14 indirect taxation accoonted 
 for 42 5 per cent, of the total. In 1918-19 it 
 yielded only 30*21 per cent., (or 18-63 if we include 
 the figures of excess profits duty). Taxation 
 per head of population is stated to have been 
 £3 los. in 1913-14, and £16 12s. lod. in 
 1918-19, of which £10 5s. 2d. came from direct 
 
 
 
 m 
 
 mi 
 
 What proportion direct taxation should bear 
 to indirect taxation cannot be determined by 
 any such simple rule of thumb as is mentioned 
 above. Those who pay direct also pay indirect 
 taxation, and everything depends upon the 
 articles selected for indirect taxation and upon 
 the distribution of wealth throughout the com. 
 munity. There is imdoubtedly a growing 
 opinion in favour of direct taxation in all wealthy 
 countries. Indirect taxes are not always very 
 elastic, as increased prices resulting from higher 
 taxation tend to check consumption — ^markedly 
 so in the case of alcoholic liquors. The elasticity 
 
72 
 
 NATIONAL FINANCE 
 
 of direct taxation was formerly regarded as an 
 incentive to Government expenditure, since the 
 money is raised, as it were, by a stroke of the 
 pen. It may, however, be pushed to a point 
 at which it discourages production and saving, 
 in which case it is not only ineffective in its 
 object, but is a serious menace to the national 
 welfare. At what point the income tax should 
 begin, so as to avoid trenching upon the margin 
 of bare subsistence, and by what steps it should 
 be increased or graduated, are questions upon 
 which statistics may afford much guidance; 
 but a number of other considerations have to 
 be taken into account. Professor Bowley has 
 recently analysed the division of the product 
 of industry before the War. He gives the total 
 income of the people from home sources as from 
 ^2,000 to £2,100 millions in 1913. Of this, more 
 than half was earned by those who were exempt 
 from income tax as having an income of less than 
 ;f 160 a year. AUowing for payments to Old Age 
 Pensioners and for receipts from small properties, 
 the owners of which fall below the £160 limit,' 
 nearly 60 per cent, of the national produce was 
 in the hands of the non-income-tax-paying group. 
 The z,ioo,ooo income-tax payers and their 
 famiUes received about £742 m. of the national 
 income, and after allowing for their subsistence— 
 
 THE REVENUE OF GOVERNMENT 73 
 
 the average family being taken at 4J persons — 
 the maximum income op^ to additional taxation 
 b^ore the War is estimated to have been about 
 ;f3oom. This may seem a startling conclusion 
 when it is remembered that during the War 
 the taxation was actually increased by ^^459 m. 
 in 1918 as compared with 1913. But it must 
 always be remembered that prices had more 
 than doubled. 
 
 Statistical analysis of this kind gives us some 
 rough idea of the distribution of income and 
 taxation. But perhaps enough has been said 
 to show that the p^centages of direct and 
 indirect taxation do not take us very far in the 
 direction of deciding how far the present revenue 
 system is a fair one. The question how steep 
 the graduation of taxation ought to be, or, in 
 other words, by what steps and by what degrees 
 taxation should increase in proportion with 
 higher incomes, is very far from being settled. 
 Mr. Herbert Samuel discusses the taxation of the 
 various classes of the people in his Presidential 
 Address of this year to the Royal Statistical 
 Society. From the report in the Society's Journal 
 of March last I extract his conclusions as to the 
 percentages of income paid in taxation by 
 families of two adults and three children, but 
 the whole address should be studied : 
 
74 
 
 NATIONAL FINANCE 
 
 Income. 
 
 Earned Income, 
 
 Unearned Income, 
 
 i 
 
 1903. 
 
 1913- 
 
 1918. 
 
 1903. 
 
 1913- 
 
 1918. 
 
 
 
 87 
 
 
 9-1 
 
 87 
 
 
 100 
 
 6-2 
 
 6*0 
 
 13*8 
 
 6*2 
 
 6«o 
 
 13*8 
 
 150 
 
 
 4-9 
 
 iiK) 
 
 
 4-9 
 
 ii«o 
 
 200 
 
 5-6 
 
 4-8 
 
 io»3 
 
 7-8 
 
 7'0 
 
 I2'4 
 
 500 
 
 6-6 
 
 
 13*1 
 
 8-8 
 
 9-9 
 
 i8-i 
 
 1,000 
 
 7-4 
 
 6^ 
 
 19-4 
 
 iO'3 
 
 12*2 
 
 26*5 
 
 2.000 
 
 6'6 
 
 5-8 
 
 25*6 
 
 9*8 
 
 12*0 
 
 33*6 
 
 5,000 
 
 5-6 
 
 6-8 
 
 37-2 
 
 9«6 
 
 12*4 
 
 43*5 
 
 10,000 
 
 5-1 
 
 8-1 
 
 42*6 
 
 9-5 
 
 
 50-3 
 
 20,000 
 
 4.9 
 
 8.3 
 
 47-6 
 
 10 'O 
 
 i6-o 
 
 58-1 
 
 50,000 
 
 4-8 
 
 8-4 1 
 
 50-6 
 
 IO'2 
 
 i8-i 
 
 63-9 
 
 He also sets cmt the percentages of income 
 contributed in each class from direct and indirect 
 taxation respectively. In 1913 his figure for 
 the family with an income of £100 is 6-0 per cent., 
 for indirect taxation and nothing for direct 
 taxation. In 1918 the figure 6 becomes 13-8. 
 At the other end of the scale the £50,000 family 
 paid 0*08 indirect tax in 1913 and O'l in 1918. 
 Towards direct taxation such a family paid 8*4 
 per cent, on earned income in direct taxation 
 in 1913 and 50-6 per omt. in 1918. A similar 
 family paid x8*z per cent, on unearned income 
 in direct taxation in 1913 and 63 9 per cent, 
 in 1918. 
 
 The effect of the War upon the distribution of 
 
 THE REVENUE OF GOVERNMENT 75 
 
 taxation has been a revolution of a very drastic 
 character. The figures do not» of course, include 
 local taxation. In an emergency so severe the 
 State must take the money where it is to be 
 found, and it would be futile to impose heavy 
 taxation upon those who have not the means 
 to pay it. Mr. Rowntree estimated the human 
 needs of labour at the prices of July, 1914* to 
 cost 35s. 3d. a week for a man with a family of 
 three young children if they were to be adequately 
 fed and decently clad, and put the figure at 20s. 
 for a single woman. At present prices he alters the 
 figures to 75s. 9d. and 43s. a weelr. Facts like 
 these must be borne in mind in considering the 
 capacity of the poorer classes to bear taxation. 
 
V . 
 
 NATIONAL DEBT 
 
 THE gross liabilities of the State (what we 
 generally call the National Debt) amounted 
 on the 31st of March, 1913, to £716,288,421, 
 and a year later to £707»654>iio. The debt is due 
 mainly to war. In 1899 it was only £635 m. 
 Four years later, after the Transvaal War, it 
 exceeded £798 m. It was steadily reduced in the 
 next eleven years by £91 m., but has now, thanks 
 to the Great War, soared into figures of astro- 
 nomical magnitude. 
 
 We will take for analysis the pre- War figure 
 at the end of 1913. This was made up as follows : 
 
 Funde. debt („o.i„aU.o„„t) .. .. 
 Estimated capital liability in respect of 
 
 terminable annuities ., 29,552,219 
 
 Unfunded debt 35,000.000 
 
 Other capital liabilities 56,384,019 
 
 ;t707»654,iio 
 
 The Funded Debt was originally so-called 
 because it was charged or secured upon a particu- 
 
 7^ 
 
 NATIONAL DEBT 77 
 
 lar fund, such as the proceeds of a particular 
 branch of revenue. It has now come to mean 
 a debt incurred for an indefinite period, and 
 is sometimes called permanent debt as dis- 
 tinguished from floating or unfunded debt, which 
 is intended to be of short duration — ^for a few 
 months or, at most, a few years, repayable at 
 a fixed date. 
 
 The nominal amount of the debt is the amount 
 which Government has promised to repay. If we 
 suppose a Government to issue a loan of £10 m. 
 at 5 per cent., at the issue price of 98, and if 
 the loan is fully subscribed, it receives only 
 ;f9,8oo,ooo, but undertakes to pay £10 m. when 
 the loan is redeemed. If in course of time the 
 market price falls to 96, Government might 
 purchase ;£ioo of its own stock for £96, and by 
 cancelling the stock diminish its nominal debt 
 by £100; but this does not affect the liability of 
 Government to pay a full £100 in case of com- 
 pulsory redemption as against a holder who 
 is unwilling to take less. 
 
 Terminable Annuiiies are annual payments for 
 a limited period, for Ufe or for a fixed number of 
 years. If I purchase from the National Debt 
 Commissioners an annuity for life, or say for 
 fifteen years certain, and pay £1,000 for the 
 annuity, the C(»nmiflsioners will apply the 
 
78 
 
 NATIONAL FINANCE 
 
 £t,ooo to the redemption of debt, and will pay 
 me the agreed annuity until it expires — i.e., on 
 my death in the i^t case or at the end of fifteen 
 years in the second. When the annuity comes 
 to an end the transaction is closed. The Com- 
 missioners have exchanged a temporary or 
 terminable annuity for the right to a perpetual 
 annuity. They have paid year by year at a 
 higher rate than if my £i,ooo had remained part 
 of the debt, but they pay for a shorts period. 
 Their liabilities at any moment in respect of 
 these annuities depend upon the ages of the life 
 annuitants at the time, the number, amount, 
 and conditions of the various annuities, and the 
 market rate of interest. Apart, therefore, from 
 the cessation or the shortening of the term of old 
 annuities and the creation of new ones, the 
 actuarial value of the present value of the 
 annuities varies from year to year. 
 
 Terminable annuities may be created in favour 
 of Government Departments like Savings Banks 
 or Courts of Justice, which, having dormant 
 balances, deposit with the Commissioners for 
 cancellation a quantity of Government stock 
 on condition that an annuity is paid for a certain 
 number of years. The transaction amounts to 
 an investment on the part of the depositors, who 
 receive, so to speak, thek annual interest and 
 
 NATIONAL DEBT 79 
 
 in addition a payment which is an instalment of 
 return of capitaL Of the £^m. which we 
 have in view, almost exactly one-half was in 
 respect of annuities held by private persons. 
 
 The Unfunded Debt consisted as to £20^ m, 
 of Exchequer Bonds, repayaWe in April, 1915. 
 and as to £14^ m. of Treasury Bills, repayable 
 six months from date of issue. 
 
 The " Other Capital LaaHtities" npnamt the 
 outstandii^^ liability to the Commissioners in 
 respect of various loans authorised by Parliament, 
 to be repaid by annual instalments. In many 
 cases the repayments are made by an annual vote 
 of Parliament. The effect is to spread the cost 
 of some large capital operation, like the building 
 of Government offices or the constructiim of the 
 Pacific cable, over a number of years. The debt 
 is thus gradually extinguished almost from the 
 time of its creation. These other capital Ua- 
 biUties are, like the imfunded debt, excluded 
 from the total of dead-weight or permanent debt. 
 Naval and Military Works account for £zsi m.. 
 Telegraphs and Tel^hcmes for £21 m., of the 
 total ;f56 m. under " Other Capital Liabilities." 
 
 It is good policy to keep the debt as small 
 as possible, and in times of peace two <Hiiiiri|^ g 
 Funds are in <^eration for this purpose. The 
 first of these is the Old Sinking Fund, and consists 
 
So NATIONAL FINANCE 
 
 of any surplus of Exchequer revenue over the 
 issues out of the Exchequer for the year charge- 
 able against revenue, the last column of Table A 
 in the Appendix. Unless Parliament otherwise 
 determines, this is handed over after the end 
 of the year to the National Debt Commissioners 
 for the reduction of debt. The 'New Sinking Fund 
 is arrived at by providing every year as a charge 
 against the revenue a fixed amount (£24^ m. 
 in 1913) for the service of the debt. This fixed 
 sum is higher than the estimated amount required, 
 and the excess over and above the payment of 
 interest, annuities, and cost of management, 
 is applied to the redemption of debt. If no new 
 debt is created, this procedure provides a con- 
 stantly increasing balance available every year, 
 the balance obviously increasing as the debt 
 charges diminish. 
 
 Apart from the sinking funds and the termin- 
 able annuities there are some other resources, 
 not considerable in amount, applied to the 
 redemption of debt. Examples are sums paid for 
 redemptions of land tax, or compositions for 
 stamp duty which give freedom from future 
 payment. The revenue of the year is not entitled 
 to benefit by the whole amount of lump sums 
 of this character at the expense of the revenue 
 of future years. In the same way Suez Canal 
 shares belonging to Government may be drawn 
 
 NATIONAL DEBT 
 
 81 
 
 and paid off, and the proceeds are devoted to 
 debt redemption. So also certain windfalls to 
 the Exchequer, such as the receipts from the 
 Chmese indemnity and occasional donations and 
 
 bequests. 
 
 We are now in a position to examine the 
 operations of the National Debt Commissioners in 
 1913 They began the year with a funded debt 
 of about ^593im., of which about £4m. was 
 entitled to interest at per cent.; and the 
 remamder to 2i per cent. Taking first the fixed 
 provision of £24im., we find it accounted for 
 as follows: 
 
 Interest on funded debt .. .. 1478^100 
 
 Terminable aimuities .. i'lnl'no^ 
 
 Interest on unfunded debt ' I'l?^ Sen 
 
 Management of the debt . . . . 166 ^0 
 
 New Sinking Fund . . . . ^^^^^^l 
 
 £24,500,000 
 
 The Sinking Fund moneys applicable to re- 
 demption of debt in any year are not always 
 fully applied within the year. The Commfa- 
 sioners do not always effect their purchases of 
 stock, etc., immediately on receipt of the 
 money. The balance of cash in their hands at 
 the end of the year is appUed in the following 
 y^. The fuU consideration money for the 
 Debt created in one year may not be received 
 
82 
 
 NATIONAL FINANCE 
 
 by them till after the close of that year. The 
 reduction of the funded debt by various means 
 
 was as under: 
 
 I 
 
 Conversion into annuities . . . . . . 972,710 
 
 Redemption of land tax and compositions for 
 
 stamp duty .. .. .. .. 413,448 
 
 New Sinking Fund 1912-13 (part) . . . . 4,229,219 
 
 1913-14 (part) . . . . 325,000 
 
 Received on account of China indemnity . . 756,607 
 
 Sundry minor receipts . . . . . . 39»ooi 
 
 £6.735.985 
 
 The Funded Debt was thus reduced from 
 
 £593.453*857 to 3£586,7i7.872. 
 
 The capital liability in respect of Terminable 
 Annuities was reduced by £1,967,689, taking 
 into account the annuities expired or reduced in 
 their duration and those newly created. On the 
 other hand, other Capital Liabilities increased by 
 £1,569,363. Allowing for £1,500,000 paid off 
 from Unfunded Debt, the total debt redemption 
 for the year amounted to £8.634,311, agreeing 
 with the opening sentence of this chapter. The 
 amount of nominal debt actually redeemed does 
 not agree with the cash available for that purpose, 
 since the cash will purchase a larger amount of 
 Stock standing below par. The Sinking Funds 
 are, of course, suspended during a time when 
 we have to borrow large amounts instead of 
 being able to pay off debt. 
 
 NATIONAL DEBT 
 
 83 
 
 If we were discussing the growth of our debt 
 
 or comparing it with the debts of other countries, 
 we should have to attend to many considerations 
 which are frequently left out of sight. Firstly, 
 we must take account of the whole debt, national 
 and local, since local government has a wider 
 sphere at one time than another, or in one country 
 than anotha-. Secondly, the sphere even of 
 these united Governments varies. One Govern- 
 ment may spend a great deal and another very 
 little upon such a matt^ as Public Health. In 
 some cases railways, tramways, electric light 
 and gas undertakings, waterworks, and even (as 
 in the United States; telegraphs and telephones, 
 may be left to private enterprise, and in others 
 may be operated by central or local government. 
 Thirdly, the assets held against the debt differ. 
 Fourthly, account must be taken of the growth 
 of population and of wealth, the numbers and 
 fortunes of the people in the community. Fifthly, 
 changes in the value of money are to be noted 
 and aUowed for. Sixthly, the rate of interest or 
 annual cost of the debt is to be considered. And, 
 lastly, it is of some importance how far the debt 
 is held within the country and how far it is an 
 external debt, though the consequences of this 
 difference are often stated in terms which are 
 exaggerated and indefensible. Proposals have 
 rt;cently been made for heroic measures to wipe 
 
$4 
 
 NATIONAL FINANCE 
 
 off the whole or a large part of the National Debt 
 
 by an enormous levy on capital. All these 
 questions are of great economic importance and 
 require highly skilled statistical treatment. 
 Without attempting to discuss them here, it may 
 be stated that various estimates of our national 
 wealth agree in hxmg the figure of £15,000 m. 
 as the minimum value of the capital wealth of the 
 United Kingdom in 1913. 
 
 The Estimated Assets, which, according to the 
 official return, " admit of being calculated/' 
 amoimted on the 31st of March, 19 14, to 
 £34,929,000 estimated value of Suez Canal 
 shares; £190,000 advanced for the purchase of 
 bullion for coinage, to be repaid by the Mint; 
 £46,044 lent to the Government of the East Africa 
 Protectorate; £1,294,534 due from the Colonies 
 as their contribution to capital expenditure on the 
 Pacific cable; £1,820,000, nominal value of the 
 debenture stock of the Cunard Steamship Com- 
 pany, held as security for the repayment of ad- 
 vances made to the Company under an Act of 
 1904; total, £38,279,578. To this may be added 
 the balances in the Exchequer — £10,434,000. 
 The true assets of Government are a matter of 
 conjecture. Mr. Pethick Lawrence has estimated 
 them at £600 m. in 1914. At the present moment 
 they are immensely larger. 
 
 VI 
 
 LOCAL FINANCE 
 
 IOCAL GOVERNMENT is a subdivision of 
 ^ Government, entrusted with the local 
 administration of certain local affairs 
 through local officials. Its powers and duties 
 are regulated by the central or supreme Govern- 
 ment. Some functions formerly discharged by 
 the central Government have 4[>een transferred 
 to Local Government. To meet its expenses it 
 is provided with the power of levying rates upon 
 the occupiers of land and houses within its 
 jurisdiction. The value of these properties is 
 assessed, and a rate is fixed annually at so much 
 in the £ upon the assessed value. Other re- 
 sources are contributions from the central 
 Government, receipts from various undertakings 
 for the supply of water, light, tramway and 
 otlier services, etc. 
 
 The total receipts of local authorities in the 
 United Kingdom in 1913 amounted to 
 £200,057,768, the total expenditure to 
 
 85 
 
86 
 
 NATIONAL FINANCE 
 
 £200,080,692, and their debt on 31st of March, 
 19 14, to £654,969,3x9. These figures are singu- 
 larly close to the corresponding figures for the 
 central Grovemment. 
 
 We will consider briefly the finances of Local 
 Government with regard chiefly to their bearing 
 upon the general finance of the country. 
 
 The receipts are, in round numbers of millions, 
 82 from rates, 27 from Government, 50 from 
 municipal enterprises or "undertakings," 24 
 from loans, and 17 from miscellaneous sources. 
 The receipts from rates are only 41 per cent, 
 of the total of 200 millions, but we must bear in 
 mind that expenditture includes a large amount 
 in respect of undertakings, and that against 
 receipts from loans we have expenditure to pay 
 ofE interest and capital on existing loans. It is 
 in the main upon rates and upon Exchequer 
 contributions that the local authorities have to 
 rely. 
 
 Among other duties, the local authorities must 
 keep in order the roads and pavements, light 
 
 the streets, provide the sewers, pay for the 
 police, and render other services which add to 
 the value of the property assessed. In so far 
 as this is the case the rates are, in the language 
 of Mr. Goschen, an investment. Such services 
 are sometimes called beneficial, as distinct from 
 
 LOCAL FINANCE 87 
 
 onerous, but the distinction has little to conunend 
 
 it. Just as the expenditure on the Navy, though 
 onerous, is undoubtedly beneficial, so the poor 
 rate and the education rate are of benefit to the 
 whole country, and nothing is gained by thinking 
 of them as onerous. Having regard to the 
 services rendered by local authorities, and to the 
 number and wealth of the population, we may 
 brush aside any suggestion that the rates are a 
 burden of crushing magnitude. The question 
 how far our rating system is fair as between 
 different localities and between different classes 
 of the community is one of some difficulty. 
 Two Reports have in recent years been presented 
 to Parliament on the subject — ^by a Royal Com- 
 mission in 1901 and by a Departmental Committee 
 in 19 14. The War has overshadowed the prob- 
 lem for the last five years, but it is likely to 
 become acute in the near future. 
 
