FEDERAL FINANCE.

Directly we leave the simple path of financial independence, and endeavour to construct schemes which on the one hand disguise the financial difficulties of Ireland, and on the other provide for Imperial control of Irish Customs and Excise, we involve ourselves in a tangle of difficulties. A brief examination of these schemes will throw into still stronger relief the merits of the simpler solution.

First of all, let us dispose finally of the Federal analogy. In Chapter X. I showed that the framework of Home Rule cannot be Federal, because the conditions of Federation do not exist in the United Kingdom. One of the invariable features of a Federation is the Federal control of Customs and Excise, but I pointed out that an equally invariable condition precedent to Federation was the willingness on the part of a self-supporting State, previously possessing complete financial independence, to abandon its individual control over this realm of taxation to a Federal Government of its own choosing,[141] and that no such condition existed in the case of Ireland. But some features of Federal finance undoubtedly may be made to show a superficial analogy to Anglo-Irish conditions, and may therefore have an attraction for those who shrink from giving Ireland financial independence. In the first place, it is possible to find Federal precedents for the payment out of the common purse of certain large items of Irish expenditure. There is no precedent for the payment of Police, but Old Age Pensions, for example, are paid in Australia by the Commonwealth, not by the States. The chief point of interest, however, is the mechanism of Federal finance. The Australian and Canadian Federations are the only two which suggest even a remote parallel. There the subordinate States are actually "subsidized" by regular annual payments out of Federal revenues, mainly derived from Customs and Excise, and in the case of Australia, as I observed at p. 245, the process at present entails an elaborate system of bookkeeping to distinguish between the "collected" and "true" revenue of the several States, similar in kind to the calculations now made by the Treasury for ascertaining the "collected" and "true" revenue derived from Ireland, Scotland, and England.[142]

In Australia this system of bookkeeping is discredited, although the recent attempt by a Commonwealth Referendum to abolish both it and the financial system of which it forms a part just failed. It is to be hoped that, whatever financial scheme is adopted for Ireland, this bad colonial precedent, together with the precedent of the Home Rule Bill of 1893, will not be made pretexts for perpetuating a system whose defects are so glaring, and which is a source of continual dissatisfaction to Ireland. If Irish Customs and Excise are to be outside Irish control, while their proceeds are to be credited to Ireland, let her whole collected revenue from those sources be credited to her, in spite of the excessive allocation that step would involve.

Apart from this point of similarity in mechanism, the Australian and Canadian subsidies to the States and Provinces respectively are of no value as models for a Home Rule Bill. Let us examine the case of Australia. There the Commonwealth, besides having exclusive control of Customs and Excise, has general powers of taxation concurrently with the States, though in practice Commonwealth taxation is almost entirely confined to Customs and Excise. All surplus Commonwealth revenue is, by the present law, returnable to the States, and the total annual amount so returned must not be less than three-fourths of the total proceeds of Customs and Excise; so large are these proceeds, and so small, relatively, the expenses of the Commonwealth Government.[143] Here at the outset is a feature which places Australian Federal Finance in an altogether different category to that of the United Kingdom, where only 47.6 per cent, of the revenue is from Customs and Excise. Nor are the distributions of surplus revenue to the States really "subsidies," even in the case of the poorest States, but repayments, on a method laid down in the Constitution, of that part of the State contribution to Federal services which the Federal Government does not want. Here the system of bookkeeping is of some service to us, because it reveals, approximately, at any rate, both the contribution and the actual repayment, which is based on a calculation of the amount saved to the State by the transference of certain departments to the Federal Government, set off by a per capita charge for new Federal expenditure, as, for example, for Old Age Pensions (see Table on p. 297).

The great bulk of the tax revenue shown comes, as I have said, from Customs and Excise, and it is unnecessary to set out the respective figures of revenue derived from these duties.[144] It will be seen, after deducting repayments from contributions, that even the poorest States make a substantial net contribution to Federal purposes. On the other hand, the relative proportion of revenue contributed by Western Australia and Tasmania is diminishing. In Western Australia it was 12-49 per cent. of the whole in 1905, 8-13 per cent. of the whole in 1909. In the same period, not only relatively, but actually, the gross contribution of Western Australia has diminished from £1,431,624 in 1905 to £1,166,126 in 1909, while the repayment to her has also diminished from £1,031,223 in 1905 to £627,933. Tasmania's repayment is also diminishing, though her gross contribution has increased. These circumstances suggest a slight resemblance to the growing disproportion between the resources of Ireland and Great Britain, but they do not assist us towards a solution of the Irish problem. Each Australian State, while contributing the whole of its Customs and Excise to the Federal Government, receives back at least half, and in some cases two-thirds,[146] and adds that sum to its own independent revenue for the maintenance of the State Government. The sum refunded amounts on the average to a little below a quarter of the total State revenue—to be accurate, 23.01 per cent. Of the remaining 76.99 per cent., only 10 per cent, on the average is derived from direct taxation; 10.10 per cent from public lands, 4.15 per cent, from miscellaneous services, and no less than 52.55 per cent, from Public Works—railways, tramways, harbours, etc.

CONTRIBUTIONS OF, AND REPAYMENTS TO, THE STATES OF THE AUSTRALIAN COMMONWEALTH, 1908-09.[145]
Contributions to Revenue.Repayments from Commonwealth.
££
New South Wales5,621,9583,326,276
Victoria3,750,1611,987,435
Queensland1,989,5401,027,047
South Australia1,307,621716,957
Western Australia1,166,126627,938
Tasmania515,387244,747
Total Commonwealth Revenue.Total Repayments.
14,350,7937,930,395

Here are the details of revenue for 1908-1909 in the richest and the poorest State, respectively:

Particulars.New South Wales.Tasmania.
££
Refunded by the Commonwealth3,377,213232,342
Taxation (direct)907,249250,835
Public Works and Services7,309,062329,192
Land1,778,00296,519
Miscellaneous274,60025,017
Totals13,646,126934,405