The New Irish Constitution Part 8

The Royal Commission reported in 1896. The question of the financial relations remained then in practical abeyance till 1907. In that year the Government of Sir H. Campbell-Bannerman proposed to establish an Irish Council under the Lord-Lieutenant entrusted with the control and direction of certain administrative Departments. A sum was to be charged on the Consolidated Fund to enable the Council to meet the expenditure of the transferred Departments. This sum was fixed for the first five years at 4,164,000. This was simply a measure to decentralise administration, and to admit Irishmen to a share in Irish administration. It did not, however, obtain support in Ireland, and in consequence it was not pressed.

We come now to the last stages in the story of Irish finance. The Government of Mr. Asquith decided to introduce the Third Home Rule Bill in the session of 1912, and in 1911 they appointed a Departmental Committee under Sir Henry Primrose to advise them. The able report of that Committee has been laid before Parliament, and it brings our information on the financial relations up to the latest date:

They state the "true" Irish Revenue in 1895-6 to have been 8,034,000.

They estimate "true" Revenue 1910-11 at 10,300,000.

Increase 2,266,000.

The "true" local expenditure in Ireland, 1895-6, 5,938,000.

The "true" local expenditure 1910-11, 11,344,000.

5,406,000.

Thus whereas Ireland in 1895-6 made a contribution of 2,066,000 to Imperial Expenditure, in 1910-11, not only did she make no contribution to Imperial Expenditure, but the British taxpayer was called on to contribute more than 1,000,000 towards Irish local expenditure. But Irish local expenditure is increasing under the heads of old-age pensions, land purchase, and expenses of the Government which will be established in Ireland under Home Rule. The Committee in consequence estimate:

The Irish local expenditure in 1913-14 at 12,400,000.

The Irish Revenue at 10,350,000.

Deficit 2,050,000.

for which provision must be made in the forthcoming measure.

In order to meet the existing deficit, the Committee suggest that the British Exchequer should take over liability for all old-age pensions which had been actually granted at the date when the Home Rule Bill comes into operation. They estimate that liability at 3,000,000 a year, gradually, of course, diminis.h.i.+ng. If necessary, the liability in whole or part of the Irish Constabulary Pensions (400,000) might also be transferred to the British Exchequer. They advise that the obligation of Ireland to contribute to the Imperial expenditure should be affirmed, but that a settlement of the amount of the contribution should remain in abeyance; and lastly, that the guarantee of the Imperial Exchequer in respect of the Land Stock should remain, but that means should be taken to secure regular payment of the sum due from Ireland to the National Debt Commissioners.

I shall contrast later the recommendations of the Committee with the actual provisions of the Home Rule Bill.

I will now compare the finance of the three Home Rule Bills which have been submitted to Parliament, those of 1886, 1893 and 1912.

THE BILL OF 1886

Mr. Gladstone made it an essential condition of his plan that there should be an equitable distribution of Imperial charges and that Ireland should pay her fair proportion to the common expenses of the Empire. In 1885 that contribution was represented by the surplus of Irish Revenue remaining after deduction of the expenditure in Ireland on Irish services. He calculated in 1886 that the surplus above described provided a contribution by Ireland to Imperial expenditure equivalent to 2 where Great Britain contributed 23. This proportion contrasts with Mr. Pitt's arrangement in 1800 that Ireland should pay 2 where Great Britain paid 15. Mr. Gladstone proposed in future that where Great Britain paid 28, Ireland should pay 2, a concession of moment to Ireland, and he supported it on the following ground: he measured the taxable capacity of the two countries by (1) the Income-tax returns (2) the death duty returns, and (3) the valuation of property. Income-tax gave a proportion of 38 to 2, but he held Income-tax an imperfect test, because it was paid in Ireland on a lower valuation than in Great Britain and because many Irishmen receive dividends on securities which pay Income-tax in England. He thought that 34 to 2 would be nearer the true proportion. He held the death duties to be a better test and they showed a proportion of 26 to 2, while the valuation, lower in Ireland than in Great Britain, gave a proportion of 24 to 2. Arguing from these premises, he held that his proposed contribution of 2 to 28 was an equitable and even a generous arrangement, justified by the necessity of starting the Irish Legislative body with a balance to its credit.

