Nations seldom realise till too late how prominent a place a sound
system of finance holds among the vital elements of national
stability and well-being; how few political changes are worth
purchasing by its sacrifice; how widely and seriously human
happiness is affected by the downfall or the perturbation of
national credit, or by excessive, injudicious, and unjust
taxation.—LECKY.
I
In finance, the most important of all the many fields of his activity, Mr.
Gladstone had the signal distinction of creating the public opinion by
which he worked, and warming the climate in which his projects throve. In
other matters he followed, as it was his business and necessity to follow,
the governing forces of the public mind; in finance he was a strenuous
leader. He not only led with a boldness sometimes verging on improvidence;
apart from the merits of this or that proposal, he raised finance to the
high place that belongs to it in the interest, curiosity, and imperious
concern of every sound self-governing community. Even its narrowest
technicalities by his supple and resplendent power as orator were suffused
with life and colour. When ephemeral critics disparaged him as mere
rhetorician—and nobody denies that he was often declamatory and
discursive, that he often over-argued and over-refined—they forgot that he
nowhere exerted greater influence than in that department of affairs where
words out of relation to fact are most surely exposed. If he often carried
the proper rhetorical arts of amplification and development to excess, yet
the basis of fact was both sound and clear, and his digressions, as when,
for example, he introduced an account of the changes in the English taste
for wine,(38) were found, and still remain, both relevant and extremely
interesting.
(M19) One recorder who had listened to all the financiers from Peel
downwards, said that Peel’s statements were ingenious and able, but dry;
Disraeli was clever but out of his element; Wood was like a cart without
springs on a heavy road; Gladstone was the only man who could lead his
hearers over the arid desert, and yet keep them cheerful and lively and
interested without flagging. Another is reminded of Sir Joshua’s picture
of Garrick between tragedy and comedy, such was his duality of attitude
and expression; such the skill with which he varied his moods in a single
speech, his fervid eloquence and passion, his lightness and buoyancy of
humour, his lambent and spontaneous sarcasm. Just as Macaulay made
thousands read history who before had turned from it as dry and repulsive,
so Mr. Gladstone made thousands eager to follow the public balance-sheet,
and the whole nation became his audience, interested in him and his themes
and in the House where his dazzling wonders were performed. All this made
a magnificent contribution to the national spirit of his time. Such
extraordinary power over others had its mainspring in the depths and zeal
of his own conviction and concern. “For nine or ten months of the year,”
he told Sir Henry Taylor in 1864, “I am always willing to go out of
office, but in the two or three that precede the budget I begin to feel an
itch to have the handling of it. Last summer I should have been delighted
to go out; now [December] I am indifferent; in February, if I live as
long, I shall, I have no doubt, be loath; but in April quite ready again.
Such are my signs of the zodiac.” The eagerness of his own mind
transmitted itself like an electric current through his audience.
Interest abroad was almost as much alive as the interest felt in England
itself. We have already seen how keenly Cavour followed Mr. Gladstone’s
performances. His budget speeches were circulated by foreign ministers
among deputies and editors. Fould, one of the best of Napoleon’s finance
ministers, kept up a pretty steady correspondence with the English
chancellor: appeals to him as to the sound doctrine on sugar drawbacks; is
much struck by his proposals on Scotch banks; says mournfully to him
(April 28, 1863), in a sentence that is a whole chapter in the history of
the empire: “You are very fortunate in being able to give such relief to
the taxpayers; if it had not been for the war in Mexico, I should perhaps
have been able to do something of the same sort, and that would have been,
especially in view of the elections, very favourable to the government of
the Emperor.’”
When Mr. Gladstone came to leave office in 1866, he said to Fould (July
11): “The statesmen of to-day have a new mission opened to them: the
mission of substituting the concert of nations for their conflicts, and of
teaching them to grow great in common, and to give to others by giving to
themselves. Of this beneficent work a good share has fallen to the
departments with which we have respectively been connected.” Fould had
already deplored his loss. “I counted,” he says, “on the influence of your
wise doctrines in finance, to help me in maintaining our country in that
system of order and economy, of which you were setting the example.” Alas,
in France and in continental Europe generally at that time, selfish
material interests and their class representatives were very strong,
popular power was weak; in most of them the soldier was the master.
Happily for our famous chancellor of the exchequer, England was different.
