■ \« V 'Sir, :%^:m ■^''^^^isr- «- «r »:'f c c •<• . ' c<:< ■ ^~. ccxrc f ,, ♦ •» lA^.f Z^-/ SPEECH •' tL/S'sJ OF THE CHANCELLOR OF THE EXCHEQUER ON THE FINANCIAL STATE AND PROSPECTS OF THE COUNTRY, DELIVERED IN THE HOUSE OF COMMONS, On Monday, April 18, 1853. PUBLTSnED BY PERMISSION. LONDON: JOHN W. PARKER AND SON, WEST STRAND. MDOCCLITI. LONDON: SAVIM AND EDWARDS, PRINTEB8, CHAND08 STREET, COVENT GARDEN. The House havi?ig 7'esolved itself into a Cornmittee of Ways and Means, The CHANCELLOR of the EXCHEQUER rose and said,— THE annual exposition of the financial state and prospects of tliis country, even upon ordinary occasions, affords abundant material of interest to this House and to the country, and of anxiety to the person charged witli the preparation of that exposition ; but on the present occasion, perhaps that interest on the one hand, and certainly that anxiety on the other, are greatly enhanced by a variety of circumstances, including among them the number of se2:iarate motions respecting taxes which have recently been made in this house, and which indicate the increasing eagerness of the jDeople with respect to financial questions. Political events, shocks which have enfeebled or overthrown Administrations, and which have made it necessary to adjourn from year to year questions of taxation, have likewise greatly accumulated on the present Government the task they have to discharge in that department; and in connexion with those ques- tions there have of late been raised discussions of a nature most deeply interesting, descending to the first elementary principles of taxation nay, almost to the first principles on which men are united in civilized society. With a task so formidable before me, I feel warranted in addressing a special appeal to the Com- mittee for their kindness and indulgence, for I am certain that only by their kindness and indulgence can I be enabled — I will not say to discharge the task as it ought to be discharged, for that is wholly beyond my power — but to discharge it so as in any case to be at least intelligible to my hearers. The first portion of my duty will be to lay before the Com- mittee the state of the account of the country. I think I shall best discharge it, by taking up the state of that account from the point at which it stood last year, when the financial department was in the hands of the right hon. gentleman ojq^osite (Mr. Disraeli) ; and it will be satisfactory to the Committee to observe, that as our experience grows with the lapse of time, so do we obtain larger and still larger proof of the elasticity of the revenue, and of the progress of the productive and consuming powers of the country. On the 30th of April, 1852, the right hon. gentleman opposite estimated the revenue for the financial year, which had then just A 2 4 The Chancellor of the Exchequer's Speech on the commenced, at 51,625,000/., and in the month of December, 1852, when the right hon. gentleman had occasion to return to the subject, he was able to present to us an estimate which placed the revenue of the year at 52,325,000/., exhibiting an increase upon his estimate in April amounting to not less than 700,000/. And now, within the few months which have elaj)sed since last December, we have further evidence of the same gratifying character, for the revenue which the right hon. gentleman then judiciously estimated at 52,325,000/. amounted to no less, when we reached the termination of the year on the 6th of April, than 53,089,000/., showing an increase of 1,464,000/. upon the estimate formed at the commencement of the year. The expenditure of the last year, as estimated by the right hon. gentleman oj)i30site on the 30th of April, 1852, was taken at 51,103,000/., but the actual expenditure has only reached to 50,782,000/., and consequently you have had figures presented to you in the balance-sheet which must have been gratifying to every member of the Committee, in showing a surplus of income over the expenditure for the year beginning April 6, 1852, and ending April 5, 1853, to the amount of 2,460,000/. But, Sir, having reached this point by a smooth and easy progress, it is now my duty to entreat hon. gentlemen to make large deductions from the very sanguine estimate which has been made in this House — so sanguine as, considering the quarters from which it came, to excite my surprise — that because our balance-sheet for the past year shows 2,460,000/. of surjolus, therefore we have that sum available for remission of taxation. That would be a too precipitate inference. Unfortunately, before we arrive at that conclusion, there is one circumstance rather material to examine, and this is, what is the estimated amount of expenditure for the year that we have just commenced ? Well, when I look to that, and compare it partly as it is estimated, but chiefly as it appears on the actual votes of this House, with the estimates of the last year, I find it stands as follows:— The expenditure for 1852-53 was 50,782,000/.; but the expenditure for 1853-54, the great bulk of which is already voted, and upon which I can anticipate, on the whole, no dimi- nution, amounts to 52,183,000/. Therefore, without going into other particulars, which, I am sorry to say, occasion a further deduction from the surplus of 2,400, 000/., I beg to point out that no less than 1,400,000/., or nearly three-fifths of that surplus, are already disposed of by the charges to which you are liable under acts of Parliament, by the votes to which the House has come for the defence of the country, and by the charges on account of the miscellaneous services, which, I apprehend, this House will not be inclined either to refuse or to diminish. The right hon. gentleman opposite, in December, 1852, esti- mated as follows his surplus for the present year : — He took a Financial State and Prosj^ects of the Country. 5 total sum of 1,600,000/., of which, I think, he stated that, on the ordinary revenue, he would venture to anticipate a surplus amounting to between 1,300,000/. and 1,400,000/., and by de- crease of charge for the CafFre war, a further sum of 200,000/. or 300,000/. These two sums put together gave a surplus, as the basis of his calculation for the year, amounting to 1,600,000/. At that period, the right lion, gentleman thought that the only charge against that surplus on account of coming expenditure would be the sum of 100,000/., which he proposed to apply to light dues and purposes connected with shipping, and 600,000/. for the increase he anticipated on the great military services of the country. As regards the 100,000/., the present Government have made arrangements which they hope will afford great relief to shipping, without any charge to the Exchequer; but as regards the estimates for defence made by the right hon. gen- tleman, his successors in oflBce have not been so fortunate ; nor have they, nov has the House, thought it wise to confine the votes for the year within these limits. I shall now state to the House how that surplus of 1,600,000/. has been swallowed up. The increase on the navy estimates, in- cluding the packet service, as it was voted in 1852, and as we found it prepared for this year (making the comparison with the estimate of April, 1852, and not for my present purpose including the supi^lemental vote of December), amounts to 617,603/. The increase on the army and commissariat, but almost entirely on the commissariat, is 90,000/. ; and that increase on the commissariat is to be accounted for by the fact that we have now reached, we trust, that stage in the hostilities at the Cape when we may consider our extraordinary votes at an end, and when the provision to be made has passed under the head of ordinary expenditure ; therefore, though it is our duty to submit to the House, during the present session, an extraordinary vote for 200,000/., which is essentially retrospective, we have likewise to submit a vote for 70,000/. in commissariat expenditure, which in its character is prospective, and analogous to our ordinary estimates. So that a double expenditure, as far as the Cape is concerned, is charged on the service of the present year. The increase on the ordnance is 616,000/. The militia esti- mates have not yet been brought to the shape in which they will be laid on the table ; but 1 am sorry to say that there will be a large, yet I believe an unavoidable, increase on the amount estimated last year by my right hon. friend then Secretary for the Home Department. The estimate for the present year cannot, I fear, be expected to be much less, if at all less, than 530,000/. I doubt if it was expected twelve months ago by my right hon. friend that the amount would be more than