A table is given showing how the contribution was appropriated.

The amount to be contributed by Ireland to Imperial expenditure being thus ascertained, the more difficult part of the problem remained, viz., how to provide the fund out of which the contribution would be payable and how to secure its payment. The plan which commended itself to him as insuring the fiscal unity of the three kingdoms, and giving absolute security to the British Exchequer, left the imposition and collection of Customs and Excise duties with the Imperial Government, and under Imperial control.

This plan was to be carried into effect in the following manner. The Customs and Excise were to be levied under Acts of the Imperial Parliament, and were not to be subject to the control of the Irish Legislature. The Irish Legislature with that exception could impose taxes on Ireland. Under the Land Purchase Bill, which was to be introduced concurrently with the Home Rule Bill, a Receiver-General was to be appointed, into whose hands the Customs and Excise Duties and other taxes were to be paid, including taxes imposed by the Irish Parliament. The Imperial Receiver-General, having thus in hand all Imperial and local taxes levied in Ireland, would in the first instance pay out of them the Imperial charges. Apart from the Imperial charges there were other charges, strictly Irish, such as Judges' salaries, pensions, the salaries of existing civil servants, for the security of which the Bill provided.

The Bill bound the Irish Parliament to impose taxes sufficient to meet such charges, and ordered them to be paid by the Receiver-General. The Receiver-General was to keep an Imperial and an Irish account. The Irish charges would of course be paid from the latter account. He was to carry the Customs and Excise Duties in the first instance to the Imperial account, and the local taxes to the Irish account, transferring to the Irish account the surplus of Custom and Excise, after payment of the Imperial contribution. He was subsequently to pay the balance remaining on the Irish account to the Irish Exchequer.

An Imperial Court of Exchequer was established in Ireland to watch over the observance of the Act, and all Revenue acts were to be tried and defaults punished in that Court. The Bill further enabled the Irish Parliament to take over the Irish Post Office, if it should so desire, though it was Mr. Gladstone's opinion that it would be for the convenience of both countries if the Post Office were to remain under the control of the Postmaster-General.

The Imperial contribution payable by Ireland was not to be increased for thirty years, though it might be reduced if the Imperial charge for Army, Navy and Imperial Civil expenditure for any year should be less than fifteen times the contribution paid by Ireland. In that case one-fifteenth of the diminution could be deducted from the Imperial contribution.

Existing Civil Servants were retained in their offices at existing salaries. If the Irish Government were to desire their retirement, they would be retired on pensions. On the other hand, if at the end of two years the officers themselves desired to retire, they could do so, receiving pensions on the usual abolition of office scale.

Supposing the Home Rule Bill to have become law the account of Irish finance would have stood thus:

RECEIPTS.

Imperial taxes: Customs 1,880,000 Excise 4,300,000 Total 6,180,000

Local taxes: Stamps 600,000 Income-tax 6d. 550,000 Total 1,150,000

Non-tax revenue: Post Office 1,020,000

Total: 8,350,000

EXPENDITURE.

Contributions to Imperial expenditure on basis of one-fifteenth of Imperial expenditure: Debt charges 1,466,000 Army and Navy 1,666,000 Civil charges 110,000 Total 3,242,000

Sinking Fund on one-fifteenth of capital of debt 360,000 Constabulary(101) 1,000,000 Local Irish Civil charges 2,510,000 Collection of revenue: Imperial taxes 170,000 Local taxes 60,000 Non-tax revenue 604,000 Total 834,000 Surplus 404,000 Total 8,350,000

When it is said that in 1885-1886 Ireland was paying to Imperial expenditure in the proportion of 2 to 23, that proportion was calculated on the whole gross Imperial expenditure, whereas Mr. Gladstone calculated the proportion of 2 to 28 on a military expenditure materially cut down, for he excluded from it charges which ought strictly to be called war charges, a modification very favourable to Ireland and reducing considerably her true contribution.