 The Government contributions are to some 
 extent a payment for services rendered. The 
 Crown is not liable to pay rates, and Government 
 property is not assessed by the local authorities. 
 But it would be manifestly unfair that the 
 residents in a particular district should provide 
 at their expmise the cost of services rradeed 
 locally to Government in respect of streets, 
 sewers, water, ( tc, and Government therefore 
 
88 
 
 NATIONAL FINANCE 
 
 contributes, as an act of grace, a payment in 
 lieu of rates, based upon an assessment made 
 by a Government ofl&cial. Attempts have been 
 made to distinguish between the national services 
 of local authorities and their other services. It 
 is argued, for example, that education and 
 poverty are matters of national concern. If 
 every area were left to deal unaided with its 
 own children, poor, pohce, main roads, and other 
 matters, the poorer areas would be charged much 
 more heavily than the wealthy ones, which would 
 have higher rateable values and lower expenses. 
 The fact that an overburdened central Govern- 
 ment hands over some of its functions to Local 
 Government, which is often in a position to 
 discharge them more economically and efficiently, 
 is no reason why the taxpayer at large should be 
 relieved at the expense of the less fortunate 
 groups of ratepayers. Government therefore 
 makes an annual contribution from the public 
 purse towards the needs of local authorities. 
 
 It may be worth while to notice that in con- 
 sidering the total cost of our Government, national 
 and local, we must make allowance for this 
 contribution, amounting in 1913 to £27 m. 
 Thus, if we take the cost of Government at 
 ;fi97 m. and of Local Government at £200 m., 
 we must not assume a total of £397, but only of 
 
 LOCAL FINANCE 
 
 89 
 
 £370, as the £27 m. figures twice over — once in 
 the expenditmre of Government as paid out of the 
 Exchequer to local authorities, and again in the 
 expenditure of these authorities. 
 
 The financial relations between the central 
 and the local Government are complicated. If 
 we go back to 1888, we find that PtoHament made 
 every year grants to local authorities in aid of 
 poUce, poor rehef (including the care of pauper 
 lunatics), main roads, sanitary officm, and 
 dementary education. Under the Local Govern- 
 ment Act, 1888, the Exchequer grants for all 
 these services except elementary education were 
 discontinued, and in their place the produce of 
 certain taxes was assigned to the County Councils 
 and County Borough Councils created under that 
 Act. In Z890 the Local Taxation (Customs and 
 Excise) Act allotted the English share of certain 
 duties on beer and spirits as to a fixed sum of 
 £300,000 in aid of Police Pension Funds, and 
 as to the residue to the County Councils and 
 County Borough Councils in aid of rates, with 
 an option to apply it to technical education. 
 
 In 1896 the Agricultural Rates Act relieved 
 occupiers of agricultural land from one-half of 
 their poor rates and borough rates, the deficiency 
 to be made good from the Exchequer on the basis 
 of one-^ialf the rates then paid on such land. 
 
90 NATIONAL FINANCE 
 
 The Education Acts of 1902 and 1903 absorbed 
 the voluntary schools into the national system, 
 and put the financial responsibility for their 
 maintenance on the local Education Authorities. 
 An Exchequer grant was made of 4s. for each 
 child, and an additional ijd. for every complete 
 2d. per scholar by which the produce of a penny 
 rate falls short of los. per scholar in average 
 attendance. 
 
 The Finance Act, 1907, provided that the 
 assigned revenues should be paid into the 
 Exchequer instead of into the special fund of 
 the Local Taxation Account, the Exchequer 
 being charged with the payments of the annual 
 produce year by year. In 1908 the power to levy 
 certain licences was transferred to the councils. 
 The licences are issued at the Post Offices, and 
 a grant of £40,000 is made to the councils for 
 expenses of collection. In 1910 and 1911 Acts 
 were passed to fix the amounts annually payable 
 to local authorities in respect of carriage and 
 motor-car licences, liquor licences, and local 
 taxation (Customs and Exdse) duties, at amounts 
 equal to those produced in the year 1908-09. 
 
 The Old Age Pensions Act of 1908 considerably 
 eased the cost of the burden of poor relief to 
 local authorities. 
 
 The Development and Road Improvements 
 
 LOCAL FINANCE 
 
 91 
 
 Act, 1909, set up a new authority, the Road 
 Board, with power to make and improve roads. 
 The help thus given to local authorities has been 
 to some extent neutralised by the fixing of the 
 amount received for carriage and motor-car 
 licences at the 1908-09 level. 
 
 Finally, the National Health and Unemploy- 
 ment Insurance Act, 1911, and the provision 
 made for sanatoria and for combating tuberculosis 
 tend further to diminish the charges upon local 
 authorities for providing for the sick and poor. 
 
 The general tendency of local expenditure to 
 growth is so marked that the cost of what are 
 called the national " services — Poor Relief, 
 Lunatics, Police, Main Roads, and Sanitary 
 Officers — has trebled in twenty years. The main 
 causes of this increase are growth of population 
 (especially urban), extended legislation imposing 
 new duties or giving new powers (such as for 
 housing of the working classes), and the progress 
 of medical, sanitary and engineering practice, 
 leading to more elaborate and costly methods of 
 sewerage, sewage disposal, hospital treatment, etc. 
 
 All this development of Local Government, 
 the creation of new duties, the increased expense 
 of carrying out those duties, partly because of 
 better and more costly methods and partly 
 because of the growth of the community, have 
 
92 
 
 NATIONAL FINANCE 
 
 made it a difficult matter for Local Government 
 authorities to meet their expenses out of rates. 
 The prmcipal complaints of the ratepayer are--- 
 {«) That the State does not contribute enough 
 towards the cost of " national " services; (b) that 
 the burden of these services is unequal as between 
 districts; W that there is a want of variety in the 
 means of raising local revenues; (d) that those 
 who possess property which is not rateable occupy 
 an unduly favourable position; and (e) that the 
 burden is unduly heavy upon persons engaged in 
 agriculture and other occupations who require 
 an amount of rateable property large in propor- 
 tion to their abiUty to pay. If we take two 
 shopkeepers, side by side, one of them dealing 
 m bulky objects like furniture, which take up 
 a lot of space and require large premises, and 
 another dealing, say, in jewellery, which require** 
 httle space in proportion to its value, they may 
 be making equal profits, while the first is burdened 
 with much heavier rates than the second. There 
 is also a grievance connected with the rating of 
 machinery fixed to the soil, which is classed as 
 real and not as personal property. The question 
 of mcidence, of course, arises-whether the shop- 
 keeper or manufacturer passes on the rate- 
 charge to his customers in the price of his goods 
 or whether he has to bear part or aU of the 
 
 LOCAL FINANCE 
 
 95 
 
 Special expense himself. Such questions are 
 among the most difficult with which the economist 
 is confronted, owing to the uncertainty as to 
 the facts and the weight to be assigned to them 
 in particular cases. 
 
 The questim whethtf , and if so when, local 
 authorities ought to undertake business or 
 trading enterprises has been a subject of much 
 controversy. A large factor in its development 
 has been the liability of local authorities to keep 
 the roads in repair. When the streets of a city 
 are hable to be taken up for the construction or 
 repair of sewers, watermains, gaspipes, electric 
 light and power cables, telegraphs and telephone 
 wires, tramway lines, etc., and when a number of 
 separate companies take up the roads one after 
 another, the local residents find the use of the 
 roads denied to them at frequent intervals. By 
 having all these businesses in their own hand the 
 local authorities are able to open up the roads and 
 to ovMrhaul the services which make use of them 
 at one and the same time. The profits made by 
 such companies are, of course, an additional at- 
 traction to direct management. It may be said 
 that local authorities could charge a rent or 
 royalty upon the profits of a company to which 
 it concedes a right to take up its roads, but if 
 this merely results in increased charges to resi- 
 
94 
 
 NATIONAL FINANCE 
 
 dents, what is gained in one way is lost in another. 
 A claim on the part of local authorities to fix the 
 prices would probably be objected to, and direct 
 management is usually the only alternative to 
 leaving the companies a free hand in this respect. 
 
 How far municipal enterprise has, so far, justified 
 itself is not easily ascertained, owing to the 
 difficulty of securing proper trading accounts. 
 The receipts and expenditure should carefully 
 distinguish between current and capital opera- 
 tions; proper sinking-fund allowances should 
 be made and depreciation allowed for; the fact 
 should not be left out of account that, whereas 
 a private company would pay rates, the local 
 authority does not pay rates to itself; and even 
 then the true figure of profit and loss, if ascer- 
 tained, does not necessarily prove the wisdom 
 or unwisdom of municipal management. It is 
 sometimes urged that it is unjustifiable for a 
 local authority to make a profit, for example, 
 on its tramways. Such a profit is at the expense 
 of those who use the trams and pay more than 
 the cost price of the service, while the profit 
 goes to relief of rates and so benefits those who do 
 not ride in trams. Conversely, a loss means that 
 the ratepaym who do not use the trams are 
 being made to pay in order to enable other 
 persons to ride at less than cost price. If the 
 service is one of such gmieral utility at the 
 
 LOCAL FINANCE 
 
 95 
 
 provision of water, the objection is not so strong, 
 as a high or low charge for the service is offset 
 to some extent by a reduced or increased rate. 
 Amateur manag^ent or mismanagement, 
 bungling direction, political corruption in the 
 form of jobbing friends into posts for which they 
 are not competent, are, where they exist, sources 
 of additional expense to the ratepayer; but he 
 has the remedy in his hands, and can turn out 
 delegates who abuse their trust or show them- 
 selves bad men of business. We may say with 
 confidence that the best directions for municipal 
 enterprise are imdertakings of pubUc utility 
 likely to be better conducted coUecrively in the 
 public interest than by private enterprise, which 
 looks primarily to profit. It is implied in this 
 condition that the business to be managed should 
 be tolerably simple and straightforward. 
 
 Assuming, then, that municipal enterprise 
 is reasonably well conducted and that its charges 
 are fair, we may conclude that its cost is no real 
 burden upon the ratepayers, who are merely 
 buying necessary services at a proper price. 
 They are only penalised in so far as the charges 
 are higher or the service worse than if the business 
 were in private hands. 
 
 Receipts from Loans, £24 m., may be briefly 
 dismissed. Loans are controlled by Government 
 in such a way as to assure that they are justified 
 
96 
 
 NATIONAL FINANCE 
 
 in their object, and that arrangements are made, 
 not only for paying the interest, but for wiping 
 o£^ the principal by annual instahnents. If a new 
 cemetery is needed, it would be very disturbing 
 to require the whole cost to be met from the rates 
 of one year, and the resort to a loan enables the 
 cost to be spread over a period not longer than 
 the cemetery is likely to prove sufficient. The 
 general position as to local loans will be con- 
 sidered later. 
 
 The Miscellaneous Revenue, ;fi7m., includes 
 nearly £6 m. from rents, interest, sales of pro- 
 perty, etc. Over £2 m. were received for fees, 
 fines, poialties, and licences, and about m. 
 for repa3anaits on account of private improve- 
 ments executed by local authorities. 
 
 Turning to the e^q>enditure side, we have the 
 following tahte: 
 
 Ezp^DiTURE BY Local Authoritibs, 1913. 
 (000 's omitted). 
 
 Town and miinictiMa antiiofftties for police, ^ 
 
 sanitary and other pablic works, etc. . . 127,987 
 
 Unions and parishes for poor rehef, etc. , . 20,675 
 County authorities for police, lunatic asylums. 
 
 Rural District and Parish Conndls, etc.' .* 185 
 School Boards and Seomdary Mncation 
 
 Committees (Scotland) . , , , . , 4 
 
 Harbour authorities .. .. \\ \\ ii'«8 
 
 Other authorities i ^2 
 
 200,080 
 
 U>CAL FINANCE 97 
 
 It is to be noted that Irish police and education 
 are mainly provided from Imperial funds not 
 included in these figures. 
 
 The outstanding debts of local authorities on 
 the 31st of March, 1914, were about £655 m. 
 Against this may be set properties which have 
 been valued roughly at ^i,5oom. The figure 
 is, of course, highly conjectural. Mr. Pethick 
 Lawrence pertinently says: What is the value 
 of a main road a hundred miles long ? Its actual 
 area valued as agricultural land may be worth 
 some £30,000, but the community has probably 
 spent many times this amount in bringing it to 
 its present condition, and would lose untold 
 wealth if it were done away with." Similar 
 remarks apply to bridges, sewers, etc. Many 
 of the properties of local authorities are produc- 
 tive of revenue, and others have a considerable 
 selling value. A list of such properties would in- 
 clude lands, parks, gardens, cemeteries, municipal 
 buildings, such as schools, workhouses, asylums, 
 markets, baths, piers, docks, harbours, quaysi 
 canals, and the assets of going concerns, like water- 
 works, gas and electricity works, tram-ways, etc. 
 In view of the increased population and rateable 
 value, and the enlarged functions of Local Govern- 
 ment, the growth and extent of local loans is by 
 no means so alarming as is often supposed 
 7 
 
VII 
 
 THE BUDGET OF 1919 
 
 WE have now examined the financial record 
 of a specimen year, the last before the 
 War, with the object of seeing how 
 the figures of our National Finance are to be read. 
 The War upset everything, Finance included, 
 and the figures since 1913 are abnormal both 
 in form and in substance. Instead of voting 
 annually so much for the Army, the Navy, 
 and the new Air Services, Parliament has passed 
 huge Votes of Credit for War expenditure without 
 a disclosure of details of the purposes for which 
 the money was provided, and large sums have been 
 borrowed in various forms, including the issue 
 of Treasury notes greatly in excess the gold 
 reserve held for their redemption. 
 
 It will bring our information up to date and 
 test our power of understanding our financial 
 position if we read an abridged report of the 
 Budget speech made by the Chancellor of the 
 Exchequer in the House of Commons on the 
 30th ol April, Z9Z9. 
 
 THE BUDGET OF 1919 
 
 99 
 
 Mr. Chamberlain, Chancellor of the Exchequer, 
 said: People during the War accepted the im- 
 mense burdens of the War without grumbling, 
 and the House of Commons passed them with 
 the minimum of criticism. But both the House 
 and the people are in a different mood to-day. 
 I am called upon at one and the same time to 
 remit or to repeal the taxation which was imposed 
 and to remedy all the grievances which have 
 been cheerfully endured in these years of stress 
 and strain, not merely to resume the civil ex- 
 penditure which was interrupted under the 
 stress of war, but to provide the means for 
 creating within a few months or a few years a 
 new heaven and a new earth. The same people 
 who call upon me for fresh and large expendi- 
 ture m every special field expect me at the same 
 time to accomphsh vast reductions in expendi- 
 ture. I can work no such marvel, and unless 
 I can have not merely the good will, but the 
 assistance of Parliament, the task which con- 
 fronts me is one which no man can complete. 
 
 The expenditure— the Exchequer issues for 
 the year which has just been completed— was 
 less than the estimate of ;f2,972,ooo,ooo by 
 £393,000,000. The estimate of daily average 
 expenditure was £8,143,000, and the actual 
 expenditure was £7,067,000. In the eadier period, 
 from the ist of April to the 9th of November it 
 was £7,443,000; in the later period, from the 
 loth of November to the 31st of March, it was 
 £6,476,000. That is a reduction of £1,667 000 
 per day on the Budget Estimate, or, in other 
 words, a reduction of 20 per cent. That reduc- 
 tion would have been stiU greater but for special 
 
lOO 
 
 NATIONAL FINANCE 
 
 expenditure consequent on and the result of 
 demobilisation. For instance, £52,000,000 was 
 spent on gratuities to members of the forces 
 who were demobilised, and unemployment — 
 a charge arising out of demobilisation — has cost 
 £13,000,000. There has been a saving on the 
 year in the debt charge, compared with the 
 estimate, of £45,000,000. 
 
 If I turn from the expenditure side of the 
 account to the revenue side, the estimate was 
 for £842,000,000 in round numbers. The actual 
 receipts were £889,000,000; in other words, the 
 receipts exceeded the estimate by £47,000,000. 
 There is an increase under Inland Revenue on 
 every important head of duty except three. 
 Income-tax and supertax realised just about 
 £750,000 more than the estimate — a very re- 
 markable approximation, I think, on a total of 
 £291,000,000. The Death Duties failed to reach 
 the estimate by £1,200,000, but that was one of 
 those accidents to which we shall always be 
 subject as long as a considerable portion of 
 the Death Duties is derived from very large 
 estates, because those large estates are not 
 sufficient in number to give us a stable annual 
 average. Had the year closed a week later 
 the payment of duties on two estates .would 
 have brought up the receipts to the amount 
 of the Estimate. Excess Profits Duty showed 
 a larger deficiency below the estimate. It was 
 down £15,000,000, but that indicates no loss 
 of revenue except for the year. What was not 
 paid last year will be paid this year. 
 
 Stamps are an uncertain revenue apt to 
 disappoint the Chancellor of the Exchequer. 
 
 THE BUDGET OF 1919 101 
 
 In the year which has closed they have done 
 remarkably well. Even apart from the new 
 cheque duty they have beaten all previous 
 records. The total yield was nearly £12,500,000, 
 representing an excess of more than £3,000,000 
 over the estimate and of £4,000,000 over the 
 receipts for the preceding year. The produce 
 of the increased cheque duty has been more than 
 double the estimate of £750,000, a result which 
 is due in part to the bankers having sent in for 
 embossment with additional stamps larger stocks 
 than were anticipated, and in part to the fact 
 that the imposition of the tax would seem hardly 
 to have restricted the use of cheques at all. 
 The duties on conveyances yielded nearly 
 £1,000,000 more than in the preceding year, due 
 to the large number of sales of property that have 
 taken place. Transfers on stocks and shares 
 account for a further £400,000 of the increase, 
 and the yield of the Companies Capital Duty 
 has risen by over £500,000. 
 
 Customs and Excise have also done well. 
 They show a surplus over the estimate of 
 £14,520,000. Tobacco was up £5,750,000, spirits 
 were up £3,000,000, tea showed an excess over 
 the estimate of over £2,000,000, and the enter- 
 tainment tax contributed £1,500,000. Only beer 
 showed a small deficit compared with the 
 estimate. Of the other items on the revenue 
 side I need only mention the Miscellaneous 
 Revenue, which contributes £37,000,000 out of 
 a total excess of £47,000,000. 
 
 The excess was composed as to £33,000,000 of 
 a contribution from India, on account of the 
 £100,000,000 of Five per Cent. War Loan for 
 
I02 
 
 NATIONAL FINANCE 
 
 which she undertook to be responsible. A 
 further sum of £2,500,000 represents additional 
 grants from the Colonies, making ;£4,5oo,ooo 
 m all; £1,500,000 was due to extra profits of the 
 Mint, chietiy arising from the large demand for 
 silver coinage. 
 
 If we now compare the two sides of the account, 
 we find that the Exchequer issues were 
 £2,579301,000. The revenue was £889,021,000, 
 leaving a deficiency to be made good by borrow- 
 ing of £1,690,280,000 cash, or nearly £440,000,000 
 less than was anticipated a year ago. Of the 
 total expenditure in 1918-19, 34-47 per cent, was 
 provided by revenue, while 65-53 per cent, was 
 provided by borrowing. If we take the figures 
 for the five years from the ist of April, 1914, to 
 the 31st of March, 1919, the proportions are 28-49 
 per cent, from revenue and 71-51 per cent, by 
 borrowing. That is a record which I be- 
 lieve no other belligerent can equal, and the 
 sacrifices which it indicates place us in a good 
 position to face our future difiiculties. The 
 borrowing to meet the deficiency on the year of 
 £1,690,280,000 has been under the following 
 main heads National War Bonds, £986,000,000; 
 War Savings Certificates, £89,000,000; and Other 
 Debt, £400,000,000, of which £325,000,000 was 
 advanced by the American Government and 
 the rest derived from various other loans abroad. 
 The balance has been provided mainly by the 
 Floating Debt. These figures are given net and 
 represent the face value, excluding premiums, 
 of the securities issued except in the case of War 
 Savings Certificates, the figure for which is taken 
 at the cash receipt of 15s. 6d. per certificate. 
 