It has often been said that he ignored the social question; did not even
seem to know there was one. The truth is, that what marks him from other
chancellors is exactly the dominating hold gained by the social question
in all its depth and breadth upon his most susceptible imagination. Tariff
reform, adjustment of burdens, invincible repugnance to waste or
profusion, accurate keeping and continuous scrutiny of accounts,
substitution of a few good taxes for many bad ones,—all these were not
merely the love of a methodical and thrifty man for habits of business;
they were directly associated in him with the amelioration of the hard lot
of the toiling mass, and sprang from an ardent concern in improving human
well-being, and raising the moral ideals of mankind. In his “musings for
the good of man,” Liberation of Intercourse, to borrow his own larger name
for free trade, figured in his mind’s eye as one of the promoting
conditions of abundant employment. “If you want,” he said in a pregnant
proposition, “to benefit the labouring classes and to do the maximum of
good, it is not enough to operate upon the articles consumed by them; you
should rather operate on the articles that give them the maximum of
employment.” In other words, you should extend the area of trade by
steadily removing restrictions. He recalled the days when our predecessors
thought it must be for man’s good to have “most of the avenues by which
the mind, and also the hand of man conveyed and exchanged their respective
products,” blocked or narrowed by regulation and taxation. Dissemination
of news, travelling, letters, transit of goods, were all made as costly
and difficult as the legislator could make them. “I rank,” he said, “the
introduction of cheap postage for letters, documents, patterns, and
printed matter, and the abolition of all taxes on printed matter, in the
catalogue of free trade legislation. These great measures may well take
their place beside the abolition of prohibitions and protective duties,
the simplifying of revenue laws, and the repeal of the Navigation Act, as
forming together the great code of industrial emancipation.”(39)
(M20) It was not unnatural that fault should be found with him for not
making a more resolute effort to lighten the burden of that heavy mortgage
which, under the name of the National Debt, we have laid upon the industry
and property of the nation. In 1866 he was keenly excited by Jevons’s
argument from the ultimate shrinkage of our coal supply, and he accepted
the inference that we should vigorously apply ourselves by reduction of
the debt to preparation for the arrival of the evil day. But, as he wrote
to Jevons (March 16, 1866), “Until the great work of the liberation of
industry was in the main effected, it would have been premature or even
wrong to give too much prominence to this view of the subject. Nor do I
regard that liberation as yet having reached the point at which we might
say, we will now cease to make remission of taxes a principal element and
aim in finance. But we are in my judgment near it. And I am most anxious
that the public should begin to take a closer and more practical view of
the topics which you have done so much to bring into prominence.”
He was always thinking of the emancipation of commerce, like Peel and
Cobden. His general policy was simple. When great expenditure demanded
large revenue, he raised his money by high income-tax, and high rates of
duty on a few articles, neither absolute necessities of life nor raw
materials of manufacture. He left the income-tax at fourpence. In 1866, he
told the House that the new parliament then about to be elected might
dispense with the tax. “If,” he said, “parliament and the country
preferred to retain the tax, then the rate of fourpence is the rate at
which in time of peace and in the absence of any special emergency, we
believe it may be most justly and wisely so retained.” While cordially
embracing Cobden’s policy of combining free trade with retrenchment, he
could not withstand a carnal satisfaction at abundant revenue. Deploring
expenditure with all his soul, he still rubs his hands in professional
pride at the elasticity of the revenue under his management.
II
When it is asked, with no particular relevancy, what original contribution
of the first order was made by Mr. Gladstone to the science of national
finance, we may return the same answer as if it were asked of Walpole,
Pitt, or Peel. It was for Adam Smith from his retreat upon the sea-beach
of distant Kirkcaldy to introduce new and fruitful ideas, though he too
owed a debt to French economists. The statesman’s business is not to
invent ideas in finance, but to create occasions and contrive expedients
for applying them. “What an extraordinary man Pitt is,” said Adam Smith;
“he understands my ideas better than I understand them myself.”
Originality may lie as much in perception of opportunity as in invention.
Cobden discovered no new economic truths that I know of, but his
perception of the bearings of abstract economic truths upon the actual and
prospective circumstances of his country and the world, made him the most
original economic statesman of his day. The glory of Mr. Gladstone was
different. It rested on the practical power and tenacity with which he
opened new paths, and forced the application of sound doctrine over long
successions of countless obstacles.
