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The New Review.

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No. 62.-JULY, 1894.

THE BUDGET OF 1894.

HATEVER differences of opinion there may be as to the Budget of 1894, everyone will agree that it effects a revolution in our system of finance, and for good or evil will radically change the circumstances of our social life, especially in country districts.

To discuss the various questions it raises would require a volume, and within the limits of an article I can only touch on the more important changes, though there are many other points in the Budget on which, if space permitted, I should have been glad to say something. For instance, Sir W. Harcourt trenches on the Sinking Fund to the extent of £2,123,000. I cannot characterise this proposal better than in his own words in his Budget speech. "To take such a course," he said, "in time of peace in order to meet expenditure which we regard as indispensable, not exceptionally, but as a part of the regular demands for the defence of the country, would be a fatal and cowardly error, unworthy of a great nation. I pray the committee to consider the vital consequences, alike in peace and in war, of this great, perhaps the greatest of all national reserves—a reserve not less valuable, even more valuable than the Naval and Military Reserves. In peace time our financial credit depends upon the confidence which is felt that the nation is ready and willing to make all the sacrifices necessary to meet its needs and obligations, that its policy is not to increase, but to diminish the Public Debt. In times of war this fund becomes a priceless resource -a resource not less powerful than ships, or guns, or men. You could not do a more unwise or spendthrift act than to dissipate. in peace this great reserve. war chest.' Let nothing

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It is your

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induce you to shirk this primary obligation. demands to meet present needs. We have no right to shuffle them off our own shoulders and foist them on our successors."

That is sound doctrine admirably stated. Only, unfortunately, he took the very course he denounced. It is a magnificent example of

Video meliora proboque, deteriora sequor.

Again, it has been hitherto held as a cardinal principle that any provisions dealing with the National Debt should always be presented to the House in a separate Bill. Mr. Gladstone has made many changes in the constitution of the Debt, and the arrangements as regards the Sinking Fund, but he invariably presented them to the House of Commons in a separate Bill, so that there might be a proper opportunity for discussion. The only precedent for 200 years has been that of Pitt in 1787. It was denounced by Charles James Fox as inconsistent with Liberal principles, and it was felt that there was so much force in Fox's arguments that the mistake has never been repeated till this year. I moved to divide these clauses from the rest of the Bill, and Sir W. Harcourt asserted that I did so in order to give the House of Lords. an opportunity of discussing and rejecting the Bill. My object, however, was that which led Fox to resist a similar proposal, namely, that the House of Commons should have a proper opportunity of discussing it; and if I wished to attribute motives to the Chancellor of the Exchequer, I should say that, in my judgment, this was just what he desired to prevent.

EQUALISATION OF THE DEATH DUTIES ON REAL AND PERSONAL

PROPERTY.

Passing from these important though minor considerations, the main feature of the Budget is the mode in which it deals with the Death Duties, namely, the great increase, the equalisation of the duties on Real and Personal Property, the Graduation of Taxation, and the Taxation of Capital as opposed to Income.

There is no doubt that Real property i.c., land and houses, are, as regards the Death Duties, treated more leniently than Personal property, i.e., stocks, shares, &c., and that all classes of property ought to contribute fairly towards the expenditure of the country. But the reason for the difference has been that the burden of rates falls entirely on real property, and as rates amount to £29,000,000, while the death duties only bring in £11,000,000, of which, moreover, real property

bears a part, it seems clear that personal property has very much the best of the bargain. If the death duties are to be equalised, rates ought also to be equalised; but Sir W. Harcourt, while making the change as regards death duties, leaves untouched the still greater inequality in the case of rates.

INCREASE OF THE DEATH DUTIES.

The Chancellor of the Exchequer justifies the great increase in the death duties as follows. He says:-"The governing principle is this. Upon the devolution of property of all descriptions the State takes its share first-before any of the successors in title or beneficiaries. The reason on which this is founded is plain. The title of the State to a share in the accumulated property of the deceased is an anterior title to that of the interest to be taken by those who are to share it. The State has the first title upon the estate, and those who take afterwards have a subsequent and subordinate title. Nature gives a man no power over his earthly goods beyond the term of his life. What power he possesses to prolong his will after his death-the right of a dead hand to dispose of property-is a pure creation of the law." In a subsequent speech he based the right of the State on the precedent of feudal times. Surely that was a curious authority for a Liberal Chancellor of the Exchequer. It could hardly be regarded as a satisfactory precedent by supporters of the Government. It is, no doubt, true that wills are of comparatively recent origin. They did not, however, involve any increase of the rights of the children at the expense of the State, but they did increase the rights of the dead to modify previous custom with a view of securing a fair division. The Greeks had no wills until the Peloponnesian War; the Primitive Romans had no wills. The Teutonic races had no wills in the time of Tacitus. The Polynesians had no wills, but the child succeeded as soon as it was born, which was not found to be conducive to infant life. Among the Hindoos, the first will is said to have been that of Omichund, in 1756. I am not sure that archaic customs and rights have much bearing on the question; but when the proposals of Government are justified by general statements as to ancient laws and customs, it seems well to point out that they have no sanction from any such venerable authority. The right of the heir is far older than the power of willing. The claims of the State were the creation

