The first striking fact in the foregoing statement is the large
difference between "contributions" and "collections," _i.e._ between the
"true" revenue derived from Ireland and the sums merely collected there.
During the last two financial years this difference amounted to an
average of £1,752,000. The excise collections alone represent an excess
of £1,920,000 over the actual contribution. This, of course, arises from
the movements of duty-paid spirits and beer between different parts of
the United Kingdom. The last Report of the Commissioners of Customs and
Excise (Cd. 5827) gives the amount of home-made spirits on which duty
has been paid in Ireland at 5,209,000 proof gallons, whereas the
quantity retained for consumption was only 2,776,000 proof gallons. A
similar but smaller difference exists in the case of beer. To credit
Ireland with the full amounts of the duties collected in Ireland, as was
done by Mr. Gladstone in 1886, and as is now proposed in some quarters,
would, in effect, amount to a gift from the British Exchequer of
£1,750,000 a year. And there is obviously no security that the Irish
Exchequer could rely on this boon being continued for more than a short
time. There would be nothing to prevent the British spirit merchant from
removing his spirits to this country in bond and paying the duty here
after arrival. It is obvious that the Treasury would be compelled to
grant facilities for this course. The present system is merely one of
book-keeping and administrative convenience, but as the withdrawal of
this sum from the British Exchequer to which it properly belongs would
have to be made good from other British sources, there would be every
inducement for the British merchant to effect such slight changes of
method as would transfer the whole of this sum from the Irish to the
British Exchequer. Having regard to the fact that on the other sources
of revenue the collections in Ireland are estimated to fall short of the
actual contributions by nearly £200,000, and that these are in the main
direct taxes paid by the individuals concerned, it is not unlikely that
a scheme which gave to Ireland the full benefit of her revenues as
collected would in a short time be converted from a gain of some
£1,700,000 to a loss of £100,000 to £200,000 to the Irish taxpayer.
Stability in the tax system and reliability upon the realisation of the
estimated revenue could not be assumed if "collections" instead of
"contributions" were to be made the basis of any financial arrangements.
Turning next to the contributed revenue upon which alone an Irish
Parliament could rely, we note first the large proportion of the revenue
represented by Customs and Excise. Contrasted with the figures for Great
Britain, it is seen by the following table that whereas in Ireland the
revenue from Customs and Excise amounts to 60 per cent. of the total, in
Great Britain the proportion was not more than 36 per cent.
PERCENTAGE OF REVENUE FROM DIFFERENT SOURCES CONTRIBUTED BY IRELAND AND
GREAT BRITAIN RESPECTIVELY IN TWO YEARS ENDING MARCH 31, 1911.[51]
Ireland. Great Britain.
Per cent. Per cent.
Customs 29 18-1/2
Excise (_ex._ licences) 30 17-1/2
Estate, etc., duties 9 14-1/2
Income tax 13 23-1/2
Postal, etc. 11 15
Other sources 8 11
--- ---
100 100
Exclusive of the licence duties the average yield (contribution) of
Customs and Excise in Great Britain amounted in the last two years to
£55,900,000, or at the rate of £1 7_s._ 5_d._ per head; in Ireland the
average yield was £5,800,000, or at the rate of £1 7_s._ 10_d._ per
head. The incidence of our consumption taxes is thus seen to be at the
present time practically the same in Ireland as in Great Britain; and
the much larger proportion of the Irish revenue obtained from them is
due to the smaller relative yield of direct taxes. Ireland being mainly
an agricultural country, income tax, death duties, and stamps yield much
less per head of the population there than in Great Britain. Such
conditions are highly suggestive of inelasticity. An Irish Chancellor of
the Exchequer will find no such fiscal reserves in direct taxes as does
his more fortunate British colleague. This conclusion should give pause
to those who think that if the Customs and Excise continued to be
controlled from Westminster, it would be still possible to extract the
larger revenue needed for the growing expenditure of Ireland by higher
rates of income tax and death duties. Such a course would increase the
burdens of the direct taxpayers of Ireland, but it would not fill the
Irish Treasury. On the other hand, it is clear that there is no chance
of relief being afforded to the Irish indirect taxpayer under Home Rule,
supposing Customs and Excise were handed over to the Irish Parliament.
Yet whenever a British Chancellor of the Exchequer has found it
necessary to increase any of the taxes on consumption, the protests from
the Irish benches have been invariably both loud and vehement. Irish
members have pointed to the low wages earned in Ireland, the greater
addiction of the people to tea and spirits, and the higher toll of their
earnings consequently extracted by the Exchequer. The yield of existing
taxes, therefore, whether direct or indirect, is not elastic in Ireland.
Neither of them afford sufficient resources to meet the necessities of
an Irish Parliament.