 THE BUDGET OF 1919 103 
 
 This brings me to the amount of the National 
 Debt. The National Debt proper, exclusive of 
 what we call " Other Capital Liabilities," was, at 
 the outbreak of the War, approximately 645 
 millions. On the 31st of March last year the 
 total was, in round figures, 5*^72 milhons. On 
 the 31st of March this year the total was 7,435 
 millions, as against the estimate a year ago of 
 7 ,980 millions. Of the capital debt incurred, inter- 
 ternal debt accounts for, approximately, 6,085 
 millions, and the external debt, approximately, 
 1,350 miUions. A large part of the debt is 
 represented by National War Bonds repayable 
 at a premium. The premiums of these bonds 
 represent a further liability of 3£5i.7 16,000. 
 Further, the War Savings Certificates are allowed 
 for at 15s. 6d. If they were all held for five 
 years they would be repayable at £1, and would 
 then involve an additional obligation of 65 
 millions. , ' , , 
 
 Finally, our foreign debt is lar^dy repayable 
 in foreign currency, and the sterhng equivalent 
 of the debt must necessarily vary according to 
 the state of the exchanges at the time when 
 repayment becomes due. Against this large 
 total we hold certain assets. First, there are the 
 obligations of our Allies and Dominions, amount- 
 ing on the 31st of March of this year to £i,739 
 milUons. Of that sum £171 miUions were due 
 by the Dominions and £1,568 millions by the Alhcs. 
 Russia owes £568,103,000, France j£434.49o>oo?. 
 Italy £412,520,000, Belgium £86,779,000, Serbia 
 /i8,643,ooo, and other Allies £47.9i5»ooo. Next 
 to this debt from the Dominions and Allies there 
 is the remaining Uability of India in respect of 
 
I04 
 
 NATIONAL FINANCB 
 
 ^^""rl^' ^^-^ which amounts to 
 about ;^3o,ooo,ooo. There are also aMete of a 
 
 aedKid acquired out ofv5(?of 
 
 be £„"T r '""g^'^ --eq^ired, and M 
 tWe arf ?ht °^ opportunity offers. FinaUy. 
 i^^f^ J - P^y'"?"*^ that we shaU receive In 
 
 wh^iverv '^rn""^'r, enemies bS 
 
 Ssl?h7 P'^°P«'' allowance is made for these 
 
 SIhrdSt TTu^""^ ^^^"^ which as wdU 
 as ine date at which we mav exnecf r<>/.^^ 
 
 rW^it for them is neces^sarirUcerS^ 
 increase in the estimates of expenditure 
 
 -proHmateJy 275,000,000 out of a total sum 
 Of ^495,000,000, is due to expenditure m tZ^ 
 porary charges arising out of the War 
 
 nec^l L ^'""^ published it has been 
 
 Si^ln^lLt^?" period though at reduced 
 nlifl! ^I'^'^'^T^ ^S,ooo,ooo additional 
 nf M-. r^^?f • ^^^^ ^ ^ave to provide out 
 ^ the Consohdated Fund capital for loan ev 
 
 ^ItTir/'^V'^ ^^^^ Sett'iement Bmr^d^f 
 ^timate It for the current year at U o^)oooo 
 FmaHy. there is an addition^ Civil S^^C'^ 
 
 THE BUDGET OF 1919 
 
 bonus under the recent award of the Arbitration 
 Board, which may cost us another £4,000,000 
 in the course of the year. I must therefore allow 
 in my calculation for an excess of at least 
 £65,000,000 on the Estimates as at present 
 presented. The only other item of expenditure 
 with which I need deal is the Debt Charge. I put 
 this at £360,000,000, of which £29,800,000 will 
 be required for service within the fixed Debt 
 Charge, and the balance, £330,200,000, for 
 services outside that charge, including the new 
 borrowing to be efifected during the year. Under 
 the present circumstances, so long as borrowing 
 must continue, I cannot make provision for a 
 sinking fund. The total expenditure for the 
 current year, after allowing for the additional ex- 
 penditure which I have just described, wiU be 
 £1,434,910,000. 
 
 What revenue have we got to set against that ? 
 On the existing basis of taxation we expect to 
 collect during the coming year a revenue of 
 £1,159,650,000, an increase, without any altera- 
 tion in revenue, of £270,629,000 over the actual 
 receipts of last year. It includes a sum of 
 £300,000,000 on account of excess profits duty 
 and of £210,000,000 for miscellaneous revenue, 
 of which £200,000,000 are receipts from the 
 realisation of Vote (A Credit assets. Tlie sum 
 taken on account of excess profits duty may be 
 counted upon whatever be the dedsion of the 
 House in respect of that duty. It represents 
 tax due to accounting periods already closed, or, 
 indeed, running out, and even if the tax w^e 
 brought to an end as rapidly as possible there 
 would remain to be paid £300,000,000 in the 
 
io6 
 
 NATIONAL FINANCE 
 
 current year, and I anticipate £100,000,000 in 
 
 the year after. » , «* 
 
 As regards the £200,000,000 which I have taken 
 as the probable receipts from Vote of Credit 
 assets this year, this figure, of course, does not re- 
 present the total amount of these assets, nor even 
 the total amount expected to be realised in the 
 present year It is the amount of cash which 
 we hope will be paid into the Exchequer over 
 and above the very considerable amounts from 
 the same source which are appropriated in aid 
 of Votes I give the figures: In aid of the Ministry 
 ot Munitions, £140,000,000; in aid of theMinistrv 
 of Shipping, £50,000,000; at the War Office. 
 £50,000,000; at the Admiralty, £14,000,000^ 
 together, £254,000,000; making, with the 
 £200,000,000 which I expect to receive into the 
 Exchequer, a total for the year of £454,000,000. 
 That does not exhaust the amount of the credit 
 which we expect to realise. I put the total value 
 ot the assets outstanding on the 31st of March 
 last at approximately £800,000,000. There wiU 
 therefore be a further sum to come in in future 
 years. The £200,000,000 estimated for this vear 
 IS a provisional figure. 
 
 Resuming what I have said, the position for 
 1919-20 would then be as foUows: An expendi- 
 ture of £1,434,910,000, a revenue of £1,159,650,000, 
 and a deficit, therefore, on balance of £275,26o,oo<J 
 —a lesser deficit, I think, than most people have 
 anticipated We are left, therefore, with a 
 deficit of £275,000,000 for the current year, or. 
 as I would prefer to call it, £300,000,000, in order 
 to allow for contingencies and further demands, 
 some of which I can ahready see maturing. That, 
 
 THE BUDGET OF 1019 
 
 therefore, is, I hope, the maximum figure of 
 new money which on balance we shall need to 
 have borrowed at the end of the year. It may 
 be reduced by any sums which we receive, if we 
 receive such in the course of the year, on account 
 of repayment of capital, or payment of interest 
 on their loans by our Allies, or in the shape of 
 indemnities from the enemy countries, and, of 
 course, it would be reduced to the extent of any 
 increase of new taxation in the current year. 
 
 That is not an unreasonable figure, but I beg 
 the Committee not to think for a moment that it 
 is any measure of the effort that is required. 
 In the first place, the early months of the year 
 are from the revenue point of view always lean, 
 and we have to borrow in anticipation of the 
 revenue coming in. In the second place, a large 
 part of our debt — no less than £957,000,000 — is in 
 the form of Treasury bills, and for the most part 
 of three-monthly bills, which therefore fall due 
 for repayment every quarter. In other w^ords, 
 we have to borrow that sum of money four times 
 over in the course of the year. During the War 
 these bills were largely used by the public as a 
 means for the temporary investment of funds 
 intended on the cessation of the War to be 
 employed in industry and commerce; and as 
 they are withdrawn for that purpose, the diffi- 
 culty of borrowing to replace them would be 
 no less great than the difficulty of new borrow- 
 ing. It will, in fact, be new borrowing. 
 
 We have, in addition, the maturing in the 
 current year of Ways and Means Advances of 
 £455,000,000; Exchequer bonds of £245,000,000, 
 including the figure, £66,000,000 of 1922 
 
NATIONAL FINANCE 
 
 bonds, which have an option of redemption 
 ^fr^ of October) and the foreign debt 
 ^\iP^'^^><>^^ogetheT, ;f796,ooo,ooo; making, 
 wth the Tre^ury bills, a total of ;ti753,ooo,ooo. 
 The floating debt on the 31st of March this year 
 amounted in round figures to ^1,412,000,000— 
 namely, ;f957,ooo,ooo of Treasury bills and 
 £455»ooo,ooo for Ways and Means Advances, an 
 marease m the year 1918-19 of ;f223,584,ooo. 
 
 ims smn is less than the amount outstanding 
 at the half-year ended the 30th of September, iqi8, 
 and much less than the maximum of/1,550,000,000 
 vjich was reached on the 31st of December, 1918. 
 lUe drop is, of course, in part due to the col- 
 lection of revenue, but it is mainly owine to 
 the large subscriptions in War Bonds in January 
 last as a r^ult of the special effort and special 
 campaign then taken in hand, which brought 
 the floatmg debt down to ;fi,38o,ooo,ooo. 
 
 Another question closely connected with the 
 floating debt is the continued expansion of the 
 currency noteissue. (Cheers.) On the ist of April, 
 the amount of notes outstanding was 
 £228,000 000. This figure had increased by the 
 Ammtice to £291,000,000. On the 
 31st of March of this year it stood at £328,000,000, 
 and on the 23rd of April it had risen to 
 £349»ooo,ooo. The gold reserve remains station- 
 ary at £28,500,000, the balance being covered 
 Dy Government securities. The Bank of England 
 note issue has increased since ist April, iqi8, 
 l>y £23,000,000. The aggregate amount of legal 
 tender money m the country, which is estimated 
 to have amounted at the beginning of the War 
 to about £214,000,000, is now more than 
 
 THE BUDGET OF 1919 
 
 109 
 
 £540,000,000. It is obvious that that expansion 
 cannot be allowed to continue indefinitely. 
 (Cheers.) But the remedy is not so simple as at 
 first sight it seems. It is to be remembered 
 that there has never at any period during the 
 War or since been anything in the nature of a 
 forced issue. Currency notes have only been 
 issued in response to the public demand for 
 currency. If there was any thing . like a forced 
 issue it could be stopped to-day not only without 
 disadvantage, but with positive advantage to 
 all concerned. What would be the effect of such 
 action under present circumstances ? The re- 
 fusal of the Treasury to issue any more ciurency 
 notes would not lessen the demand of the manu- 
 facturer on his banker for legal tender, and 
 the banker would be forced to meet that demand 
 so long as his customer had a balance to his 
 credit. After exhausting his own stock of notes, 
 he would go to the Bank of England. The Bank 
 of England, unable to obtain currency notes, 
 would have to meet the demand by the issue of 
 their own notes or of sovereigns withdrawn from 
 the reserve in the Banking Department. In 
 order to protect that reserve from immediate 
 exhaustion a violent rise in money rates and 
 drastic curtailment of credit would have to take 
 place. 
 
 This would not only have a most Serious efEect 
 on the prices of securities, on wages, and on the 
 rates charged on Government borrowing, but 
 also on the revival of trade and industry, at a 
 critical moment when the revival of traule and 
 industry is the most important object we have 
 in hand. It is to be remembered, further, that 
 
ZIO 
 
 NATIONAL FINANCE 
 
 }hru f'''' currency is not a pecu- 
 
 liarity of our system; it is not confined evITto 
 of wnru'^'^^^ countries. It is a phenomenon 
 of world-wide extent. A new level of world pric^ 
 has got to establish itself before we cln^J^ 
 anything like exactness what amount of currency 
 
 inH 'i?''/'''^;/^^, ^^^^'^ have got that 
 and before hat level is estabUshed might eaX 
 produce evil consequences by restriction beyond 
 
 Tdvltay '''''^^ ^"^^^^ compenskig 
 
 Lord Cunliffe's Committee went carefully into 
 this question. They recognise clearly that the 
 restriction of inflation is impracticable untU the 
 conclusion of the period of demobilisation^! 
 th^ cessation of War borrowing. Whilst a direct 
 limitation of further currency issue is not, in mv 
 opinion, a step which is at the moment practi^abk 
 
 unXtun ^"^^'^ '^^'^^ should attack the 
 
 underlying causes as quickly as possible. The 
 
 fcLr'.T T^^^ "^'"'T- ^^^^^^ expenditure! 
 ic f ^^/"^P^ *hat expenditure 
 
 (CheersV Th^^^ of^reven^! . 
 
 (sneers.) The third is, when we are obliged to 
 borrow, to borrow from real investors The 
 
 Sff'h ^"^^ ^^^^^ ^dvanc^ 
 
 1 ^/"^ refund the immense 
 
 volume of short-dated Treasury bills ^^^"^ 
 
 onlv bwV'^'/-^f ?^ be rendered practicable 
 Snomv /rh'*™*^'^ ''^^^^^^^ individual 
 ^uiTl ^^^^f^'l I should like the Com. 
 
 I^u inexorable, economic facts 
 
 ^L^r^^^ a fictitious appearance of wealS! 
 (cneers.) There is between two and three times 
 
 THE BUDGET OF 1919 
 
 III 
 
 as much legal tender money in circulation as 
 there was before the War. The deposits of the 
 icdnt-stock banks have more than doubled. 
 The position of those banks, judged by every 
 approved criterion of sound banking, is stronger 
 than ever it was before. Almost the whole of 
 their additional deposits are covered by the 
 best of all banking assets, short-nlated British 
 Government securities. These securities, stand- 
 ing behind the deposits and standing behind the 
 legal currency, represent to a large extent, not 
 existinjg wealth, but wealth consumed in the 
 operations of war which it must be our business 
 to replace out of the exertions of the present. 
 Both are drafts on future labour and the future 
 creation of wealth. Pending payment there is an 
 immense reservoir of artificial purchasing power, 
 out of relation to the actual wealth on which it 
 operates, and therefore diminishing in effect with 
 each new step in its increase. Look beyond the 
 accounts for the year and you see a different 
 picture. We have sold a thousand millions of 
 our foreign investments, losing an equivalent 
 power to draw on the wealth created in foreign 
 countries. We have incurred debt to the extent 
 of £1,300,000,000. Against this we have claims 
 on our Allies and on our Dominicms; but the 
 position of our debtors forbids us to count on 
 these claims for much large immediate relief. 
 Ultimately and gradually that relief will, we 
 hope, mature, but we cannot count upon it for 
 immediate piuposes. 
 
 For years to come a considerable part of our 
 production must be devoted to paying our foreign 
 creditcnrs, and a large part to nuddng good u» 
 
tl2 
 
 NATIONAL FINANCE 
 
 ^""^^"^ roads, our 
 
 dpir/^ ^J?- ^ ^^^^^ ^«gr««' in some 
 degree, our machinery suffered from the absence 
 during these past years of the ordinary 
 
 arr^.r^ f '^^^ hopelessly S 
 
 next ve.^ t'^h production ofV 
 
 n^ff/ T/ ^^ow whether I ought 
 
 not to say the next few years, but a large iSxt 
 
 of the production of the coming year both ofthe 
 
 ^".^T capitfllwill be nSdS 
 
 to make good these losses and to pay the^w 
 habihties we have incurred. I begtheCoim^^ 
 therefore to be under no misap^rehens™To 
 the magnitude of the task which hes before m I 
 
 [nS ^^^'^ ^^^^ national 'and 
 
 S ^Ti 1 economy. Nothing but a united effort 
 of all classes comparable to that we have seen 
 
 nfentr ""^^^l' ^"^^^^ ^ to ^ace the years 
 of difficulty which must follow on the conclis^ 
 of so great a struggle. 
 
 Sir J. Walton.— Government economy. 
 
 Mr. Chamberlain.— Government economy first 
 and foremost. (Hear, hear.) «"myni5i; 
 
 That review of our position brings me to the 
 coi^ideration of the policy whichie ought to 
 follow The deficit of the current year on the 
 present basis of taxation is, as I We «S 
 £275,000,000 or £300,000,000. The current 
 year is a wholly abnormal year. Expenditure 
 IS swollen by the overlappiig of waT^harg^ 
 Peace is not yet signed, and even when p^ce 
 IS signed war charges continue. On the ^er 
 .rllr' receipts are swollen by sums 
 
 arising out of the conclusion of the War, iid the 
 
 THE BUDGBT OF 1019 113 
 
 result is that neither side of the balance-sheet 
 gives us a complete, true picture of our normal 
 post- War position. But if this year is abnormal 
 next year, if not equally abnormal, will at least 
 be similarly disturbed alike by the overlap of war 
 charges and the overlap of war receipts. The 
 expenditure side will be swollen by demands 
 arising out of demobilisation, out of the 
 condition of the railways, and out of the coal 
 production. On the other hand, there will be an 
 overlap of existing excess profits duty and an 
 overlap of receipts from the sale of vote of credit 
 assets. Neither this year, nor next year, nor 
 perhaps the year after, will therefore be entirely 
 normal, and in inviting the Committee to consider 
 what our policy ought to be, I am driven to the 
 hazardous expedient of casting my mind forward 
 into the future to an imaginary normal year. 
 
 The Committee will recognise at once what a 
 dangerous and difficult experiment that is to 
 make. I recall but one case in which it was 
 attempted. Mr. Gladstone in 1853 forecast an 
 expenditure over a period of seven years, and 
 almost before his speech was uttered his calcula- 
 tions were upset by the outbreak of the Crimean 
 War. God forbid that my calculations, after all 
 we have gone through, should be upset by a 
 similar cause, but apart from that I cannot 
 conceal from myself that I may be wrong in 
 all assumptions I make, and that I must be 
 wrong in many. But I must have some basis 
 on which to ask the Committee to proceed, and, 
 as far as such a thing is possible, the future should 
 be laid open so that members may see something 
 of what is in proq>ect. For reasons which I wiU 
 8 
 
NATIONAL FINANCE 
 
 explain later, I shall assume that by that time 
 the excess profits duty as we now know it will have 
 ceased to exist. I assume it will come to an end 
 by the time of this normal year. I shall assume, 
 further, that the available assets out of votes of 
 credit have all been realised and that no further 
 funds will be drawn from them. I shall leave 
 out of account for the present the sums we may 
 expect to receive on account of indemnities from 
 the enemy and in payment of interest and repay- 
 ment of capital lent to our Allies. I shall present 
 a picture of our liabilities and our resources 
 standing by themselves alone. I think that will 
 be the best picture, and the necessary reductions 
 can be made later when knowledge is more 
 exact. 
 
 On this basis I estimate the revenue of the 
 future normal years on the existing basis of 
 taxation at £652,000,000, made up of ^^198,000,000 
 derived from Customs and Excise, £400,000,000 
 from Inland Revenue, and £54,000,000 from 
 other sources. The calculation of our expendi- 
 ture in that imaginary year is an even more 
 difficult and hazardous task. I can only tell 
 the Committee the hypothesis on which it seems 
 to me most nearly to approximate to the probable 
 truth. For the purpose of my balance-sheet 
 I assume that the deficit on the railways and the 
 coal mines is made good, and I know nothing 
 more urgent than that steps Should be taken 
 to deal with both of these deficits. I assume 
 that all fresh loans to the Alhes will cease, and 
 that other abnormal expenditure, notably that 
 m connection with the Ministries of Labour, 
 Food, and Shipping, will also have terminated. 
 
 THE BUDGET OF 1919 
 
 "5 
 
 Then comes a more uncertain item. What 
 am I to estimate for the Army and Navy ? what 
 am I to put down for the new Air Force ? For 
 the purposes of my balance-sheet I have assumed 
 the figure for the three forces at £110,000,000, 
 being rather more than a 40 per cent, increase on 
 the cost of the Army and Navy before the War. 
 We dl hope that as a result of the Peace Con- 
 ference the demilitarisation of Europe may be 
 effected without fr^ naval competition being 
 started in any other quarter. I hope that it 
 may be possible, and I believe it should be 
 possible, to reduce the numbers both of the Army 
 and the Navy; but whatever reduction may be 
 possible, in that respect the pay will be higher, 
 material will be more expensive, and none of 
 these factors, numbers, pay, or cost of matoial, 
 are yet capable of exact estimation. I give my 
 figure for what it is worth. You can vary my 
 calculations according to your own estimates of 
 whether I have plac^ them too high or too low. 
 The debt charge I place at £400,000,000, including 
 a sinldng fund of i per cent. The Qvil Services 
 at £190,000,000; Customs, Inland Revenue, and 
 Post Office at £53,000,0001 and other services at 
 £13,000,000; making a total expenditure of 
 £766,000,000, against which, as I have told the 
 Committee, I can count only on a revenue of 
 £652,000,000, leaving a deficit of £114,000,000. 
 I propose to aik the Committee to raise this 
 amount approximatel]^, not all in the current 
 year, but by taxes which in the full year would 
 Dring in approximately that figure. On the 
 assumption that my calculations are not unduly 
 sanguine, on the assumption, further, that they 
 
Ii6 
 
 NATIONAL FINANCE 
 
 are not upset by forces beyond our own control, 
 and on the yet further assumption, about which 
 I feel as much hesitation as anyone, that Parlia- 
 ment will husband our resources and observe 
 economy, the Committee knows the work which 
 it has to face, and any funds received in repay- 
 ment from our AUies or in indemnities from our 
 enemies will be available in so far as they are 
 capital for the reduction of our National Debt, 
 and in so far as they are interest charges for the 
 relief of our own interest charges, and either way 
 indirectly for the relief of the burdens which 
 I am now going to ask the Committee to assume. 
 
 Before explaining the methods by which he 
 proposed to raise iaiis large sum, the Chancellor 
 dealt with two subjects, the first of which was 
 land values duties. He said: I do not need 
 to remind the Committee that at the time of their 
 birth those duties were the subject of fierce and 
 prolonged debate (hear, hear), and as fate would 
 have it the Prime Minister and I took opposite 
 sides. There is a certain delicacy in a Chancellor 
 of the £xchec[uer touching the handiwork of 
 his existing chief, and it is not made easier if the 
 Chancellor of the Exchequer before being a 
 Minister serving under the Prime Minister was 
 one of his most active opponents (hear, hear) ; 
 but fortunately on this occasion I have the benefit 
 of the advice of the Prime Minister instead of 
 having to fear his opposition. (Cheers.) And 
 1 am glad to be relieved of that by at once stating 
 that the Prime Minister and myself, no less than 
 the rest of our colleagues in the Government, 
 are entirely agreed as to the course that ought 
 to be pursued. (Hear, hear.) Hon. members 
 
 THE BUDGET OF 1919 
 
 "7 
 
 interested in this subject know that from the first 
 the Revenue yield of these duties has ^ been 
 disappointing, but that is not all, and it is not 
 the worst. For one reason and another, in 
 consequence in part perhaps of the original 
 character of the taxes, in part of the inherent 
 difficulties of attempting at one and the same 
 moment to carry out all over the country a new 
 and unparalleled valuation and simultaneously to 
 raise revenue upon it, and in part, and in no 
 small part, owing to decisions of the Courts, 
 the legal propriety of which I must not be thought 
 for a moment to question, the tax by now has 
 become unworkable. (Cheers.) In certain cases 
 duty is declared to be leviable in circumstances 
 in which Parliament never intended to exact it, 
 and in which admittedly it would be unfair and 
 contrary to the pubHc interest to levy it, and 
 legislation to reverse that judgment was only 
 held up in consequence of the outbreak of war. 
 In other cases the taxes, owing to other decisions, 
 cannot be levied, nor can even a valuation be 
 made upon which any tax can be levied. The 
 result is, as I say, that the taxes in their present 
 form are unworkable. They must eitiier be 
 amended or repealed. They cannot be left in- 
 definitely as they are. 
 
