to drastic and costly measures to protect our reserves; but in time of war this neglect to provide a large stock of gold will have disastrous consequences for the entire commercial community.

The position of the State as banker is not one which the taxpayer can afford to view with any other feeling than one of dissatisfaction. The writer was astonished to read, in The Times report of the proceedings at the conversazione given by the City Corporation in the Guildhall, on the 3rd of November last, in celebration of the jubilee of the Post Office Savings Bank, that the Postmaster-General (Mr. Herbert Samuel) had stated in the course of his speech that one-fifth of the whole population were depositors, and the State stocking provided for the people now held 170 millions of sovereigns.' The writer asked the Postmaster-General whether he had been correctly reported in The Times, and received the following reply:

General Post Office, London, 13 November, 1911. DEAR SIR,-In reply to your letter of the 10th instant, Mr. Herbert Samuel desires me to say that the report in The Times of his speech at the Guildhall which you quote is correct. Of course the phrase '170 millions of sovereigns' was not intended to mean that the whole of the deposits were kept in gold, but as merely an amplification of an illustration used in an carlier part of Mr. Samuel's speech, where he spoke of the State having provided fifty years ago an alternative to the practice of hoarding money in the form of a State Stocking.' The audience fully understood the meaning of the phrase.-Yours faithfully, H. F. STAMBROOK.

Anyone who had perused the balance sheet of the Post Office Savings Bank, which appears on page 71 of the Fifty-sixth Report of the Postmaster-General, would have found it difficult. to imagine that the whole of the deposits were kept in gold.' The balance sheet referred to shows that the cash balance' held by the Bank at the 31st of December 1909 was 379,6461. Os. 11d. Can this be looked upon as an adequate gold reserve to meet liabilities of 164,699,000l., practically the whole of which amount is stated to be liable to withdrawal on fifteen days' notice? The balance sheet referred to has been drawn up in such a manner as to dispense with a disclosure of the exact financial position of the Post Office Savings Bank. So far as the depositors are concerned this is immaterial, because their deposits are guaranteed by the Consolidated Fund of the United Kingdom; but taxpayers would have an unpleasant surprise if they knew the extent of the deficit which they have to make good.

Notwithstanding the-to put it mildly-qualified success' of the State's banking enterprise, it has light-heartedly undertaken a still more costly and difficult business-namely, that of insurer. At the conversazione above referred to the Postmaster-General stated that every transaction in the Savings Bank cost 43d. If

a little boy put 1s. in the Bank, it cost the Post Office 43d. to accept it, and if he took it out the week after, it cost the Post Office 43d. to pay it back.' The significance of this statement need not be emphasised; and its gravity is not diminished when we reflect upon the probable cost of administration of the individual accounts of the 14 millions of persons who will ultimately come under the National Insurance Scheme.

We must consider now the position which England and Wales occupy in the matter of their contribution to Imperial services. In 1900 England and Wales provided the sum of 69,540,500l., or 87.05 per cent. of the total; Scotland contributed 8,660,0001., or 10.84 per cent. of the total; and Ireland 1,684,500l., or 2.11 per cent. The average contribution of each kingdom for the two years ended the 31st of March 1911 to the same services was as follows: England and Wales, 87,237,2501., or 90.33 per cent. of the total; Scotland, 9,334,750l., or 9.67 per cent. Ireland had a deficit of 1,018,250l., which, of course, had to be provided by her partners.

In order to determine whether England and Wales bear a fair share of the burden of Imperial taxation and Imperial services, it is necessary to consider their population, external trade, national wealth, and national income in relation to Scotland and Ireland, and to the United Kingdom as a whole. So far as the United Kingdom is concerned the comparative figures are furnished in the following table :

The average of the above percentages works out at 84.1 per cent. In a paper read before the Royal Statistical Society on the 19th of December 1911 the writer furnished data which showed that Scotland's taxable capacity might be estimated at 9.8 per cent. of the United Kingdom; and in this Review for October 1911, using practically identical data, the writer estimated that the taxable capacity of Ireland was 6.1 per cent. of the United Kingdom. Now for the two years ended the 31st of March 1911 the average

contribution of England and Wales to Imperial revenue was 138,113,7501., or 83.6 per cent. of the total; that of Scotland was 17,023,500l., or 10.3 per cent. of the aggregate, and Ireland 10,010,000l., or 6.1 per cent. It will be observed that the contribution of England and Wales was .5 per cent. less than the ratio of their taxable capacity; while that of Scotland was .5 per cent. higher than the ratio of her taxable capacity. Ireland's contribution was exactly in proportion to the amount of her taxable capacity. These figures show the remarkable approximation that exists between the amount of revenue raised in each Kingdom and their taxable capacities, and it may be safely affirmed that there is no form of Federal finance in the world. which can show a more equitable incidence of taxation, so far as the individual States are concerned, than does the fiscal system of the United Kingdom.

