THE FINANCIAL RELATIONS BETWEEN GREAT BRITAIN AND IRELAND
"It will not do to deny the obligation. The case (of Ireland's alleged over-taxation) has been heard before a competent tribunal, established and set up by England. The verdict has been delivered; it is against England and in favour of Ireland's contention. Until this verdict is set aside by a higher court, and a more competent tribunal, the obligation of England to Ireland stands proved."
—T.W. RUSSELL, Ireland and the Empire.
The contrast between the history of Great Britain and that of Ireland during the last century—in the one case showing progress and prosperity, advancing, it is not too much to say, by leaps and bounds, and in the other a stagnation which was relatively, if not absolutely, retrograde—is one of the most dismal factors in English politics. Those who would explain it by natural, racial, or religious considerations are probing too deep for an explanation which is in reality much closer at hand. If the external forces in the two countries throughout that period had been the same it would be right and proper to search for an explanation in such directions as have been named, but that these forces have not been so distributed it is my contention to prove.
The closing years of the eighteenth century in Ireland, coinciding as they did with the achievement of Parliamentary independence, witnessed in that country a remarkable growth of national prosperity. Up to the year 1795 the taxation of the country never exceeded one and a half millions of pounds, and the National Debt was not more than one million. In the
[21]succeeding years the French war and the rebellion of '98 swelled the expenditure, as did the maintenance of an armed force in the country, which was the corollary of the rebellion, and that process which Lord Cornwallis, the Lord Lieutenant, described as "courting those whom he longed to kick," by which the Act of Union was passed, added another million and a half to the national expenditure.
The result of the various causes was that in the year 1799-1800 the taxation of the country had risen to three millions, and the National Debt amounted to just under four millions of pounds.
It is necessary to enter into these details, because it was on the basis of the years 1799-1800, and not on that of a year of normal expenditure, such as was 1795, that Pitt and Castlereagh framed the financial clauses of the Act of Union, which were to establish the taxable relations between Great Britain and Ireland.
Having said so much we need not pause to consider how far the financial clauses were justified. It will suffice to say that they provided that Ireland should pay two-seventeenths of the joint expenditure of the United Kingdom, together with the annual charge upon her pre-union debt. One should add, however, that the Irish House of Lords protested that the relative taxable capacities of Ireland and England did not bear to each other the ratio which the Act enunciated of 1 to 7-1/2, but in reality of 1 to 18.
It was no part of Pitt's scheme that there should be fiscal union. A separate Irish Chancellor of the Exchequer, drawing up an Irish budget and regulating an Irish debt, remained after the union of the legislatures. Speaking in 1800 on this very point Lord Castlereagh declared that:—
"It must be evident to every man that if our manufactures keep pace in advancement for the next twenty years with the progress they have made in the last twenty, they may at the expiration of it be fully able
[22]to cope with the British, and that the two kingdoms may be safely left like any two countries of the same kingdom to a free competition."
The seventh article of the Act of Union, which comprised the financial proposals of the Act, has been summarised as follows in the report of a Royal Commission, to which we shall have occasion to refer later:—
"Ireland and Great Britain had entered into legislative partnership on the clear understanding that they were still, for the purposes of taxation, to be regarded as separate and distinct entities. Ireland was to contribute to the common expenditure in proportion to her resources, so far as the same could be ascertained, and even after the imposition of indiscriminate taxation, if circumstances permitted, she might claim special exemptions and abatements."
We have seen how the taxation of Ireland at the time of the Union was three millions. Five years later the figure had risen to four millions, and it went on increasing at this rate until in 1815 it amounted to no less than six and a half millions, having more than doubled in amount in a space of fifteen years, while during the same time the National Debt had risen from four and a half to ten and a half millions.
