FISCAL CONFUSION
Mr. Disraeli, the most unsparing of all the assailants of Peel, tried his own hand in 1852. To have the genius and the patience of a great partisan chief is one gift, and this he had; to grasp the complex material interests of a vast diversified society like the United Kingdom demands powers of a different order. The defeat of Mr. Disraeli's budget at the end of 1852 seemed to complete the circle of fiscal confusion. Every source of public income was the object of assault. Every indirect tax was to be reduced or swept away, and yet no two men appeared to agree upon the principles of the direct taxes that were to take their place. The window duty, the paper duty, the tax on advertisements, the malt-tax, the stamp on marine insurances, were all to vanish, but even the most zealous reformers were powerless to fill the void. The order-book of the House of Commons was loaded with motions about the income-tax, and an important committee sat in 1851 to consider all the questions connected with the possibility of its readjustment and amendment. They could not even frame a report. The belief that it was essentially unjust to impose the tax at one and the same rate upon permanent and temporary incomes, prevailed in the great mass, especially of the liberal party. Discussions arose all through this period, descending not only to the elementary principles of taxation, but, as Mr. Gladstone said, almost to the first principles of civilised society itself. Party distraction, ministerial embarrassment, adjournment after adjournment of a decision upon fundamental maxims of national taxation—such was the bewildered scene. At last a statesman appeared, a financier almost by accident (for, as we have seen, it was by no special choice of his own that Mr. Gladstone went to the exchequer), but a financier endowed with a practical imagination of the highest class, with a combination of the spirit of vigorous analysis and the spirit of vigorous system, with the habit of unflagging toil, and above all, with the gift of indomitable courage. If anybody suggested the reappointment of Hume's committee, the idea was wisely dismissed. It was evidently, as Graham said, the duty of the executive government to lead the way and to guide public opinion in a matter of this crucial importance. It seemed impossible and unworthy to avoid a frank declaration about the income-tax. He was strongly of opinion (March 15) that a larger measure would be carried with greater certainty and ease than simple renewal; and that a combination of income-tax, gradually diminishing to a fixed term of extinction, with reduction of the interest of debt, and a review of the probate and legacy duties, afforded the best ground for a financial arrangement both successful and creditable. It was strong ideas of this kind that encouraged Mr. Gladstone to build on a broad foundation.
The nature of his proceedings he set out in one of the most interesting of his political memoranda:—
The liberals were, to all appearance, pledged to the reconstruction of the tax by their opinions, and the tories by their party following. The small fraction of Peelites could probably be relied upon the other way, and some few individuals with financial knowledge and experience. The mission of the new government was described by Lord Aberdeen in the House of Lords as a financial mission, and the stress of it thus lay upon a person, very ill-prepared. My opinions were with Peel; but under such circumstances it was my duty to make a close and searching investigation into the whole nature of the tax, and make up my mind whether there was any means of accepting or compounding with the existing state of opinion. I went to work, and laboured very hard. When I had entered gravely upon my financial studies, I one day had occasion—I know not what—to go into the city and to call upon Mr. Samuel Gurney, to whom experience and character had given a high position there. He asked me with interest about my preparations for my budget; and he said, 'One thing I will venture to urge, whatever your plan is,—let it be simple.' I was a man much disposed to defer to authority, and I attached weight to this advice. But as I went further and further into my subject, I became more and more convinced that, as an honest steward, I had no option but to propose the renewal of the tax in its uniform shape. I constructed much elaborate argument in support of my proposition, which I knew it would be difficult to answer. But I also knew that no amount of unassisted argument would suffice to overcome the obstacles in my way, and that this could only be done by large compensations in my accompanying propositions. So I was led legitimately on, and on, until I had framed the most complicated scheme ever submitted to parliament.
