FINANCIAL MEASURES—INCOME-TAX BILL, ETC.
On the accession of Sir Robert Peel to office he was embarrassed with great financial difficulties. For the ensuing year he had to deal with a deficiency of £2,570,000; with contingencies in China and India of uncertain amount. The present juncture, indeed, demanded a remedial measure of a bold and comprehensive character, and Sir Robert did not fail to bring forward such a measure. On the 11th of March, in a committee of ways and means, the right honourable baronet said, that for the year ending April, 1843, the estimated revenue would be £43,350,000, and the estimated expenditure £50,819,000, leaving a deficiency of £2,469,000. With the contingencies in India and China, indeed, he calculated that the deficit, in the two years ending May next, would not be less than £4,700,000. How, he asked, were these deficiencies to be met? Should the system of loans and exchequer-bills be continued? Was there the prospect of any considerable reduction in expenditure? Was the present deficiency a casual one? Should he impose a tax on articles of consumption and the necessaries of life? Should he revive old taxes? Should he go back to the post-office? or revive the taxes upon salt, leather, or wool? Finally, should he resort to locomotion for the purposes of taxation? All these expedients Sir Robert repudiated; and he fixed upon one which, while it justly gave offence to a large body of the people, has proved to fully answer the end for which it was designed. This was an imposition of an income-tax of sevenpence in the pound upon all incomes from £150 and upwards, and in which was included not only landed but funded property, whether in the hands of British subjects or of foreigners. He estimated the assessable yearly value of the land at £39,400,000; of houses, at £25,000,000; and of tithes, shares in railways and mines, and other similar property, at £8,400,000: total, £72,800,000. From this he would deduct one-fourth for the exemption which he proposed to give to all incomes under £150, and then the tax thus far would give him £160,000. The occupiers of land, assessed at half their rent, would yield £120,000. Next came funded property. The dividend paid in 1841 was £29,400,000, from which he would deduct £1,000,000 in respect of savings’ banks; but he added upon bank, foreign, and other stocks £1,500,000, making a total of almost £30,000,000, from which, deducting one-fourth for incomes under £150 a year, he would derive £646,000. Sir Robert Peel next proceeded to incomes of trades and professions, from which he expected to obtain £1,253,000; and he then stated that from the incomes of public officers he calculated upon £150,000. The total would be £3,771,000. With respect to the duration of this impost, he said, that government might probably require it for five years; but he would in the first instance propose its continuance for three years. In case of war he should deem it reasonable that Ireland should bear her proportion of this tax; but during peace, and for a limited period, he should prefer to raise the quota of that country by other means. He proposed, therefore, a duty of one shilling per gallon upon spirits; the equalization of the stamp-duty with that of England; and a tax of four shillings upon coal exported in British vessels from this country. The aggregate revenue from these sources and the income-tax in England would be about £4,380,000; constituting a considerable surplus, after covering the deficiency on the votes of annual expenditure. This surplus Sir Robert Peel proposed to apply in relaxing the commercial tariff. The duties on raw materials were in no case to exceed five per cent.; the duties upon articles partially manufactured were to be diminished, the highest being twelve per cent.; and upon complete manufactures no duty was to be imposed higher than twenty per cent. He laid upon the table this amended scale of duties, which had been distributed under twenty different heads; in which, he said, would be found an abatement in about seven hundred and fifty articles, and that on about four hundred and fifty the duty had been left untouched. The total diminution of revenues occasioned by the reductions was estimated by the right honourable baronet at about £270,000. He regretted to say that upon sugar, ministers could not offer any reduction; but with respect to coffee he proposed a reduction of fourpence upon British, and eightpence upon foreign, which he calculated would cause a loss of £171,000 to the revenue. On the subject of timber, he said that his measure would be the reverse of that which was brought forward by his predecessors in office; he would advise a great reduction of duty, which would benefit all classes, from the agriculturist to the shipbuilder. His propositions were to lower the duty on foreign timber to twenty-five shillings a load, and to let in the timber of Canada at a duty of one shilling a load; causing a probable loss to the revenue of £600,000. There were yet two other reductions he had to propose: one upon the export of certain British manufactures, and another upon stage-coach duties. These two heads of reduction would produce a loss of £70,000. On the whole these reductions, in addition to the excess of expenditure, would increase the deficit to about £3,700,000; but the estimated produce of the income-tax would not only cover this, but leave more than £500,000 applicable to the contingencies of war in India and China. Sir Robert Peel concluded with an earnest appeal to the house to support the name which the English had inherited from their forefathers, untarnished: and he then moved his first resolution, which was to grant a duty on Irish spirits. No discussion followed Sir Robert Peel’s speech: the motion was agreed to, and the house resumed.