To understand the significance of these figures it must be realised that the Napoleonic war was in progress, and that the supply, on the part of Ireland, of provisions at enhanced war prices was the only means by which she was able to cope with her increasing liabilities. The conclusion of the war and the consequent fall in prices accelerated a crisis in Irish finance. Even in the years of plenty not more than one-half of what the Act of Union proposed could be squeezed out of the country, and the balance, which was added to her debt, raised the ratio which it bore to that of Great Britain from the proportion of 1 to 15-1/2 in 1800 to that of 2 to 17 in 1817. One would have thought that such an increase of debt would have
[23]made Ireland less fitted to bear equal taxation with Great Britain, but the statesmen of the day thought otherwise, and in 1817 the Exchequers were amalgamated. Even then the fiscal systems of the two countries were not in all respects assimilated, though in regard to some taxes an equalisation was effected, as, for example, in the case of tobacco, the duty on the unmanufactured variety of which was raised from 1s. to 3s. per lb., while that on cigars and manufactured tobacco was raised from 1s. to 16s. per lb. The manner in which the change affected social conditions in Ireland at this time may best be illustrated by the fact that the taxes on commodities, which necessarily hit the poorest classes hardest, rose from 4s. a head per annum in 1790 to 11s. a head per annum in 1820. After the Consolidating Act of 1817 the annual taxation fell to about five millions, abatements and exemptions being made every year. The tobacco tax and the Stamp Duty of 1842, which realised about £120,000 a year, were, it is true, equalised in the two countries, but for many years the system of special treatment was pursued. To Sir Robert Peel credit is due for having refused in 1842 to extend to Ireland the Income Tax, which he re-imposed in England, and for reducing the duty on Irish whiskey to its original figure by the remission of an additional 1s. per gallon which he had imposed.
Soon after this the country supped full of horrors in the famine of 1846-1847. In the decade from 1845 to 1855 more than a quarter of Ireland's population was lost. No sooner did she begin to recover from the effects of this visitation than the Repeal of the Corn Laws dealt her an almost equally disastrous blow. The absence of an industrial side which she might develop, as did England, the almost complete dependence on agriculture, joined to the enfeebled condition in which the lean years had left her, made the adoption at this moment of the principle of Free Trade—in her case—deplorable. Nor was this all.
[24]It was at this moment that the opportunity was taken by Mr. Gladstone, at that time Chancellor of the Exchequer, to reverse the discriminative policy upon which Peel had so strongly insisted.
The Income Tax was applied to Ireland in 1853 at the rate of seven pence in the pound. Ten years later it had risen to seventeen pence. At the same time an additional duty of eight pence a gallon on Irish whiskey was exacted, which in two years was multiplied fourfold, while in 1858 Disraeli assimilated for the first time the whiskey duty in the two islands by raising it in Ireland to 8s. a gallon. The result of this new departure in taxation may be summarised by saying that the Irish revenue was raised from just under five millions in 1850 to nearly eight millions in 1860, and that, too, at a time when, of all others, her distress demanded special treatment and care.
Although the process of assimilation was carried far in 1853 and the subsequent years, fiscal unity has never been completely effected. To this day Ireland secures exemption from the Land Tax, the Inhabited House Duty, the Railway Passenger Duty, and the tax on horses, carriages, patent medicines, and armorial bearings. It will be said, no doubt, that Ireland ought to show due gratitude for these exemptions, but though they raise collectively a sum of £4,000,000 by their incidence in England, Scotland, and Wales, it is calculated that if applied to Ireland they would bring in not more than £150,000 a year, a sum so small that one may ask whether it would bear the cost of collecting.
By way of set-off to the imposition of income tax, which it should be noted was at the time said to be "temporary," Mr. Gladstone wiped out a capital debt of four millions, but it must be pointed out that, in the fifty years which have ensued, a sum of between twenty millions and thirty millions has been collected in Ireland as income tax. Objection cannot—beyond a certain point—be taken to the incidence of this tax,
[25]seeing that it does not fall upon the poorest classes, and that no country benefits more than does Ireland from the substitution of direct for indirect taxation. But what does call for censure is that its application was not made an occasion for the remission of other taxes.