 But if I were to attempt the task of amendment 
 or repeal at this moment in the present divided 
 state of public opinion on the subject, and in 
 the absence of full knowledge as to the facts of 
 the case, I should be inviting, as we hope on the 
 eve of the conclusion of peace, a recrudescence 
 of all the old controversies which we have for- 
 gotten during the War. Under the circumstances 
 
Ii8 
 
 NATIONAL FINANCE 
 
 the Prime Minister and I joined in recommend- 
 ing to the Cabinet that before action is taken the 
 present position of the duties should be referred 
 to a Select Committee of this House in order 
 that they may explore it, and may recommend 
 a course of action in regard to it. We hope that 
 such a careful inquiry, before which all parties 
 can be heard, may Secure something in the nature 
 of common agreement as to the best course to 
 pursue in future. 
 
 It is fair that I should add that whilst neither 
 the Prime Minister nor I wish to prejudge or 
 to attempt to prejudice the decision which 
 such a Committee may form upon the duties or 
 upon any taxation which may be introduced in 
 their place, we both think it is of importance that 
 there should be a trustworthy valuation of the 
 land of the country available for public purposes 
 whenever it is required. (Cheers.) 
 
 I must say something about motor spirit. 
 (Hear, hear.) It was imposed by the 1009 
 Budget. The full duty, formerly 3d. per gallon, 
 raised in 1915-16 to 6d,, applies only to cars used 
 for private purposes. Cars used for trade or 
 husbandry, hackney cars, cars of doctors or 
 veterinary surgeons when used for professional 
 purposes, are all entitled to a rebate of half 
 the duty. Motor fire-engines and certain other 
 cars are entitled to free spirit. Petrol used by 
 stationary engines, motor-boats, and aeroplanes, 
 or for cleaning purposes is also free. In 1913-14 
 the year before the War, about 47,000,000 gallons 
 paid full duty, over 40 millions paid half duty, 
 and about 8 millions were delivered free of duty. 
 
 I thiuk the Committee will see that a tax of that 
 
 THE BUDGET OF 1919 
 
 119 
 
 character is open to serious objection. (Hear, 
 hear.) It is compUcated, and therefore expen- 
 sive to administer and collect. (Hear, hear.) 
 In the second place, the test of dutiability isnot in 
 the nature of the article, but in the use to which 
 it is appHed. The same quaUty of spirit IS 
 dutiable if applied to one purpose, and not 
 dutiable if appHed to another. 
 
 The machinery for differentiating the duty 
 prescribed in the Act is that the duty is to be 
 collected at the full rate and repayment made 
 where the uSer is entitled to an abatement. 
 In practice the extreme inconvenience of this 
 is overcome in the case of some large users, such 
 as the London Omnibus Company, but the 
 examination of the claims for rebate from small 
 owners gives rise to an immense amount of 
 trouble and an immense consumption of time and 
 irritation, which is correlative not to the value of 
 the tax so much as to the trouble of investigating 
 the claim; and, lastly, as the Committee will 
 observe, in a tax of that kind So levied there 
 is a wide opportunity for ev^ision and for fraud. 
 (Hear, hear.) I think there will be a great deal 
 to be said for levying the charge, whatever it 
 may be that we wish to levy, on the users of 
 motor-cars in some other form than in the form 
 of petrol, but a satisfactory scheme of licensing 
 could only be worked out after conference with 
 the various interests affected, and I desire before 
 making any proposals on the Subject to have the 
 advantage of the advice and assistance of the 
 Minister of Ways and Communications as soon 
 as the House has placed him in the Saddle. ^ I 
 propose, therefore, to discuss this question with 
 
I20 
 
 NATIONAL FINANCE 
 
 him in the interval between the present and the 
 next Budget, and I hope by next Budget day 
 that I or my successor may be in a position to 
 make proposals in regard to them. 
 
 As to the existing Excise duty on motor spirit, 
 that duty yields only a trifling revenue of some 
 £50,000 a year, derived entirely, I think, from 
 Scottish shale oil. But a difficult position has 
 recently arisen in regard to benzol manufactured 
 in this country. Before the War benzol was one 
 of those spirits which were occasionally and 
 experimentally used for propelling motor-cars, but 
 were not taxed when so used. In refraining from 
 taxing it the Board of Customs and Excise acted 
 upon instructions issued by the present Prime 
 Minister, and announced in the House of Commons 
 in the early days of the new tax, to the effect 
 that they were to aim at the taxation of spirit 
 which was ordinarily and generally used for 
 driving motor vehicles, and not to attempt to 
 levj' the tax on the various substances which, 
 though not generally used as motor-car fuel, could 
 be or were occasionally used as substitutes for 
 or in association with it. That was the position 
 up to the War. The War has changed the 
 position completely. During the War the pro- 
 duction of benzol for war purposes was stimu- 
 lated by the Munitions Department with remark- 
 able results. There is now in existence a manu- 
 facturing industry with large stocks of spirit 
 which the Munitions Department no longer 
 reqiiires, and large continuous output amounting 
 now to about 100,000 tons a year, of which 
 70,000 tons, or thereabouts— that is equivalent 
 to 21 million gallons— is available for motor 
 
 THE BUDGET OF 1919 
 
 121 
 
 fuel. The Minister for Munitions promised to 
 hand over these stocks to the trade for the use 
 of motor petrol. The Petrol Control Committee 
 undertook to release for motor fuel as much as 
 could be put on the market. Then the Board of 
 Customs and Excise felt it to be theu: duty 
 to step in and to issue a warning that benzol 
 so applied might be subject to taxation. I have 
 to consider what is to be done. We have here 
 a case of an industry found vital duni^ the 
 War, created and stimulated for war purposes, 
 practically created at Government instigation 
 and under Government guidance, and that 
 industry is suddenly confroiited with the loss of 
 its market owing to the cessation of the War. 
 
 That is not all. Benzol is not only important 
 to the nation as an additional indigenous source 
 of supply of motor fuel, but it is a very important 
 ingredient in the dyeing industry, an industry 
 which, as the Committee knows, has been found 
 so vital to our existence and to our trade that 
 not only this but preceding Governments have 
 done everything in their power to establish 
 it and to promote its growth in this country. 
 Under the drcumstances, and acting on the 
 advice of the Board of Trade, I propose to give 
 legal authority for the exemption of benzol 
 from taxation by repealing the Excise duty, 
 and I am glad to think that the Scottish shale 
 industry, an industry which it is also in the 
 national interests to develop, will, of course, obtain 
 the advantage of the repeal. 
 
 There is another subject in r^ard to motor 
 spuit— viz., motor spirit licences. The motor 
 spirit licence duty was imposed as a war measure 
 
122 
 
 NATIONAL FINANCE 
 
 to restrict the use of private motor-cars at a 
 time of shortage. Its revenue effect was purely 
 secondary. The necessity for restriction has 
 now gone. The licence duty was collected by the 
 Petrol Control Department of the Board of 
 Trade, a Department which, I think, did its 
 work extremdy well, but which is now in process 
 of being dissolved. I am told that if we abolish 
 this small licence duty, with all its anomalies, we 
 shall at the same time enable the Board of Trade 
 to put an end to this Department, with its 300 
 officials. (Loud cheers.) 
 
 That brings me to a subject which I, at any 
 rate, regard as the most important feature of 
 the present Budget. I come to tiie establishment 
 of Imperial Preference. I am not propounding, 
 and cannot propound to-day, the general trade 
 policy for tms country. If the ste^ which are 
 foimd to be necessary require legislative sanction, 
 that Sanction must be given in some other 
 measure than the Finance Bill. For the present, 
 my task is only to give effect and assent to the 
 declaration of the Imperial War Cabinet and 
 the Imperial War Conference two years ago, 
 in which the representatives of the Brit^ 
 Government concurred that, as soon as possible, 
 preference on duties now or hereafter existing 
 should be introduced for goods <^ Imperial 
 origin. 
 
 The range of our present Customs duties is 
 not wide, though it covers more articles than 
 people are apt to suppose. Only three Colonial 
 or British oversea products fall into the categories 
 subject to duty at the present time in any 
 large quantities— namely, tea, cocoa, and rum, 
 
 TU£ BUDG£T OF 1919 
 
 "3 
 
 but there are many other dutiable articles 
 which appear in our Customs returns from His 
 Majesty's possessions overseas. I need name only 
 such articles as coffee, sugar, tobacco, and 
 
 wine. -\ 
 
 But though the beginnings may be smaU, tfte 
 measure of what I am inviting the Committee to 
 do is not the amount of British Imperial trade 
 which secures preference at this moment, but 
 the opportunities for the development of that 
 trade which I invite the Committee to open out. 
 There is room for vast extension. There never 
 was a time when it was more important to the 
 Empire as a whole or to us in particular that 
 development should take place. From the 
 small beginnings of to-day, I hope that many 
 members of this House will Hve to see a reaUy 
 wide structure of inter-Imperial trade develop. 
 
 In deciding on the form which preference is to 
 take I have had four main considerations before 
 me. In the first place, the preference should be 
 substantial in amount. In the next place, the 
 rates should as far as possible be few and sunple. 
 Thirdly, where there is an existing Excise duty 
 corresponding to the Customs duty which is 
 affected, the Excise duty must be proportionately 
 altered. We cannot give preference at the 
 expense of the home producer. (Hear, hear.) 
 Lastly, in carrying out this policy, I have to 
 remember the interests of our Allies and, as far 
 as practicable, to avoid increasing duties on their 
 products for the purpose of giving preference.^ 
 
 As I have said, the range of our existing duties 
 is small. It falls mainly into three classes: 
 First, there are the new Customs duties imposed 
 
134 
 
 NATIONAL FINANCE 
 
 by Section iz of the Finance Act (No. 2), iqi'5, 
 which carry with them no corresponding Excise, 
 on cmematograph fihns, clocks and watches, 
 motor-cars and musical instruments. On these 
 duti^ I propose to fix the preference at one-third 
 which IS what I may call the general Empire rate 
 mso far as a general Empire rate exists. 
 
 The next class comprises taxes on consumable 
 commodities apart from alcohol. These are, in 
 essence, revenue duties pure and simple. On 
 th^ in many cases the duties are themselves very 
 mjQ in relation to the value of the article, and a 
 preference of one-third would be both more than 
 1 could afford, and more than I tliink is necessary 
 or justifiable. Before coming to any definite 
 deasion, I thought I ought to take consultation 
 with the mterests affected. I accordingly ap- 
 pomted a SmaU Departmental Committee of 
 r^resentetives of the Colonial Office, the India 
 OflBce, the Board of Trade, and the Board of 
 Customs and Excise, and asked them to get into 
 touch with representatives in this country of the 
 producers, importers, and manufacturers of the 
 articles affected, and to ascertain their views as 
 to the probable effect of preference on the trade 
 and industry of the United Kingdom and the 
 British Possessions and on the rate of duty 
 ^« ^o^Si^ering the views of the interests 
 affected, as gathered by that Committee, I have 
 come to the conclusion that for preference on this 
 class of articles I should be justified in recom- 
 mendmg to the Committee a rate of one-sixth 
 of the duty. 
 
 I ought to say at this stage that I propose 
 tnat, in the two classes of goods with which I 
 
 THE BUDGET OF 1919 
 
 125 
 
 have already dealt— -viz., the duties on manu- 
 factured articles and the duties on consumable 
 commodities other than alcohol— the preference 
 should be given by way of reduction of the 
 existing duties on Colonial produce, and not by 
 way of surcharge on foreign produce. 
 
 My right hon. friend asked me to give some 
 further information as to the character of the 
 articles concerned. The most important is tea. 
 The estimated revenue from tea in the coming year 
 is, without the change in duty, ;fi6,ooo,ooo. The 
 duty is IS. ; the preference will therefore be 2d. 
 In normal circumstances before the War, when 
 the importation of tea was unrestricted, nearly 
 90 per cent, of the tea was already Empire-grown. 
 The result, therefore, of the grant bv way of 
 preference will practically be equivalent to the 
 reduction of the duty on tea, and I anticipate 
 that that will lead, as it always has led, to a 
 largely increased consumption. In the circum- 
 stances, the loss for a full year involved in that 
 preference may be put at £2,300,000, but will not 
 be more in the current year, which is not a 
 complete year, than probably ;£i,8oo,ooo. 
 
 The next article is cocoa. The estimated 
 revenue from cocoa is £2,400,000. About two- 
 thirds of our imports now come from Empire 
 sources. Preference at the rate of one-sixth 
 would be worth 7s. per cwt., meaning a loss of 
 revenue of about £200,000. The revenue from 
 coffee is small— £650,000— and a small proportion 
 —only about 20 per cent, of our imports at 
 present— comes from Empire sources. The 
 amount which could be grown in the Empire is 
 capable, I think, of ahnost limitless expaosion. 
 
126 
 
 NATIONAL FINANCE 
 
 (Hear, hear.) The preference of one-sixth, which 
 is worth 7s. per cwt., would mean on the present 
 proportion an immediate loss of revenue of 
 ^20,000. Chicory will, of course, follow coffee, 
 as it always does, and the Excise duty will be 
 proportionately reduced. 
 
 Now I come to sugar. The estimated Customs 
 revenue from sugar is £39,000,000. Only a very 
 small pc^on of the imports, 7 per cent., comes 
 from Empire sources. The preference would be 
 worth 4s. per cwt., and would mean a loss of 
 revenue of about £500,000. The Excise duty 
 on beet su^ar produced in this country will, of 
 course, be sunilarly reduced. It already stanch at 
 2s. 4d. per cwt. less than the Customs duty. 
 Dried fruits are only a small matter. I need not 
 trouble the Committee with the figures, but the 
 preference will be given on them also. 
 
 Coming now to tobacco, the estimated revenue 
 on the present basis is £47,000,000. Only 2 per 
 cent, of the imports come from Empire sources, 
 but a very ccmsiderable e3q[>ansion is possible. 
 A preference of one-sixth, or is. 4d. per lb., on 
 unmanufactured tobacco, a rate which governs 
 the other duties, is a substantial one, and will, 
 I hope, stimulate increased production in India 
 and the Colonies concerned. The Excise duty 
 on tobacco grown in the United Kingdom wiU 
 again be correspondingly reduce. In the case 
 of both tobacco and sugar it is proposed that the 
 preference to the maniuacturers should be based 
 on the amoimt of the British-grown product in 
 the import. With r^;ard to motor spirit, the esti- 
 mated Customs revenue from vMch is £a,2op,ooo, 
 only about 18 per cent, comes fnxm Empire 
 
 THE BUDGET OF 1919 
 
 127 
 
 sources, and a preference of one-sixth, or id. per 
 gallon, mav mean a loss ot revenue of about 
 60,000. I have decided for other reasons, as 
 have already explained, to reconmiend the 
 abolition of the Excise duty. 
 
 I come now to the third class of dutiable 
 articles, beer, wine, and spirits. There is no 
 importation of Colonial beer. The arrange- 
 ment of a preference would be complicated 
 and difficult, and at any rate we may safely 
 neglect it for the time. I propose to do the 
 same, for the same reason, with table waters, 
 matches, and playing-cards. Cards are hardly 
 worth mentioning except that I might be 
 attacked afterwards for concealing what I was 
 doing or was not doing. The estimated revenue 
 from wine on the present basis is £1,250,000. 
 Only about 7 per cent, of the imports come from 
 Empire sources at present. The industry, how- 
 ever, is one which is being developed, and is 
 enable of being further developed both in Soutib 
 Africa and Aus&alia, and both Dominions attach 
 importance to it. At present the wine duty 
 is levied at two rates— is. 3d. and 3s. a gallon, 
 according to strength. A preference id one-sixth 
 on those small duties would, I am adv^ed, be 
 quite ineffective. On the other hand, in con- 
 sideration of the interests of our AUies, notably 
 of France and Portugal, and of some neutrals, 
 we are unwilling at such a moment as the present 
 to raise the duty on a very important article 
 of their export. We propose, therefore, to give 
 the preference by way of reduction, and to wow 
 6d. on the lower rate of is. 3d. and is. on the 
 higher rate of 38. There is an additional tax 
 
128 
 
 NATIONAL FINANCE 
 
 on wines imported in bottles of is. a gallon on 
 still wine and 2S. 6d. on sparkling. I propose 
 to allow 6d. preference on the first and gd. on 
 the second. Spirits constitute my most diffi- 
 cult problem. The State derives a very large 
 revenue from the Excise duty on spirits manu- 
 factured in this country, and it is essential that 
 preference shall not be given in a form which 
 would appreciably reduce the yield. For that 
 reason it is necessary to take spirits in a class 
 apart, as an exception to the general rule which 
 I have followed. To give a preference by re- 
 duction would involve a corresponding reduction 
 in the Excise duty and a loss of revenue which 
 I am unable to face. For the purpose of the 
 duties, spirits are divided into five classes, four 
 subject to Customs duty— rum, brandy, Geneva, 
 and other sorts, and the fifth, home-made spirit, 
 including whisky, subject to the Excise duty. 
 Over 80 per cent, of the rum comes from Empire 
 sources. The imports from the Empire of other 
 spirits are at present small, and I think likely to 
 continue so, at any rate for a long time to come, 
 though they are capable of some development. 
 
 As regards the amount of the preference, I have 
 come to the conclusion that anything like a 
 rate of one-sixth with such high duties as are 
 charged would be too high. It would amount 
 to 5s. a gallon on the rate of duty in force, 
 and a larger amount if this duty is increased. 
 I propose, therefore, to fix the rate of preference 
 at 2s 6d. per gallon, not by a reduction in the 
 duty on Colonial spirits, but by an increase in 
 the duty on foreign spirits. That will give me 
 a slight additional yield of revenue. The effect 
 
 THE BUDGET OF m9 
 
 129 
 
 of the preference proposals as a whole on revenue 
 will be a reduction of £2,500,000 in the current 
 3^ear, and something over £3,000,000 in the full 
 year, and without allowing for any large increase 
 in the imports of Colonial products. The great 
 bulk will be in respect of tea. 
 
 Now as to the date on which preference will 
 take effect. The general date I propose is ist of 
 September, so as to allow time for administra- 
 tive machinery to be set up. But tea requires 
 special treatment, as the great bulk of the 
 supply comes from the Empire. To postpone 
 the introduction of the new rate too long might 
 lead to the withholding of Stock, and the con- 
 sumer going short. After consulting the dis- 
 tributing interest, I propose that the reduced duty 
 should come into force on 2nd of June. If these 
 results are small, it must be remembered that the 
 immediate bulk of Colonial products affected is 
 small, but the results both on the revenue and, 
 as I hope, on the trade will be seen increasingly 
 as the years go on. 
 
 At last I come to the new taxation which I 
 propose to impose. I confine myself at this 
 moment to saying that I do not propose to proceed 
 with the luxury tax. I am quite ready to give 
 my reasons for this, but I thmk that I should 
 unduly delay the Committee if I did so. Dealing 
 first with spirits, I may remind the Conrniittee 
 that it was found necessary to restrict the delivery 
 of spirits from bond as from the ist of April, 
 1917, to a limit not exceeding 50 per cent, of the 
 deliveries of 1916. Owing to a variety of causes, 
 including the restriction above referred to, the 
 increased duty on spirits, the operation of the 
 
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 immature spirit duty, and I am afraid I must add 
 some withholding of stocks, the supply of spirits 
 fell short of the demand and prices rose to an 
 extent which led the Food Controller, in con" 
 sultation with my predecessor, in the spring of last 
 year to Hmit them by imposing a maximum scale 
 of prices, which were announced by Budget day, 
 and provided for a substantial increase in the 
 then duty. Two changes affecting the position 
 have since occurred. In the first place, the scale 
 of prices was revised in August so as to afford 
 relief to a section of the trade which had bought 
 their stocks at somewhat inflated prices, and had 
 not then had an opportunity of disposing of them. 
 The quantities allowed to be dehvered from 
 bond were increased as from the 24th of February 
 last from 50 to 75 per cent, of the quantities de- 
 livered in 19 16, bringing the authorised clearance 
 up to 21,400,000 gallons a year. Both of these 
 changes have further increased the profits of 
 the trade, and they are now m the aggregate 
 more than my predecessor estimated, and more 
 than, I think, is reasonable. The Committee will 
 not be surprised, therefore, to learn that I propose 
 to ask that part of these profits at any rate 
 should be diverted to the Exchequer by a further 
 increase in spirit duty from 30s. to 50s. per proof 
 gallon. This increase will involve some read- 
 justment of trade prices to prevent the burden 
 falling unequally on different sections of the 
 trade. The scale, consequently, has been revised 
 so as to distribute the additional duty as equit- 
 ably as possible throughout. The alteration will 
 only affect the consumer in a few cases, such as 
 the price of spirits sold to him in bottle, or in jar 
 
 THE BUDGET OF 1019 
 
 or cask. Owing to the great rise in the cost of 
 bottling and the prices fixed for the bottle and 
 the glass respectively the sale of spirits by glass 
 has been much more remunerative than the sale 
 by bottle, and I think that some of the difficulties 
 complained of in the early part of the year during 
 the epidemic of influenza in reference to the ob- 
 taming of spirits were due to this cause. That 
 mcrease will produce an additional revenue of 
 £21,650,000 in the full year on the present 
 authorised amount of clearance. For the current 
 financial year, a month of which has already 
 passed, it will bring in an increased yield of 
 £19.850,000. 
 
