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Finance makes or mars Federations. Some Federations or organic Unions of independent States have come into being through a strong desire in the separate States to have, among other things, a common system of Customs, and in the case of the German Empire and the South African Union a Customs Union or Zollverein has preceded Federation. These phenomena are the most marked illustration of the general truth that a common desire to federate, or unite, on the part of individual States is a condition precedent to a sound Federation or Union. On the other hand, finance, especially the question of joint Customs, has sometimes presented obstacles to a Federation which, on other grounds, was earnestly desired. The long delay in achieving the Australian Federation was largely due to the desire of New South Wales to maintain her Free Trade system, while the financial arrangements generally caused most of the practical difficulties met with in arranging the Federation both of Canada and Australia, and in their subsequent domestic relations. Nova Scotia in the former case, and Western Australia in the latter, held out to the last instant, and the former subsequently had to receive exceptionally favourable treatment. In both Federations some measure of friction is chronic, and in neither has a perfectly satisfactory system been evolved. The Union of Ireland and Great Britain in 1800 was in this respect, as in all others, a flagrant departure from sound principle. The Customs Union which followed it was a forced Customs Union, and, together with the other financial arrangements between the two countries, has produced results incredibly absurd and mischievous. Some of these results I briefly indicated in Chapter V. In the following chapters I shall tell the whole story fully, and I hope to convince the reader that we should follow, not only historically, but morally and practically, the correct line of action if, in dissolving the Legislative Union, we dissolve the Customs Union also. That would involve a virtually independent system of finance for Ireland, and place her fiscally in the position of a self-governing Colony. If and when a real Federation of the United Kingdom becomes practical politics, she would then have the choice of entering it in the spirit and on the terms invariably associated with all true Federations or Unions. That is, she would voluntarily relinquish, in her own
interest, financial and other rights to a central Government solely concerned with central affairs.
I need scarcely point out in this connection the vital importance of the question of representation at Westminster. Ireland resembles the self-governing Colonies, and differs from Great Britain, in that the greater part of the revenue raised from her inhabitants is derived from Customs and Excisethat is, from the indirect taxation of commodities of common
If she is denied control of these sources of revenue under the coming Bill, it will be absolutely necessary, in spite of all the concomitant difficulties, to give her a representation at Westminster which is as effective as it can be made. But let it be realized that we could not make her control over her own finance as effective as that exercised by a small State within a Federation, because such a State, however small, has equal, or at any rate disproportionately large, representation in the Federal Upper Chamber, and Federal Upper Chambers can reject Money Bills. The Upper Chamber in Ireland's case would be the House of Lords, where she could scarcely be given effective representation, and which, in any case, cannot reject Money Bills.
Let us now examine Ireland's claim for fiscal autonomy.
I ASK the reader to follow with particular care the following historical summary of Anglo-Irish finance. None of it is irrelevant, I venture to say. It is not possible to construct a financial scheme, or to criticize it when framed, without a fairly accurate knowledge of the historical facts.
BEFORE THE UNION.* Before the Union Ireland had a fiscal system distinct from that of Great Britain, a separate Exchequer, a separate Debt, å separate system of taxation, a separate Budget. Yet she can never truly be said to have had financial independence, because she was never a truly self-governing country. Until 1779, when the Protestant Volunteers protested with arms in their hands against the annihilation of Irish industries in the interest of British merchants and growers, her external trade and, consequently, her internal production, were absolutely at the mercy of Great Britain. As I showed in Chapter I., Ireland was treated considerably worse than the most oppressed Colony, with permanently ruinous results. On the other hand, her internal taxation, never above a million a year, and her Debt, never above two millions in amount, were not heavy. But from 1779, through Grattan's Parliament to the Union, a short period of twenty-one years, Ireland, though still governed on the ascendancy system by an unrepresentative and corrupt Parliament of exactly the same
* The Treasury Returns of 1869, “Public Income and Expenditure," in two volumes, are the basis of all information up to that date.