In 1864 the Conservative Government recognised the serious problem of the unequal incidence of taxation in the two islands, and appointed a committee to consider their financial relations. Sir Stafford Northcote, the chairman of this committee, declared that, notwithstanding the fact that they were both subject to the same taxation, "Ireland was the most heavily taxed and England the most lightly taxed country in Europe." Twenty-five years later Mr. Goschen, the Conservative Chancellor of the Exchequer, consented to the appointment of another Committee on the same subject, but no report was ever issued. In 1895 a Royal Commission was appointed, comprising representatives of all political parties, and presided over by a man of commanding ability in the person of Mr. Childers, a former Liberal Chancellor of the Exchequer. The terms of reference were "to inquire into the financial relations between Great Britain and Ireland and their relative taxable capacity." The following extract will serve to show the conclusions of the Commissioners:—
"In carrying out the inquiry we have ascertained that there are certain questions upon which we are practically unanimous, and we think it expedient to set them out in this report. Our joint conclusions on these questions are as follows:—
"(1) That Great Britain and Ireland must, for the purposes of this inquiry, be considered as separate entities.
"(2) That the Act of Union imposed upon Ireland a burden which, as events showed, she was unable to bear.
"(3) That the increase of taxation laid upon Ireland
[26]between 1853 and 1860 was not justified by the then existing circumstances.
"(4) That identity of rates of taxation does not necessarily involve equality of burden.
"(5) That whilst the actual tax revenue of Ireland is about one-eleventh of that of Great Britain, the relative taxable capacity of Ireland is very much smaller, and is not estimated by any of us as exceeding one-twentieth."
It is difficult to conceive a more damning indictment of English rule in Ireland. One cannot help recalling the glowing promises of Pitt in 1800:—
"But it has been said, 'What security can you give to Ireland for the performance of the conditions?' If I were asked what security was necessary, without hesitation I should answer 'None.' The liberality, the justice, the honour of the people of England have never yet been found deficient."
One is reminded of Dr. Johnson's remark to an Irishman who discussed with him the possibility of the union of the Parliaments:—
"Do not make a union with us, sir; we should unite with you only to rob you."
It is a striking testimony to the fact that the approach to some men's hearts is through their pockets; that the report of the Commissioners brought all Ulster into line with the Nationalists. Such a vision of the Protestant lion lying down with the Catholic lamb had not been seen since the Volunteers had mustered in 1778, and then, too, curiously enough, the common cause was financial, being the demand for the removal of the commercial restraints on the island.
A conference was held in 1896, presided over by Col. Saunderson, the leader of the Orangemen, and was attended by all the Irish members, irrespective of party. The outcome was a resolution in the House of Commons, proposed by Mr. John Redmond, and seconded by Mr. Lecky. The rejoinder of the
[27]Government to the demands made was to the effect that the postulate of the Commissioners that Ireland and Great Britain must, for the purposes of the inquiry, be considered as separate entities stultified the report.
One cannot characterise this attitude otherwise than as a piece of special pleading. The appointment, not merely of the Royal Commission, but of the Select Committees of 1865 and 1890, presupposed a disparity between the conditions in the two countries which not only existed in fact but were recognised by law.
In regard to the Church, the kind, the police, education, and even marriage, the laws are different in the two countries; and we have seen how, in respect of such widely separate things as land, railway passengers, and armorial bearings, the systems of taxation are distinct.
The position of the official Conservatives was well stigmatised by one of the most distinguished among their own body—Mr. Lecky—when he declared that—
"Some people seem to consider Ireland as a kind of intermittent personality—something like Mr. Hyde and Dr. Jekyll—an integral part when it was a question of taxation, and, therefore, entitled to no exemptions, a separate entity when it was a question of rating, and, therefore, entitled to no relief."