something like 300,000/. If this be so, there will be a considerable increase in the expense of giving effect to that plan, and it is right that the G The Chancellor of the Exchequers Si)eech on the House of Commons should know clearly the expense of giving etfect to any plan, especially one which has realized, in other respects, all the most favourable anticipations formed of it. The increase of expense for the militia, as compared with the reckoning of my right hon. friend, will, I apprehend, be about 230,000/. The last item in these augmentations of expense is the sum of 100,000/., added to the votes during the present year for the purposes of public education. If the committee take the pains to i^ut together these five items, they will find that, though the right hon. gentleman opposite (Mr. Disraeli) anticipated a sur- plus of 1, 000,0007. for the financial year of 185:3-54, the aug- mentations of charge, principally voted already and in part yet to come, amount to no less than 1,054,000/. However, as I have already stated to the committee, there has been a further imjDrovement in the revenue of the country, and there are likewise some few items of public expenditure on which the Government have been able to effect some small saving. With respect to the important and unsatisfactory charge for the i)acket contract service, it has been our most anxious desire to see what, consistently with justice, was to be done to amend the position of the public. We think that the amount of charge which that service has reached is wholly disproportionate with the benefit derived. I am not at present in a condition to lay the estimate on the table, or to state exactly what the estimate will be, but I venture to anticipate that at any rate, for the first year, we may be able to efiect a saving on it of not less than 75,000/. There will also be a saving on the charge for Exchequer bills, owing to the dimi- nution of interest, amounting to about 65,000/., and there will be a sum, which the House must observe is occasional in its nature, of 135,000/., arising out of repayments to the Crown revenues, and available under the jsrovisions of the law as ways and means, in consequence of a bill lately passed by the House, which had reference to metrojiolitan improvements ; and also there will be a sum available, through the liberation of the Crown revenues from a charge which heretofore affected them on the same account, to the extent of about 27,000/. These various items will give a fund amounting to about 301,000/. I will now state more particularly to the committee the items of anticipated revenue and expenditure of the country, from which they will see precisely the amount of the surplus we have to deal with. I should at the outset explain that I think it will be convenient that I should in all cases, disregarding minute inaccuracies, give my estimates in round numbers. I will now present to the committee an account of the estimated revenue and expenditure for the year 1 ■'^53-54. With regard to the expenditure, the charge for the funded debt is put down at Financial State and Prospects of the Country. 7 27,500,000/., and the charge for the unfunded debt at 304,000/., making a total for the debt of 27,804,000/. The charges on the consohdated fund will be 2,503,000/.; the army estimates, G, 025,000/. ; the navy, 6,235,000/., not including the packet service ; the ordnance estimates, 3,053,000/. ; miscellaneous, 4,476,000/.; commissariat, 557,000/.; the militia, as nearly as I. can judge, 530,000/. ; the extraordinary vote for the Caffre war, 200,000/. ; and the packet-service, I think, may be reasonably taken at 800,000/. for the present year. These items give a total of estimated expenditure amounting to 52,183,000/. I now come to the estimate of anticipated revenue. I take the revenue of the Customs at 20,080,000/.; Excise, 14,640,000/.; stamps, 0,700,000/. ; taxes, 3,250,000/. ; and income-tax, 5,550,000/. From the Post-office we expect 900,000/.; and from the Crown lands, swelled by the addition I have already referred to, 390,000/.; from miscellaneous sources of receipt (including, I think, about 160,000/., being the capital of the Merchant Seamen's Fund, out of which we shall have to pay 80,000/. daring the present year on account of pensions, and the whole of the remainder, I need not say, will be absorbed long before that charge for pensions ceases) we exj^ect about 320,000/., and from old stores 460,000/. To these I venture to add, though the item is necessarily one of uncertainty and con- jecture, that I anticipate a saving of not less than 100,000/. from the operations which have been proposed to the House in con- nexion with the exchange and redemption of stock. It may, certainly, be less, and it may, on the other hand, be more — the final result, I hope, will show a considerably greater saving. I venture now to take credit for 100,000/. on that account. Add- ing up, then, these various items, the committee will find that they give a total estimated income for the year of 52,990,000/., against which we have to set the total estimated expenditure of 52,183,000/., showing an apparent surplus of 807,000/. Anxious, above all, to avoid raising undue expectations, I am desirous to imjiress on the committee that it must bear in mind that out of this sum of 800,000/. an amount of 215,000/. consists of monies which do not proceed from permanent or recurring sources, but of monies available simjjly for the year, and not to be repeated. Likewise, with the uncertainty connected with the item for the packet- service and with that for the Channel Islands' har- bours, on which my right lion, friend at the head of the Admiralty and I are not quite sure whether we can or cannot venture to make a reduction in the sum printed in the estimates, it is possible that the surplus I have mentioned may fall short of being realized to the extent, perhaps, of 100,000/. Therefore, it will be more secure for the committee to assume that the surplus, instead of 800,000/. will be 700,000/., and to bear in mind that 215,000/. out of it consists of occasional payments. At the same time, 8 The Chancellor of the Exchequer s Speech on the wLile giving this explanation by way of caution, my sanguine hope is that we shall realize a surplus of 800,000/. This is the state of the account of the country, as I have endeavoured to bring it up to the present moment. The com- mittee will not have failed to observe that in reckoning the estimated income I have included a large sum, amounting to more than one-tenth of the whole revenue which, from 1842 up to the present time, we have been deriving from the income-tax. However, the income-tax has at this moment legally expired, and it will be for the committee to consider whether or not they shall revive it. Upon that subject I am afraid that it will be my duty to trouble the committee at some length ; but before I venture on a detailed and continuous exposition of the views of the Government with respect to prospective finance, there are two incidental questions to which I shall briefly advert, on ac- count chiefly of the position they occupied in the financial statement of my predecessor in the o£Bce I now have the honour to fill. The first of these has reference to a particular class. Now, as regards the shipping interest, the House knows from a statement already made by my right hon. friend the President of the Board of Trade, that Her Majesty's Government propose to afford what they trust will be found considerable benefit and relief to that interest, without inflicting an annual charge upon the iDublic. But there was another interest mentioned by the right hon. gen- tleman oi^posite (Mr. Disraeli) which has so much claim upon the general sympathies of the House, that resj^ect and consideration demand that I should not leave it without mention, 1 mean that which is called the West Indian interest. With regard to that interest, I regret to say that there is indeed little, if any thing, that can be done by a Government, in our view, con- sistently with its more extended duties to the public, in fulfil- ment of the requisitions which that interest has preferred. With regard to a reduction of the duty on sugar, which is one of its requests, in jn'oportion to the fall in the duty upon foreign sugar, so as to maintain the differential rate that now exists between them, it is entirely impossible for the Government to hold out the smallest hope that their recom- mendation can be adopted. With respect to the question of refining their sugar in bond, which is of a different character, my hon. friend the Secretary to the Treasury (Mr. Wilson) will take a future occasion of entering more at large into that ques- tion ; but I regret to say that we have not discovered any method of granting that privilege in the present state of the law with respect to sugar, which would be satisfactory to the West Indians and to the refining trade, and which at the same time would not inflict very heavy loss upon the revenue. With respect to the equalization of the spirit duties, again I fear that really nothing Firbancial State and Prospects of the Country. 