'We then turned to the Berber railway, and decided that it should be a temporary or contractor's line made only so far as might be necessary for purely military reasons. We then decided that Wolseley should not be allowed to make himself Governor-General of the Soudan.

'After the Cabinet Chamberlain and I continued our discussion as to his strong wish to resign. I told him that I wanted to finish the Seats Bill, that I thought Lord Salisbury might refuse or make conditions with regard to coming in, that Mr. Gladstone would not lead in opposition, and that we should seem to be driving him into complete retirement, and I asked whether we were justified in running away.'

Meantime the financial business of the year had to go on, and part of it was a demand for increased naval expenditure, to which, as has been seen already, Mr. Gladstone was opposed.

'The Navy Estimates were first discussed, and then the Army, and a sum asked for for the fortification of coaling-stations was refused, and also a sum asked for for defending the home merchant ports. We all of us were guilty of unwise haste on this occasion, for the demand was right; but the chief blame must fall rather on Childers, Hartington, and the others who had been at the War Office than upon those who sinned in ignorance.'

This decision against naval expenditure was a cause of embarrassment to the Government in the country, for a strong 'big navy' campaign followed. The real question at issue in the Cabinet became that of taxation. On March 2nd, and again in April, Sir Charles 'warned Mr. Gladstone against Childers's proposed Budget'—the rock on which they finally made shipwreck. 'Mr. Gladstone replied: "The subject of your note has weighed heavily on my mind, and I shall endeavour to be prepared for our meeting." I now sent him a memorandum after consultation with Chamberlain.'

What Sir Charles wrote in 1885 is nowadays matter of common argument; it was novel then in the mouth of a practical politician:

'I stated at length that, as head of the Poor Law department, I ought to have knowledge of the pressure of taxation upon the incomes of the poor. As Chairman of the Royal Commission on the Housing of the Working Classes, I had had to hear a great deal of evidence upon the subject of the income of the working classes, and as Chairman of the recent Conference on Industrial Remuneration had had special opportunities of further examining the question. It was my opinion that the position of the agricultural labourers had declined, and that the Whig or Conservative minority on my Commission, represented by Mr. Goschen and Lord Brownlow, admitted this contention of mine as regarded the south of England. The labourers of the south were unable to procure milk, and relied largely on beer as an article of food. Their wages had but slightly increased in the twenty years since 1865, and had decreased considerably since 1879. Food had slightly risen in price, clothes were nominally cheaper, but the same amount of wear for the money was not obtainable, and house rent (where house rent was paid by the labourers) had greatly risen. An enormous proportion of the income of the rich escaped taxation: fifty millions a year of their foreign income at the least. The uncertainty of employment placed the labourer even lower as a partaker in the income of the country than the statisticians placed him. The calculations of employers, upon which the estimates of statisticians were based, were founded upon the higher earnings of the best workers; and when the matter was examined, it was found that variation of wages, loss of time, and failure of work, much lowered the average earnings. The taxation of the working classes rose to a higher percentage than that of the upper and middle classes. Mr. Dudley Baxter, who was a Conservative, had admitted this, and had advocated a reduction in the tobacco duty and the malt tax. Since that time the tobacco duty had been raised, and the duties pressing upon beer had been rather raised than lowered.'

Sir Charles's insistence upon this matter is all the more notable because foreign complications were rapidly accumulating, and they were of a gravity which might well have seemed to dwarf all questions of the incidence of taxation.

There were not only the difficulties with Germany. There was also the Soudan, where a large body of British troops was engaged, in a country the perils of which England had now to realize.

'On March 7th there was a Cabinet as to the Suakim-Berber railway. Northbrook and I, soon joined by Harcourt and Chamberlain, were in favour of stopping our impossible campaign. I argued that when we decided to destroy the power of the Mahdi, it was on Wolseley's telling us that he hoped possibly to take Khartoum at once. For some weeks after that he had intended to take Berber. Then he had told us that he at least could occupy Abu Hamed. Now he was in full retreat, and both his lines of supply—namely, that up the Nile and that from Suakim—seemed equally difficult. The Chancellor wrote on a slip of paper for me: "We seem to be fighting three enemies at once. (1) The Mahdi; (2) certain of our people here; (3) Wolseley." Nothing was settled, and we passed on to Egyptian finance.'