A few nights subsequently, Sir Robert Peel entered into an explanation of the details of the measures he had announced; especially with respect to the machinery by which the income-tax was to be collected. On the motion to go into a committee of ways and means, Mr. T. Baring found fault with Sir Robert Peel’s calculations; and he was followed by Lord Howick, who strongly censured the income-tax, and Lord John Russell, who condemned the construction of tire tariff for not working out its own principle, but sparing certain articles, as sugar, merely from fear of the influential interests connected with them. After three several motions by Messrs. Cobden, H. Berkeley, and Bernai, “That the chairman do report progress,” which were all negatived by large majorities, Sir Robert Peel was compelled to defer the measure till the 4th of April. The income-tax was resumed immediately after the Easter recess. The first resolution, to impose a tax of sevenpence on every pound upon all incomes, except the incomes of occupiers of land, was put and carried without discussion. On the second resolution, however, imposing a tax on the occupation of laud, calculated at the rate of threepence-halfpenny in the pound on the yearly value being read, Lord John Russell pointed out the operation’ the tax might have in inducing landlords to split their farms, so as to make the rental of each below the amount liable to taxation; and gave notice that, on the report of the resolutions, he should move this amendment:—“That it has been stated to this house, on official authority, that the deficiency of income to meet the expenditure of the country, may be estimated for the years ending the 5th day of April, 1842, at £2,350,000, and on the 5th day of April, 1843, at £2,569,000. That this house is fully sensible of the evil of a continued inadequacy of the public income to meet the expenditure, and will take measures for averting the same in future years. That, by a judicious alteration of the duties on corn, by a reduction of the prohibitory duty on foreign sugar, and an adjustment of the duties on timber and coffee, the advantage of a moderate price to the community may be combined with an increased revenue to the state. That, in addition to those main articles of general consumption, the interests of trade will be promoted by the repeal or reduction of various prohibitory and differential duties, and that extended commerce will improve the revenue, whilst it gives employment to industry. That the amount of taxes taken off, or reduced, from the termination of the last war to the end of the year 1836, exclusive of the tax on income, may be stated in round numbers at £23,873,000. That the income-tax, having been first imposed in a period of extreme emergency and during a most perilous war, was repealed on the re-establishment of peace; and having been again imposed on the renewal of war, was again repealed in 1816, on the termination of hostilities. That considering the various means of supplying the deficiency without enhancing the price of the necessaries of life, or embarrassing trade, it is the opinion of this house that the renewal of a tax, inquisitorial in its character, unequal in its pressure, and which has hitherto been considered as the financial reserve of the nation in time of war, is not called for by public necessity, and is therefore not advisable.” The second resolution was then put and agreed to; as was also the third, equalizing certain stamp-duties in Ireland with those of England; and the report was ordered to be brought up. Lord John Russell’s amendment came on for discussion on the 8th of April, when his lordship, in a speech of great length, charged the government with taking too gloomy a view of affairs, comparing the present aspect of the finances with that when an income-tax was formerly proposed. If new taxes must be resorted to, his lordship recommended a tax on the succession to real property, or the revival of some of the repealed assessed taxes. Mr. Goulburn defended the ministerial policy; and Sir Robert Peel vindicated himself from the charge of over-rating difficulties, and contrasted the state of finances which the Melbourne government found on entering office in 1835, with that which they left on their departure, in the British and Indian empire. The debate on Lord John Russell’s amendment lasted four nights, most of the principal speakers on both sides taking part in it. On the fourth night the house divided; when it was lost by a majority of three hundred and eight against two hundred and two. The report was then brought up and read, and leave given to bring in a bill founded on Sir Robert Peel’s resolutions. On the motion for the first reading of the bill, on the 18th of April, Lord John Russell moved that it be read a first time that day six months. A debate of considerable length ensued, in which arguments urged for or against the measure were repeated; after which the amendment was rejected by a majority of two hundred and eighty-five to one hundred and eighty-eight. The bill was then read a second time, and a few days afterwards the house went into committee. In committee the first question discussed was the period when the tax should commence; and the time finally decided was the 5th of April, 1842. The original proposition respecting schedule A was then affirmed, as was also schedule B. On schedule C Mr. Ricardo moved an amendment to exempt terminable annuities, and to subject them to special scales according to their market value; but, on a division, the motion was rejected by a large majority. In considering schedule D, which rendered incomes derived from professions, trades, and employments liable to the tax of sevenpence in the pound, Mr. Roebuck moved that it be fixed at half that sum. This motion was warmly supported by several speakers; but it was rejected, as was also another amendment to defeat this clause, moved by Mr. Sharman Crawford. Sir Charles Napier made a proposition on schedule E, to exempt officers in the army and navy from taxation; but this was also rejected: and after this the progress of the bill went on rapidly, more than eighty clauses being disposed of in one night’s debate. A second sufficed to get through the bill; amendments moved by Messrs. Baring, Hume, and Benjamin Wood, being all rejected by large majorities. On the third reading, Mr. Sharman Crawford moved an amendment, to the effect that the present house of commons could not be considered a fair representation of the people; and that therefore it was unfit that any system of increased taxation should be imposed by parliament until all just causes of complaint, with regard to the mode of electing members, should be redressed. Lord John Russell himself opposed this motion, and it was at once rejected; and after some further discussion on the bill, it was read a third time by a majority of one hundred and ninety-nine against sixty-nine. The bill then passed.