9 remains to be done in that res23ect. I believe the distillers of this country consider that already the duties have been some- what more than equalized, all things considered, in the case of the West Indies. At all events, we are not prepared to propose any change in the law in the nature of equalization of spirit duties as between colonial and domestic produce. There is but one way in which it has occurred to the Govern- ment that they might entertain a sanguine hope of being able, at very slight charge to this country, perhaps at no charge, to confer material benefit on the West Indies, and that is a way which, if it can be effected, will, I am sure, command the ai)pro- bation of this House, because it is by enabling them to economize the heavy expenditure of their own governments, a heavy and now in many cases almost a ruinous exjienditure. In the case of Jamaica, for example, there is a jDublic debt, the minimum rate of interest upon which is per cent., and the maximum 10 per cent., the capital of the debt amounting to about 500,000/. ; and if it were possible for the Government to induce the As- sembly of Jamaica to amend the vicious constitution of that island, and to place it upon a foundation that would give scope for a strict control over ex23enditure, Her Majesty's Government would then be disposed to recommend to this House to employ the credit of this country in the way of guarantee on behalf of the island of Jamaica. I do not now inquire whether that would entail a charge uj)ou you ; I believe it would entail none. I should be the first to assert, that there should be the utmost jealousy as to the inter- position of the credit of this country between debtors and credi- tors out of this country, but considering all that has happened to the West Indies, considering the effect that British legislation has had in precipitating their difficulties, I do believe that if we were able to point out a prospect of great and effectual relief to Jamaica, to be indirectly obtained through an effectual reform in its government, this House would look with a generous and a con- siderate eye ujion any proposal for using the credit of this country in the manner that I have mentioned. What I have said refers to Jamaica, which presents at this moment by far the most urgent case of distress among the West India colonies ; 1 am not sure that there is any other among those colonies which would be in a condition to request a similar interposition ; if they did, it would depend upon the case they showed. I do not think it likely that such a case will arise ; all I mean to say at the present moment is, that the door would not be absolutely shut against them. I pass on now from the collateral topic of the West Indian in- terest to another such topic — that connected with the Exchequer Loan Fund. After all that passed in debate in December last, it was evidently the duty of Her Majesty's Government to make 10 The Chancellor of the Exchequer's Speech on the a full investigation into the transactions of that Board. We have instituted that investigation ; we have presented the results in print to the House ; they are in a form so simple that an inspection occupying only a few minutes will exhibit them to any hon. member. It appears from the figures there presented, that after debiting the Exchequer Loan Fund — I will not say with every folly of Parliament, but with every questionable or ambiguous grant that was made — after charging the whole of this to the last farthing, yet such has been the sound discretion exercised by the members and officers of that board in the loans they have made, that while they have afforded an immense amount of local accommodation, they have likewise realized, after paying every expense that belongs to the office, a net balance of not less than 227,000/., which balance, if we put values such as sanguine men might perhaps put upon certain investments that have not yet been realized, it is far from impossible may be raised to nearly 1,000,000/. of money to the credit of the entire transactions of the board. It is our candid opinion, under these circumstances, that the favourable senti- ments expressed by my right hon. friend the First Lord of the Admiralty, in December last, in regard to the Exchequer Loan Fund, are justified by the facts, and it is not our intention to propose the abolition of that system, which we think has been both honourable to those who have administered it, and highly beneficial to the country. I now approach a very difficult portion of tlie task that I have to perform — the discussion of the income-tax. The first question that tliis committee has to consider is, whether or not it will make eflbrts to part with the income-tax at once. I do not say that such an alternative is imiiossible. On the contrary, I believe that by the conjunction of three measures, one of which must be a tax ui^on land, houses, and other visible proj)erty, of perhaps Gd. in the pound ; and another, a system of licences upon trade made universal, and averaging something like 7/.; and the third, a change in your system of legacy duties, it would be possible for you at once to part with the income-tax. But Her Majesty's Government do not recommend such a course to the committee. They do not recommend it, because they believe, in the first place, that such a system would, upon the whole, be far more unequal and cause greater dissatisfac- tion than tlie income-tax ; they believe, likewise, that it would arrest other beneficial reforms of taxation ; and they believe, that it would raise that difficult question in regard to the taxation of the public funds of this country in a form the most inconvenient. 1 might dilate upon this subject, but it is needless to do so. I leave it to those, if such there be, who are prej^ared to recom- mend the immediate abandonment of the income-tax. Such is not the recommendation of Her Majesty's Government. Financial State and Prospects of the Country. 11 Now, in regard to the income-tax, I wish that I could jDossess the committee with the impression, that constant study has made upon my own mind of the deep and vital importance of the sub- ject. We are too apt to measure the importance of the subject by the simple fact, that we draw from this tax 5,500,000/. of revenue. Sir, that sum is a large one, but the mention of it conveys no idea to the committee of the immense moment and magnitude of the question. If you want to appreciate the income-tax you must go back to the epoch of its birth ; you must consider what it has done for you, in times of national peril and emergency; you must consider what, if you do not destroy it — and I will explain afterwards what I mean by " destroy" — what it may do for you again, if it please God that those times shall return. Sir, it was in the crisis of the revolutionary war that, when Mr. Pitt found the resources of taxation were failing under him, his mind fell back ujjon the couceiDtion of the income-tax; and, when he 2:)roposed it to Parliament, that great man, possessed with his great idea, raised his eloquence to an unusual height and power. There is a description of the speech of Mr. Pitt on that occa- sion, written by a foreigner, a well-known writer of the day — Mallet du Pan — which I may venture to read to the committee ; I believe, after the lapse of fifty-five years, it will be heard not wholly without interest. This is an account which, in a periodical that he edited, he gives of Mr. Pitt's speech, in 1798: — " From the time that deliberative assemblies have existed, I doubt whether any man ever heard a display of this nature, equally astonishing for its extent, its precision, and the talents of its author. It is not a speech spoken by the Minister; it is a complete course of public economy; a work, and one of the finest works, upon practical and theoretical finance, that ever distinguished the pen of a philosopher and statesman. We may add this statement to the learned researches of such men as Adam Smith, Arthur Young, and Stuart, whom the Minister honoured with his quotations." I do not know whether this committee are aware how much the country owes to the former income-tax ; but, because I deem it to be of vital importance that you should fully ajopreciate the power of this colossal engine of finance, I will venture to place before you, in what I think an intelligible and striking form, the results which it once achieved. 