To the argument that Ireland has no greater claim to relief, on the score of her poverty, than have the more backward agricultural counties of England, the answer is that Wiltshire or Somersetshire—shall we say—have always received equal treatment with the rest of the country, and have never entered into a mutual partnership as did Ireland when she trusted to the pledges made to her by England, and expressed in these terms by Castlereagh:—
"Ireland has the utmost possible security that she cannot be taxed beyond the measure of her comparative ability, and that the ratio of her contribution
[28]must ever correspond with her relative wealth and prosperity."
The attitude of Ireland in this matter is perfectly plain. While deprecating in the strongest terms the means by which the Union was carried, she is prepared, so long as it remains in force, to abide by its terms. It partakes of the nature of what lawyers call a bilateral contract, imposing duties and obligations on both sides, and these liabilities can only be removed—as in the case of the Disestablished Irish Church—by the consent of both the contracting parties to the treaty.
The spectacle of the richest country in Europe haggling over shekels with the poorest is a sight to give pause, while Great Britain's insistence upon her pound of flesh is the more unpardonable because Ireland declares that it is not in the bond. That the highest estimate of the taxable capacity of Ireland arrived at by the Commissioners was one-twentieth, while the actual revenue contribution of Ireland was one-eleventh of the total for the United Kingdom, throws much light upon the social conditions of the smaller island. The rate of taxation per head per annum went up in the second half of the nineteenth century more than 250 per cent.—rising from about £1 in 1850 to more than £2 10s. in 1900. This occurred simultaneously with a diminution of population in the same period from seven millions to four and a half millions, a change which is in glaring contrast with the concurrent increase in Great Britain from twenty millions in 1850 to more than thirty-eight millions at the present day. Whatever may be the other causes which have led to the stream of emigration from Ireland it may certainly be claimed that not least among them is the ever-increasing incidence of taxation which is year by year laying a greater burden upon the privilege of living in that country.
A recent Report, issued by the Labour Department of the Board of Trade, gives statistics with reference
[29]to the earnings of agricultural labourers throughout the three kingdoms. It concludes that on an average a labourer in England obtains 18s. 3d. a week, in Wales 17s. 3d., in Scotland 19s. 3d., and in Ireland 10s. 11d. It may be noted that in no English county is the average lower than 14s. 6d., while in Ireland in seven counties it is less than 10s., Mayo being the lowest with an average wage of 8s. 9d. The present writer has had occasion in the course of the last few months to hear old men on political platforms in a typical English agricultural constituency pointing a moral from their own or their fathers' recollections of the days before the Corn Laws when wages ran from 8s. to 9s. a week. What is recalled with horror in England as the state of affairs in the "hungry forties" is the present condition in several of the Irish counties. It would be idle to multiply proofs to show the desperate condition of the country. Even in the ten years which have elapsed since the issue of the Report of the Royal Commission the taxation of the country has increased by more than two and a half million pounds, while the population, it is estimated, has in the same period diminished by no less than 200,000. On the assumption arrived at by the Commissioners, that the proper share which Ireland should pay was one-twentieth of the contribution of Great Britain, the country was overtaxed ten years ago to the extent of two and three-quarter millions; yet in spite of that fact in the course of those ten years two millions of additional taxation has been imposed. Two years ago the Chancellor of the Exchequer, in answer to an inquiry, announced to the House of Commons that in the year 1903-4, the latest for which figures were available, the proportions of tax revenue derived from direct and indirect taxes were:—
Great Britain Ireland
Direct Taxes 50.6 per cent. 27.8 per cent.
Indirect Taxes 49.4 per cent. 72.2 per cent.
[30]These figures show very clearly to what an extent in Ireland taxation falls, not on the luxuries of the rich, but on the commodities which are to a great extent the necessaries of the poor. The manner in which this state of things is maintained was expressed by Sir Robert Giffen in his evidence before the Royal Commission:—
"It is only evident that in matters of taxation Ireland is virtually discriminated against by the character of the direct taxes which happen to be on articles of Irish consumption."