(M21) If we probe his fame as financier to the core and marrow, it was not
his power as orator, it was not his ingenuity in device and expedient, it
was his unswerving faith in certain fixed aims, and his steadfast and
insistent zeal in pursuing them, that built up the splendid edifice. Pitt
performed striking financial feats, especially in the consolidation of
duties, in reformed administration, and in the French treaty of 1786. But
ill-fortune dragged him into the vortex of European war, and finance sank
into the place of a secondary instrument, an art for devising aliments,
some of them desperate enough, for feeding the war-chest of the nation.
Sir Robert Walpole, Mr. Gladstone wrote, “had not to contend with like
difficulties, and I think his administration should be compared with the
early years of Pitt, in which way of judging he would come off second,
though a man of cool and sagacious judgment, while morally he stood
low.”(40)
In the happier conditions of his time, Mr. Gladstone was able to use wise
and bold finance as the lever for enlarging all the facilities of life,
and diffusing them over the widest area. If men sometimes smile at his
extraordinary zeal for cheap wines and cheap books and low railway fares,
if they are sometimes provoked by his rather harsh views on privileges for
patents and copyrights for authors, restrictive of the common enjoyment,
it is well to remember that all this and the like came from what was at
once clear financial vision and true social feeling. “A financial
experience,” he once said, “which is long and wide, has profoundly
convinced me that, as a rule, the state or individual or company thrives
best which dives deepest down into the mass of the community, and adapts
its arrangements to the wants of the greatest number.” His exultation in
the stimulus given by fiscal freedom to extended trade, and therefore to
more abundant employment at higher wages, was less the exultation of the
economist watching the intoxicating growth of wealth, than of the social
moralist surveying multiplied access to fuller life and more felicity. I
always remember, in a roving talk with him in 1891, when he was a very old
man and ill, how he gradually took fire at the notion—I forget how it
arose—of the iniquities under which the poor man suffered a generation
ago. “See—the sons and daughters went forth from their homes; the cost of
postage was so high that correspondence was practically prohibited; yet
the rich all the time, by the privilege of franking, carried on a really
immense amount of letter-writing absolutely free. Think what a softening
of domestic exile; what an aid in keeping warm the feel of family
affection, in mitigating the rude breach in the circle of the hearth.”
This vigorous sympathy was with Mr. Gladstone a living part of his
Christian enthusiasm. “If you would gain mankind,” said old Jeremy
Bentham, “the best way is to appear to love them, and the best way of
appearing to love them, is to love them in reality.” When he thought of
the effect of his work at the exchequer, he derived “profound and
inestimable consolation from the reflection that while the rich have been
growing richer, the poor have become less poor.” Yet, as my readers have
by this time found out, there never was a man less in need of Aristotle’s
warning, that to be forever hunting after the useful befits not those of
free and lofty soul.(41) As was noted by contemporaries, like all the
followers of Sir Robert Peel he never thought without an eye to
utilitarian results, but mixed with that attitude of mind he had “a
certain refinement and subtlety of religiousness that redeemed it from the
coldness, if it sometimes overshadowed the clearness, of mere
statesmanlike prudence.” On the other hand, he had “the Lancashire
temperament.”
III
(M22) This thought and feeling for the taxpayer was at the root of another
achievement, no less original than the peculiar interest that he was able
to excite by his manner of stating a financial case. Peel was only prime
minister for five years, and only four months chancellor. Mr. Gladstone
was prime minister for twelve—ten years short of Sir Robert Walpole in
that office, seven years short of Pitt. But he was also chancellor of the
exchequer under three other prime ministers for ten years. Thus his
connection with the treasury covered a longer period than was attained by
the greatest of his predecessors. His long reign at the treasury, and his
personal predominance in parliament and the country, enabled him to stamp
on the public departments administrative principles of the utmost breadth
and strength. Thrift of public money, resolute resistance to waste, rigid
exactitude in time, and all the other aspects of official duty, conviction
that in the working of the vast machinery of state nothing is a
trifle—through the firm establishment of maxims and principles of this
sort, Mr. Gladstone built up a strong and efficacious system of
administrative unity that must be counted a conspicuous part of his very
greatest work. “No chancellor of the exchequer,” he once said, “is worth
his salt who makes his own popularity either his first consideration, or
any consideration at all, in administering the public purse. In my
opinion, the chancellor of the exchequer is the trusted and confidential
steward of the public. He is under a sacred obligation with regard to all
that he consents to spend.”(42) This tone of thinking and feeling about
the service of the state spread under his magisterial influence from
chancellors and the permanent officers that bear unobtrusive but effective
sway in Whitehall, down to tide waiters and distributors of stamps. As
Burke put the old Latin saw, he endeavoured to “give us a system of
economy, which is itself a great revenue.” The Exchequer and Audit Act of
1866 is a monument of his zeal and power in this direction. It converted
the nominal control by parliament into a real control, and has borne the
strain of nearly forty years.