1 will draw the comparison between the mode in which your burdens were met, during that period of the war when you had no income-tax, during that period of the war when you had the income-tax in a state of half- efiiciency — and during that last and most arduous period of the war, when the income-tax was in its full power. From 1793 to 1798, a period of six years, there was no income-tax; from 1799 to 1802, there was an income-tax; but 12 The Chancellor of the Exchequer s Speech on the the provisions of the law made it far less effective, in proportion to its rate, than it now is; and from 1806 to 1815, a period of eleven years, you had the income-tax in its full force. Now, every one of us is aware of the enormous weight and enormous mischief that have been entailed upon this country by the accumulation of our debt; but it is not too much to say, that it is demon- strated by the figures, that our debt need not at this moment have existed, if there had been the resolution to submit to the income-tax at an earlier period. This test, I think you will admit, is a fair one; I jout together the whole charge of govern- ment and war, together with the charge of so much of the national debt as had accrued before 1793, so as to make (if I may so ex- press myself) a fair start from 1793. The charge of government and war, together with the charge of debt incurred before 1793, amounted, on the average of the six years, down to 1798, to 30,030,000/. a-year: the revenue of that period, with all the addi- tional taxes that were laid on, amounted to 20,626,000/. a-year; there was, therefore, an annual excess of charge above revenue — charge for government, for war, and for debt contracted before 1 793, but not including the charge of debt contracted since 1793 — of no less than 15,404,000/. In 1798 you just initiate the income-tax, and immediately a change begins. In the four years, from 1799 to 1802, the charge for the same items that I have mentioned, which had been 36,000,000/., rose to 47,413,000/. a-year; but the revenue rose to 33,721,000/. a-year, and the excess for those four years was diminished by about 2,000,000/. a-year; instead of an annual excess of 15,400,000/. over revenue, it was 13,689,000/. Now look to the operation of the tax, both direct and collateral, from 1806 to 1815, during the time when your exertions were greatest, and your charges were heaviest. The average annual expenses of war and government, from 1806 to 1815, together with the charge upon the debt contracted before 1793, were 65,794,000/.; but you had your income-tax in its full force, with your whole financial system invigorated by its effects, and the revenue of the country now amounted to 63,790,000/.; while the deficiency in actual hard money, which during the war represented something like double the amount in debt, owing to the rate at which you borrowed, instead of being 15,404,000/. a-year, or (as it was in the second period) 13,689,000/. a-year, was only 2,004,000/. a-year, from 1806 to 1815. Such was the power of the income-tax. I have said there was a deficiency annually of 2,004,000/., but it is fair for you to recollect, and it is necessary, in order to present to you the fact I want to place in clear view, that out of the 65,794,000/. of charge that I have mentioned, about 9,500,000/. were due for charge of debt contracted before 1793; so that, if you compare the actual expense of government, including the whole expense of war from 1806 to 1815, with your revenue when you had the Financial State and Prospects of the Country. 13 income-tax, it stands thus before you — that 5'ou actually raised 7,000,000/. a-year during that period, more than the charge of government, and the charge of war. That, I must say, is to me a most remarkable fact. It affords to me the proof, that if you do not destroy the efficacy of this engine — I do not raise now the question whether it is to be temporary or permanent, which I hold, to be quite a different question, and I will go into that by and by — it affords you the means, should unhappily hostilities again break out, of at once raising your army to 300,000 men, and your fleet to 100,000, with all your establishments in proportion. And, much as may be said of the importance — in which I concur — of an army reserve and a navy reserve, and of having your armouries and your arsenals well stored, I say this fiscal reserve is no less important; for, if it be used aright, it is an engine to which you may resort, and with which, judiciously employed, if unhappily necessity arise — which may God in His mercy avert — with it judiciously employed you may again, if need be, defy the world. This then is the purpose which the income-tax has served — that in a time of vital struggle it enabled you to raise the income of the country above its exj)enditure of war and civil govern- ment, and that service so performed, was performed at a time when men do not minutely inquire into the incidence of taxation, they do not then indulge themselves in the adjustment of details, but are afraid lest they should lose the mass and the substance. But times, when the hand of violence is let loose, and when whole plains are besmeared with carnage, are the times when it is desirable that you should have the power of resort to this mighty engine, to make it again available for the defence and the salvation of the country. Well, "Sir, the income-tax dropped along with the purpose of the income-tax, in 1816: butit was destined to be revived. Sir K. Peel, in 1842, called forth from repose this giant, who had once shielded us in war, to come and assist our industrious toils in peace; and, if the first income-tax produced enduring and memorable results, so I am free to say, at less expenditure by far in money, and without those painful accompaniments of havoc, war, and bloodshed — so has the second income-tax. The second income-tax has been the instrument by which you have introduced, and by which I hope ere long you may perfect, the reform — the effective reform, of your commercial and fiscal system ; and I, for one, am bold enough to hope, and to expect, that, in reforming your own fiscal and commercial system, you have laid the foundations of similar reforms — slow, perhaps, but certain in their progress — through every country of the civilized world. I say, therefore. Sir, that if we rightly use the income-tax, when we part with it, we may look back upon it with some satisfaction, and may con- sole ourselves for the annoyances it may have entailed by the J 1 The Chancellor of the Exchequer's Sj^eech on the recollection, that it 1ms been the means of achieving a great good immediately to England, and ultimately to mankind. Let me now attempt to j-jresent to the committee a closer analysis of this impost. I shall assume that it is your view, as it is the view of the Government, that we cannot, at the present moment, with a due regard to the public interest, disj^ense with the income-tax ; let us look a little into its comjiosition. Let us attempt to investigate the charges which are alleged against it. I am not one of those who make light of those charges. In my own individual opinion it is perfectly plain, from the mode in which the income-tax was put an end to at the termination of the war, that it is not well adapted for a perma- nent portion of your ordinary financial system. Whether it is so or not, on which there is a great difference of ojoinion, yet I think this is on all hands agreed, that it is not adapted for a permanent l^ortion of your fiscal system, unless you can by reconstruction remove its inequalities. Even if you could remove its inequa- lities, a question into which we will patiently examine, there would still remain in my mind at least objections to it of the gravest character. The reconstruction of your income-tax would, I think, under any circumstances, be found to oj)en up social questions of the most serious import; and the machinery of the income-tax, involving, as it necessarily does, to so large an extent, the objectionable principle of self-assessment, in my opinion can never be satisfactory to the country. First, because self-assess- ment leads to grievous frauds upon the revenue, and renders the real inequality of the tax far greater than any of those among its inequalities which immediately strike the public eye and feelings; and, secondly, because of the tendency to immoi'ality, wliich is, I fear, essentially inherent in the nature of the oj^eration. But now let us examine the composition of the income-tax. First, let me observe, that we are too much in the habit of speaking of this impost as merely a simple tax; it is rather a code, or system of taxation. In mere bulk it is a volume; it has been elaborated by many successive strokes in successive years ; it has accumulated a large mass of precedents for its application, and, in short, it is a vast and comiDlicated system of taxation, by which we succeed in raising, in round numbers, 5,G00,000/. a-year. One-28th part of this sum is 200,000^. Now, if you investigate the composition of schedule A, you will find that land and houses — which I take together, because their position is substantially analogous — including the incomes charged upon them in respect to mortgages and settlements, pay no less than 12-28ths of the tax, or about 2,400,000/. Now, let us look at the other great element of this tax — namely, the payment tbat j)roceeds from trades. In order to get at this payment accurately, we must descend a little deeper Fmancial State and Prospects of the Country. 