II
Out of the commercial treaty grew the whole of the great financial scheme of 1860. By his first budget Mr. Gladstone had marked out this year for a notable epoch in finance. Happily it found him at the exchequer. The expiry of certain annuities payable to the public creditor removed a charge of some two millions, and Mr. Gladstone was vehemently resolved that this amount should not “pass into the great gulf of expenditure there to be swallowed up.” If the year, in such circumstances, is to pass, he said to Cobden, “without anything done for trade and the masses, it will be a great discredit and a great calamity.” The alterations of duty required for the French treaty were made possible by the lapse of the annuities, and laid the foundation of a plan that averted the discredit and calamity of doing nothing for trade, and nothing for the masses of the population. France engaged to reduce duties and remove prohibitions on a long list of articles of British production and export, iron the most important,—“the daily bread of all industries,” as Cobden called it. England engaged immediately to abolish all duties upon all manufactured articles at her ports, and to reduce the duties on wine and brandy. The English reductions and abolitions extended beyond France to the commodities of all countries alike. Mr. Gladstone called 1860 the last of the cardinal and organic years of emancipatory fiscal legislation; it ended [pg 024] a series of which the four earlier terms had been reached in 1842, in 1845, in 1846, and 1853. With the French treaty, he used to say, the movement in favour of free trade reached its zenith.
Outline Of The Scheme
The financial fabric that rose from the treaty was one of the boldest of all his achievements, and the reader who seeks to take the measure of Mr. Gladstone as financier, in comparison with any of his contemporaries in the western world, will find in this fabric ample material.[16] Various circumstances had led to an immense increase in national expenditure. The structure of warships was revolutionised by the use of iron in place of wood. It was a remarkable era in artillery, and guns were urgently demanded of new type. In the far East a quarrel had broken out with the Chinese. The threats of French officers after the plot of Orsini had bred a sense of insecurity in our own borders. Thus more money than ever was required; more than ever economy was both unpopular and difficult. The annual estimates stood at seventy millions; when Mr. Gladstone framed his famous budget seven years before, that charge stood at fifty-two millions. If the sole object of a chancellor of the exchequer be to balance his account, Mr. Gladstone might have contented himself with keeping the income-tax and duties on tea and sugar as they were, meeting the remissions needed by the French treaty out of the sum released by the expiry of the long annuities. Or he might have reduced tea and sugar to a peace rate, and raised the income-tax from ninepence to a shilling. Instead of taking this easy course, Mr. Gladstone after having relinquished upwards of a million for the sake of the French treaty, now further relinquished nearly a million more for the sake of releasing 371 articles from duties of customs, and a third million in order to abolish the vexatious excise duty upon the manufacture of paper. Nearly one million of all this loss he recouped by the imposition of certain small charges and minor [pg 025] taxes, and by one or two ingenious expedients of collection and account, and the other two millions he made good out of the lapsed annuities. Tea and sugar he left as they were, and the income-tax he raised from ninepence to tenpence. Severe economists, not quite unjustly, called these small charges a blot on his escutcheon. Time soon wiped it off, for in fact they were a failure.
The removal of the excise duty upon paper proved to be the chief stumbling-block, and ultimately it raised more excitement than any other portion of the scheme. The fiscal project became by and by associated with a constitutional struggle between Lords and Commons. In the Commons the majority in favour of abolishing the duty sank from fifty-three to nine; troubles with China caused a demand for new expenditure; the yield from the paper duty was wanted; and the Lords finding in all this a plausible starting-point for a stroke of party business, or for the assertion of the principle that to reject a repealing money bill was not the same thing as to meddle with a bill putting on a tax, threw it out. Then when the Lords had rejected the bill, many who had been entirely cool about taking off the 'taxes upon knowledge'—for this unfavourable name was given to the paper duty by its foes—rose to exasperation at the thought of the peers meddling with votes of money. All this we shall see as we proceed.
This was the broad outline of an operation that completed the great process of reducing articles liable to customs duties from 1052, as they stood in 1842 when Peel opened the attack upon them; from 466 as Mr. Gladstone found them in 1853; and from 419 as he found them now, down to 48, at which he now left them.[17] Simplification had little further to go. “Why did you not wait,” he was asked, “till the surplus came, which notwithstanding all drawbacks you got in [pg 026] 1863, and then operate in a quiet way, without disturbing anybody?”[18] His answer was that the surplus would not have come at all, because it was created by his legislation. “The principle adopted,” he said, “was this. We are now (1860) on a high table-land of expenditure. This being so, it is not as if we were merely meeting an occasional and momentary charge. We must consider how best to keep ourselves going during a period of high charge. In order to do that, we will aggravate a momentary deficiency that we may thereby make a great and permanent addition to productive power.” This was his ceaseless refrain—the steadfast pursuit of the durable enlargement of productive power as the commanding aim of high finance.