But when we turn to expenditure we find a very different state of affairs. Expenditure must always be considered in strict relation to income, and in the following table a statement is submitted which shows the actual local expenditure in each division of the United Kingdom and the amount of expenditure which should have been incurred in relation to taxable capacity and contribution to Imperial revenue :

The expenditure in England was therefore 7,841,2281. less than she was entitled to receive on the basis of her taxable capacity. The expenditure of Scotland was 881,9271. in excess of the amount to which she was entitled on the basis of her taxable capacity; but this was set off by the fact that her contribution to revenue was also slightly in excess of her taxable capacity. The expenditure in Ireland was 6,949,3021. more than the amount to which she was entitled on the basis of her taxable capacity and her contribution to the national revenue, and this is the real amount which Ireland is costing Great Britain annually. Even if Ireland's taxable capacity be estimated at only 5 per cent. of the United Kingdom, she is costing Great Britain at least 4,663,000l. per annum. This amount is arrived at by adding to the Irish deficit

the amount which she should have contributed to Imperial services, and which had to be provided by her partners.

The general tendency of Imperial finance within the past decade has been to place the burden of expenditure for Imperial services more and more upon the shoulders of the English and Welsh taxpayers. In 1900 England contributed 87.05 per cent. of the total Imperial expenditure; she now contributes 90.33 per cent. Scotland in 1900 contributed 10.84 per cent.; she now contributes only 9.67 per cent.; while Ireland's meagre contribution of 2.11 per cent. in 1900 has been transformed into a deficiency of 1.06 per cent. England and Wales are already contributing far more towards the cost of Imperial Services than they should be required to provide on the basis of taxable capacity, and any scheme of Federal Home Rule on the lines which have already been suggested for Scotland and Ireland would inevitably throw a still greater burden upon the English and Welsh taxpayers in respect of Imperial services, and at the same time raise difficult questions which would certainly lead to bitter controversy.

Clause 19 of the Government of Scotland Bill, which was brought in by Sir Henry Dalziel on the 16th of August last, provides that in every financial year a contribution shall be made by Scotland towards the maintenance of all Imperial establishments and the defraying of all Imperial charges. This contribution is in the first place to be the average, as near as may be, of the sums contributed by Scotland to the expenditure of the United Kingdom as a whole during the three financial years that immediately precede the coming into operation of the Act. On the basis of the past three financial years Scotland's contribution would work out at about 9,351,000l. per annum. But the Bill as drawn makes no provision for any immediate great increase of Imperial expenditure. If it became law, and the Imperial Parliament decided to undertake, say, a great shipbuilding programme, it must presumably go cap in hand to the Scots Parliament and say 'We know your quota towards Imperial services has been fixed at 9,300,000l. per annum, but we want you to increase it to 10,300,000l.' By what machinery is it suggested the Imperial Parliament could enforce such a claim if the Scots Parliament said 'No, we do not approve your scheme of naval expansion'? Federal Home Rule means the weakening of the authority of the central Government, and it would certainly involve the reconstruction of the whole fabric of national finance.

It may be seriously questioned whether the protagonists of Federal Home Rule have realised the far-reaching effect which the adoption of their proposals would have upon the national and local finances. Our present system may be open to objection; but, as stated above, it works out in practice with a marvellously

VOL. LXXI-No. 421

E E

The extravagance of the

accurate and therefore fair incidence. past decade is not the fault of the system; Parliament alone is responsible for that. The belief appears to be entertained that Federal Home Rule would prove a panacea for most of our difficulties of Government. Certain of the existing disadvantages might be overcome; but on the other hand we have only to look to the frequent and bitter disputes that have arisen between the Central Governments and the Federal States of Germany and AustriaHungary as well as our Overseas Dominions to perceive that Federal Home Rule would create new difficulties of a most acute and disturbing character. The expenditure in the three divisions of the United Kingdom under the existing system is disproportionate to their contributions to Imperial Revenue, but that is not the fault of the system, and England is the sufferer : moreover, the existing inequalities can, if necessary, be remedied by further legislation without destroying the whole fabric. The most fair-minded Englishmen, Scotchmen, and Welshmen may rest under the conviction that it would be almost impossible to devise a fiscal system which would work more equitably, so far as the division of the burden of taxation between the three Kingdoms is concerned, than that at present in operation. They may feel equally certain that under the existing arrangements Ireland is being treated with a generosity which is unparalleled in the history of Federal finance throughout the world; and if, in the interest of the United Kingdom as a whole, the British people should now withhold from the majority of Irish people the measure of Home Rule which Mr. Churchill has outlined, they will have the satisfaction of knowing that in so doing they are making certain that the wonderful economic improvement of Ireland within the past ten years shall continue without running the risk of the disturbance-if not disaster-which Home Rule would entail.

EDGAR CRAMMOND.