15 than the mere classification of the schedules. There are in schedule A some considerable classes of property which pay duty along with land and houses, to the extent, I think, of something like 270,000/. a year, yet which arc essentially trading concerns. For the purpose wliich I have in view I must likewise take out of schedule B the sum paid for the occupation of land, and place it along with trades, with which it is essentially analogous in character. This gives me 830,000/. more, and then I come to what I may call trades proper — namely, those which appear in schedule D, and which pay a sum of something like 1,200,000/. These three branches of trades in schedules A, B, and D con- tribute an income of no less than 1,800,000/., or 9-28ths of the ■whole tax ; and the two together — that is to say, land and houses and trades, pay 4,200,000/., or 21-28ths of the whole tax. There remain the funds in schedule C, which pay 750,000/., or l-7th of the whole tax ; and salaries in schedule E, which pay about 1-1 7th of the tax. Professions in schedule D, after striking out those which partake rather of the character of trades, pay 250,000/., or about 1 22d of the tax. Thus we see, the funds, salaries, and professions make up the remaining fourth of the tax ; three-fourths being paid by land and houses, and by trades. Now, it is said that gross inequality is the characteristic of the tax, and that it ought not to be levied — that it is unjust to levy it upon precarious and realized income alike. What income is precarious, and what income is realized ? Income derived from trade would, I presume, be called precarious ; and, without wishing to anticipate the judgment of the committee, I may pro- bably assume that this is their opinion. Now, I beg the com- mittee to observe that, after all, the main question is between laud and trade. Everything else, in respect of bulk and magni- tude, forms but a mere outlier and appendage to this, the main question. Land and houses, we find, pay an income-tax of 2,400,000/., and trade pays 1,800,000/.; between them they pay three-fourths of the whole tax. It is, therefore, evident that the justice of the present relations between land and trade must go a considerable way, I do not say the whole way, towards the solution of the great question whether the tax is, in the main, a just tax or not. Let us look now at the case as it stands between land with houses on the one side and trade on the other, and, if the com- mittee will do me the favour to follow me in the estimate I am about to enter upon, it shall be my endeavour to place the matter before them in as clear a light as possible. My first object is to show the amount of tax really paid by land. When persons say that realized and precarious incomes ought not to pay the same rates, and that therefore the tax should be reconstructed, they forget to inquire whether at the present moment realized and precarious incomes as represented by laud 1 6 The Chancellor of the Exchequer's Speech on the and houses on the one hand, and by trades on the other, do or do not pay the same rates. Let us, in the first place, see at what rate laud and houses pay. Land pays in the gross 7d. in the pound upon an income not assessed by the possessors of the property, but by a standard independent of them; and this sum is paid without even the smallest deduction in respect of the difference between gross and net income. It is obvious that, in order to estimate how much land and houses really pay, we must deduct the whole of the difference between the gross and the net income. Nay, we must do more than this, because the owners of land and houses are not the only persons beneficially interested in this description of property; there remain behind a large body of mortgagors, encumbrancers, and life-renters, who, although they pay 7d. in the pound on their share of the proceeds of lands and houses, do not pay anything towards making up the difference between gross and net receipts. In the estimate I am about to submit to the committee, I have been guided by inquiries which every member of it is as capable of making as I am. I can only say, that this estimate has been framed in a sjairit of moderation, and tested, as well as the case admitted, by reference to persons most familiar with the subject. About 80,000,000/., the gross income of land and houses, pay the tax. At 7d. in the pound, this gives, in round numbers, 2,333,000/. What are the deductions which ought to be allowed for the difference between gross and net income, — I will not say according to an arbitrary standard of equity — but if we should break up the present scheme and construct a new one, what should we be called on, and of course I must say, what should we in justice be compelled, to allow on this score ? In Scotland, among the difference between gross and net income from lands, one class are known by the designation of " public burdens." We have no analogous phrase in England ; but we have heavy deductions, perhaps on the whole not less heavy than in Scot- land, from gross rental. The first great item is the large charge for repairs, and under this head I include repairs of buildings, fences, and such drains as are not kept by the tenant. Eei3airs constitute a large charge upon land, but as regards houses it is still larger. You must allow for insurance ; and also for law charges, without which it is impossible to conduct business connected with landed property and houses. You must allow — I will not say all the cost of management, but as much of it as you allow to a merchant under schedule D — you must allow for clerks, sub- agents, ground -bailiffs, oflBces, stationery, receipts, and so forth. You must allow for arrears of rent, and you must likewise allow for what are called abatements of rent, which are a real deduction from income. How much shall we allow under these heads ? What is the gross deduction we must make from the income of 80,000,000/. supposed to be received by the owners of land and Financial State and Prospects of the Country. 17 houses? I take it at 16 jDer cent. I do not think this an unfair estimate ; I am certain that it is, in some instances, a very low one. If 16 per cent, be a fair deduction, it is evident we should reduce the 80,000,000/., subjected to a tax of '7d. in the pound by the sum of 12,800,000/., which is actually expended before the income reaches the pocket of the owner ; and, there- fore, we have arrived at this point, that we have got instead of 80,000,000/. of income, only 67,200,000/., and this reduced amount pays a tax amounting to 2,333,000/. Then I come to another question upon which I must again resort to conjectural estimate. What is a fair estimate to make of the total amount of charges on land and houses, all over the kingdom, in respect not only of mortgages, but of settlements and all other arrangements of that kind ? I estimate that one- fourth part of the gross income derived from land and houses goes into the pockets, not of persons beneficially interested in them, properly speaking, but into those of mortgagees, annuitants, and others who receive under settlements. If that be so, then it appears that the owners of land and houses do not receive 67,200,000/. ; but from that sum you must deduct the fourth part of 80,000,000/., which reduces their income to 47,200,000/. This sum of 47,200,000/. is, then, the net receipt of those bene- ficially interested in land and houses. But you will j ustly say that the encumbrancers, who receive the 20,000,000/., pay the income-tax. Well, let us see what their quota amounts to. Sevenpence in the pound on 20,000,000/. gives 