He was more alive than any man at the exchequer had ever been before, to
the mischiefs of the spirit of expenditure. As he told the House of
Commons in 1863 (April 16): “I mean this, that together with the so-called
increase of expenditure there grows up what may be termed a spirit of
expenditure, a desire, a tendency prevailing in the country, which,
insensibly and unconsciously perhaps, but really, affects the spirit of
the people, the spirit of parliament, the spirit of the public
departments, and perhaps even the spirit of those whose duty it is to
submit the estimates to parliament.” “But how,” he wrote to Cobden (Jan.
5, 1864), “is the spirit of expenditure to be exorcised? Not by my
preaching; I doubt if even by yours. I seriously doubt whether it will
ever give place to the old spirit of economy, as long as we have the
income-tax. There, or hard by, lie questions of deep practical moment.”
This last pregnant reference to the income-tax, makes it worth while to
insert here a word or two from letters of 1859 to his brother Robertson,
an even more ardent financial reformer than himself:—
Economy is the first and great article (economy such as I
understand it) in my financial creed. The controversy between
direct and indirect taxation holds a minor though important place.
I have not the smallest doubt we should at this moment have had a
smaller expenditure if financial reformers had not directed their
chief attention, not to the question how much of expenditure and
taxes we shall have, but to the question how it should be
raised.... I agree with you that if you had only direct taxes, you
would have economical government. But in my opinion the indirect
taxes will last as long as the monarchy; and while we have them, I
am deeply convinced that the facility of recurring to, and of
maintaining, income-tax has been a main source of that
extravagance in government, which I date from the Russian war (for
before that a good spirit had prevailed for some twenty-five
years).
Bagehot, that economist who united such experience and sense with so much
subtlety and humour, wrote to Mr. Gladstone in 1868: “Indirect taxation so
cramps trade and heavy direct taxation so impairs morality that a large
expenditure becomes a great evil. I have often said so to Sir G. Lewis,
but he always answered, ‘Government is a very rough business. You must be
content with very unsatisfactory results.’ ” This was a content that Mr.
Gladstone never learned.
(M23) It was not only in the finance of millions that he showed himself a
hero. “The chancellor of the exchequer,” he said, “should boldly uphold
economy in detail; and it is the mark of a chicken-hearted chancellor when
he shrinks from upholding economy in detail, when because it is a question
of only two or three thousand pounds, he says that is no matter. He is
ridiculed, no doubt, for what is called candle-ends and cheese-parings,
but he is not worth his salt if he is not ready to save what are meant by
candle-ends and cheese-parings in the cause of the country.”(43) He held
it to be his special duty in his office not simply to abolish sinecures,
but to watch for every opportunity of cutting down all unnecessary
appointments. He hears that a clerk at the national debt office is at
death’s door, and on the instant writes to Lord Palmerston that there is
no necessity to appoint a successor. During the last twenty years, he said
in 1863, “since I began to deal with these subjects, every financial
change beneficial to the country at large has been met with a threat that
somebody would be dismissed.” All such discouragements he treated with the
half scornful scepticism without which no administrative reformer will go
far.
He did not think it beneath his dignity to appeal to the foreign office
for a retrenchment in fly-leaves and thick folio sheets used for docketing
only, and the same for mere covering despatches without description; for
all these had to be bound, and the bound books wanted bookcases, and the
bookcases wanted buildings, and the libraries wanted librarians. “My idea
is that it would be quite worth while to appoint an official committee
from various departments to go over the ‘contingencies’ and minor charges
of the different departments into which abuse must always be creeping,
from the nature of the case and without much blame to any one.” Sir R.
