I.

BEFORE THE UNION.[97]

Before the Union Ireland had a fiscal system distinct from that of Great Britain, a separate Exchequer, a separate Debt, a separate system of taxation, a separate Budget. Yet she can never truly be said to have had financial independence, because she was never a truly self-governing country. Until 1779, when the Protestant Volunteers protested with arms in their hands against the annihilation of Irish industries in the interest of British merchants and growers, her external trade and, consequently, her internal production, were absolutely at the mercy of Great Britain. As I showed in Chapter I., Ireland was treated considerably worse than the most oppressed Colony, with permanently ruinous results. On the other hand, her internal taxation, never above a million a year, and her Debt, never above two millions in amount, were not heavy. But from 1779, through Grattan's Parliament to the Union, a short period of twenty-one years, Ireland, though still governed on the ascendancy system by an unrepresentative and corrupt Parliament of exactly the same composition as before, nevertheless had financial independence in the sense that her Parliament had complete control of Irish taxation, revenue, and trade. It was, moreover, in these financial matters that the Parliament showed most genuine national patriotism, together with a greatly enhanced measure of the Imperial patriotism traditional with it. Internal taxation, except in time of war, was still comparatively light; depressed home industries were judiciously encouraged by bounties; no attempt was made at vindictive retaliation upon British imports, though Irish exports to Great Britain were still unmercifully penalized; and sums, growing to a relatively enormous size during the French War, which began in 1793, were annually voted for the Imperial forces. This voluntary contribution, which had averaged £585,000 in the eleven years of peace, from 1783 to 1793, rose to £3,401,760 in 1797,[98] and in 1799, when Ireland was paying the bill for British troops called in to suppress her own Rebellion, to £4,596,762, out of a total Irish expenditure for the year on all purposes, military and civil, of £6,854,804. Not more than half, on the average, of these war expenses were met out of the annual taxes. Debt was created to meet the balance; but neither the debt, heavy as it was, nor the taxes, were intolerably burdensome—that is, if we regard Ireland as financially responsible for Imperial wars and for the suppression of a Rebellion which was provoked by scandalous misgovernment. Tax revenue rose from £1,106,504 in 1783, when the free Parliament first prepared a Budget, to £3,017,758 in 1800, and averaged a million and a half. In the same period the total amount of the funded and unfunded Irish Debt rose from £1,917,784 to £28,541,157, almost the whole of this increase having taken place in the seven years of war immediately preceding the Union. In Great Britain both Debt and taxation had risen in a larger ratio, and were relatively far greater. For example, in the six years, 1793-1798 inclusive, £186,000,000 had been added to the British Debt, only £14,000,000 to the Irish Debt. In 1801 the British Debt stood at £489,127,057; the Irish Debt at £32,215,223.

II.

FROM THE UNION TO THE FINANCIAL RELATIONS COMMISSION OF 1894-1896.

The Union of 1800, therefore, could not be justified on the ground that a poor country would profit by fiscal amalgamation with a rich country, and Pitt and Castlereagh, when framing the Union Act, recognized that truth by leaving Ireland with a separate fiscal system, as before; though the administration of this system was, of course, now to be wholly in British hands. There were to be separate Exchequers, Debts,[99] taxes, and balance-sheets, with the following restrictions: That prohibitions against imports and bounties on exports (corn excepted), should cease reciprocally in both countries; that, with the exception of 10 per cent. ad valorem duties on a variety of articles named, there should be mutual free trade; and that no tax on any article of consumption should be higher in Ireland than in Great Britain.

But although Pitt and Castlereagh ostensibly carried out the principle of separate fiscal systems, they laid the foundations for a fiscal amalgamation which was disastrous to Ireland. Since his Commercial Propositions of 1785, Pitt had never abandoned the idea of obtaining from Ireland an obligatory annual contribution to Imperial services based on some fixed principle. By Clause 7 of the Act of Union he achieved his aim. It was settled that for twenty years Ireland should contribute in the proportion of 1 to 7½ (or 2 to 15)—that is, that Great Britain should pay 15/17, or 88.24 per cent., of common Imperial expenses, including the charge for debt contracted for Imperial services, and Ireland 2/17, or 11.76 per cent. Nobody now denies that this ratio was grossly unjust to Ireland. It took no account of the relative pre-Union Debts; it took no account of the tribute of nearly four millions paid in rents to absentee English proprietors; it was based on superficial deductions from inadequate and misleading data, and the Act was hardly passed before its absurdity became manifest. Fifteen years of almost incessant war followed the Union. Ireland, even by raising taxation to the highest possible point, was unable to pay her contribution without contracting a Debt colossal in proportion to her resources. While Great Britain only doubled her Debt, and paid 71 per cent. of her expenses out of current taxation, the Irish Debt quadrupled, and in 1817 reached the portentous total of £112,634,773; while only 49 per cent. of Irish expenditure was paid for out of revenue. Here is a little table which shows the effect upon Ireland of Clause 7 of the Act of Union:

Five Years.Average Revenue.Average Expenditure.
££
1785-17901,246,0001,247,000
Before Union — 1790-17951,340,0001,646,000
1795-18002,100,0004,601,000
1801-18063,643,0007,270,000
After Union— 1806-18114,885,0009,061,000
1811-18165,927,42413,188,000

The scandal could no longer be overlooked. It was impossible to raise the Irish taxes. Their yield was already showing signs of diminishing. But the Act of Union had provided for the situation which had arisen. One of the sections of the famous Clause 7 enacted that if and when the separate Debts of the two countries should reach the proportion of their respective Imperial contributions, Parliament might, if it thought fit, declare that all future expenses of the United Kingdom should be defrayed indiscriminately by equal taxes imposed on the same articles in both countries, "subject only to such exemptions and abatements in favour of Ireland as circumstances may appear from time to time to demand." The framers of this section had anticipated that the English Debt would sink to the level of the Irish Debt. Anglo-Irish finance teems with grim jokes of this sort; but the section was useful in either event. With its terms before them, a Committee sat to consider the state of Ireland, with the result that, by an Act which came into operation on January 5, 1817, the Exchequers, Debts, revenues, and expenditures, but not as yet the taxes, of the two countries were amalgamated. In Professor Oldham's words,[100] "the corpse of Ireland's insolvency was huddled into the grave, and no questions were to be asked." The whole expenditure, Imperial and local, of the United Kingdom, Ireland included, was to be defrayed out of a Consolidated Fund, and the arrangements, therefore, for a separate Irish contribution on a fixed basis to Imperial services were cancelled. Henceforth her Imperial contribution, for anyone who troubled to calculate it, was represented by the excess of revenue raised within Ireland over the expenditure in Ireland. A mutual free trade was also established, not instantaneously, but in the course of a few years. By 1824 all duties, as between Ireland and England, had ceased, and in 1826 the custom-houses ceased to record the transit of goods between England and Ireland, except in articles such as spirits, on which a different excise duty was charged. No statistics were compiled, therefore, of Anglo-Irish trade until ninety years later, when the Irish Department of Agriculture began to prepare returns. Such was the origin of our Customs Union against the world (for, needless to say, those were still the days of high Protection), and it is instructive to compare it with the voluntary pacts of the German States and South African Colonies, and with their political results.

In one important point unification was left incomplete. It was impossible in 1817 to equalize internal taxation in the two countries, though it was held desirable to do so, because Ireland could not have borne the higher British scale, and suffered enough under her own. Regard, too, was had at first to those important words in the Act of Union which guaranteed to Ireland such "exemptions and abatements" as might appear fair. But they were soon forgotten. Without any inquiry into the taxable capacity of Ireland, the stamp, tea, and tobacco duties were equalized early in the period, the enhancement in Ireland of the last duty from 1s. to 3s. on raw tobacco, and from 1s. to 16s. on manufactured tobacco, laying an exceptionally heavy burden on the Irish poor. Meanwhile the abolition, after the close of the war, of taxes representing about sixteen millions a year, and purely affecting Great Britain, gave a relief to her which Ireland did not feel. But it was not until 1853, when Mr. Gladstone extended the income-tax to Ireland, and raised the Irish spirit duty, that the principle of "exemptions and abatements" was most seriously infringed. Mr. Disraeli followed in 1855 with a further elevation of the spirit duty, which was finally equalized with the British duty in 1858, at 8s. a gallon; while in 1860 both duties were raised to 10s. In the seven years 1853-1860 the taxation of Ireland was raised by no less than two and a half millions per annum. It will be recalled that the great famine had taken place in 1846-47, and that between the Census of 1841 and that of 1861 the population sank from eight to six millions, while the British population rose from eighteen and a half to twenty-three millions. The statistical result of the increased taxes, therefore, was to show a rise in taxation per head of the Irish people from 13s. 11d. in 1849 to £1 5s. 4d. in 1859, while in Great Britain it rose only from £2 7s. 8d. to £2 10s. during the same period. Equality of taxation has never been wholly established, for to this day a few quite unimportant taxes are not levied, or are levied on a lower scale in Ireland;[101] but from 1858 onward we may regard the taxation of the two countries as almost identically the same.