The heavy duties on tea, tobacco, and alcohol—articles which form a larger part of the family budget of the Irish peasant than of the English labourer—are the causes of this burden. The reasons for the larger consumption of what may be roughly called stimulants by the Irishman is undoubtedly to be found in climatic conditions, and also in the smaller amount of nourishing food which he is able to afford. With regard to alcohol, the form in which it is most used in England—namely, beer—is subjected to a special exemption at the expense of the whiskey-drinking people of Ireland and Scotland. Cider is not taxed. The tax on whiskey is between two-thirds and three-fourths its price, while that on beer is one-sixth of its price; so that sixty gallons of beer bear the same weight of taxation as does one gallon of whiskey. The usual standard of taxation of liquor is its alcoholic strength, but the special treatment accorded to the Englishman's principal drink reduced—according to the Royal Commissioners—the taxation to which, in proportion to its alcohol it should be subjected, from 1s. to 2d. per gallon. Even in respect of tea and tobacco, the inequitable treatment of Ireland is obvious to any one who considers that what is spoken of as equality of taxation is, in reality, identical taxation on articles consumed in vastly different proportions in Great Britain and Ireland.
The argument by which the charge that Ireland is
[31]overtaxed was rebutted by the late Unionist Government was that the balance is restored by the amount of money spent in the administration of that country. When the complaint is heard that she is contributing at this day no less a sum than,£9,750,000 to revenue, the answer is made that she has no grievance since the cost of Irish services amounts to more than £7,500,000, the balance, a paltry two and a quarter millions, forming her Imperial contribution.
Ireland is being bled to death, and to her complaints the answer is that she is being expensively administered. To fleece a poor man of his pittance and to justify the action by telling him that it is on every appurtenance of a spendthrift to which he objects that it is being spent is scarcely to provide a satisfactory justification. The two cases are exactly parallel, and it is a weak position which has to entrench itself behind the fact that the cost of government per head is in Ireland double what it is in England.
The country is against its will saddled with a Viceregal Court, of which the Lord Lieutenant enjoys a salary twice as great as that of the President of the United States. The government is conducted by more than forty boards, only one of which is responsible, through a Minister in the House of Commons, to the country. Official returns show that Scotland, with a population slightly larger than that of Ireland, possesses 942 Government officials as against 2,691 in Ireland. In Scotland the salaries of these public servants amount to less than £300,000, while in Ireland the corresponding cost is more than £1,000,000 per annum, showing that the average salaries in the poorer country are considerably higher than in the richer. Of the £7,500,000 devoted to Irish services, £1,500,000 goes to the Post Office and Customs, while one half of the remainder is consumed by the salaries and pensions of policemen and officials.
To take a single example—the Prison Boards of Scotland and Ireland work under identical Acts,
[32]dating from 1877. It is instructive, therefore, to compare the conditions of the two. The estimates for the year 1905 were calculated on the assumption that there were 120 fewer prisoners a day in Irish prisons than in Scotland. In spite of this the cost of the Irish Board for the last year of which I have seen the figures was £144,597, and that of the Scottish Board was only £105,588. The ratio between these figures is as 1.3 to 1, which is in nearly the same proportion as is the number of the officials on the two boards—namely, 622 in Ireland and in Scotland 467, and this, too, in spite of the fact that further statistics show, namely, that there are five convicted criminals in Scotland for every three in Ireland.
These are a few facts which show the value of the case for the present state of affairs, based on the assumption that over-taxation is balanced by profligate expenditure. The maintenance—to take only one point—of a police force about half the size of the United States army, when at the present time white gloves—the symbol of a crimeless charge—are being given to the judges on every circuit, is a state of affairs which is intolerable, while the small proportion which in the returns Ireland is shown to bear of the Imperial contribution is the result of the inclusion of the Viceregal and Civil Service charges, not, as should be the case, in the Imperial account, but in the separate Irish account.