 I pass by a not unnatural transition from 
 spirits to beer. A year ago, when the authorised 
 annual output of beer was 331 per cent, of the 
 19 16 output my predecessor found that excessive 
 profits were being made, that the prices charged 
 to the consumer were higher than could be 
 justified by the then existing conditions. He 
 accordingly decided, in consultation with the 
 Food Controller, to increase the duty from 25s. 
 to 50s. a barrel. At the same time the partial 
 control of prices previously instituted was con- 
 tinued in a modified form". The order limiting 
 prices did not touch sales on any portion of 
 licensed premises other than public bars, and it 
 did not refer to all articles sold. It did not touch 
 draught beer above 1034 degrees or any bottled 
 beer. The controlled prices which were fi xed so as 
 to enable the trade to secure sufficient profit with- 
 out unduly raising the prices of the beer were not 
 affected by the order. It was, however, subse- 
 quently found that for beers of higher gravity and 
 
NATIONAL FINANCE 
 
 bottled beers the prices charged were in many 
 cases increased much beyond the hmit which would 
 have provided a reasonable profit. Further, 
 after the armistice it became possible to some 
 extent to meet the public demand for more 
 and better beer, and as from the ist of January an 
 additional quantity has been allowed to be brewed 
 at a higher average gravity. The increase, 
 which was in the proportion of 25 per cent, of the 
 standard barrelage for 1918, had, of course, the 
 effect of reducing the cost of production, and 
 the trade was thus in a position to make still 
 larger profits than before. In view of that, the 
 Government thought it right to warn the trade, 
 that while they might have the run of those 
 profits until Budget day, they must expect an 
 increase of duty at that time. A new scale of 
 prices was issued at the same time that the 
 increased barrelage was allowed. This scale 
 allowed a fair margin of profit for further taxation 
 to be taken in respect of the increased barrelage. 
 
 The necessity which existed during the War ot 
 rigidly restriticng the amount of grain to be used 
 in brewing has now passed away, and the Govern- 
 ment, after full consideration, are prepared to take 
 a further step in allowing increased supphes of 
 beer and of beer of a better quality. Brewers 
 will be accordingly allowed to increase their output 
 by 50 per cent, on their 1918 barrelage. This, 
 added to the 25 per cent, increase sanctioned 
 last January, will mean that the restricted 
 barrelage which was allowed in 19 18 will be 
 increased by 75 per cent., bringing the total 
 authorised barrelage for the year up to 20,000,000 
 barrek, compared with the pre-war barrelage 
 
 THE BUDGET OF 1919 
 
 133 
 
 of 36,000,000. In order that the consumer 
 may be able to obtain beer of better quality, 
 brewers will be at liberty henceforth to brew to an 
 average gravity not exceeding 1040 degrees in 
 Great Britain, as compared with the 1032 which 
 is the existing limit, and with the pre-war gravity 
 of 1050 under unrestricted conditions. The 
 average gravity of beer brewed in Ireland, which 
 has always been higher, will remain at 1047, 
 as compared with 1065 before the War. (An 
 hon. member. — Why ?) In consequence of the 
 particular conditions and character of that trade. 
 (Laughter.) This increase in the average gravity 
 which the brewers in Great Britain are allowed 
 to brew will, I hope, go far to remove the grievance 
 of which some of them have complained that they 
 were unable to maintain their special trade at the 
 low gravity hitherto imposed upon them. The 
 effect of further relaxing the restrictions on 
 output while continuing the present scale of 
 prices to the consumer, which we do not propose 
 to alter, will be to increase the margin of profit 
 for taxation beyond what was contemplated 
 when the prices were hxed in February last and 
 the trade warned. 
 
 I now feel justified in proposing to appropriate 
 to the Exchequer from these profits a total 
 amount of 20s. per standard barrel by raising 
 the duty from 50s. to 70s. In fixing this rate 
 of duty I have had to consider the diversity of 
 conditions existing in the trade, and to give fair 
 consideration to those who are least fortunately 
 situated. I will indicate very shortly the effect 
 of the proposal on the revenue of the current year. 
 I put my estimate of the revenue from be&r on 
 
134 
 
 NATIONAL FINANCE 
 
 the existing basis of taxation at £37,800,000, 
 and by the existing basis I mean the existing 
 barrelage and the existing rate of duty before 
 any alterations are made. Any increase of output, 
 of course, increases the yield of the tax quite 
 apart from any increase in duty. In estimating 
 the additional revenue I shall secure I have to 
 take account of both the increased number of 
 barrels on which duty will be paid and of the 
 increased rate of duty on each barrel so charged, 
 and I estimate that the combined effect of these 
 two increases will be £31,200,000 for a full year 
 and for the current short year £22,200,000. 
 The Government desire that I should add that the 
 character and nature of the control to be exer- 
 cised over this trade in alcoholic drink is now 
 occupying the attention of His Majesty's Govern- 
 ment. That is not wholly or mainly a revenue 
 matter, but we think it right to say that should 
 at some future time a yet further increase of 
 barrelage be allowed, that would be a fair reason 
 for a still further increase in taxation. 
 
 In this connection I have one small change to 
 propose, which I think is fair and right, with 
 the object of bringing the charges on beer made in 
 private houses into some kind of correlation with 
 the increased charges now made on beer brewed 
 for sale. The provisions of the existing law are of 
 long standing, and however appropriate they 
 may have been to a time when the beer duty was 
 6s. 8d. a barrel, they are not suitable when the 
 duty is raised to 70s. a barrel, and when brewers 
 for sale are still restricted as regards output and 
 gravity. I thought first of all that it might be 
 possible, in view of the new high rates, to prohibit 
 
 THE BUDGET OF 1919 
 
 135 
 
 domestic brewing altogether, but in deference 
 to an old-established custom in certain agri- 
 cultural districts I refrained from taking that 
 course, though I could not view with equanimity 
 or patience a large increase of private brewing 
 in consequence of the increased duty imposed 
 upon the brewers for sale. In the case of private 
 brewers who now pay beer duty no change is 
 necessary, and they will remain as at present 
 liable to beer duty, subject to the nominal 
 registration duty of 4s. In the case of persons 
 who do not pay beer duty, I do not propose to 
 impose the beer duty, as such, but to make them 
 pay their contribution to the Exchequer by way 
 of a licence duty. The revenue effect of these 
 changes is negligible, except as some measure of 
 protection against loss of revenue from other 
 sources, but I think they are necessary for that 
 purpose and for fairness. 
 
 I turn now to direct taxation. The Excess 
 Profits Duty in its present form is a war tax. 
 It was imposed under the stress of war, and when 
 in the midst of the enormous burdens we had 
 to bear it was felt that profits in excess of pre-war 
 profits might justly be called upon to make 
 special contribution. It is open to many objec- 
 tions, but it was a rough-and-ready method of 
 justice which Parliament, in its then, happily, 
 not very critical mood, accepted without too 
 much difiiculty, and the revenue results of it 
 have been most satisfactory during the war period. 
 It was imposed for the first year at 50 per cent, 
 then for a period at 60 per cent., and since the 
 ist of January, 1917, at 80 per cent. It has 
 been a good revenue-raiser, but there are great 
 
NATIONAL FINANCE 
 
 objections to it. In the first place, it operates 
 with unfairness and inequality as between firms 
 with a good pre-war standard of profit and firms 
 with a poOT pre-war standard or no pre-war 
 standard at all. 
 
 In the second place, at the existing high rate 
 It has encouraged wasteful expenditure. When 
 /4 out oi every £$ would have gone to the State 
 if not spent by the owner, he was inclined to 
 lavish expenditure on his business. But, more 
 than that, it cannot be doubted that a flat rate 
 tax of 80 per cent, on all profits over pre-war 
 standards or where there was no pre-war 
 standard over a small margin acts as a great 
 deterrent to enterprise, industry, and new 
 development. I do not wish under these circum- 
 stances to continue the tax a moment beyond 
 what is necessary at so high a figure as at present. 
 It would be contrary to public interest, and I do 
 not propose to do it. On the other hand, I have 
 to remember that this is a war tax, that the war 
 expenditure is still continuing and that even after * 
 peace is signed war expenditure and the burdens 
 of war will still remain, and that I am not in 
 a position simply to repeal the duty without 
 finding anything to put in its place. 
 
 Und^ these circumstances my first effort was 
 to find some fOTm in which the profits of businesses 
 might be called upon to make a special contri- 
 bution to the revenue of the country without 
 the anomalies and the objections to which the 
 I)resent tax is subject. I had before me sugges- 
 tions made to that effect by Sir J. Harmood- 
 Baimer, by Mr. J. F. Mason and by Mr. Lionel 
 Hichens. 
 
 THE BUDGET OF IMO ^37 
 
 I had also the example of taxation imposed 
 with similar objects both in the United States 
 and in Canada. My information is imperfect, 
 and the time at the disposal of myself and my 
 colleagues has been short, and we have been 
 subjecttooth^dailygravepreoccimations. Ineed 
 not say that if a new tax is to oe imposed, it 
 would m any case be necessary that it ^ould be 
 carefuUy thought out and its advantages and 
 disadvantages carefully weighed in (»*der that 
 we should not repeat the anomalies or injustices 
 of the existing tax. Therefore the form of the 
 tax would be of great importance, and such an 
 inquiry takes time. I have had other suggestions 
 made to me, but the Government have not been 
 able to give to the subject in the weeks befcM^ 
 the Budget the attention which it requires for a 
 satisfactory solutiim. Under the ckcumstances^ 
 therefore, I propose to the Committee, as a 
 temporary measure, and only as a temporary 
 measure, to continue the existing tax for 
 another year at the reduced rate of 40 per 
 cent. (Cheers.) I anticipate that the yield of the 
 excess profits duty on this basis few a full year 
 will be £50,000,000. It must not be supposed 
 that the yidid oif the 80 per cent, rate under war 
 ccmditions is at all a safe guide as to the yield 
 under post-war conditions. I have to allow for 
 the right of recoupment which is given by statute 
 imder certain conditions to those who have paid 
 the tax. I have to allow for the fact that the 
 high yield of the tax, and, indeed, the initiation 
 of the tax itself, was based upon^the fact that 
 certain businesses were making extrawdinary 
 andabnormal profits. Under these circumstances. 
 
158 
 
 NATIONAL FINANCE 
 
 although the estimate must, of course, be a very 
 rough and hypothetical one, I am advised that it 
 would not be safe to count upon a revenue of 
 more than £100,000,000 if the tax continued at 
 00 per cent., and I expect a revenue of ;f5o,ooo,ooo 
 at the lower rate of 40 per cent. 
 
 Now I turn to the death duties. The last 
 alteration m the scale of the estate duty was made 
 in the first Budget of 1914, and it has not been 
 altered dunng the War. I think that my prede- 
 cessors were right in so doing. Death duties are 
 not a suitable instrumentfor meeting a temporary 
 emergency. It requires a generation for aU the 
 prm)erties subject to the tax to pass under it, 
 and accOTdingly it is only when you are con- 
 sidering a permanent increase of revenue that the 
 death duties ought to be raised. We have come 
 to the time when we have to consider permanent 
 increase of revenue, and I propose to ask the 
 Committee to sanction such an alteration in the 
 scale as is estimated to produce in a full year 
 a sum of ;^io,ooo,ooo. No change is made in the 
 case of estates under £15,000 in value. Estates 
 between £15,000 and £20,000, which now pay 
 at the rate of 5 per cent., will in future pay at 
 the rate of 6 per cent. The present rates rise 
 from 6 per cent, to 9 per cent, in respect of estates 
 of between £20,000 and £100,000. A corres- 
 ponding rise in the new scale would be from 7 per 
 cent, to 14 per cent. At present an estate of 
 £250,000 pays 12 per cent. I propose m the 
 future that it shall pay 20 per cent. The rate 
 is now 16 per cent, on estates of over £500,000, and 
 the proposed new rate is 25 per cent. The maxi- 
 mum rate on the existing scale is 20 per cent. 
 
 THE BUDGET OF 1019 
 
 139 
 
 applicable to estates of over £1,000,000. I 
 propose that estates between £1,000,000 and 
 £1,250,000 should in the future pay 30 per cent. ; 
 estates between £1,250,000 and £1,500,000, 32 per 
 cent.; and between £1,500,000 and £2,000,000, 
 35 per cent. ; and that estates of over £2,000,000 
 should pay 40 per cent., or double the existing 
 rate. (Cheers.) 
 
 I do not attempt to hide from the Committee 
 the fact that these are very onerous rates. They 
 constitute, taken in conjunction with the income 
 tax, a further differentiation between wealth 
 derived from continuing personal exertion and 
 wealth derived from accumulated capital, but they 
 are more than that. They are an insurance for 
 the safety of capital. Montesquieu said that 
 taxation was ** that part of his wealth which each 
 citizen gave to obtain the secure enjoyment of 
 the remainder." There has been a good deal of 
 discussion of late about a levy or tax on capital. 
 If by a tax on capital is meant a small annual 
 charge, then I think that that charge is as widely 
 distributed and more fairly and conveniently 
 raised in the shape of our income tax. If, on the 
 other hand, there is meant a large levy on capital, 
 a large slice to be taken out of accumulated 
 capital, then I beg the Committee to consider 
 what the result might be. It is a bad time to 
 propose such a tax when, for the past five years, 
 you have been begging people to save, and when 
 you are still obliged to ask them to save and to 
 give you their savings. It is a bad time to tax 
 those who have responded to your appeal by 
 reducing their expenditure and making econo- 
 mies, and to let those go free who disregarded 
 
NATIONAL FINANCE 
 
 your instructions and who spent their money 
 When it was not in the interest of the State, 
 or in ways which were not in the interest of the 
 State. 
 
 Consider a levy on capital apart from the cir- 
 cumstances of the moment. The death duties 
 n^ke such a levy, and they make it once in a 
 lifetime, at a time when the taxpayer receives an 
 accesdon of income, and since they are levied only 
 at death, and we do not all die at the same time, 
 the process of making the valuation and of 
 levymg the tax is a task of manageable pro- 
 portions. It can be done justly and fairly as 
 between man and man, and it can be done with a 
 minimum of evasion or of fraud. Since only 
 a portion of the capital of the country is dealt 
 with in any one year, the tax is paid without 
 any disturbance of credit, and without any 
 dejM-eciation of securities to the detriment either 
 of the State itself or of the home. If a levy 
 was to be made on all the capital of the country 
 at one and the same time by the tax collector, 
 all these advantages would be lost. To make 
 an efficient valuation, fair as between man and 
 man, and fair as between the revenue and the 
 State, would exceed the power of any revenue 
 administration in the world, and I make bold 
 to say that our own is the best. It would 
 exceed their power at any time, and still more 
 now, when the staff is still depleted owing to 
 the War, and when they are charged with the 
 overwhehning new responsibilities which the 
 War has brought. It would be open to all the 
 objections which arose and all the difficulties to 
 which simultaneous valuation of the whole land of 
 
 THE BUDGET OF 1919 
 
 the country and the taxation of the land of the 
 country gave rise under the Land Values Duty, 
 and open to those objections on a vaster scale, 
 because you would have to value not only real, 
 but personal property. Since very few people 
 would have money lying idle sufficient to pay 
 their obligations under the tax, it would mean 
 an immense disturbance of credit. Everyone 
 would be seeking to sell securities of one sort or 
 another, and where all are sellers who would 
 be buyers, and who shall measure the loss to the 
 country by the depreciation of all securities 
 (cheers), and who shall measure the loss to the 
 individual through the same cause ? 
 
 If to avoid these difficulties the State takes 
 payment in kind then all the difficulties of valua- 
 tion still remain. The State cannot refuse to 
 accept property of any kind at a valuation which 
 itself has put upon it, and we should be left the 
 owners of parcels of land, odd parcels of shares, 
 in every conceivable part of the country and in 
 every conceivable undertaking, many of them 
 of very doubtful value and very difficult to realise. 
 I will only add that if it were thought that this 
 expedient, once resorted to, would, as well might 
 be the case, and as some desire should be the 
 case, be resorted to again at every moment of 
 difficulty or of extravagance, it would then be 
 the greatest possible discouragement to industry 
 and enterprise that the mind of man or Parlia- 
 ment could devise. It would be the strongest 
 deterrent to saving and the creation of new 
 capital, and it would be the strongest incentive 
 to wasteful expenditure and to the dissipation or 
 withdrawal ^ existing capital. I say boldly 
 
142 
 
 NATIONAL FINANCE 
 
 that whatever be our views on the distribution 
 of wealth or on the respective shares of the fruits 
 of industry to y^bich capital and management and 
 labour are entitled, our great need now and for 
 years to come is that we should have, not less 
 capital, but more capital (cheers), and I hope 
 the House will lend no countenance to so 
 hazardous and, in my opinion, so disastrous an 
 ei^riment. I estimate, as I have said, that 
 this new scale of death duties will add 10,000,000 
 in a full year and £2,500,000 in this year, and it 
 will take effect from the date of the Royal assent 
 to this year's Finance BiU. 
 
 There is one small matter in this coimection 
 with which I must deal — ^the existing rate of 
 interest charged in respect of outstanding death 
 duties at 3 per cent. That no longer corresponds 
 at all to the value of money. It acts as an 
 encouragement to postpone the payment of 
 duties. Without wishing to suggest for a moment 
 anything in the nature of a vincfictive or punitive 
 rate, I think it would be proper now to raise 
 the rate to 5 per cent. 
 
 Before we leave the subject of the death duties, 
 let me say that certain rdief was granted from 
 the death duties as regards the estates of members 
 of the Forces, mercantile marine, and fishermen. 
 I now propose to extend these provisions in two 
 respects. At present the death must have 
 occurred within twelve months of the wound, 
 accident, or disease to wtdch it was attributable. 
 Experience has shown that that period is not 
 long enough to cover a considerable number of 
 cases which fall within the spirit if not the letter 
 df the law. I propose to extend the period to 
 
 THE BUDGET OF .1919 ^43 
 
 three years and to give that extension retro- 
 spective effect. (Cheers.) 
 
 Further, I hope the Committee will agree that 
 there should be power to grant relief to persons of 
 the categories named dying within the same period 
 of three years as the result of wounds, accidents, 
 or disease occurring after the War, but as a direct 
 consequence of the War. I have in mind such 
 cases as military operations, if they continue 
 anywhere after peace is signed, and cases where 
 death or accident may be due to mine-sweeping 
 or removal of dangers which the War has left 
 behind. Provisions to that effect will be inserted 
 in the Finance Bill. 
 
 I come now to income tax. (Cheers.) I have 
 already mentioned the satisfactory yield of 
 income tax last year. In the current year we 
 expect to do even better. Last year's income tax 
 and super tax together produced £291,000,000. 
 This year we estimate them to produce 
 £354,000,000, an increase of £63,000,000, with- 
 out any further change in the rates. Apart 
 from normal growth, the increase is due to two 
 causes — first, owing to the imposition of the 
 tax at higher rates last year, the arrears carried 
 forward are at a higher figure; and second, this 
 year will see a full collection under Schedule A, 
 whereas, owing to the introduction of the instal- 
 ment system, only one-half^ was collected last 
 year. 
 
 Now what am I to do about it ? The Com- 
 mittee knows that a Royal Commission has been 
 appointed to investigate income tax and super tax 
 and all the problems to which they give rise. 
 It was recognised before the War that the time 
 
144 NATIONAL FINANCE 
 
 had cdme for such an inquiry. The higher rate has 
 increased the anomalies of the tax and rendered 
 greater any hardships which were endured. But 
 the pre-War rate is nothing compared with the post- 
 War rate. Accordingly all these anomalies and 
 grievances pressed more iirgently for considera- 
 tion, and new ones were created by the circum- 
 stances of the War. I therefore appointed a 
 Royal Commission as soon as I could after 
 entering office. I do not know what the report 
 of that Commission may have in store for the 
 taxpayer or the Chancellor of the Exchequer. 
 The taxpayer, I imagine, views it with hope. 
 The QianceUor of the Exchequer looks forward 
 to it with foreboding. Whatever may happen, 
 they are likely — I think they are certain — to 
 prcmose great changes, and great changes are 
 seldom made in a tax without decreasing its 
 yidd at the then existing rate. Under the 
 circumstances I have thought that the wisest 
 course for me to pursue was to make no change 
 in the income tax (cheers) pending the report 
 of that Commission, except so far as may be 
 necessary to carry out special undertakings 
 already given, such, for example, as the exemption 
 from income tax of wounds and disability pensions 
 and of gratuities payable on donobuisation. 
 (Cheers.) On the other hand, in pursuance of the 
 same pnnciple — for yirbzi is sauce for the goose is 
 sauce for the gander— I do not propose to ask the 
 Conmiittee to modify this year any of the tem- 
 porary reliefs from income tax or super tax which 
 have Deen granted from time to time as the result 
 of the War. I hope, whether right or wrong, that 
 the proposals which I make with r^ard to the 
 
 THE BUDGET OF 1019 
 
 U5 
 
 income tax are consistent proposals to be treated 
 as a whole. I hope the Committee will ^reat them 
 as such, and I think they may be encouraged by 
 the thought that Lord Colwyn, the chairman of the 
 Royal Commission, hopes that the Commission 
 will be able to report in time to enable efiect to 
 be given if the House so wills to their recom- 
 mendations by the Budget of next year. 
 
