CHAPTER V
WAR FINANCE—TAX OR LOAN
(1854)
The expenses of a war are the moral check which it has pleased the Almighty to impose upon the ambition and lust of conquest, that are inherent in so many nations. There is pomp and circumstance, there is glory and excitement about war, which, notwithstanding the miseries it entails, invests it with charms in the eyes of the community, and tends to blind men to those evils to a fearful and dangerous degree. The necessity of meeting from year to year the expenditure which it entails is a salutary and wholesome check, making them feel what they are about, and making them measure the cost of the benefit upon which they may calculate.—Gladstone.
The finance of 1854 offered nothing more original or ingenious than bluntly doubling the income tax (from seven pence to fourteen pence), and raising the duties on spirits, sugar, and malt. The draught was administered in two doses, first in a provisional budget for half a year (March 6), next in a completed scheme two months later. During the interval the chancellor of the exchequer was exposed to much criticism alike from city experts and plain men. The plans of 1853 had, in the main, proved a remarkable success, but they were not without weak points. Reductions in the duties of customs, excise, and stamps had all been followed by increase in their proceeds. But the succession duty brought in no more than a fraction of the estimated sum—the only time, Mr. Gladstone observes, in which he knew the excellent department concerned to have fallen into such an error. The proposal for conversion proved, under circumstances already described, to have no attraction for the fundholder. The operation on the South Sea stock was worse than a failure, for it made the exchequer, in order to pay off eight millions at par, raise a larger sum at three and a half per cent., and at three per cent. in a stock standing at 87.[331] All this brought loudish complaints from the money market. The men at the clubs talked of the discredit into which Gladstone had fallen as a financier, and even persons not unfriendly to him spoke of him as rash, obstinate, and injudicious. He was declared to have destroyed his prestige and overthrown his authority.[332]
POWERFUL SELF-DEFENCE
This roused all the slumbering warrior in him, and when the time came (May 8), in a speech three and a half hours long, he threw his detractors into a depth of confusion that might have satisfied the Psalmist himself. Peremptorily he brushed aside the apology of his assailants for not challenging him by a direct vote of want of confidence, that such a vote would be awkward in a time of war. On the contrary, he said, a case so momentous as the case of war is the very reason why you should show boldly whether you have confidence in our management of your finances or not; if you disapprove, the sooner I know it the better. Then he dashed into a close and elaborate defence in detail, under all the heads of attack,—his manner of dealing with the unfunded debt, his abortive scheme of conversion, his mode of charging deficiency bills. This astonishing mass of dry and difficult matter was impressed in full significance upon the House, not only by the orator's own buoyant and energetic interest in the performance, but by the sense which he awoke in his hearers, that to exercise their attention and judgment upon the case before them was a binding debt imperatively due to themselves and to the country, by men owning the high responsibility of their station. This was the way in which he at all times strove to stir the self-respect of the House of Commons. Not sparing his critics a point or an argument, he drove his case clean home with a vigour that made it seem as if the study of Augustine and Dante and the Fathers were after all the best training for an intimate and triumphant mastery of the proper amount of gold to be kept at the bank, the right interest on an exchequer bond and an exchequer bill, and all the arcana of the public accounts.[333] Even where their case had something in it, he showed that they had taken the wrong points. Nor did he leave out the spice of the sarcasm that the House loves. A peer had reproached him for the amount of his deficiency bills. This peer had once himself for four years been chancellor of the exchequer. 'My deficiency bills,' cried Mr. Gladstone, 'reached three millions and a half. How much were the bills of the chancellor whom this figure shocks? In his first year they were four millions and a half, in the second almost the same, in the third more than five and a quarter, in the fourth nearly five millions and a half.' Disraeli and others pretended that they had foreseen the failure of the conversion. Mr. Gladstone proved that, as matter of recorded fact, they had done nothing of the sort. 'This is the way in which mythical history arises. An event happens without attracting much notice; subsequently it excites interest; then people look back upon the time now passed, and see things not as they are or were, but through the haze of distance—they see them as they wish them to have been, and what they wish them to have been, they believe that they were.'
For this budget no genius, only courage, was needed; but Mr. Gladstone advanced in connection with it a doctrine that raised great questions, moral, political, and economic, and again illustrated that characteristic of his mind which always made some broad general principle a necessity of action. All through 1854, and in a sense very often since, parliament was agitated by Mr. Gladstone's bold proposition that the cost of war should be met by taxation at the time, and not by loans to be paid back by another generation. He did not advance his abstract doctrine without qualification. This, in truth, Mr. Gladstone hardly ever did, and it was one of the reasons why he acquired a bad name for sophistry and worse. Men fastened on the general principle, set out in all its breadth and with much emphasis; they overlooked the lurking qualification; and then were furiously provoked at having been taken in. 'I do not know,' he wrote some years later to Northcote, 'where you find that I laid down any general maxim that all war supplies were to be raised by taxes.... I said in my speech of May 8, revised for Hansard, it was the duty and policy of the country to make in the first instance a great effort from its own resources.' The discussions of the time, however, seem to have turned on the unqualified construction. While professing his veneration and respect for the memory of Pitt, he opened in all its breadth the question raised by Pitt's policy of loan, loan, loan. The economic answer is open to more dispute than he then appeared to suppose, but it was the political and moral reasons for meeting the demands of war by tax and not by loan that coloured his economic view. The passage in which he set forth the grounds for his opinion has become a classic place in parliamentary discussion, but it is only too likely for a long time to come to bear reproducing, and I have taken it as a motto for this chapter. His condemnation of loans, absolutely if not relatively, was emphatic. 'The system of raising funds necessary for wars by loan practises wholesale, systematic, and continual deception upon the people. The people do not really know what they are doing. The consequences are adjourned into a far future.' I may as well here complete or correct this language by a further quotation from the letter to Northcote to which I have already referred. He is writing in 1862 on Northcote's book on Twenty Years of Finance. 'I cannot refrain,' he says, 'from paying you a sincere compliment, first on the skill with which you have composed an eminently readable work on a dry subject; and secondly, on the tact founded in good feeling and the love of truth with which you have handled your materials throughout.' He then remarks on various points in the book, and among the rest on this:—
LETTERS TO NORTHCOTE