There are, of course, other reasons why there should be no delegation of
the power to impose Customs and Excise. The constitutional objections to
such a course are overwhelming. It would involve the abandonment of the
plea that Home Rule for Ireland was the prelude to Home Rule all round;
in other words, that separation was the condition precedent to
federalism. In every federal system in the world the control of Customs
and Excise has been retained by the central authority. This is true not
only of the quasi-federations within the British Empire; it is equally
true of the United States, Germany, and Switzerland. One can scarcely be
surprised at the emphatic repudiation which such a proposal received at
the hands of the Parliamentary Secretary to the Board of Trade (Mr. J.M.
Robertson) when, on February 7, 1912, in a speech at Lincoln, he said--
"There was, however, just one thing that must remain one for three
kingdoms, and that was the fiscal system, Customs and Excise. _It
was a federal union we want, a federal state._ If they were to do
as some of his unreflecting Home Rule friends, Irish and English,
have done, and demand that Ireland should not only have power to
lay taxes but to fix Customs and Excise then they had no State left
at all."
Another obvious objection to such a course is that it necessitates the
erection of a Customs barrier between Ireland and Great Britain. Tariff
Reformers are ready to admit that the present fiscal system is at least
as injurious to Ireland as to other portions of the United Kingdom. The
power to impose Customs duties on British goods--and the proportion of
British total imports is so large that if this power were limited to
foreign goods it would be financially valueless--would no doubt provide
the Irish Exchequer with considerable funds and might be used to develop
her prosperity. But the separation of the Customs systems for the
purpose of enabling Ireland to impose tariffs in her own interests would
necessarily be followed by a demand for treaty-making powers such as
have been successfully claimed and are now enjoyed by British Dominions
overseas. Under a general tariff for the United Kingdom the same
advantages would accrue to Ireland without any corresponding damage to
British or Imperial interests.
Thus, whether Customs and Excise are handed over to the Irish Parliament
or retained by the Imperial Parliament, the consequences are equally
embarrassing. In the one case Ireland would be deprived of the control
of some 60 per cent. of her present revenue, and of all power of
expansion; in the other, British trade with Ireland might be gravely
injured by hostile legislation, and the union of the three kingdoms in
financial and commercial policy would be destroyed. But this is not
federation, nor is it a step towards it. It is separation pure and
simple. Unless we are prepared to accept separation as the end of our
policy the control of Customs and therefore of Excise, must remain an
Imperial affair.
There can, therefore, be no justification for taking the control of the
Customs and Excise from the Imperial Parliament. The Irish Parliament
would thus be left with some 40 per cent. of present revenue under her
own control. But the power to raise further revenue within the limits
legally reserved to the Irish Parliament would be even less than this
figure would imply. For of the £4,100,000 of revenue other than Customs
and Excise, nearly £1,200,000 comes from the Postal Services; and even
if these services were controlled by Ireland, it may be taken that the
rates charged will be the same as in Great Britain. Of the remaining
£2,900,000 nearly one-half comes from income tax. It has already been
pointed out that its yield cannot be materially increased. There are
only two ways by which an Irish Chancellor might attempt such a task. He
might raise the rate of income tax or he might lower the exemption
limit. The former course would almost certainly be followed by two
equally undesirable results. So far as the tax continued to be paid in
Ireland it would fall with crushing force on the already
heavily-burdened agricultural industry. Still, from the point of view of
the Exchequer, there might be some additional revenue on this account.
On the other hand, there would be a check to the investment of capital
in Ireland--and no country needs capital more--and a powerful temptation
to transfer it where the tax would be lower. It may be seriously
questioned, therefore, whether any increase in the income tax above the
British rate is practicable. The other alternative, namely, the lowering
of the exemption limit, would be so unpopular that no Irish Chancellor
is ever likely to consider it seriously.
Passing from the consideration of revenue it is necessary to examine the
relation of present revenue to present expenditure. The first table in
the present article shows that the ascertainable expenditure for Irish
purposes in 1910-11 was about £1,400,000 more than the revenue. To this
expenditure must be added about £300,000 for the State Share of the
benefits under Part I. of the National Insurance Act, about £50,000 in
respect of Part II., and about £100,000 for cost of administration of
both parts, increasing the immediate deficit to about £1,550,000. This
calculation, moreover, includes no charge against Irish revenue on
account of Imperial Services--navy and army; National Debt, interest and
management; the diplomatic services, and so forth. The equity of such
payments has been consistently recognised in the two Bills and the three
financial schemes submitted by Mr. Gladstone. However moderate the scale
of contribution it would in the present case double or treble the margin
between Irish revenue and Irish expenditure for local purposes. If, for
example, the precedent of the 1886 Bill were followed, and Ireland
charged with a contribution for Imperial services in proportion to the
estimated relative taxable capacities, the additional charges on the
Irish Exchequer would amount to not less than about £4,000,000 on the
1910-11 figures if the taxable capacity of Ireland be taken at
one-twenty-fifth, and to nearly £3,500,000 if it be taken at
one-thirtieth.