He made another concession of great importance. He proposed to credit Ireland with the entire receipts levied in Ireland, but that was not a true test of the amount of taxation paid by Ireland. There are goods which pay duty in Great Britain, but which are consumed in Ireland, so conversely there are goods which pay duty in Ireland but are consumed in Great Britain. For instance, spirits, porter, and tobacco are largely exported duty paid from Ireland and are consumed in Great Britain, and Mr.

Gladstone calculated that the excess of duties so paid in Ireland on goods consumed in Great Britain amounted to no less a sum than, 1,400,000 a year. That is of course British Revenue, and in striking a true account between the two countries it should be credited to Great Britain, not to Ireland. The Home Rule Bill, however, gave it to Ireland, a direct grant of 1,400,000(102) from Great Britain to Ireland, and if that amount be subtracted from the contribution of 2 to 28, it leaves the proportion 2 to 52 instead of 2 to 23.

If we strike a balance between the contributions to be paid by Ireland to Great Britain under the Home Rule Bill, and the grants to be paid to Ireland, we shall arrive at the following result:

Contribution from Ireland to Great Britain 3,602,000 Grants from Great Britain to Ireland: Duties paid in Ireland on goods consumed in Great Britain 1,400,000 Grant toward the Constabulary 500,000 Total: 1,900,000

Net contribution from Ireland to Imperial purposes (or nearly in the proportion of 2 to 60) 1,702,000

If the Imperial contribution _actually_ paid by Ireland in 1885 be equated on like principle, the proportion stated above at 2 to 23 will be similarly reduced.

The Bill was defeated in the House of Commons, and therefore its provisions did not undergo the test of scrutiny in Committee.

The provisions of this Bill ill.u.s.trate the difficulties which attend the financial severance of the Irish from the British Government. High authorities thought at the time that Mr. Gladstone, in 1886, should have proceeded in the first instance by way of Resolutions establis.h.i.+ng the principles upon which the Bill would be subsequently founded, and there is much to be said for that view. The main principles of the measure would have been established in the first instance after free and full discussion, and the details would have been adapted later to the principles then laid down. Mr. Gladstone himself, in his reply upon the Second Reading (June 7th, 1886,) indicated a course somewhat similar in its result. He said:

"If an interval is granted us, and the circ.u.mstances of the present session require the withdrawal of the Bill, and it is to be re-introduced with amendment at an early date in the autumn, it is our duty to amend the Bill with every real amendment and improvement, and with whatever is calculated to make it more effective and more acceptable for the attainment of its end."

It must be remembered that there had been no sufficient time for the collection of the data on which an effective measure could be founded, and the collection of those data was a task of great difficulty, for the Departments did not possess them. The Government came into power in February, and the Bill was introduced on April 6th; thus there was no real opportunity for testing the value of the data collected in that short interval, or for gauging beforehand objections both to the principles and details of the scheme adopted, and experience proved that some of the objections were valid, though probably not insurmountable.

The scheme was based on two principles which would be especially liable to criticism:

(1) For thirty years Ireland was to contribute to Imperial charges as they then existed a fixed annual sum.

(2) The Customs and Excise duties as _collected_ in Ireland (_i.e._, not the "true" revenue) were to be credited to the Irish Government.

The first of these principles would have been closely scrutinised in Committee, but probably in the main it could have held its ground. In the first place, it reduced considerably the Imperial contribution, consisting hitherto of the balance of revenue after payment of Irish charges. As Mr.

Gladstone pointed out, the amount of military expenditure, on which the proportion of 2 to 28 was calculated, was considerably reduced, and Great Britain had to pay the difference, and so far the change was favourable to Ireland. In the second place, Irish expenditure was increasing, and under the existing system the balance of Irish revenue, const.i.tuting the Irish Imperial contribution, was, as the sequel lamentably proved, diminis.h.i.+ng, and, a result not foreseen at the time, the wasteful and unsound finance which financial partners.h.i.+p entailed upon Ireland ere long extinguished it. The grant of autonomy was an effective check on this continued waste, otherwise the contribution of a fixed quota would soon have reduced the Irish Government to insolvency.