 I am now able to summarise the result. In 
 a full year I should obtain, by the changes in 
 taxation, £108,950,000, derived as to /6o,ooo,ooo 
 from inland revenue and as to /48,95o,ooo from 
 Customs and Excise, thus almost exactly meeting 
 the deficit of /ii4,ooo,ooo which I calculated 
 we shall have to face in a future normal year. 
 In this calculation I took no credit for the 
 normal growth of the yield in revenue. On the 
 other hand, I allowed very little for the normal 
 growth of expenditure. I set one against the other. 
 But it must be remembered that social and 
 industrial changes now in progress, if by lessening 
 the return on capital, they restrict the accumula- 
 tion of wealth, may eat into the yield of the 
 durect taxes, and especially of the super tax 
 and the death duties. Again, the £50,000,000 
 of the £114,000,000 which is attributable to 
 the continuation of the excess profits duty is 
 avowedly intended only to be temporary, and 
 must be replaced from some other source unless 
 m the meantime we find relief from our burden 
 m other ways. In the current year I estimate an 
 additional revenue of £41,450,000 net. 
 
 The final balance-sheet for 1919-20 will thus 
 be: Expenditure, £i,434»9io,ooo; revenue, 
 £1,201,100,000; deficit to be borrowed, 
 ro 
 
146 
 
 NATIONAL FINANCE 
 
 £233,810,000. On this basis the gross debt 
 on the 31st of March, 1920, will be increased 
 from £7,435,000,000 to £7,669,000,000, or, if 
 we take the round figure of £250,000,000 as the 
 new borrowing to aflow for a margin -of error, 
 £7>685,ooo,ooo, still substantially less than the 
 figure of £7,980,000,000 which we thought last 
 year might be the total on the 31st of Mwh mm 
 past. Against these future liabilities we shall 
 hold special assets in the shape of loans to oiv 
 AUies, £1,668,450,000; loans to our Dominions, 
 £196,890,000; a further contribution from India 
 of £30.500,000, making together a total of 
 £1,895,840,000. Or, if I follow the calculation 
 of my right hon. friend of last year, who reckoned 
 the Allied debt to us at half of its amount, loans 
 to Allies, £834,225,000; loans to Dominions. 
 £196,890,000; Indian contribution, £30,500,000, 
 giving a total of £1.061,615,000. There wiU 
 be— I cannot forget them (cheers)— in addition, 
 the German indemnities (cheers), and so much 
 of the remaining assets acquired out of vote 
 of credit and arrears of existing excess profits 
 duties still outstanding on the ist of April next 
 as IS not required to meet the abnormal ex- 
 penditure of that year caused by the overlapping 
 of war conditions. The estimated balance of the 
 vote of credit assets, as I have ahready stated, is 
 £350,000,000, and the arrears of the existing 
 excess profits duty £100,000,000. 
 
 I have now completed— and I thank the House 
 for the patience with which they have heard me 
 —(cheers) my immediate task. I have en- 
 deavoured to give the House as dear a picture 
 as is yet possible both of our present position 
 
 THE BUDGET OF 1019 
 
 and of our future prospects. I have had to urge 
 upon the House, as I may have to urge again 
 ana agam, the necessity for severe economy in 
 national and individual expenditure. I have no 
 i« ^u- reduction in expenditure unless we 
 T u ^^^^^ , ^^^^ example. (Cheers.) 
 1 have had at the same time to impose further 
 large burdens upon the community. I cannot 
 hope that m the discharge of either part of mv 
 ta^ I Shall earn popularity. But in one point I 
 find satisfaction. I am grateful that it has 
 fallen to my lot to make the first proposal in 
 this House for the statutory embodiment in 
 our financial system of that policy of Imperial 
 Preference with which my father's name and 
 fame will be for ever hnked. (Loud cheers,) 
 
 It is anticipated that in 1919 spirits will yield 
 £52 m., beer £60 m., tea £14-2 m., sugar £39^ m. 
 tobacco £46 8 m„ motor spirit ^8m.. matched 
 £2 4 m., entertainments £8 m. 
 
 From the Chancellor's speech it will be seen 
 that our present financial position is obscure, 
 and the outlook uncertain. We are passhig 
 through the end of a great crisis which has 
 necessitated an enormous emergency expendi- 
 ture. We cannot forecast with any confidence 
 our expenditure in the near future, the value of 
 the salvage to be recovered in the process of 
 clearing up after the War, or the times and 
 amounts of repayment of debts due to us from 
 
XiS NATIONAL FINANCE 
 
 other countries. The range of prices is another 
 unknown factor. The fieavy charge for naval 
 and military pensions will gradually diminish, 
 and much of the expenditure for reconstruction^ 
 Uke the land settlement and the provision of 
 houses throughout the country, will be made once 
 for all and will be productive of revenue. Our 
 financial history for some years to come will be 
 of absorbing interest and importance, and will 
 deserve all the consideration which every ond 
 of us should give to it. No attempt is made here 
 to enlarge upon tjie figures or the methods of 
 our War Finance, or to touch upon currency, 
 public credit and other difficult problems which 
 the student cannot understStnd without special 
 preparation. The near future is sure to see an 
 abundance of financial hterature of all kinds. 
 A note is added on page 164 lor the assistance 
 of those who desire to pursue their studies 
 fiurther and to keep abreast of the subject. 
 
 APPENDIX 
 
 — Rbvbnub AMD EznarDiruRB, 1907-18. 
 B.—Revenub (Principal Heads), 1907-18. 
 C— Expenditure (Principal HKads). 1907-18. 
 
 r>. — National Debt, 1906-18. 
 
 E. — Principal Changes in Tariff, 1911 and 1918. 
 
 Compared. 
 
 F. — Taxes Reduced or Increased since 1907. 
 
 NOTE TO APPENDIX 
 
 IN using the figures in these tables allowance 
 should be made for the growth of population 
 and the rise of prices. On the 30th of June, 
 1907, the estimated population of the United 
 Kingdom vitai about 43} m. It increased about 
 r per cent, per annum till 1911, when the rate 
 of increase iell to about i per cent, and since 
 the War has remained at about a total of 48 m. 
 The range of prices^ is measured by an Index 
 Number. Taking that of the Economist, based 
 upon forty-five principal commodities, and 
 starting with an average of 100 for the five 
 years 1901-1905, we have the following table : 
 
 149 > 
 
NATIONAL FINANCE 
 
 ii6*6 
 127-3 
 165a 
 223 
 263*2 
 
 2B4'S (highestwar 
 point reached). 
 282*6 (after the 
 
 Armistioe). 
 290*9 
 
 It may be noted that the tarifi rates mentioned 
 are the principal or goveming rates. Beer, for 
 example, pays a higher rate for each degree of 
 gravity over 1055. Sugar is charged according 
 to its quahty as measured by the polariscope, 
 and sugar of less than 98 degrees is taxed at a 
 lower rate, but the great bulk of sugar imported 
 is of 98 degrees or more. The minor changes 
 in molasses, glucose, and saccharin which follow 
 sugar are not specially mentioned. Tobacco is 
 the unmanufactured leaf containing not less than 
 10 per cent, of moisture. The rates on cigars, 
 cigarettes, snufE, tobacco with less than the 
 standard amount of moistiure, stripped leaf, etc., 
 are not given here. Details will be found in 
 such works of reference as Whiiaker's Almanack, 
 or more completely in the Annual Reports of the 
 Commissioners of Customs and Excise and of the 
 Commissioners of Inland Revenue. A summary 
 of the tariff is included in the annual Statistical 
 Abstract. 
 
 End of July, 1914 
 
 December, 1914 . . 
 
 » 1915 •• 
 M 1916 .. 
 
 •» »f 1917 
 
 Angntt, X918 
 
 November, 1918 .. 
 ». July, 1919 ' - 
 
 APPENDIX A. 
 
 AMOUNT OF THE IMPERIAL REVENUE AND 
 
 EXPENDITURE OF THE UNITED KINGDOM 
 AND THE SURPLUS OR DEFICIENCY OF IN- 
 COME. IN EACH OF THE YEARS BEGINNING 
 Isx APRIL, 1807 TO 1918. 
 
 Ybars 
 BBonnmio 
 
 1ST April. 
 
 1907 
 
 X908 
 
 1909 
 1910* 
 
 1911 
 1912 
 
 19x3 
 
 1914 
 
 1915 
 X9x6 
 
 X917 
 
 X918 
 
 RSVBMUB. 
 
 Receipts 
 into the 
 Exchequer, 
 
 156,537.690 
 
 151.578.295 
 
 131,696.456 
 203.850,588 
 185,090,286 
 188,801.999 
 198,242,897 
 226,694,080 
 336,766.825 
 
 573.427.582 
 707.234.565 
 889«oax«ooo 
 
 EZPSNDITURB. 
 
 Issues out 0/ 
 the EMchequ0r 
 
 (exclusive of 
 Expenditure 
 not chargeable 
 against 
 
 151.812,094 
 152,292.395 
 i57.944.6H 
 171.995.667 
 178.545.100 
 188,621.930 
 
 i97.49a.969 
 
 560,473,533 
 
 1.559.158.377 
 2,198,112,710 
 
 2.696,a2X.405 
 «.579.30'.«» 
 
 SOKVLOS (+) 
 
 or 
 
 D rnWCIBMC Y 
 
 (-). 
 
 } 
 
 £ 
 
 4.725.596 
 714.100 
 
 5.6o6.766t 
 
 + 6.545,186 
 + 180,069 
 + 749,928 
 
 - 333.779,453 
 -1.222,391,552 
 
 - 1,624.685,128 
 - 1,988,986.840 
 - 1,690,280.000 
 
 * TmrhMflng atraut of X909-XO. 
 
 t Tho Revenue Act. xoxx. diioctod tint tbo inoome and 
 
 expenditure of the years 1909-10 and 1910-11 should be aggre- 
 gated for the pvrpoM of detenninuif the OU Siakiag Fvad lor * 
 1910-11. 
 
 I5« 
 
APPEN 
 
 IMPERIAL REVENUE (EXCHEQUER 
 ^saL,t^ ^^^^ THEREOF. IN EACH OF 
 
 (UUUS OMITTED.) 
 
 
 igoj 
 
 ' tgoi 
 
 > 
 
 i 19x0 
 
 Customs 
 Excise 
 
 Estate, etc.. Duties . . 
 Stamps (exclusive of Fee and 
 ^^teM stamps,. 
 
 House Duty . . 
 
 ^operty and Income Tax 
 
 ^iT (including Super Tax from 
 
 igio).* 
 
 Excess Profits Dnfir 
 Land V^e Duties .. 
 
 £ 
 
 35.72 
 19,07 
 
 7.97 
 
 73 
 1.96 
 
 — 
 
 £ 
 
 )o 29,2c 
 33.6f 
 18.37 
 7.77 
 
 73 
 1,90 
 
 33.93 
 
 £ 
 
 >o 30.3^ 
 »o 3i.oj 
 'o 21,76 
 'o 8,07 
 
 15 
 
 56 
 13.29 
 
 - — 
 
 £ 
 
 [S 33,140 
 
 2 40,020 
 ►6 25,452 
 '9 9,784 
 
 1,220 
 3,080 
 5 61.946 
 
 Total 
 
 • • • • 
 
 I30.32< 
 
 > 125,55< 
 
 ^ 105. 23< 
 
 } 175,162 
 
 Postal Service 
 Telegraph Service ] . 
 Teleptione Service . . 
 
 Qrown Lands (Net Receipts)' 
 Receipts from Suez Canal 
 Shares and Sundry Loans. 
 
 z 7,88c 
 
 } 4.42c 
 
 52c 
 1.185 
 
 > 17.77* 
 
 > / 3.02< 
 
 \ I.5K 
 
 > 53^ 
 
 > 1.171 
 
 > l8,22( 
 
 5 3.09< 
 
 > 1,72c 
 
 > 48c 
 [ I.26{ 
 
 > 19,220 
 
 > 3.175 
 
 > 1.955 
 ) 500 
 
 ^ 1.234 
 
 Miscellaneous : 
 Fee and Patent Stamps . 
 K«ceipts by Ovil Depart- 
 ments, etc. 
 
 1,024 
 1,184 
 
 1.023 
 1,003 
 
 1.037 
 
 650 
 
 1,070 
 1.534 
 
 Total Miscellaneoos .. 
 
 2.208 
 
 2.026 
 
 1.687 
 
 2.604 
 
 Total Rxvsnus 
 
 156,537 
 
 151.578 
 
 131.696 
 
 203.850 
 
 ♦ The rate in the ^ was as follows :. 
 
 Nominal rate 1907 and 1908. 19091019x3, 
 
 Rate on Earned Ii^e 1 ^' 
 
 Rate of Super Tax^^ , \ ^ ^' 
 
 ^L'rat" of^'n'c'^n^^^ 
 of Super Tax extended to 3^ 6^ '^'^ ''^'^^^J t>y 40 per 
 
 152 
 
 ™® UNITED KINGDOM. UNDER THE 
 THE YEARS BEGINNING 1st APRIL, 1907 to 1W8. 
 
 19x1 
 
 Z912 
 
 1913 
 
 1914 
 
 1915 
 
 1916 
 
 1917 
 
 1918 
 
 £ 
 
 £ 
 
 / 
 
 / 
 
 t 
 
 f 
 £ 
 
 £ 
 
 £ 
 
 
 
 5 35.45" 
 
 3^.^6 
 
 2 59.6o( 
 
 5 70.56 
 
 I 71,26 
 
 I 102,780 
 
 
 w 30.00 
 
 39.59< 
 
 ^ 42,31. 
 
 3 6i,2i< 
 
 > 56.38^ 
 
 5 38,77 
 
 2 59,440 
 
 25.39 
 
 2 25,24 
 
 8 27,35( 
 
 9 28.38: 
 
 2 31.03, 
 
 5 31.23' 
 
 2 31.67 
 
 4 30,26t 
 
 9.45 
 
 * 10,05 
 
 9 9.96( 
 
 ^ 7#57' 
 
 
 
 » O.jO" 
 
 12,430 
 
 75< 
 
 a 70 
 
 jOi 
 
 > 63< 
 
 > 66< 
 
 > 64< 
 
 > 66 
 
 5 630 
 
 2,I3« 
 
 3 2,00 
 
 D 2 c%c%t 
 
 ^ A f \J\J\ 
 
 ^ 1.93* 
 
 ) 1,99c 
 
 ) l,94< 
 
 > 1.96« 
 
 a x.850 
 
 44.80- 
 
 \ 44.80 
 
 ^ 47.24< 
 
 > 69.394 
 
 ) I28r32C 
 
 > 205,03; 
 
 J239.S* 
 
 9 291*4^ 
 
 — 
 
 — _ 
 
 
 
 14c 
 
 » I7Q Q2C 
 
 
 i 2fie Aftft 
 ^ •05**'**' 
 
 48] 
 
 ^ 45. 
 
 5 715 
 
 > 41a 
 
 f 363 
 
 521 
 
 68< 
 
 5 664 
 
 155.04c 
 
 » 154.753 
 
 \ 163,029 
 
 > 189.303 
 
 290.088 
 
 514,10^ 
 
 I 61^. 04c 
 
 
 19,650 
 
 20,30c 
 
 ) 21,190 
 
 20,400 
 
 24.100 
 
 24.350 
 
 25,20c 
 
 ) 29,400 
 
 3.105 
 
 3. IOC 
 
 ► 3.080 
 
 3.000 
 
 3.350 
 
 3.350 
 
 3.50c 
 
 > 3,800 
 
 2.945 
 
 5.775 
 
 i 6,530 
 
 6,250 
 
 6,450 
 
 6.400 
 
 6,60c 
 
 ► 6.800 
 
 530 
 
 530 
 
 530 
 
 545 
 
 550 
 
 650 
 
 690 
 
 > 760 
 
 1,281 
 
 1.418 
 
 1.579 
 
 1.276 
 
 2.431 
 
 «.055 
 
 6,156 
 
 x 1,680 
 
 1 
 
 1,031 
 
 1.066 
 
 1.078 
 
 961 
 
 943 
 
 934 
 
 934 
 
 
 1.507 
 
 1.859 
 
 1,225 
 
 4.956 
 
 8.853 
 
 15,582 
 
 51.214 
 
 
 2.538 
 
 2,925 
 
 2.303 
 
 5.917 
 
 9.796 
 
 16,516 
 
 52.148 
 
 52.303 
 
 ^85,090 
 
 188,801 
 
 198,242 5 
 
 126,694 : 
 
 J36.766 
 
 573.427 
 
 707.234 
 
 889,021 
 
 i9X4r* I9i5.« 1916 and 1917 1918. 
 
 9rf. to 15. li IS. 6d. to 2S. 6d. 25. d to 5S 2S .^'tn fi. 
 
 5^ toxs.4i. iorf.toa,.8rf. iorfft». u:lo%'.°(^" 
 the Income Tax year. 
 
 cent, for the second half of the Xnoome Tax year and that «ale 
 
 «5S 
 
APPEN 
 
 AMOUNT OF THE IMPERIAL EXPENDITURE (EX 
 THE PRINCIPAL HEADS THEREOF. IN EACH 
 
 fjM'M OMITTBD.) 
 
 t 
 
 1007 
 
 IQ08 
 
 X909 
 
 XOIO 
 
 I.— COMSOUSiAnD FOMD 
 
 £ 
 
 ;^ 
 
 i 
 
 / 
 
 Sbrvicbs: 
 
 
 
 
 A 
 
 National Debt Services: 
 
 
 
 
 
 Inside the Permanent or 
 
 
 
 
 
 Fixed Annual Charge: 
 
 
 
 
 
 interest of Funded Debt 
 
 15.773 
 
 15.652 
 
 15.490 
 
 15.377 
 
 Terminable Annuities 
 
 3.590 
 
 3.550 
 
 3,526 
 
 3.481 
 
 Interest of UnfnndAfl 
 
 T mAa 
 
 If 100 
 
 1.567 
 
 1.353 
 
 Debt. 
 
 
 
 Ifanasement of tlwi 
 
 Tftn 
 
 175 
 
 173 
 
 175 
 
 Debt 
 
 
 
 
 New Sinlring Pnnd 
 
 
 /»455 
 
 x.ooo 
 
 4. 1 12 
 
 JLOtai .. 
 
 
 28.000 
 
 21.757 
 
 24.500 
 
 Outside the Permanent or 
 
 
 
 54 
 
 Fixed Annual Charge. 
 
 
 
 
 Total National Debt ServiCM 
 
 2Q.SOO 
 
 88.000 
 
 '*»757 
 
 *4.534 
 
 Development Fund . . 
 
 
 
 
 500 
 
 Road Improvement Fond . . 
 
 
 
 
 862 
 
 Payments to Local TaatiQtt 
 
 11.155 
 
 
 9.445 
 
 
 Accounts, etc. 
 
 
 
 
 Otlier Gonsolidatod Fnnd 
 
 
 
 
 
 Services: 
 
 
 
 
 
 Civil List 
 
 470 
 
 470 
 
 470 
 
 470 
 
 Annuities and Pensions 
 
 284 
 
 271 
 
 265 
 
 299 
 
 Salaries and Allo^fiqmoes 
 
 77 
 
 
 72 
 
 56 
 
 Courts of Justice 
 
 515 
 
 sll 
 
 518 
 
 314 
 
 Miscellaneous Services . . 
 
 624 
 
 331 
 
 327 
 
 323 
 
 
 I.971 
 
 1.669 
 
 1.653 
 
 1.664 
 
 Total ContQitdated Fund 
 
 42,627 
 
 39.493 
 
 32.856 
 
 37.462 
 
 Services {mni§d for- 
 
 
 
 
 
 
 
 ♦ From ist January. 1909, the coUsctioii of Dog, Gun, Game, 
 ierred to the Local Authorities. 
 t Interest, etc., on debt created under the War Loan Acts. 
 
 «54 
 
 DIX C 
 
 CHEQUER ISSUES) OF THE UNITED KINGDOM. UNDER 
 OF THE YEARS BEGINNING 1st APKJU 1907 TO 1918. 
 