It may be worth while here to refer to the amazing statement that Great
Britain has made a large "profit out of the Union." At the last meeting
of the British Association, Prof. Oldham affected to prove that Ireland
"in the course of one hundred years ... had sent across the Channel as
her contribution to the British Exchequer a clear net payment of about
330 millions sterling." The same contention has been urged by Lord
MacDonnell. This calculation ignores the fact that even the Irish
Parliament between 1782 and 1800 acknowledged its obligation to
contribute to Imperial services, and voted contributions for Imperial
purposes, besides raising and maintaining in Ireland a force of 12,000
to 15,000 men, some of whom were available for foreign service. It makes
no allowance also for the debt which Ireland brought into the Union
when the Exchequers were amalgamated in 1817. The importance of the last
item may be judged from the fact that if the whole of the so-called
contribution to Imperial services, _i.e._ the excess of true revenue
over local expenditure, had been employed since 1817 in paying interest
at 3 per cent. on the old Irish debt and the whole of any balance
remaining after payment of interest had been used for redemption of the
capital, this debt would only have been extinguished in 1886. If a
contribution of only 1 per cent. to the cost of Imperial services had
been previously charged against this excess, there would be a large
balance of the Irish debt still outstanding. As a matter of fact, in the
same period that Ireland is said to have contributed £330,000,000, Great
Britain may be shown by a precisely similar calculation to have
contributed no less than £5,800,000,000 for Imperial purposes. The
measure of "injustice to Ireland" meted out by unsympathetic Britons in
respect to the Imperial contribution extracted from Ireland may be seen
from the following comparison for different dates in the last century.
RATIOS OF POPULATIONS AND CONTRIBUTIONS TO IMPERIAL SERVICES
OF IRELAND AND GREAT BRITAIN AT DECENNIAL INTERVALS.
Ratio of British to Ratio of British to
Irish Populations. Irish Contributions.
1819-20 2·1 12·7
1829-30 2·1 10·9
1839-40 2·3 11·5
1849-50 3·2 17·6
1859-60 4·0 9·8
1869-70 4·8 12·3
1879-80 5·7 16·3
1889-90 7·0 22·6
1899-00 8·9 46·5
1909-10 9·3 [52]
The truth is that from a financial point of view Ireland has no valid
complaint to make on the score of her contributions for Imperial
purposes. Between 1820 and 1840 the Irish population was a little less
than one-half of the population of Great Britain; her contribution for
Imperial Services varied from one-eleventh to one-thirteenth. In
1899-1900 the British contribution was 46-1/2 times the Irish, though
the population was less than nine times as large. If any contribution
for Imperial Services from Ireland is justified, and Mr. Gladstone at
least acknowledged it, no one can say that the contribution actually
taken from Ireland has been excessive.
As already stated we are still without any information as to the
financial proposals to be included in the Home Rule Bill of 1912. The
Government have appointed a Committee to advise them upon this subject.
Though the cost of the Committee has been met out of public funds, and
sources of information were laid open to them which are not readily
available to the public, the Prime Minister has steadily refused to
supply to Parliament any information as to the results of their
labours.[53] The terms of reference to the Commission; the witnesses
examined by them; the information placed at their disposal; the
character of the conclusions and recommendations; these have, all alike,
been refused to the House of Commons. But while Parliament has been
denied this information, there is every reason to believe that the
leaders of the Nationalist Party have been taken fully into the
confidence of the Government. We do not know whether, for example, the
Customs or Excise or both will be imposed and collected by the future
Irish Parliament. We do not know whether any contribution will be
required for the Irish share of Imperial services. We are equally
uncertain whether any and what purely Irish services will be retained by
the Imperial Parliament, and charged on the Imperial Exchequer. And
lastly, the intentions of the Government in regard to the payment of a
subsidy from the Imperial Exchequer to the Irish Parliament, with which
rumour is busy, are as yet unrevealed.
In spite of this lamentable paucity of information as to the Government
plan, I think it can be safely said that no scheme even remotely
resembling any of those presented in connection with the two previous
Bills can be put forward now. Each of those schemes would involve the
Irish Parliament in a huge deficit from the very outset. Even if the
schemes were adapted to the changed modern conditions the same
impassable gap between available revenue and certain expenditure
remains. Those schemes presumably embodied principles which the
Governments of 1886 and 1893, and the Nationalist parties of those dates
regarded as adequate. It would be strange if it were otherwise, seeing
that an examination and comparison of the separate schemes can discover
no other consistent principles except the solitary one of juggling with
the revenues, expenditures, and contributions in such manner as would
start the Irish Parliament with a small surplus. In view of the
importance of these earlier attempts to secure an approximation to
financial equilibrium, it appears desirable to examine how Ireland would
fare in modern conditions under each of them.