of law; the rights of the children were primeval, and preceded the very idea of a State.

At the same time, the right of the State to impose death duties is unquestionable, but they are taxes on Capital, and ought therefore to be kept within moderate limits.

GRADUATION.

The Chancellor of the Exchequer imposes a new tax-the Estate Duty, charged on the whole property which passes on the death of any person, and to be levied, not, on the principle hitherto followed, according to the amount, but on a graduated scale. It seems to be assumed that in this manner the rich will pay more in proportion, according to their wealth. One or two illustrations will suffice to show that this is not so. One man has £51,000 and an only son, who inherits the whole; another man has £101,000 and one son, to whom he bequeaths £51,000, leaving the rest to charities; a third has £510,000 and ten sons, who share it equally. Now, in all these cases, each son would, but for the tax, inherit £51,000, and yet they will have to pay very different rates of duty, because, in the second and third cases, they form part of a group of persons interested in the same property. You might as logically make the holder of Bank Stock pay more than a share in a smaller bank, or a Yorkshireman more than an owner of a similar property in Rutland because Yorkshire is a larger county.

It might reasonably have been expected that the Chancellor of the Exchequer would have elaborately defended this fundamental change in our system. He did not, however, argue the question at all, merely saying that in his opinion it was a "most equitable and politic principle" that an estate of £100,000 should pay not only more to the death duties, but also on a higher scale than one of £10,000, but he did not think it necessary to discuss the question, because, he said, every political writer of authority was in favour of it. If that had been the case, perhaps any argument might have been unnecessary. On the contrary, however, the very reverse is the case. There is no single authority on Political Economy who has supported the course proposed by the Government.

For instance, I will quote two authorities who were not only economists but statesmen. M. Thiers, in his work on Property, lays it down as a self-evident axiom that every member of a State should

contribute to the revenue of the country in proportion to what he earns or to what he possesses-" proportionellement à ce qu'il gagne ou à ce qu'il posséde." He goes on to discuss graduated taxation, and points out the objections and difficulties-that if you once begin you have no logical limit; that it is as if a merchant or shopkeeper had different prices, and asked the income of a customer before naming the price of his wares; that you are on an inclined plane, and, once started, cannot stop yourself. Having shown that the principle is unwise, he concludes by giving his opinion that it is " un vrai pillage." In proportional taxation, he says, you have a principle; graduated taxation is an odious injustice, a "revolting exercise of arbitrary power." The second authority I will cite is that of a great economist and a true Radical-the late Professor Fawcett.

The Chancellor of the Exchequer has correctly said that the effect of the graduated succession duty is, in some respects, equivalent to a graduated income tax. Now, Professor Fawcett, in his excellent "Manual of Political Economy," says:

"The proposal to make the rate of the income tax progressively increase with the amount of the income would almost indefinitely strengthen the objection that the tax operates as a discouragement to prudence. It would be sanctioning the principle that the proportion which the State should take from a man's income should increase in the direct ratio of the amount he might save."

The tax as proposed by the Government is avowedly a tax on Capital, and Professor Fawcett goes on to point out that :

"It consequently follows that, if any portion of the Income Tax is paid out of Capital which would otherwise be employed within the country itself, the incidence of the tax falls partly on the labourers, although the tax may never be directly levied from them,' and he then proceeds to show how this will be the effect. He continues, "There is no doubt weight in the argument that the income tax presses with unequal force upon the owners of comparatively small incomes, because the tax often involves some real sacrifice to them, whereas, with regard to the very wealthy, it in no way diminishes their means of enjoyment. It is, however, important to remember that the proposal to graduate the income tax seems to sanction the principle that it is desirable to impose a penalty upon the accumulation of wealth. Any such scheme which is aimed against large capitals probably obtains popular support, because it seems to favour the