 191 1 
 
 1912 
 
 1913 
 
 19x4 
 
 1915 
 
 19x6 
 
 1917 
 
 1918 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 15,202 
 
 3.517 
 1.158 
 
 15,000 
 
 3.540 
 1.171 
 
 14.787 
 3,202 
 
 1.115 
 
 14.632 
 2.931 
 1.771 
 
 12.934 
 2,897 
 
 4.330 
 
 7.965 
 2,860 
 
 8,630 
 
 7.953 
 2,809 
 
 8,519 
 
 7.949 
 
 2.573 
 12,403 
 
 173 
 
 166 
 
 166 
 
 162 
 
 175 
 
 327 
 
 547 
 
 r«3 
 
 4.447 
 
 4.620 
 
 5.228 
 
 z.ooo 
 
 
 
 
 
 24.500 
 
 24.500 
 
 24.500 
 
 20,497 
 
 t2.I7I 
 
 20,338 
 
 19,782 
 
 4 107 ^6*7 
 
 19.828 
 J 1 70,023 
 
 23.638 
 
 1240,327 
 
 24,500 
 
 500 
 1.209 
 9.636 
 
 24,500 
 
 1,172 
 9.653 
 
 24,500 
 
 1.394 
 9.734 
 
 22,668 
 
 1,528 
 9.529 
 
 60,249 
 
 694 
 9.756 
 
 127,250 
 9.895 
 
 189,850 
 9.730 
 
 269.965 
 9.681 
 
 470 
 317 
 56 
 
 523 
 325 
 
 470 
 
 320 
 
 56 
 
 523 
 321 
 
 470 
 
 316 
 
 56 
 533 
 317 
 
 470 
 
 319 
 56 
 
 534 
 3»3 
 
 470 
 
 320 
 
 56 
 531 
 1.409 
 
 470 
 315 
 
 53 
 528 
 606 
 
 470 
 
 332 
 
 56 
 524 
 287 
 
 470 
 
 338 
 56 
 521 
 314 
 
 1.692 
 
 1,692 
 
 1.693 
 
 1.693 
 
 2.787 
 
 1.973 
 
 1,670 
 
 1.699 
 
 37.539 
 
 37.017 
 
 37.322 
 
 35.419 
 
 73.4«8 
 
 • 
 
 X39.XI9 
 
 aox.S52 
 
 281.345 
 
 and EstabUshment Licences in England and Wales was tiaas- 
 19x4 to X918. 
 
 «55 
 
APPENDIX C 
 
 AMOUNT OF THE IMPERIAL EXPENDITURE (EX 
 THE PRINCIPAL HEADS THEREOF, IN EACH OF 
 
 (OOO'S OMITTBD.) 
 
 
 1907 
 
 X908 
 
 1900 
 
 19x0 
 
 IQII 
 
 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 
 xotai uonsoli dated 
 
 4a,6a 
 
 7 39>49 
 
 3 S2,8j 
 
 6 37.4^ 
 
 « 37.339 
 
 Fand Services — 
 
 
 
 
 11. 
 
 
 
 
 
 
 SuvwLY Sbsvicbs: 
 
 
 
 
 
 
 Army 
 
 ' • • • • 
 
 — 
 
 5 26.84* 
 
 D 27.23 
 
 6 27.44< 
 
 ? 27.649 
 
 ivjuuistiy m MUBltlOIlS 
 
 — 
 
 
 
 
 > 42.8^8 
 
 
 
 31.14 
 *— ~" 
 
 I 32,18 
 
 B 35.80 
 
 7 40,38( 
 
 
 — 
 
 
 
 
 Gvil Services: 
 
 
 
 
 
 1 
 
 I. Public Works 
 
 3.69 
 
 2 2,872 
 
 * 3." 
 
 3 3.16^ 
 
 j 
 
 ^ 3.217 
 
 
 and ijuiidings 
 
 
 
 
 M.X. MuanesandEx- 
 
 a, 91 
 
 6 a.87^ 
 
 5 3.04 
 
 I 3.36€ 
 
 > 4,144 
 
 
 penses ot Uvil 
 
 
 
 
 
 
 
 Departments. 
 
 
 
 
 I 4.278 
 
 f 4.360 
 
 i^w and Justice 
 
 3.83 
 
 9 3. 96 J 
 
 5 4.08 
 
 IV. Edacfttioii. 
 
 17.35 
 
 9 17.36c 
 
 A 17.90: 
 
 1 18.744 
 
 18.983 
 
 
 Boeaoe and 
 
 
 
 
 
 
 Art. 
 
 
 
 
 
 
 V. tfoteiga and 
 
 a,05< 
 
 > 1,024 
 
 _ A 
 
 \ «.94< 
 
 » 1.995 
 
 2.053 
 
 
 uoiomal Ser- 
 
 
 
 
 
 
 vices. 
 
 
 
 
 
 
 
 'Non - effective 
 
 
 
 
 
 
 VI, 
 
 and Charit- 
 
 81' 
 
 f 77« 
 
 09] 
 
 oOI 
 
 804 
 
 
 aUe Services 
 
 
 
 
 
 
 Miscellaneous 
 
 50: 
 
 
 
 Q4.Q 
 
 681 
 
 VII. 
 
 Old Age Pen- 
 
 
 a.070 
 
 8.49C 
 
 9.708 
 
 XI TKQ 
 
 
 sions, Labour 
 
 
 
 
 
 
 
 Sxehaiiges, 
 
 
 
 
 
 
 
 Insurance, etc. 
 
 
 
 
 
 
 Uther Services. J 
 
 
 
 
 
 
 Total Civil Services 
 
 30.180 
 
 32.33^ 
 
 40,010 
 
 43.098 
 
 46,001 
 
 Cnstoitis 
 
 947 
 
 974 
 
 *2,Il6 
 
 2.2II 
 
 2.297 
 
 Inland! Revenud 
 
 2.275 
 
 2.346 
 
 *I,226 
 
 1,708 
 
 1.654 
 
 Post Office Services . . 
 
 
 I«,ii3 
 
 18,693 
 
 19.681 
 
 2^.547 
 
 iotai 
 
 Sap^ Ser- 
 
 
 
 
 
 
 vices .. ] 
 
 109.185 
 
 112.799 
 
 125.088 
 
 134.533 
 
 X4X.006 
 
 voxes 
 
 
 
 
 iNaval and Military 
 
 
 
 
 
 
 Operations, etc. 
 
 
 
 
 
 
 Total Expendi- i 
 
 
 152.292 
 
 "57.944 
 
 '7I.995 3 
 
 f 78,545 
 
 TURE chargeable 
 
 
 
 
 
 against Revenue 
 
 
 
 
 
 
 Exase transferred from Inland Revenue to Customs in 
 t Nominal amounts, the substantive issues being made 
 t Nomuial ainoiiats lot libiistiies of Ftesions: ^d! 
 
 156 
 
 (Continued) 
 
 CHEQUER ISSUES) OF THE UNITED KINGDOM. UNDER 
 THE YEARS BEGINNING 1st APRIL. 1907 to 1918 
 
 1912 
 
 I913 
 
 1914 
 
 1915 
 
 1916 
 
 I9I7 
 
 1 1918 
 
 i 
 
 37.01 
 
 £ 
 
 7 37.32: 
 
 £ 
 
 * 35.41 
 
 £ 
 
 9 73.4^ 
 
 £ 
 
 18 139.11 
 
 £ 
 
 9 201,255 
 
 \ t 
 
 i 
 
 281,345 
 
 28,07 
 
 44.36, 
 
 I 28.34( 
 
 5 48,831 
 
 ) 28,88 
 1 51.55 
 
 t 
 
 _ t 
 
 t 
 
 7 _ti 
 
 5 T*2 
 
 7 fiJ 
 
 r 
 
 ti5 
 t7 
 
 3.49 
 
 ^ 3.33fi 
 
 3.66 
 
 I 3.43 
 
 3 2,971 
 
 6 3^880 
 
 » 
 
 
 4.32< 
 
 4.287 
 
 4.58* 
 
 9 4.62 
 
 ^■•04 
 
 
 
 
 4.47* 
 19.533 
 
 ' 4.49X 
 t 19,450 
 
 4.75. 
 20.23. 
 
 5 4.66- 
 1 20.67- 
 
 4,47- 
 20.30' 
 
 \ 4.791 
 
 7 25,803 
 
 
 CO 
 
 •J 
 
 8. 
 
 2.151 
 
 1.523 
 
 1.83^ 
 
 1.49: 
 
 1 I,22< 
 
 I.3I7 
 
 
 r -M . 
 
 
 a 
 
 795 
 
 509 
 16.677 
 
 824 
 
 322 
 
 19,666 
 
 ■ 1. 08c 
 20. 795 
 
 > 1.072 
 
 i8,74S 
 
 i,06€ 
 
 I9.2ifi 
 
 > 1,046 
 20,009 
 
 
 s 
 
 • 
 
 
 
 
 
 I 
 
 32 
 
 
 
 51.944 
 
 2,324 
 1,876 
 23,024 
 
 53.901 
 
 2.431 
 
 2,052 
 
 24.607 
 
 56,956 
 
 2.479 
 
 2,123 
 
 26,060 
 
 54.718 
 2.514 
 2,089 
 
 26.673 
 
 54.113 
 2.397 
 2.331 
 
 26,454 
 
 61,246 
 
 2.473 
 2.683 
 
 25.738 
 
 67.988 
 
 } 5.532 
 26.396; 
 
 151,604 
 
 160,170 
 
 [68,053 
 J57.000 
 
 86,018 
 1.399.65a 
 
 85,328 
 
 1.973.664 
 
 92,169 
 
 a,4oa.8oo 
 
 99.956 
 2,198,000 
 
 
 197.492 : 
 
 )6o.473 
 
 A, 559. 158 
 
 2,198,112 
 
 2.696.221 
 
 2.579.301 
 
 1909. 
 
 under Votes of Credit. 
 
 Shipping, etc., and a grant to Lady Maude ol 1^5.000 in 19x7. 
 
 157 
 
13S 
 
 NATIONAL FINANCE 
 
 J 
 
 Exchequer 
 Balances 
 at 
 
 Banks of 
 England 
 
 and 
 Ireland. 
 
 we«QOOMvOOOC*^0»0»00 
 lO M »0 Tj-vO M IT) r<l ro 
 v^} 0^ fOOO »0'<*"CO'<1-^iO'^0 
 
 M MM MOO M M « 
 
 Estimated Assets. 
 
 Other 
 
 Assets. 
 
 8. 
 
 €i '•^ •'i 
 
 Suez 
 Canal 
 Shares. 
 Estimated 
 Market 
 Value. 
 
 Q VO «0 t*. «O00 vO "O 0* f^OO -^CO 
 CO 0» "OO ON Q M W On «OvO « 
 *SjO_ t^0_0^ « vO On OnoO -^vO 
 
 M* M* m' m" 10 ^ ^ 0^ t>i QK 
 •O to **> fO fO ▼ •*> €• CI CI CI 
 
 Aggregate 
 Gross 
 Liabilities of 
 the State as 
 represented 
 by the 
 Total of 
 Columns 
 4 and 5. 
 
 6. 
 
 m «*)NvO00 ■^m On'^w^ 
 
 <> M M ■"^ 00 N vO C50 -"i-vO 
 *HlO0"" ON N cf »0 -^vO «0 t>i PO M* 
 
 <% « «» 
 
 Other 
 Capital 
 Liabilities 
 in Respect 
 of Sums 
 Borrowed 
 under 
 various 
 Acts. 
 
 On "500 M T^^^Q On»0 
 
 t** «0 «0 M ^VO M CX) 00 ON 0» 
 
 *^nO^ 00 'l-WOO 000 *OOnvO m N 
 •0 On 1^ On vO VO C4 OtN 
 
 ^ 5f m ir> ^ IT) 10 V) <^ 
 
 Totals of 
 Columns. 
 I to 3. 
 
 4- 
 
 0N»O«Ot^«ON ^ rr>0 t^OO ^ O 
 
 N «0 N N N 00 ^00 
 ViJ ro Onm c< t*^ \r\ yi" t.* t.4 on cT iJ" 
 
 t<« r^vD «o «o >o M M 00 
 
 m' M~ to 
 
 Unfunded 
 
 ueoi. 
 
 5? loiP oooooooMMM 
 
 vo uSvO n" csT cT c^vcT 10 rCvfi rr\ m* 
 NO "O^L ^0 ^ «n CO **> On 0^ vO PO 
 
 m" «*> «0 
 
 Estimated 
 Capital 
 Liability 
 in respect 
 
 Termin- 
 able 
 Annuities. 
 
 2. 
 
 ON^t^o^^o ^^■^O^N 000 »r><r> 
 *S5 \ °0 ^OOO^^O »0«00 M On 
 
 *2 ONoo* mS ^ «o m" o^oo~NO^ M 
 ^^fofofocnfofodcictcici 
 
 
 t^OO 00 00 00 >oo »or^Q t^o 
 
 ^ W POvO M IT) M OnvO 00 
 M* uS m" ^ 0* N f'^vO* *O0C? 
 
 9 9 2 2 9 ONOO 00 M M M 
 
 At the 
 close 
 of the 
 Financial 
 Year 
 finding 
 
 March. 
 
 NO t^OO On M N U^\0 t^CO 
 O'WW^ONOtONONO^O^ONONO'* 
 
 APPENDIX E. 
 
 COMPARISON OF PRINCIPAL CHANGES IN CUSTOMS 
 AND EXCISE DUTIES^ 1919 AND 1919. 
 
 -^r, bome-made, per 36 
 galloiit of specific gravitjr 
 <rf 1055- 
 Cinematograph films, im- 
 ported, per foot of length : 
 
 Blank 
 
 Positives , , , , 
 Negatives 
 Clocks, watches, and parts 
 
 thareof. imported. 
 Cocoa, per cwt. . . , * 
 Cofiee, roasted, per lb. . . 
 . Dried fruit (other than 
 
 currants), per cwt. 
 Matches, for every 10,000 
 (2d. extra on imported 
 matches). 
 Mechaniol lighters: 
 
 Requiring tlM use of 
 
 spirits. , 
 Otnisrsorts .. 
 Motor-cars, motor-cycles, 
 and parts thereof, im- 
 ported. 
 Motor spirit, the gallon . . 
 Musical instruments im- 
 ported 
 
 ^Spirits, imported, per 
 galloii. 
 
 Home-made . . 
 Sugar exceeding 98 degrees 
 of polarisation, per cwt. 
 Tea, per lb. , . , . 
 Tobacco, per lb. 
 Entertainments 
 
 • Additional rates are 
 charged on spirits im- 
 ported in botue. imma- 
 ture spirits, and * per* 
 fumed spirits. 
 
 1913- 
 
 £ 8. d. 
 
 079 
 
 o 
 
 o 
 
 O 
 
 o 
 
 o 
 o 
 o 
 
 o 
 
 o 
 o 
 o 
 
 9 
 o 
 
 7 
 
 o 
 
 o 
 
 o 
 o 
 
 4 
 
 3 
 o 
 
 * • 
 
 •• • 
 
 000 
 
 000 
 
 o 
 o 
 
 o 
 o 
 
 o 
 o 
 
 o 
 o 
 
 o 
 o 
 
 3 
 o 
 
 o 15 I 
 
 o 14 9 
 o I 10 
 
 o o 
 
 • 3 
 000 
 
 i 
 
 1919. 
 £ s. d. 
 s 10 o 
 
 o o o| 
 001 
 
 005 
 One- third 
 of value. 
 330 
 o o 
 o 10 
 
 6 
 6 
 
 050 
 
 010 
 
 006 
 One-third 
 of vatoe. 
 
 006 
 One-third 
 
 of value. 
 
 2 10 4 
 
 I 10 O 
 I 5 » 
 
 010 
 08a 
 
 From up 
 to25.accor(^ 
 ing to price 
 of admission. 
 After 15s. 
 6d. extra for 
 every 5s. or 
 
 ptrttheraof. 
 
 >59 
 
APPENDIX F. 
 
 PRINCIPAL CHANGES IN TAXATION SINCE 1907. 
 
 (OOO'S OmTTBD.) 
 
 Yeaf 
 
 beginning 
 1st April, 
 
 1908 
 
 1909 
 
 Sugar duty reduced from 4s. 2d. to 
 Z8. lod. the cwt., with correspondikig 
 
 reductions in glucose, etc. 
 Establishment licenses transferred to 
 local authorities in England and 
 A^^clIgs 
 
 stamp duty on certain marine insur- 
 ances reduced from 3d. to id. per cent. 
 
 New relief of tax on ^10 for each child 
 under 16 on ioeomes from £160 to 
 
 ^^00 
 
 Additional relief under Schedule A In- 
 come tax lands and houses . . 
 
 Spirit duty increased from iis. to 
 14s. gd. per gallon on British and 
 from IIS. 4d. to 15s. id. on foreign 
 spirits (estimate for the y^ar) 
 
 To^cco duty increased from 3s. to 
 3s. 8d. per lb., with increases on 
 cigars, manufactured and home- 
 grown tobacco 
 
 Bfbtor spirit datf of 3d. per gallon 
 imposed 
 
 Loss + or 
 Gain-to 
 Revenue 
 in a Full 
 
 - 1,650 
 
 - 80 
 
 -640 
 -500 
 
 + 1.600 
 
 + 2.600 
 -•■375 
 
 * Changes of taxation proposed in the Budget speech do 
 not become effective until a later date. In some cases the 
 estimate is given for the year in which the change took place ; 
 in others the Budget estimate for a complete year. Unless 
 otherwise stated, the figure in this column is for a normal 
 year as computed at the end of the year of change. 
 
 160 
 
 APPENDIX F 
 
 161 
 
 Year 
 beginning 
 1st April, 
 
 1910 
 1911 
 1912 
 
 1913 
 1914 
 
 liquor licenses increased (estimate for 
 
 the year) 
 
 Motor-car licenses increased (estimate 
 for the year) . . 
 
 Death duties increased . . 
 
 Stamp duty increased on conveyances, 
 leases, bearer securities, and con- 
 tract notes . • . . . . 
 
 Income tax increased from is. to is. 2d. 
 
 Super tax imposed on incomes over 
 ;^5,ooo — 6d. in the £ on excess over 
 
 ^ ^ , •• 
 
 Abolition of abatements, etc., on in- 
 come tax for non-residents in the 
 United Kingdom 
 
 Land value duties imposed (estimate 
 for the year) . . . . . . • • 
 
 No change. 
 
 Relief from estate duty in respect of 
 quick succession . . . . . . 
 
 Income tax relief for each child in- 
 creased from tax on ;^io to tax on £20 
 
 Additional reUef for repairs, etc., of 
 small houses . . 
 
 Additional relief on incomes foom £160 
 
 to ;^500 . . 
 
 Publicans' licences reduced for short- 
 ened hours (estimate for the 3rear) . . 
 
 Death duties increased . . 
 
 Income tax increased from is. 2d. to 
 
 xs* ** ** ** ** ** 
 Modified relief of earned income 
 Enlarged liability of income from in- 
 vestment abroad 
 Super tax extended to incomes of 
 ;^3,ooo, and rates increased . . 
 
 Loss + or 
 Gain "to 
 
 Revenue 
 in a Full 
 Year. 
 
 + 2,600 
 +260 
 
 + 1,290 
 + 4,640 
 
 + 2.500 
 
 + 220 
 + 600 
 
 -156 
 - 220 
 
 -35 
 
 -150 
 
 -550 
 + 5.400 
 
 + 2,825 
 + 490 
 
 + 1,000 
 + 5.000 
 
 II 
 
I62 
 
 NATIONAL FINANCE 
 
 Year 
 beginning 
 1st April, 
 
 After 
 declara- 
 tion 
 ol 
 War. 
 
 1915 
 
 V 
 
 25s 
 
 Tea dutjr raised from 5d. to 8d. per 
 
 lb. (estimate for the year) . . 
 Beer duty raised from 7s. gd. to 
 
 per barrel (estimate for the year) 
 Income tax rates doubled (estimate 
 
 for the year) 
 
 Super tax rates dcrabled (estimate for 
 
 the year) 
 
 Publicans' licences reduced for short- 
 ened hours (estimate for the year) . . 
 
 Income tax relief for each child in- 
 creased from tax on £20 to tax on 
 £2S (estimate for the year) . . 
 
 Naval and military pay reheved of war 
 increases for income tax in case of 
 incomes not exceeding ;^30o (esti- 
 mate for the year) 
 
 Tea duty increased m>m 8d. to is. 
 
 Cocoa, coffee, etc.. duties increased by 
 one-half . . 
 
 Sugar duty raised from is. lod. to 
 9s. 4d. per cwt. (estimate for the year) 
 
 Dried fruits (except currants): duty 
 raised from 7s. to los. 6d. per cwt,. . 
 
 Tobacco duties increased by one-half . . 
 
 Motor spirit duty doubled (estimate 
 for the year) . . . . 
 
 Patent medicine duty doubled. . 
 
 Motor-cars, motor-cycles, etc., im- 
 ported: Customs duty of ^ of value. . 
 
 Musical instruments imported: Cus- 
 toms duty of ^ of value 
 
 Clocks, watches, etc., imported: Cus- 
 toms duty of \ of value 
 
 Cinematograph films imported: Cus- 
 toms duty imposed 
 
 Income tax increased by 40 per cent. . . 
 
 Exemption limit lowered from £160 to 
 /130 and abatements reduced 
 
 Increased liability under Schedule B 
 (farmers' profits) 
 
 Gmn-io 
 
 Revenue 
 in a Full 
 
 i 
 
 + 3.200 
 + 18,400 
 -H 45,900 
 
 + 8,450 
 - 200 
 
 -490 
 
 -590 
 + 4.350 
 
 + 270 
 
 + 11,700 
 
 + 120 
 + 8.250 
 
 + 850 
 + 260 
 
 + 530 
 
 + 40 
 + 220 
 
 + 300 
 + 37.650 
 
 + 4.760 
 + 2,240 
 
 APPENDIX F 
 
 163 
 
 Year 
 beginning 
 1st AprU, 
 
 1916 
 
 1917 
 
 1918 
 
 Super tax increased on incomes over 
 £9.ooo 
 
 Excess profit duty: 50 per cent, of 
 excess over pre-war profits . . 
 