Bethell as attorney-general insisted on the duty incumbent on certain high
officials, including secretaries of state, of taking out patents for their
offices, and paying the stamp duties of two hundred pounds apiece thereon.
“I shall deal with these eminent persons,” he wrote to the chancellor of
the exchequer, “exactly as I should and do daily deal with John Smith
accused of fraud as a distiller, or John Brown reported as guilty of
smuggling tobacco.” Mr. Gladstone replies (1859):—
I rejoice to see that neither the heat, the stench, nor service in
the courts can exhaust even your superfluous vigour; and it is
most ennobling to see such energies devoted to the highest of all
purposes—that of replenishing her Majesty’s exchequer. I hope,
however, that in one point the case stands better than I had
supposed. The proof of absolute contumacy is not yet complete,
though, alas, the _animus furandi_ stands forth in all its hideous
colours. I spoke yesterday to Lord Palmerston on the painful
theme; and he confessed to me with much emotion that he has not
yet resorted to those mild means of exhortation—what the
presbyterians call dealing with an erring brother—from which we
had hoped much. The unhappy men may therefore yet come to their
senses; in any case I rejoice to think that you, in the new
capacity of mad doctor, are sure to cure them and abate the
mischief, if the which do not happen (I quote the new Tennyson):—
“some evil chance
Will make the smouldering scandal break and blaze
Before the people and our Lord the King.”(44)
After a due amount of amusing correspondence, the recusant confederacy
struck their colours and paid their money.
When he went to Corfu in the _Terrible_ in 1858, some two or three
sleeping cabins were made by wooden partitions put up round spaces
taken off the deck. Thirteen years after, his unslumbering memory
made this an illustrating point in an exhortation to a first lord
of the admiralty not to disregard small outgoings. “I never in my
life was more astonished than upon being told the sum this had
cost; I think it was in hundreds of pounds, where I should have
expected tens.” Sometimes, no doubt, this thrift descended to the
ludicrous. On this same expedition to Corfu, among the small
pieces of economy enjoined by Mr. Gladstone on the members of his
mission, one was to scratch out the address on the parchment label
of the despatch bags and to use the same label in returning the
bag to the colonial office in London. One day while the secretary
was busily engaged in thus saving a few halfpence, an officer came
into the room, having arrived by a special steamer from Trieste at
a cost of between seven and eight hundred pounds. The ordinary
mail-boat would have brought him a very few hours later. We can
hardly wonder that the heroical economist denounced such pranks as
“profligate” and much else. Though an individual case may often
enough seem ludicrous, yet the system and the spirit engendered by
it were to the taxpayer, that is to the nation, priceless.
IV
One of the few failures of this active and fruitful period was the
proposal (1863) that charities should pay income-tax upon the returns from
their endowments. What is their exemption but the equivalent of a gift to
them from the general taxpayer? He has to make good the sum that ought in
reason and equity to have been paid by them, as by other people, to the
government that protects them. Why should this burden be compulsorily laid
upon him? What is the quality of an endowment for a charitable purpose
that constitutes a valid claim for such a boon? Into this case Mr.
Gladstone threw himself with full force. The opposition to him was as
heated and as vigorous as he ever provoked, and the violence of the
resistance roused an answering vehemence in him. He speaks in his diary of
his “deadly encounter with the so-called charities.” “I was endeavouring,”
he says, “to uphold the reality of truth and justice against their
superficial and flimsy appearances.” “Spoke from 5.10 to 8.20, with all my
might, such as it was.” This speech, with its fierce cogency and trenchant
reasoning, was counted by good judges who heard it, to be among the two or
three most powerful that he ever made, and even to-day it may be read with
the same sort of interest as we give to Turgot’s famous disquisition on
Foundations. It turns a rude searchlight upon illusions about charity that
are all the more painful to dispel, because they often spring from pity
and from sympathy, not the commonest of human elements. It affects the
jurist, the economist, the moralist, the politician. The House was
profoundly impressed by both the argument and the performance, but the
clamour was too loud, all the idols of market-place and tribe were marched
out in high parade, and the proposal at last was dropped.
