Yet at the same time the narrow scrutiny to which expenditure had been so long subjected and the habitual reluctance of statesmen to enlarge its bounds, left no very obvious opportunities to the new Chancellor. The field had, except for some small patches, been well and thriftily gleaned. Nor did it seem at first sight that the system of taxation which had for five years received Mr. Gladstone’s approval would readily lend itself to striking or sensational treatment.
On the other hand, however, more than one great tendency to change was apparent. The whole question of the Sinking Fund was ripe for reconsideration. The remodelling of the death duties thrust itself before every Chancellor each succeeding year. Above all, the inevitable and swiftly approaching departure in Local Government, involving as it did a complete readjustment of national and local finance and the transference of large responsibilities and resource from Whitehall to the County and Borough Councils, required a strong and daring mind at the Treasury.
Certainly Lord Randolph Churchill’s plan did not err on the side of timidity. He contemplated nothing less than a complete reconstruction of the revenue. The general rate of expenditure and the whole condition of the National Debt were examined anew by a searching and audacious eye. Hardly a single tax was left untouched. The death duties, the house duties, the stamp duties, the wine duties, were all the subject of reform. Immense reductions were proposed in existing taxes. Numerous new taxes were devised. All these changes were not a mere meddlesome and vexatious shifting of burdens from one shoulder to the other. They were each and all essential parts in a vast financial revolution.
The first object of the Chancellor of the Exchequer was to effect a large and substantial reduction in taxation. He desired especially to diminish those taxes which fell upon the lower middle class. He laboured to transfer the burdens, so far as possible, from comforts to luxuries and from necessaries to pleasures. He applied much more closely than his predecessors that fundamental principle of democratic finance—the adjusting of taxation to the citizen’s ability to pay. His second object was to provide a much larger sum of money for the needs of local bodies, so that the impending measure of Local Government might be wide and real in its character. His third object was to effect a certain definite economy in the annual expenditure.
The estimates with which he was confronted amounted to 90,400,000l. The income which the existing taxes were expected to yield was 90,000,000l. The Chancellor of the Exchequer proposed to augment his income by extra taxation aggregating 4,500,000l.—namely, by an increase in the death duties of 1,400,000l., and in the house duties of 1,500,000l.; by extra stamps to yield 284,000l.; and by a wider application of corporation duty, worth 315,000l.; by the revival of a tax on horses to produce 500,000l.; by an increased tax on wine to produce 250,000l.; and by certain minor taxes, to be considered later, which were estimated to produce 300,000l. He proposed to diminish his expenditure by withholding the 2,600,000l. local grants-in-aid, for which a new provision was to be made; by a reduction in the charge for the debt of 4,500,000l.; and by a direct economy of 1,300,000l. He had, therefore, raised his income to 94,500,000l., and reduced his expenses to 82,000,000l., thus becoming possessed of a surplus income over expenditure of 12,500,000l. This surplus he intended to distribute variously. 5,000,000l. were to be available for the purposes of Local Government, in lieu of the old grants-in-aid of 2,600,000l. The indirect taxpayer was to be relieved by a reduction of the tea duties from 6d. to 4d., costing the revenue 1,400,000l.; and by a reduction of 4d. in the tobacco tax, costing 500,000l. The income-tax payer received the greatest advantage, for by a remission, costing no less than 4,870,000l., the rate of the income-tax was to be lowered from 8d. in the pound, at which it stood in 1886, to 5d. in 1887. These outgoings together aggregated 11,770,000l., and the Treasury was left with a final surplus of 730,000l.
These proposals require to be more closely examined. The principal feature of the new taxation was the re-grading and increase of the death and house duties. The death duties in force in 1886-7 were four in number—namely: (1) Probate duty upon the personal property passing on the death of any person, irrespective of destination; (2) the account duty, imposed since 1881 chiefly as a preventive to evasion of probate duty, and chargeable in respect of personalty included in voluntary settlements—death-bed gifts, &c.; (3) the legacy duty, upon benefit derived by the successor to personal property of the deceased at rates according to consanguinity; and (4) the succession duty, upon benefit derived by the successor to settled personalty and to the real property of the deceased, also at rates depending on consanguinity, chargeable, however, on the life interest and not on the capital value. Lord Randolph Churchill approached this complicated system of taxation with the double object of obtaining a larger revenue by a simpler method. He wanted more money and less machinery, fewer taxes and an increased return. His early inquiries at Somerset House and the discussion of the first suggestions which, coming fresh to the subject, he