588,000/. Deduct this sum from the 2,333,000/. paid by the owners of land and houses, and the sum of 1,750,000/. will bo left, and this is the amount actually paid on an income of 47,200,000/. Now if hon. members will take the trouble to apply the figures I have stated, they will find the result to be this — that the sum of ninejience in the pound on a net income of 47,200,000/. would amount to 1,732,500/. ; and that, consequently, under the law as it now stands, the income derived from land and houses is taxed at the rate not of Id. but 9f/. in the pound. Then, what I want to know is this — supposing there be a />r/mayac7(? case for break- ing up the income-tax on the ground of inequality between the two classes of payers — namely, the owners of land and houses and those engaged in trades, do you, on the whole, think that if a difierence had to be made between the two classes, the dif- ference ought to be greater than that which now exists ? I do not raise the question whether there ought to be any difierence whatever between the two classes, or whether the income of the year is not the just and proper object of a tax intended to pro- vide for the services of the year; I pass that question by; but I show you that, according to a rational estimate, land at this moment pays 9^. and trade Id. in the pound, and I ask any moderate man whether, if we were now about to establish a B 18 The Chancellor of the Exchequer a Speech on the different rate of payment between the two classes, he would think of making the difference greater than exists at this moment? In December last, the right hon. gentleman opposite (Mr. Disraeli) projiosed that realized income should pay a tax of Id., and precarious incouie one of h\d. Now, if any one will have the kindness to compare my figures with the right hon. gentle- man's proposal, it will be found that, within a small fraction of a farthing, the rates paid by the two classes of income are at present equivalent to Id. and h\d. If we break up the present income-tax it must be for some object. If that object be to relieve trade at the expense of land and houses, it is well that those who may be about to sanction tliat purpose should con- sider where they are to begin in fixing the proportions of the payments to be made by different classes, and where they are to fnd. If it be desired to settle the question according to the views which have impressed themselves on the minds of many moderate and intelligent men, according to the view taken by the right hon. gentleman opposite, and by my hon. friend the member for Wiltshire in the committee which sat upon this subject — namely, by making land pay about four, and precarious income about three, then I say that object is already accom- plished, for the payments of the two classes bear that projiortion to each other at this moment. But let us go further in the consideration of this deeply- important question. It is commonly stated, that though we cannot do justice to each individual, we may do justice as between classes ; and that for this purpose we must take an average of each class within itself. Now, I question the doctrine of those who propose to do justice between the vai'ious kinds of income by establishing averages for each class -within itself. This is not the course advocated by the hon. member for Montrose. The hon. meud)er is always consistent, and always manful ; when he sees a difliculty in his path he takes no pains to get out of the way. His instinctive sense of fair- ness and scorn of artifice leads him, in his attemjDts to reform the income-tax, into difficulties which a man acting as a tactician would avoid. He says, fairly appraise the property or income of each individual. But the common notion is, that incomes should be classed in averages. In the name of reason and com- mon-sense, I ask how those who demand either equality, or an approach to it, can obtain it by averaging classes of income ? Look at annuities. The tables give the value of female life at 15 years of age at 25 years' purchase; but go upwards to 70 or 75 years of age, and the value of the life is only five years' pur- chase : yet you ])ropose to average, forsooth, these dissimilar cases — to bring up the value of five years' purchase and bring down the value of the 5i5 years' ])urchase to a common standard. Finatwial Slate and Pro,y)ec/s of the Countnj. 19 What possible average can these interests admit of? A life of 25 years' purchase is five times the vakie of one of five years' purchase. Will it be any consohition to the hfe of five years' purchase, when called on to pay three times as much as he ought on the principles of the reformers of the tax to pay, that the life of 25 years' purchase pays only half as much as he should do ? Still more absurd would be the attempt to average trades. Many trades are worth 25 years' purchase. I venture to say, that if the matter be closely investigated, it will be found that many trades are better, on the whole, than perpetuities, and for this reason, that trade affords ojiportunities for providing for children and relations such as no other pursuit presents. Let us, how- ever, state the case moderately, and say that some trades are worth 25 years' purchase ; there are others not worth more than five, four, or three years' purchase, and how are you to average the interest of a trade worth three and another worth 25 years' purchase ? I must enter my protest against this averaging of classes as a mode of what is called doing justice in the matter of the income-tax. There is another topic of a somewhat painful nature connected with this branch of the subject, to which I must briefly allude. We have seen that land pays Id in the pound, according to a standard of value which does not depend on the will or testi- mony of its owner. Trade, on the other hand, pays Id. in the pound, and this poundage assessed by each ti'ader on himself. I have no doubt that, in the majority of instances, the returns of our traders are fairly and honourably made. There are many cases, in trade, in which it is a matter of extreme difficulty to know what return to make, what really is chargeable as pi'ofit ; and 1 believe that in not unfrequent cases the doubt is solved by the honourable trader against himself, and that he returns his profits greater than they really are. Let it not be supposed that I am going to im^jute to the trading classes of England generally the conduct which is pursued by some individuals. I am going to state an extreme case. It is an example, not of what has been generally done, but of what can be and has occasionally been done upon the scale I am going to show, and of what I fear on a smaller scale is often done. I will mention no names — I will violate no confidence — but I will state what hap])ened in a great town where a new street was to be built. The persons who lived and carried on business in the old street, which was pulled down to make way for the new one, had been charged at a certain amount to the income-tax. They had also, of course, made returns at a certain amount under the income- tax. When the new street came to be built, they claimed com- pensation for the loss of their business. The amount had to be assessed by a jury. Without wearying the Committee with details, I will state the amount of compensation which these B 2 20 The Chancellor of the Exchequer s Speech on the persons — in number 28 — claimed; the amount awarded them by the jury, which maybe taken as, on the whole, an ajiproxima- tion to the real value; and the amount at which they returned their profits under the income-tax. Were I to descend to indi- vidual cases, it would be almost impossible adequately to describe the i)artly ludicrous and partly shameful asi)ect which they as- sume. I will therefore deal with the matter generally, and say that 28 persons in all claimed the sum of 48,159/. as compensa- tion for their profits for a single year. The amount of compen- sation awarded by the jury was 26,973/., or a little more than half what was claimed. But what was the amount at which they had returned their profits for assessment to the income-tax ? They claimed 48,000/.; they got from the jury nearly 27,000/.; but the return of profits for assessment to the income tax which they separately made had amounted only to 9000/. I deeply regret that the great body of honourable men who have made the name of British commerce famous throughout the earth, less even for its energy than for its truthfulness, should be degraded by association with persons who could per- petrate frauds like these. But at the same time frauds of this kind, and in many other cases, do exist; they are inseparable from the character of the