(M24) Though the idea of putting a tax on the income of charitable
endowments was rejected, the budget of 1863 was the record of a triumph
that was complete. The American civil war by arresting the supply of
cotton had half ruined Lancashire. The same cause had diminished the
export trade to America by six millions sterling. Three bad seasons
spoiled the crops. There was distress in Ireland. Yet the chancellor had a
revenue in excess of expenditure by the noble figure of three millions and
three quarters. Mr. Gladstone naturally took the opportunity of surveying
the effects of four years of his financial policy. He admitted that they
had been four years of tension, and this tension had been enhanced by his
large remissions of duty, and by taking in hand the completion of the
great work of commercial legislation. The end of it all was a growth of
wealth, as he called it, almost intoxicating. The value of British goods
sent to France had risen from four millions and three quarters to nearly
nine millions and one quarter, in other words had about doubled under the
operations of the treaty of commerce.(45) If to this were added foreign
and colonial produce sent through us, and acquired by us in exchange for
our own produce, the value had risen from nine and a half in 1859 to
twenty-one and three quarters in 1862. In Mr. Gladstone’s own description
later, the export trade of 1860, in spite of a bad harvest, was so
stimulated by the liberating customs act, that it rose at once from a
hundred and thirty millions to a hundred and thirty-five. The next year it
fell to a hundred and twenty-five, and in 1862 it fell by another million
owing to the withdrawal, by reason of the American war, of the material of
our greatest manufacture. In 1866 it rose to a hundred and eighty-eight
millions.(46) Then under the head of income-tax, and comparing 1842 with
1862, over the same area, and with the same limitations, the aggregate
amount of assessed income had risen from one hundred and fifty-six
millions to two hundred and twenty-one. Other tests and figures need not
detain us.
_April 16, 1863._—My statement lasted three hours, and this with a
good deal of compression. It wound up, I hope, a chapter in
finance and in my life. Thanks to God. 17.—The usual sense of
relaxation after an effort. I am oppressed too with a feeling of
deep unworthiness, inability to answer my vocation, and the desire
of rest. 18.—To Windsor, had an audience of the Queen; so warm
about Sir G. Lewis, and she warned me not to overwork.
Lewis had died five days before (April 13), and this is Mr. Gladstone’s
entry:—
_April 14._—Reached C.H.T. at 11-1/4, and was met by the sad news
of the death of Sir George Lewis. I am pained to think of my
differences with him at one time on finance; however, he took
benefit by them rather than otherwise. A most able, most learned,
most unselfish, and most genial man.
To Sir Gilbert Lewis, he wrote (April 18):—
Like several eminent public men of our time, he had many qualities
for which the outer world did not perhaps, though it may not have
denied them, ever give him full positive credit. For example, his
singular courtesy and careful attention to others in all
transactions great and small; his thoroughly warm and most
forthcoming and genial disposition; his almost unconsciousness of
the vast stores of his mind, and of the great facility and
marvellous precision with which he used them; and, if I may so
say, the noble and antique simplicity of character which he united
with such knowledge of men and of affairs.
The final budget of this most remarkable series was that of 1866, when he
swept away the last of the old vexatious duties on timber. It contained
another element as to which, as I have said, some thought he had not been
keen enough. In the budget of 1866 he first started the scheme of a
sinking fund, which, when amplified, and particularly when simplified by
his successors, did so much to reduce the dead weight of debt.(47) The
complication of his scheme was due to his desire to make sure of its
stability, and undoubtedly he would have carried it if he had remained in
office through the session. He is, however, entitled to credit for laying
the foundation of an effective sinking fund.
One word more may be added on Mr. Gladstone as financier. He was far too
comprehensive in his outlook to suppose that the great outburst of
material prosperity during the years in which he controlled the exchequer
and guided parliament in affairs of money, was wholly and without
qualification due to budgets alone. To insist on ascribing complex results
to single causes is the well-known vice of narrow and untrained minds. He
was quite alive to the effects of “the enormous, constant, rapid, and
diversified development of mechanical power, and the consequent saving of
labour by the extension of machinery.” He was well aware of the share of
new means of locomotion in the growth of industrial enterprise. But the
special cause of what was most peculiar to England in the experience of
this period he considered to be the wise legislation of parliament, in
seeking every opportunity for abolishing restrictions upon the application
of capital and the exercise of industry and skill. In this wise
legislation his own energetic and beneficent genius played the master
part.