THE FABRIC PLANNED
Truly has it been said that there is something repulsive to human nature in the simple reproduction of defunct budgets. Certainly if anything can be more odious than a living tax, it is a dead one. It is as much as is consonant to biography to give an outline of the plan that was gradually wrought out in Mr. Gladstone's mind during the first three laborious months of 1853, and to mark the extraordinarily far-reaching and comprehensive character of the earliest of his thirteen budgets. Its initial boldness lay in the adoption of the unusual course of estimating the national income roughly for a long period of seven years, and assuming that expenditure would remain tolerably steady for the whole of that period. Just as no provident man in private life settles his establishment on the basis of one year or two years only, so Mr. Gladstone abandoned hand-to-mouth, and took long views. 'I ought, no doubt,' he said afterwards, 'to have pointed out explicitly that a great disturbance and increase of our expenditure would baffle my reckonings.' Meanwhile, the fabric was planned on strong foundations and admirable lines. The simplification of the tariff of duties of customs, begun by Peel eleven years before, was carried forward almost to completion. Nearly one hundred and forty duties were extinguished, and nearly one hundred and fifty were lowered. The tea duty was to be reduced in stages extending over three years from over two shillings to one shilling. In the department of excise, the high and injurious duty on soap, which brought into the exchequer over eleven hundred thousand pounds annually, was swept entirely away. In the same department, by raising the duties on spirits manufactured in Ireland nearer to the level of England and Scotland, a step was taken towards identity of taxation in the three kingdoms—by no means an unequivocal good. Miscellaneous provisions and minor aspects of the scheme need not detain us; but a great reform of rate and scale in the system of the assessed taxes, the reduction of the duty on the beneficent practice of life insurance from half-a-crown to sixpence on the hundred pounds, and the substitution of a uniform receipt stamp, were no contemptible contributions to the comfort and well-being of the community. Advertisements in newspapers became free of duty.[284]
KEYSTONE OF THE BUDGET
The keystone of the budget in Mr. Gladstone's conception was the position to be assigned in it to the income-tax. This he determined to renew for a period of seven years,—for two years at sevenpence in the pound, for two years more at sixpence, and for the last three at fivepence. By that time he hoped that parliament would be able to dispense with it. Meanwhile it was to be extended to Ireland, in compensation for the remission of a debt owed by Ireland to the British treasury of between four and five millions. It was to be extended, also, at a reduced rate of fivepence, to incomes between a hundred and fifty and a hundred pounds—the former having hitherto been the line of total exemption. From the retention of the income-tax as a portion of the permanent and ordinary finance of the country the chancellor of the exchequer was wholly and strongly averse, and so he remained for more than twenty years to come. In order, however, to meet a common and a just objection, that under this impost intelligence, enterprise, and skill paid too much and property paid too little, he resolved upon a bold step. He proposed that the legacy duty, hitherto confined to personal property passing on death, either by will or by inheritance and not by settlement, should henceforth be extended to real property, and to both descriptions of property passing by settlement, whether real or personal. In a word, the legacy duty was to extend to all successions whatever. This was the proposal that in many senses cut deepest. It was the first rudimentary breach in the ramparts of the territorial system, unless, indeed, we count as first the abolition of the corn law.[285] Mr. Gladstone eagerly disclaimed any intention of accelerating by the pressure of fiscal enactment changes in the tenure of landed property, and the letters which the reader has already seen (pp. 345-9) show the high social value that he invariably set upon the maintenance of the old landed order. The succession duty, as we shall find, for the time disappointed his expectations, for he counted on two millions, and in fact it yielded little more than half of one. But it secured for its author the lasting resentment of a powerful class.
Such was the scheme that Mr. Gladstone now worked out in many weeks of toil that would have been slavish, were it not that toil is never slavish when illuminated by a strenuous purpose. When by and by the result had made him the hero of a glorious hour, he wrote to Lord Aberdeen (April 19): 'I had the deepest anxiety with regard to you, as our chief, lest by faults of my own I should aggravate the cares and difficulties into which I had at least helped to bring you; and the novelty of our political relations with many of our colleagues, together with the fact that I had been myself slow, and even reluctant, to the formation of a new connection, filled me with an almost feverish desire to do no injustice to that connection now that it was formed; and to redeem the pledge you generously gave on my behalf, that there would be no want of cordiality and zeal in the discharge of any duties which it might fall to me to perform on behalf of such a government as was then in your contemplation.'
Thirteen, fourteen, fifteen hours a day he toiled at his desk. Treasury officials and trade experts, soap deputations and post-horse deputations, representatives of tobacco and representatives of the West India interest, flocked to Downing Street day by day all through March. If he went into the city to dine with the Lord Mayor, the lamentable hole thus made in his evening was repaired by working till four in the morning upon customs reform, Australian mints, budget plans of all kinds. It is characteristic that even this mountain load of concentrated and exacting labour did not prevent him from giving a Latin lesson every day to his second boy.