As an instance showing how exorbitant exactions defeat their own end by diminishing, and not raising, the available revenue, it should be noted that in 1853 an income tax of 7d. in the pound raised £200,000 more than did an income tax of 8d. in the pound at the date of the Royal Commission. Of the remedies which are suggested, the alteration of the Fiscal system, by making abatements in the Irish Excise and Customs, is not likely to be attempted. Reduction of expenditure, liberating money which may be made to serve a useful purpose, is obviously the first
[33]step, but any scheme of allocation of large sums for Irish development, without full and proper financial control, will undoubtedly fail to meet the case. The multiplication of irresponsible boards must be stopped, and to what extent anything, save economies in expenditure, can be effected without far larger changes remains a moot point. Of one thing, at any rate, one may be certain—the present Liberal Government when in Opposition joined forces with the Irish members in driving home the tremendous admissions of the Royal Commissioners, and it is impossible to think that, now they are in power, they will repudiate their obligations, the more so as the present Chancellor of the Exchequer last year announced the intention of the Government to see how far it is possible to adjust the financial relations between the two kingdoms on a fairer basis.
Sir Hercules Langrishe, the friend and correspondent of Edmund Burke, is said to have accounted for the swampy condition of the Phoenix Park by saying—"The English Government are too much engaged in draining the rest of the kingdom to find time to attend to it."
Enough has been said to show that the process of which Sir Hercules spoke is still going on. One would have thought that counsels of prudence would have made an end of it. It remains to be seen whether the uncontestable facts to which they themselves have subscribed will prevail with the Government. "The liberality, the justice, the honour of the people of England" are concerned in it now, as truly as when Pitt spoke. Moreover, it is one of the instances in which the claims of justice and of expediency coincide. The findings of the Financial Relations' Commission fully justified the attitude of the Irish Party to the proposal, under Mr. Gladstone's Bill, that the Irish contribution to the Imperial Treasury should be one-fourteenth of that of Great Britain, while Mr. Parnell declared that it ought to
[34]have been one-twentieth. The population, since the publication of the Report of the Commission, has decreased by a quarter of a million, but taxation has increased from,£7,500,000 to £10,500,000. If Ireland had secured the fixed contribution, against the height of which she protested, she would nevertheless have been guarded from such a disproportionate rise of taxation.
Whatever test be taken, be it population, a comparison of exports and of imports, the consumption of certain dutiable articles, relative assessments to death duties, income tax, or the estimated value of commodities of primary importance consumed, every one of them shows the relative backwardness of Ireland as compared with Great Britain, in view of which the fact that the cost of government per head of population is double in Ireland what it is in England, shows the extent to which the one is liable in damages to the other. The increased expenditure on the navy obviously does not benefit equally the two countries, of which the one only has dockyards and manufactories, and this is especially the case seeing that the country which lacks these things is also without a commerce needing defence; while any advantage resulting from a portion of the army being quartered in Ireland is minimised when it is found that arms and accoutrements are purchased in England.
The attempt to stultify the findings of the Commission on the ground that its report was based on a fallacy, since Ireland has no more right to be considered as a separate entity than an English county, is remarkably disingenuous in view of the acknowledgment of this in the separate treatment which she received in the matter of grants made in relief of local taxation and for the establishment of free education in the years 1888 and 1890 and 1891. Moreover, it was impliedly admitted that she was a separate entity in the appointment of a Select Committee on taxation in
[35]1864, and again by Lord Goschen in 1890, and the whole history of her separate legislation bears the same construction. One cannot give a better commentary on what has been seen of the economic condition of the island than by quoting the peroration of the speech of John Fitzgibbon, Earl of Clare, the "great father of the Union," speaking in the Irish House of Parliament:—"It is with a cordial sincerity and a full conviction that it will give to this, my native country, lasting peace and security for her religion, her laws, her liberty, and her property, an increase of strength, riches, and trade, and the final extinction of national jealousy and animosity, that I now propose to this grave assembly for their adoption an entire and perfect Union of the Kingdom of Ireland with Great Britain. If I live to see it completed, to my latest hour I shall feel an honourable pride in reflecting on the little share I may have in contributing to effect it."