impost, human nature remaining as it is ; and it is impossible, when you are called upon to consider the question of the re-adjustment of the tax, wholly to dismiss them from consideration. Now, sir, I leave this part of the question with theproposition — which I think will hardly be controverted — that as regards the state of the case between land and trade, reserving other cases for separate consideration, there is no sufficient ground to at- tempt the reconstruction of the income-tax. I have three other cases still to consider ; and first I will take the case of schedule E, which contains the jjayments that are derived from the incomes of the salaried servants of the public. I think that no class of persons is included in schedule E, with the exception of persons connected with the Bank of England, who may not be called, in one sense or another, public servants. Some of them may be servants of local or separate authorities, as for instance of the East India Company, but they are, I think, all public servants, and they are generally servants of Her Majesty's Government. With resj)ect to the case of these public salaries, I think it is scarcely possible to distinguish between such incomes and life incomes. As they are usually held almost for life, with retire- ments in prospect, their durability is httle inferior to that of life incomes ; and their inferiority, in respect of durability, is upon the whole compensated by this, — that they are usually progres- sive incomes, while life incomes are usually fixed. It is imjjos- siblc, I think, for any dispassionate man, under these circum- Financial State and Proapects of the Count ri/. 21 stances, to draw a distinction between the case of salaries and that of life incomes, for the purpose of the income-tax. With regard to remissions upon salaries, the case seems to be argued rather high both ways. At present there is a movement among the civil servants of the Crown for a change in regard to their superannuation funds, which would amount to an increase of salary. The tide has but lately turned ; for it is not very long since the right hon. member for Oxfordshire (Mr. Henley) made a motion in this house — and, unless I am much mistaken, he all but carried it — for reducing salaries of this description whole- sale by no less than ten per cent. If the right hon. gentleman thinks that such salaries ought to be reduced by ten per cent., I would suggest that it would be better to reduce them by a little less than ten per cent, rather than break uj) the income-tax on this account; in any case I think I shall carry general assent when I say it would be much better to deal with public salaries, if they are to be dealt with, by a separate arrangement, than to make them the occasion of an attempt to jjerform an operation on the income-tax, which, up to this time, all those who have been responsible for our finances — if we except the riglit honourable gentleman opposite — have unanimously declared to be impossible and absurd. Now, sir, I come to what is supposed to be the sore place of the income-tax — schedule C; and when the committee have heard what I have to say, I will fearlessly appeal to their love of justice, and put it to them whether schedule C, even if it stood alone, is not rather a reason why they should not break up the income- tax than why they should do so. I know this is a bold challenge ; but wait and see whether I will not make good my joosition. In the first instance, I will read to the committee a testimony that has come from across the Atlantic, simply in order to impress upon them the conviction that when we approach schedule C we begin to tread upon very delicate ground. We wrote to the United States to ascertain what was done in that country, where taxes of this nature are levied, with respect to the public stocks or funds, and I have here a short letter, signed by Mr. Everett, dated "Department of State, Washington, 10th of February, 1853," in which he says : — " Sir, — I have the honour to acknowledge the receipt of your note of the 9th inst., inquiring, by direction of Her Majesty's principal Secretary of State for Foreign Affairs, wliether the public debt of the United States is subject to ^jro^^erty or income- tax in the hands of those who hold the stock, and also whether, in the acts authorizing the contracting of the debts, any provision was made, exempting them from taxation. " In reply, I have the honour to inform you, that there is nothing in the constitution of the United States, or in the laws creating the public debt, which prohibits this Government from 22 The Chancellor of the Exchequer's Speech on the levying a tax on that debt ; the Governments of the respective States, however, can levy no such tax, as this would be an act impairing tlie obligation of a contract, which is expressly for- bidden by the federal constitution." It appears to me, upon a fair review of the case, that we must set out with this doctrine admitted on all hands — that we are bound to give some rational construction to those words in the loan acts whicli provide that the public dividends shall be paid free of all taxes and charges wliatsoever. I think we are bound to give them a rational construction. Mr, Pitt thought the rational construction to give to them was, that you should not look at all to the nature of the source, but that you should consider the dividends simply in relation to the receiver as so much income. I am bound to say that I think Mr. Pitt's con- struction of the i^ledge was the safest and the wisest. It has, at any rate, been acted upon for more than 50 years, and under it the great bulk of the public debt has either been borrowed or reborrowed. I do not mean now to dwell upon the difficulties you might have in the case of these acts in proceeding at this time to impose a new construction of the contract, after a former one has so long prevailed; but what I do beg you to acknow- ledge is, that there is only one other construction, in any sense rational, that could be given to the words in the loan acts, and it is this — that we are entitled to look, if we choose, not at the mere amount of annual income, but at the durability of the income, as tested by the price of the income when it is sold. I will suppose, then, the proposition now is, that we should reconstruct the income-tax, in order that we may levy the tax upon some- thing like what is called the capitalized value of the income. Considering the circumstances under which the income-tax was first imposed, and the circumstances under which that change is now suggested, I never can believe that it would be adopted by a British Parliament. Observe not only the effect which it would have upon the interest of the fundholders, but al)ove all the light in which it exhibits the dealings of the State with them. When Mr. Pitt imi)Osed the income-tax he said to those persons, "We have nothing to do with capitalized value or with jnice in the market; we can look to nothing but what you receive from year to year," At that time, when the fundholder was taxed uj^on his income from year to year, what was the capitalized value of his income ? About sixteen years' purchase. That was not far from the average ca2)italized value of the fundholders' income for 17 years of the income-tax, until the conclusion of peace. Suppose your new doctrines had been iu vogue then, the fundholder would have paid only one- half of what he did pay ; and sliall I be told that, after adopting a eunstiu(;tion most unfavourable at the moment to the fund- holder, and after taxing him, and taxing him too at the rate of Financial State and Pro.<^2)ects of the Coimtnj. 