The Government of England (Vol. I)

by A. Lawrence Lowell

The financial procedure of the Treasury is now regulated by the Exchequer and Audit Departments Act of 1866,[117:1] and the Public Accounts and Charges Act of 1891.[117:2] By these acts the gross revenue—after making the deductions already mentioned—is paid into the "account of His Majesty's Exchequer," at the Banks of England and Ireland, to be used as a single fund. The three chief collectors of revenue are the Commissioners of Customs, the Commissioners of Inland Revenue and the Post Office. With the growth of the principles of free trade the customs duties became confined to coffee, chicory, cocoa, dried fruit, tea, tobacco, wine, and a number of articles, such as spirits, on which duties are laid to countervail the excise upon similar articles produced at home. To these were added at the time of the South African War an export duty on coal, and import duties on sugar and grain, the last being again dropped in 1903, while the coal duty was repealed in 1906. Under normal fiscal conditions in times of peace, the customs duties yield about one fifth of the total revenue, the receipts being mainly from tobacco, tea and spirits. The gross receipts from the Post Office (including the telegraphs) form about one seventh of the revenue, but this is really misleading, because three quarters of those receipts are paid out again for the expenses of the department. All but a very small fraction of the remaining receipts come through the Commissioners of Inland Revenue, and their sources of income are of a miscellaneous character. The largest item is the excise, mainly on beer and spirits, which yields more than a quarter of the total national revenue.[117:3] The next largest is the income tax, which varies very much from time to time, and has produced during the last score of years from one seventh to one quarter of the total revenue. Then there are the death duties, a progressive tax on property passing at death, which yield one tenth of the revenue. The ancient land-tax, and the inhabited-house duty produce comparatively small sums; and, finally, there are the stamp duties on all kinds of transactions, articles and licenses which yield all together about one twelfth of the revenue. Some of the license fees collected under the head of excise are so small as to appear rather vexatious than productive, such as one guinea for the display of armorial bearings not used upon a carriage, fifteen shillings for a license to have a manservant, or keep a carriage with less than four wheels, and fourpence a day for the privilege of occasionally selling tobacco.[118:1]

Permanent and Annual Taxes.

Neither the expenditure nor the proceeds of taxes being absolutely constant, it is necessary, in order to maintain a close balance between them, to adjust the sources of revenue to some extent from year to year, and this is done by means of a small number of variable charges. Most of the taxes are imposed by permanent statutes, changed only at long intervals, but the rates of assessment under the tea duty and the income tax are fixed each year in the annual Finance Act; and since 1894 certain additional duties on beer and spirits have also been laid for a year at a time.

Accuracy of the Budget.

It has been the aim of English statesmen to make the revenue and expenditure of each year balance one another as closely as possible, and their skill in doing so has been extraordinary. While the South African War was raging such a result was naturally impossible, but during the preceding twenty-five years the difference between receipts and expenditures (including payments on account of the debt) was never more than about four per cent, and in fifteen of those years it did not exceed one and a half per cent. The taxes are, indeed, of such a character that it is possible to forecast their proceeds with great accuracy. The Chancellor of the Exchequer intends to make his calculations so as to leave a margin of safety, and yet during the period under consideration the difference between the estimated and actual receipts was never more than about three and a half per cent.[119:1]

Accurate fiscal administration is very much promoted by the rule that any part of an appropriation unexpended at the end of the financial year in which it is voted shall lapse, and cannot afterwards be used unless it is granted afresh by Parliament.[119:2] The rule has been thought to lead to wastefulness by provoking improvident haste in spending the whole appropriation before March 31.[119:3] But such an evil is surely far smaller than that of allowing the appropriations to run on, with the result, well known in France, for example, that the annual accounts cannot be finally made up, and the extent of the deficit determined, until several years have passed.

Like all other excellent things devised by men, the English system of finance is not without its drawbacks. If it promotes careful administration, and rivets attention upon any increase in the budget, it also makes the revenue inelastic in emergencies. A great deal has been said in Parliament of late about broadening the basis of taxation, but that is a very difficult thing to do suddenly, without dislocating the commercial as well as the fiscal system; and while the existing taxes are elastic up to a certain point, an attempt to raise them too much would diminish rather than increase their productiveness.

Method of Getting Money out of the Consolidated Fund.

Just as there are two kinds of taxes, one permanent and the other annual, so there are two classes of expenditure, one regulated by standing laws, and the other by annual appropriations. All the ordinary expenses of the government require parliamentary sanction every year, both on the theory that the money collected from the nation ought not to be spent without the consent of its representatives, and also in order that Parliament may be able to oversee the administration and criticise it in every session. But there are certain matters that ought to be kept aloof from current politics, and ought not to be brought in question in the heat of party conflict. The principal charges that have been regarded in this light are the interest on the national debt, the Civil List or personal provision for the King, annuities for the royal family, certain pensions, and the salaries of the judges, of the Comptroller and Auditor General, of the Speaker, and of a few officers of lesser importance. These charges amount to nearly one quarter of the total expenditures; and they are called Consolidated Fund charges, because by statute they are paid directly out of the Consolidated Fund without the need of any further action by Parliament. The other expenditures are for what are known as the supply services, because the appropriations for them are voted by the House of Commons in Committee of Supply.