 Income tax increased to 5s. and scale 
 altered 
 
 Sugar duty increased by ^d. per lb. . . 
 
 Cocoa, cofiee, and chicory duties in- 
 creased to £2 2s. per cwt 
 
 Matches taxed 3s. 4d. for every 10.000 
 
 Table-waters taxed 
 
 Excess profits duty increased to 60 per 
 
 cent 
 
 Entertainment tax imposed . . 
 Motor-spirit licence duty increased 
 Tobacco duty increased by is. lod. 
 
 per lb. . . . . . , , , , . 
 
 Entertainments duty increased 
 Excess profits duty raised from 60 to 
 
 80 per cent. 
 Reduction of liquor licence duty in 
 
 special cases . . " . . , , 
 Post Office rates increased 
 Cheque stamp duty raised from id. to 
 
 20. .. 
 
 Income tax increased from 5s. to 6s. . . 
 (Children allowance extended to wife, 
 
 and limit of income for allowance 
 
 raised to £800.) 
 Super tax increased 
 
 Spirit duty raised from 14s. 9d. to 30s. a 
 gallon . . 
 
 Beer duty raised from 25s. to 50s. a 
 
 barrel . . . . . . . . , , 
 
 Tobacco (unstripped and unmanufac- 
 tured) duty increased from 6s. 5d. to 
 
 8s. 2d 
 
 Matches duty increased by one-half . . 
 Sugar duty raised from 14s. to 25s. 8d. 
 per cwt. .. .. .. 
 
 Loss+ or 
 Gain - to 
 Revenue 
 in»Fun 
 
 + 2,685 
 
 + 30,000 
 
 + 43.500 
 + 7.000 
 
 + 2,000 
 + 2,000 
 + 2,000 
 
 + 11,000 
 + 5.000 
 + 800 
 
 + 6,000 
 + 100 
 
 + 20,000 
 
 -900 
 + 4.000 
 
 + 1,000 
 + 41,400 
 
 + 5.300 
 + 11,150 
 + 13.700 
 
 + 8.000 
 +600 
 
 + 13.200 
 
 • The figures on this page are Budget estimates only. 
 
NOTE ON FURTHER READING 
 
 Everyone should read Adam Smith's WeaUh of 
 
 Nations, which is one of the great books of the 
 world, and an excellent foundation for the study 
 of finance. Professor Marshall's Economics of 
 Industry and Professor J. S. Nicholson's Elements 
 of Economics (for advanced students their Prin- 
 ciples) will give a good grasp of economic reason- 
 ing. The only considerable British work on the 
 general principles of finance is the Public Finance 
 of Professor Bastable. I have attempted in my 
 Financial System of the United Kingdom to 
 explain the mechanism and formal procedure of 
 British finance, and in National Economy to outHne 
 the art of financial administration. Lieut. -Com- 
 mander Hilton Yoimg, M.P., describes Our Finan- 
 cial System in a popular form. Our Money and 
 the State and other writings by Mr. Hartley Withers 
 will be found useful. 
 
 For the technical side of statistics and for their 
 practical handling the works of Dr. Bowley and 
 Sir R. Gifien may be referred to. For local taxa- 
 tion and finance Professor S. J. Chapman's Local 
 Government and State Aid, 
 
 164 
 
 NOTE ON FURTHER READING 165 
 
 If it is desired to make a special study of a 
 particular portion of the subject of finance, such 
 as Customs, Death-Duties, Excise, Income-Tax, 
 Debt, etc., the reader will find under the appro- 
 priate articles in such works of reference as the 
 Encyclopedia Britannica or Palgrave's Dictionary 
 of Political Economy a hst of the principal authori- 
 ties, and as each authority refers to a great many 
 others the line of inquiry may be easily followed. 
 Mention may, however, be made of Dowell's 
 History of Taxes and TaxoHon^ond of the historical 
 accounts of British Budgets in Sir B. Mallet's 
 volume of that name, in Sir S. Northcote's Twenty 
 Years of Financial Policy, and Lord Buxton's 
 Finance and Politics. There is nothing like a 
 study of the actual budgets to bring us to grips 
 with the realities of finance. 
 
 The Introduction to the Study of Finance by an 
 American Professor, C. C. Plehn, can be recom- 
 mended to beginners. Many foreign works, like 
 those of Adolph Wagner, P. Leroy Beauheu, and 
 N. C. Pierson, and the writings of American 
 authorities hke Professor E. R. A. Sehgman and 
 H. C. Adams, are of great value. But by the 
 time the reader is able to make use of works of 
 this kind he will have passed beyond the stage 
 for which this primer is designed. 
 
INDEX 
 
 Adams, H. C. 
 American Commission 
 Annuities, terminable 
 Appropriation Accounts 
 Appropriations in Aid 
 Assets of Government 
 
 of Local Government 
 Auditor General 
 
 Bastable 
 
 Beneficial services 
 Bonded warehouses 
 
 Bowley, A. L. 
 Buxton, Lord 
 
 Capital Levy.. 
 Chamberlain, A. 
 Chapman, S. J. 
 Civil List 
 
 Clearances 
 
 Colwyn, Lord ] 
 Consolidated Fund . 
 Cost of Government . 
 Cunliffe, Lord 
 Customs 
 
 Debt, deadweight 
 floating 
 funded . . 
 local 
 
 national . 
 
 permanent 
 
 unfunded 
 Development Fund , 
 DoweU, S. . . 
 Drawback 
 
 PACES 
 .. 165 
 
 .. 77 
 
 40. 44 
 
 19,84 
 
 . . 97 
 
 32, 40, 45 
 
 164 
 
 87 
 
 55 
 164 
 
 165 
 
 72, 
 
 84 
 
 ■ 16, 
 3«. 
 
 166 
 
 139 
 99 
 164 
 
 38 
 55. 65 
 
 36. 38 
 
 . 4 
 
 . 110 
 
 • 53 
 
 • 79 
 
 • 77 
 76 
 
 • 97 
 
 • 76 
 
 • 77 
 
 • 77 
 
 • 36 
 . 165 
 
 • 55 
 
 INDEX 167 
 
 Economist .... « '^^"^ 
 
 Efficiency Audit .. \[ '* 
 
 Electors, numbers of . . , ] 
 
 Encyclopaedia aitannica .. .. "165 
 Enterprise, municipal ., . ** "0? 
 
 Excess Profits Duty . . , J 
 
 Exchequer ;; ;; ; ; 
 
 receipts 
 
 Excise * 
 
 53 
 
 Finance defined . 
 
 Local .. ;; ;; ;; \ 
 
 National . . . . . , " " * * I 
 
 Private 7 
 
 Pubhc * 
 
 Forestalments .. V/i til 
 
 Free Income .* .* ; ; * * g| 
 
 Giffen. Sir R ^ 
 
 Gladstone. W. E 25:28.2^:30,57.115 
 
 Harcourt. Sir W. .. ,3 
 
 " 27. 164 
 
 Incidence of taxation . . . . . , , 50 
 Income, free . . . , * * * * * * • • 00 
 
 ^^^^^^ 5.V2. 84 
 
 6i 
 
 Janet, P 
 
 j6ze. G ;; ;; • • ^4 
 
 Lawrence, Pethick 8a qt 
 
 Leroy-BeauUeu. P f; ;; 22 i6? 
 
 Ucences.^Establishment . . . . . . 
 
 Local Government . . , , ' * " * * "if 
 Londonderry. Lord . . .. y. ^ ,| 
 
 ' • * • • • • • • • . . . . 25 
 
 Mallet, Sir B. . . ^ 
 
 Marshiu.A. .. i. ^ " " 
 
 Bfoneys provided by Bsurliament .. ][ .i 39 
 
 National Expenditure Committee .5 
 
 Services . " 2t 
 
 Wealth " e V, ft! 
 
 Net receipts * ' • • 5» 72. 04 
 
 Nicholson, J. s ;; ** 
 
 Northcote, &r S. .. .. i. l', [[ 
 
168 NATIONAL FINANCE 
 
 PAGJH 
 
 Onerous services 
 
 Other Capital Liabilities . . . . 79 
 
 Other Exchequer Issues 18 
 
 Palgrave, Sir R 165 
 
 Pierson, N. G. . . . . . , . . . , . . 165 
 
 Plehn, C. C. ..^ ..165 
 
 Plrefttrential duties .. .. .. .. 122 
 
 Public Accounts Committee 21, 44, 45 
 
 Rates . . . . . , . . 85 
 
 Rival commodities 57 
 
 Road Board . . . . . , . . . . . , • • 37 
 
 Road Improvement Fund . . . . . , . , • • 37 
 
 Robespierre .. .. .. ,. ,, ^, 6 
 
 Rowntree, B. S. .. .. .. 7^ 
 
 Samuel, H. .. .. .. .. ..73 
 
 Seligman, E. R. A. .. .. .. .. 165 
 
 Simon, Jules . . . . . . . , . . . , . . 34 
 
 Sinking Fund, New §0 
 
 Old •> *• ,, 79 
 
 Smith, Adam 164 
 
 Spencer, H. . . . . . . . . , . . . • . 34 
 
 Statistics .. ., ..10 
 
 Supply Services . . . . . . . , . . 32, 36, 40 
 
 Taxation, direct ..67 
 
 indirect .. .. ..67 
 
 incidence of . . , . . . . . . . . . 68 
 
 Treasury 45, 50 
 
 Wagner, A. . . . . , . . . . . . . , , 15^ 
 
 Whitaker's Almanack . . . . . . . . . . 150 
 
 Wthers, H 15^ 
 
 Young, Hilton- , 164 
 
 V 
 
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 Babks in thr Wood. B. M. Ckofcer. 
 Bad Times, The. George A. BimimlHMi. 
 Bakbary SHBEr. Robert "jpfcn 
 Bbcausb or Thesb Things. . . . Ifariorie 
 
 ' 
 
 Snow EMmn, Ttm. B. Marie AAaMsl 
 
 Below Stairs. Mrs. Alfred Sidgwidc 
 BotmChumwroii, THf. p. N. and A. M. 
 
 BoT. MaifeCoMlB. 
 
 BsANDBDFteMCi^THB. WeatMyChenef. 
 
 Broken Shackles. John Oxenlun. 
 
 Broom Squire, The. S. Baring-GooU, 
 
 Boried Alive. Arnold Bennett. 
 
 Btbways. Robert Hichens. 
 
 Cau. or vmm Blood, Thb. Robert Hichens. 
 
 CAmoc Maria CoieDL 
 
 Card^ Tn. Arnold Bennett. 
 
 Carissima, The. Lucas Malet. 
 
 Cf ' se Fire. J. M. Cobban. 
 
 Chance. Joseph Conrad. 
 
 Cham» in the Cabinet, A Hilaire Belloc. 
 
 Cmmt m tub Armoor, Th«. Mrs. BeUoc 
 Lowndes. 
 
 CHRomcLBS or a German Towk. Tbe 
 
 Ante of ** Merda in Germany." 
 Ooa. or Carne, The. John Oseaham. 
 OoMmr, TttE. ISafceth Robins. 
 CooNSBL or PBRTBcnoir, A. LaeasMaht. 
 Crooked Way, The. Wflliam Le Qaevx. I 
 Dan Russbl the Foou fnwilDti 
 
 and Martin Ross. 
 
 Darmblbv PLAA RicMBatDt. 
 
 Dm Mm TBI. m Tmmm. B. W. Ror. 
 
 nnng. 
 
 Dbmetbr's Daughter. Eden Phillpotts. 
 Dbmon, The. C. N. and A- M. Wil|iaaM9f|. 
 
 D««T Trail. The. DMaOoofidfa. 
 Dwrn. Doctor, T*«. Su RoiwMi; 
 Double Life or Mr. Aimo Bortw. 
 
 The. E. Phillips Oppenheira. 
 DuKB's Motto, The. T. H. McCarthy. 
 Emmanuel Burden. Hilaire Belloc. 
 '^^^^"^HowwmooN. The. Mrs. 
 
 Family, Tmb. SBner MaiAMafe. 
 
 Fire in Stubble. Baroness Orciy. 
 Firemen Hot. C. J. Cutcliffe Hyne. 
 Flower or the Dusk. Myrtle Reed. 
 Gats ornmlteBRT, The. John Oxenham. 
 Gates or WkATH, Tin. AiMU Baonett. 
 Gentlemak Aovsntobbr, Thi. R c 
 Bailey. 
 
 Golden Centipede, The. Louise Gerard. 
 Got ^ Sile nce, The. C N. and A. M. 
 
 GossAiOR. Geoc|aA.llUi«ha«. 
 
 Governor or WmauM, Ttm, Marferf. 
 Bowen. — -Q«»ie 
 
 Great Lady, A. Adeline Sergeant. 
 Gr«at Mam, A. Arnold Bennett. 
 GoAmDrLAao^nm. W.B. Maxwell 
 GvimnB AoHUiBh ^i>B r, Btabiea Kmnden* 
 Halo, The. BarniiMi tm IfHaii, 
 
 Happy Huntiw Qmmn^ Tmm. ABoe 
 
 Perrin. 
 
 HAfTT Valley, The. B. M. Croker^ 
 Heart or ms Heart. E. Maria AlbanesL 
 Heart or the Ancient Wood. Tmm. 
 
 Charles G. D. Roberts. 
 
 ^^^^ ^«»'*» The. C N. and a. M. 
 wiinainBBni 
 
 HERITAMor Anm A. A. W. Marehmont. 
 HKmwAmAM, Ika. K C ftai«y, 
 HiLLMAN, The. E. PhiUipa OppantMiak 
 
 Hill Rise. W. B. MaxwelL 
 
 "Sitot."' ^""^^^^"^ The. RidMid 
 Hyena or Kallo, Tk«. LosiieGanRd. 
 
so MBTHumi AMD CcmfAMY LmmD 
 
 Jank. Marie CorellL 
 
 Johanna. B. M. Croker. 
 
 JosBPH. Frank Danby. 
 
 Joshua DAYinsoif, CoMMumtr. E. Lynn 
 Linton. 
 
 Joss, Thk. Richard Marsh. 
 
 Kinsman, Thk. Mrs. Alfred Sidgwick. 
 
 Knhsht op Spain, A. Marjorie Bowen. 
 
 Laov Bbttv Acmms twm Watbs. C N. 
 aad A. M. WiBhiiHw. 
 
 Lalage's Lovbks. George A. Birmingham. 
 
 Lantkkm Bbaaxks, Tub. Mrs. Alfred Sidg- 
 
 JohB Orr nhsM 
 
 AMD Old Lack. Myiib Jtaii. 
 
 Light Frbights. W. W. Jacobs. 
 Lodger, The. Mrs. Belloc Lowndes. 
 Long Road, The. John Ozenham. 
 Love and Louisa. £. Maria Albanesi. 
 
 Love Pibati; TO; C N. Md A. M. 
 
 Williamson. 
 
 Mary All-Alonb. John Ozenham. 
 Master op the Vineyard. Myrtle Reed. 
 Mastbb's Vioum, Tub. Myrtk Reed. 
 Max Cabbaoos. Bhmi 
 Mavob or Tmon, Tmm. -Q," 
 MmmDbck,Thb. W. F. 
 Mmskty Atom, Thx. Mam GonB. 
 MiRAGB. E. Temple Thurston. 
 Missing DuiMUA, Turn. S. Phillips Oppei^ 
 
 Mr. Grex or Moan CAMUk I. fMi%s 
 
 Oppenheim. 
 
 Me. Washington. Marjorie Bowen. 
 Mas. Ma3K»i Pbotbsts. Anthony Hope. 
 Mbs. Pktmb HowAMD. M«i7B.MaaB. 
 
 My Danum S m bbi ' hma mt. W. CMc 
 
 RusselL 
 
 Mv Fri end T HE CHAurntuBi C. N. and 
 
 Mv HosBAMD AMD L Leo Tolstoy. 
 
 My Lady op Shadows. John Oxenham. 
 Mystery op Dr. Fu-ManchU| Tub. Sax 
 
 Mystery op thb Gkbbn Hbast, Tns. 
 
 Max Pembertoa. 
 
 Nine Days' Wonder, A. B. M. Croker. 
 
 Ninb to Six-Thirty. W. Pett RidfB. 
 
 Ocbam Slbotu. Tub. Maurice Drake. 
 
 Ou Bmb AMD SiLYBK. Myrtle Reed. 
 
 PAntWnBPMMMT, TUB. J. & 
 
 Pathway op m WwmKUL, Tint. I>alf 
 Wyllarde. ^ 
 
 PMv ornoi Bamtomb. B.M.GMkaB. 
 
 Pboplb's Man, A. E. Phillips OppMMaii 
 Peter and Jane. S. Macnaughtan. 
 Pomp op thb Lavilbttbs, Tub. Sir Gilbert 
 
 QOBST op Glory, Thb. Msijorie Bowen. 
 
 Q^T 0» THB GOUNM ROSB, ThB. JoIw 
 
 R«>BMT, Thb. Aiaold 
 
 Ridfs. 
 
 tor Cmob TIB. W.B.Ifss««IL 
 
 Return or Ti 
 Burroughs. 
 
 Round thb Rbd Lamp. Sir A. Cooan Doylcb 
 RoTALGaowBi: ff llnl^fTiirfi 
 
 SAfD, thb ftMonnuH. MarMdak* Pkk- 
 
 thalL 
 
 Sally. Dorothea Caoyan. 
 
 Salying op a Dbkbuct, Thb. Maurice 
 
 Drake. 
 
 Sandy Marrixd. Dorothea Conyan. 
 Sba Captain, Thb. H. C Bailey. 
 8ba Lady, Tub. R. G. Wells. 
 
 PAmr.TBB. GatMit A. BlnafaigbaHk 
 
 Agent, The. Joseph Conrad. 
 Histobt. C N. aad a. M. Williaai. 
 
 Secret Womai^ Thb. 
 
 Set in Silvbs. C N. aad A. IL 
 
 son. 
 
 Sevastomm., AMD Otbbb Stokibs. Laa 
 
 Tolstoy. 
 
 Seybrins, The. Mrs. Alfred Sidgwadc 
 Short Ckuisbs. W. W. Jacobs. 
 Si'Fam Mtstbribs, Thb. Sax Rohmer. 
 SpAMmGouk OaMfaA. BinrfBcliaak 
 Spinnbk in thb Sun, A. Myrtle Reed. 
 Street caixbd Stbaiobt, TU 
 King. 
 
 SOPBBMB Cbimb, Ttm. 
 
 TAUBOPMBAMSTKBBn. AfthWT MoRtsML 
 
 Tabsan or tbb Apbs. Edgar Rica Bar* 
 
 Ficnov 
 
 lUttlllMl'l OhMp IOT«ll-MMltfJltf«(/. 
 
 Teresa or Watumb Stbbbv; Aaeld 
 
 Bennett. 
 
 There was a Crookko Man. Dolf Wyllarde. 
 
 Tyrant, The. Mrs. Henry de la Pasture. 
 
 Umdbb Wbstbrn Eyes. Joseph Conrad. 
 
 Unoppkial HbMBvaHMMf, Thb. Dolf 
 WyOaida. 
 
 Valley op tbb Sbammt, TW. WIHaai 
 
 Le Queux. 
 
 Virginia Perfect. Peggy Webling. 
 
 Wallet op Kai Lung. Ernest Bramah. 
 
 Wab Wbooing, Thb. C N. andA. M. 
 WUttaanoB. 
 
 Ware Case, The. George PkyddL 
 
 Way Homb, Thb. Basil Ua*. 
 
 Way op thbsb ToMBb TiBBt X. PUHps 
 
 Oppenheim 
 
 Wbaybb op Dbbams, a. Myrtle Reed. 
 Wbaybb op Wbbs, a. JohaOiaahsM 
 
 Wrddino Dat, Ttm, C If. aad A. M. 
 
 Williamson. 
 
 Whitb Fang. Jack London. 
 
 Wild Olive, The. Basil King. 
 
 WiLUAM, BY the Gracb OP GoD. Maijorie 
 Bowaa. 
 
 Woman with THB Fah, Thb. Robart 
 
 Hichens. 
 
 WO9. Maurice Drake. 
 WoHOBB or LovB, TlBB. S. Mafia AAaaML 
 Yblump Claw, TMb. Sas Bohaiar. 
 YsLLoar DiASHMBb TMb. aUBmSmgrnat, 
 
 mt^Omm^B Om and Thieepouiy Imit 
 
 Mrs. Bdlae: 
 
 Bt Stbokb or Swobo. 
 
 Derrick Ym—iw, 
 LyalL 
 
 House op YfmumaM, Tbb. Williaai Le 
 
 Queux. 
 
 Inca's Tkbasurb, Thb £. GlanYtUe. 
 
 Katherinb 
 Crokar. 
 
 Mn. B. M. 
 
 MoTBoni Son; A. B.aadCBLlkfk 
 'PMom AMD Los& JohaOxaalaaa. 
 
 Ran Dbbbuct, Thb. Bertraa Mitfbrd. 
 Sign op thb Spidbi^ Thb. Bertram Mitkcd. 
 
 97/8/19. 
 
 PBtNTBD aV MOBXISWf AMD OmB UnflTBIH BDmaDBOB 
 
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