23 ten per cent, on the full vnlue of his income for 17 years, when he could only have got IG years' purchase for his pro- perty in the market, England and the English Parliameut will now" turn round upon that man, in the manner suggested, when, owing mainly to the general confidence in your strict gO(jd faith towards the public creditor, the value of his property has risen to 33 years' purchase ? If you now determine that the capitalized value of the fundholder's income ought to be taxed, I say that you inflicted the grossest wrong upon him in time of war. When he then consented to pay 10 per cent, upon the value of liis income, he had confidence that peace would be restored, that his income would become more valuable, that faith would be observed with him — 1 mean taith according to the common principles of equity and justice — and that no advantage would be taken of that rise in value. But if the British Parliament sets the example of establishing in time of war, when funds are low, the doctrine that you have nothing to do with capitalized income, and then in time of peace, when the funds are high, sets up the opposite doctrine, I will not merely say that the character of this nation will not stand as in the time of your fathers it has stood, but I warn you that you must abandon from henceforth the idea of taking the lead among all the borrowers of the world, and that you must prepare for a vital change in your relations with those who have hitherto trusted you. There are persons who say, " We ought to tax incomes at different rates, accordingly as they proceed from pro^ierty or from skill." In ftict, they would place industrious incomes on the one side, and lazy incomes on the other. Now, in ray opinion, a great deal may be said in favour of that doctrine, but observe the effect it must have with regard to the public creditor. The landholder must exert himself with respect to his land, the householder as to his house, and the mortgagee must either look out himself, or jjay his lawyer for looking out to ascertain the safety of the investment proposed for his money; and I do not believe there is any income which is perfectly and entirely a luzy income, except the income of the fundholder. If that were so, the fundholder would enjoy an entire pre- eminence in taxation, and the degree of that pre eminence it would rest with you to fix. I honour the sense of justice of my hon. friend the member for Montrose, and so I honour the sense of justice of those gentlemen — the actuaries — who have recom- mended the fiuidamental re-construction of this tax, and who do fairly ado])t and abide by the durability of incomes. If they had made their proposals in 17 98, I do not know that the fundholders would have had much reason to complain ; but, on the contrary, I believe that, upon the whole, they would have been gainers. I think, however, that the proposal of the actuaries is unsound in 24 The (Jhancellor of the Exchequer's Sjyeech on the principle. I conceive that it is unsound in principle to levy the revenue of the country in substance by a tax upon its property, for I think that income is, in the main, the proper basis of taxa- tion, I do not mean, however, to push that doctrine to extremes : and I undoubtedly should say, if we have a j^iroperty-tax at all in substitution for the income-tax let us have a good and honest property-tax, such as the actuaries propose. Unfortunately, these gentlemen have the plan which they recommend entirely to themselves, for no one has ever been found to j^ropose it in this house, or, as far as I know, elsewhere. In fact, nobody will propose that plan, for every one knows it is a mathematical speculation upon paper; but not a project to be submitted to an assembly of men whose bounden duty it is to provide by practicable means for the constantly recurring wants and services of the country. The project of the actuaries, then, I pass by, because, while it is of all the plans of income-tax reform the most self-consistent, it is also, I will not say the most impossible, (for that would be a solecism) but it is placed the furthest beyond the reach even of imagination as a possible measure. Now, I will request the committee to go yet further with me into the consideration of one more jjoint with regard to the funds, which I take to be highly practical in its character, and which I beg to commend to their particular attention. I have used every means in my power to analyze the manner in which the funds are held. It is, however, a matter of great difficulty. In old times there was a very general belief in the aj^pearances of hobgoblins, and now throughout the country you may here and there find those who have a somewhat analogous conception of an awful being they call the fuudholder, whom they picture to their imaginations as an iron-hearted creature, rolling in wealth, and living in worthless indolence upon the toil and sweat of his countrymen, but it is very difficult to find out whether the existence of this monster is a fact or a fiction. I cannot obtain a complete analysis of the manner in which the funds are held. The State, as we know, has no information upon the subject. The Bank of England, which pays the divi- dends, knows only one circumstance, and that is, whether the dividend is i)aid to a joint account or a sole account. Now, a very remarkable change has been taking place of late years in the manner in which the funds are held. About fifteen years ago the funds were chiefly held in sole accounts by individuals, and I think you may, upon the whole, take it nearly for granted that the sole accounts indicate — but I speak in the presence of prac- tical authorities, who can correct me if I mislead you — absolute property, with some few exceptions. So lately, then, as fifteen years ago, much more than one-half of the stocks were held in sole accounts, and therefore represented absolute property; but mark Financial State and Prosj}ects of the Country. 25 the change that has taken place. At present the case is reversed. The whole amount of stock held in sole accounts is at the present moment 280,000,000/., and out of that about 00,000,000/. represents the incomes of persons who are exempt from the in- come-tax by reason of their incomes being under 150/. a-year. There is, therefore, a sum of about 220,000,000/. held by persons who may be considered as holding perpetuities in the funds, and whom the reformers of the income-tax would regard as entitled to the distinction of pre-eminent taxation under that tax. Now, the amount held in joint accounts was, in February, 1852, 427,000,000/., and I have no doubt that it is at this time much more. One-third of the funds, upon the whole, are held in sole accounts, and two-thirds in joint accounts. Now, what do these joint accounts mean ? I will tell you very nearly what they mean. These joint accounts may be divided, I believe, into five classes, one or other of which may be taken as comprehending very nearly the whole. In the first place, the joint accounts include a large class of cha,rities, and among them I reckon the great account of the Commissioners of the National Debt for savings-banks, amounting to 33,000,000/. These sums are all by law exempt from income-tax. Then, in the second jalace, we have the Chancery and Bankruptcy accounts, amounting to be- tween 50,000,000/. and 60,000,000/. I don't imagine that it is the desire of this committee, or of the reformers of the income- tax, to lay ujoon the monies locked ujd in Chancery and Bank- ruptcy an exceptional tax. A third class which enters into the joint accounts is made up of those cases in which English firms — particularly banking firms, but other firms also — hold large sums of money on account of foreigners. I imagine that, although Englishmen who have investments in the funds more commonly hold them in their own names, it is very common for foreigners to have stock held in the names of their banking or mercantile correspondents. It has been a poj^ular doctrine to tax the foreigner, but I think that no person in this house would wish to tax the foreigner in this particular form. It has been a long-contested question with respect to income-tax in England, whether tlie foreigner is not entitled to exemption altogether. The late Sir R. Peel subjected him to equal taxation in 1842, but even that proposal was strongly resisted, and I think every member of this House will agree that it would be very impolitic to lay an excep- tional tax of this kind ujjon the foreigner. The fourth class interested in joint accounts, and a very large class too, is the class indicated by life interests less than per- petuity. When Mr. Horsman made a proposal with reference to the income-tax in 1 848, one of his main arguments was founded on the absurdity of taxing life interests at the same rate at which perpetuities are taxed. Of late the income-tax reformers have 26 The Chancellor of the Exchequer's Speech on the liacl much less compassion for the life-interest men, and few of tliem have seemed lo regard their case at all. My opinion is, that if the income-tax were reconstructed it would be very diffi- cult to shut out the class having life interests from the benefit of a reduced rate if you introduce the distinction of rate; but surely it would be intolerable to raise the tax ujjon the funds as far as regards that large portion of holders who have a mere life interest. The fifth class interested in joint accounts consists of trading companies and associations holding funded property. Now, are you to lay an excejjtional tax upon the capital of persons so engaged in trade? I sliould say that it is very much better to leave English trade where it is, paying Id. in the pound, in the I)lace of the 9