composition as before, nevertheless had financial independence in the sense that her Parliament had complete control of Irish taxation, revenue, and trade. It was, moreover, in these financial matters that the Parliament showed most genuine national patriotism, together with a greatly enhanced measure of the Imperial patriotism traditional with it. Internal taxation, except in time of war, was still comparatively light ; depressed home industries were judiciously encouraged by bounties ; no attempt was made at vindictive retaliation upon British imports, though Irish exports to Great Britain were still unmercifully penalized ; and sums, growing to a relatively enormous size during the French War, which began in 1793, were annually voted for the Imperial forces. This voluntary contribution, which had averaged £585,000 in the eleven years of peace, from 1783 to 1793, rose to £3,401,760 in 1797,* and in 1799, when Ireland was paying the bill for British troops called in to suppress her own Rebellion, to £4,596,762, out of a total Irish expenditure for the year on all purposes, military and civil, of £6,854,804. Not more than half, on the average, of these war expenses were met out of the annual taxes. Debt was created to meet the balance ; but neither the debt, heavy as it was, nor the taxes, were intolerably burdensome--that is, if we regard Ireland as financially responsible for Imperial wars and for the suppression of a Rebellion which was provoked by scandalous misgovernment. Tax revenue from £1,106,504 in 1783, when the free Parliament first prepared a Budget, to £3,017,758 in 1800, and averaged a million and a half. In the same period the total amount of the funded and unfunded Irish Debt rose from £1,917,784 to
28,541,157, almost the whole of this increase having taken place in the seven years of war immediately preceding the Union.
In Great Britain both Debt and taxation had risen in a larger ratio, and were relatively far greater. For example, in the six years, 1793-1798 inclusive, £186,000,000 had been added to the British Debt, only £14,000,000 to the Irish Debt. In 1801 the British Debt stood at £489,127,057 ; the Irish Debt at £32,215,223.
* Mr. Secretary Pelham in this year estimated that Ireland, though contributing nothing in money to the Navy, had furnished no less than 38,000 men to the Navy since the beginning of the war,
II. FROM THE UNION TO THE FINANCIAL RELATIONS COMMISSION
The Union of 1800, therefore, could not be justified on the ground that a poor country would profit by fiscal amalgamation with a rich country, and Pitt and Castlereagh, when framing the Union Act, recognized that truth by leaving Ireland with a separate fiscal system, as before; though the administration of this system was, of course, now to be wholly in British hands. There were to be separate Exchequers, Debts,* taxes, and balance-sheets, with the following restrictions : That prohibitions against imports and bounties on exports (corn excepted), should cease reciprocally in both countries ; that, with the exception of 10 per cent. ad valorem duties on a variety of articles named, there should be mutual free trade; and that no tax on any article of consumption should be higher in Ireland than in Great Britain.
But although Pitt and Castlereagh ostensibly carried out the principle of separate fiscal systems, they laid the foundations for a fiscal amalgamation which was disastrous to Ireland. Since his Commercial Propositions of 1785, Pitt had never abandoned the idea of obtaining from Ireland an obligatory annual contribution to Imperial services based on some fixed principle. By Clause 7 of the Act of Union he achieved his aim. It was settled that for twenty years Ireland should contribute in the proportion of 1 to 74 (or 2 to 15)—that is, that Great Britain should pay 15, or 88. 24 per cent.,
of common Imperial expenses, including the charge for debt contracted for Imperial services, and Ireland it, or 11.76 per cent. Nobody now denies that this ratio was grossly unjust to Ireland. It took no account of the relative pre-Union Debts ; it took no account of the tribute of nearly four millions paid in rents to absentee English proprietors; it was based on superficial deductions from inadequate and misleading data, and the Act was hardly passed before its absurdity became manifest.
* Pre-Union Debts were to be separate. Post-Union Debt contracted for Imperial services was to be regarded as joint, and its charge was to be borne by the two countries in the proportions of their respective contributions (see below); but post-Union Debt contracted by Ireland for domestic services was to be kept separate.