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With regard to the first problem, it is, of course, easy, in the case of a Federation, to distinguish between central, or Federal, expenditure and local, or State, expenditure, because the functions of the Federal Government and State Governments are delimited in the Constitution, and the separate expenditures form the subject of separate balance-sheets. But in a Union, and above all in a Union to which one part of the realm is an unwilling party, like that of the British Isles, it is clear that no absolutely accurate line can be drawn between Imperial and local expenditure. The Army, the Navy, and a number of other things are clearly enough Imperial, but there are many debatable items. For example, Is the upkeep of the LordLieutenant an Irish or an Imperial charge ? Is a loss on Post Office business in Ireland to be charged against Ireland, or should Ireland be credited with a proportion of the profits of the whole postal business of the United Kingdom ? More searching questions still : Is the enormous charge for the Irish Police, which is under Imperial control, and exists avowedly for the purpose of forcibly maintaining, in the Imperial interest, an unpopular form of government in Ireland, to be charged against Ireland ? Or, again, should Ireland be debited with the cost of the machinery for carrying out Land Purchase, a policy admittedly rendered necessary by the enforced maintenance in the past of bad land laws ? Obviously such questions can never be answered so as to satisfy both Irishmen and Englishmen, because they go to the root of the political relations between Ireland and Great Britain. The Royal Commission, therefore, was naturally unable to give a unanimous answer to the last clause of Question No. 3 of their Terms of Reference—namely, “What is the Imperial expenditure to which Ireland should equitably contribute ?” Some members held that under the Union even a theoretical classification was unjustifiable, while it was obvious that under the Union no effect could be given to it. Still, the classification had to be made, in order to arrive at a theoretical estimate of the financial situations of Great Britain and Ireland respectively, and the Treasury, charged with the preparation of this estimate, took the only course open to it in reckoning as Irish expenditure all expenditure which would not have to be incurred if Ireland did not exist. It was the perfectly correct course for the

Treasury to take in dealing with the task set before them, and, as we shall see, it provides the only basis on which to construct the balance-sheet of a financially independent Ireland.

The insolubility of the second problem-that of discovering the "true” revenue of Ireland and Great Britain respectively -arises from the difficulty of tracing the passage of dutiable articles from one part of the kingdom to the other, and of tracing the incidence of direct imposts such as income-tax and stamps. The great bulk of Irish revenue is derived from indirect taxes on commodities, liquor, tobacco, tea, sugar, etc. Since the consumer pays the tax, revenue is rightly credited to the country of consumption. The tax, for example, on tobacco manufactured in Ireland may be collected in Ireland, but the revenue from Irish-made tobacco exported to and consumed in Great Britain is rightly credited to Great Britain. The converse holds true. Half the tea consumed in Ireland has paid duty in London, but the whole of the revenue from tea consumed in Ireland must be credited to Ireland. Now, since 1826, no official records had been kept by the Customshouses of the transit of goods between Ireland and England, except in the solitary case of spirits. The data, therefore, did not exist, and do not exist now, except in the case of spirits, for an accurate computation. This is frankly confessed by the Treasury officials. They base their published figures on certain arbitrary methods of calculation which have never been submitted to any public inquiry, and which, as they admit, contain an element of guesswork. The matter is an exceedingly important one to Ireland, because ever since 1870 an increasingly heavy deduction has been made by the Treasury from her collected revenue, and her true revenue has proportionately diminished. Part of this deduction is no doubt due to the fact that her exports of tobacco and liquor have, in recent times, much exceeded her imports, but the margin for error is nevertheless large. Mr. Gladstone, in framing his Home Rule Bill of 1886, was so sensible of the inherent difficulties of the calculation that, while retaining Customs and Excise under Imperial control, he credited to the Irish Exchequer the whole of the revenue collected within Ireland. On the balance of Anglo-Irish exchange in dutiable

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articles, as roughly estimated at that time, this provision meant an annual allowance to Ireland of nearly a million and a half pounds, the principal reason being that Ireland, which is a larger manufacturer of spirits and tobacco, was exporting more than she consumed of these commodities. In the Bill of 1893, as part of a wholly different financial scheme, Mr. Gladstone abandoned the plan just described, and provided for the annual calculation of “true" Irish revenue, as distinguished from “collected ” revenue ; but it is a proof of the obscurity and intricacy of the whole business that the Treasury officials made a mistake of £400,000 in the initial calculation, with the result that Mr. Gladstone had to recast his financial scheme from top to bottom.

In the Return of 1894, as presented to the Royal Commission, this error was eliminated, but the method of calculation remained imperfect. Nobody knows now what the true figures are, and there is good reason to think that Irish revenue has always been, and still is, substantially underestimated.

The same obscurity shrouded, and still shrouds, the "true" Irish revenue from income-tax and stamps, whose proceeds it is exceedingly difficult to trace under a system of unitary finance, and which are traced by the Treasury in a fashion again admittedly unreliable.*

In regard to taxes on consumption the same difficulty has been met with in Australia since the federation of the Colonies and the delegation to the Commonwealth Government of exclusive control over Customs and Excise. The product of these duties makes up the bulk of Australian revenue, and is far too large for the needs of the Commonwealth Government. The Constitution of 1900 provided that the surplus should be returned to the individual States in proportion to their “ true” contributions to the revenue, and for the calculation of these “true” contributions an elaborate system of book-keeping was instituted, in order to trace the ultimate place of consumption of dutiable articles. Each State was then credited with its true revenue, and debited, among other things, with a proportionate share of the expense of any Department transferred by the Constitution from the State to the Common

* Detailed criticism of the current Treasury accounts under this head will be found on pp. 276-278.

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wealth. The system caused general dissatisfaction, owing, as the Australian Official Year Book puts it, “to the practical impossibility of ensuring that in every case a consuming State will be duly credited with revenue collected on its behalf in a distributing State.” That is the well-founded complaint of Ireland in regard to the Treasury returns. Hitherto in Australia efforts to change the system for another allocating the surplus on a basis of population have not been successful.* The Canadian Federal Constitution uses the basis of population for the distribution of small subsidies to the Provinces, but complaints have arisen as to its fairness. British Columbia, for example, for a long time complained that her subsidy was too small, one of the grounds being that her consumption of dutiable goods was unusually large. No means existed of verifying this complaint by figures.f

With this explanatory digression about a very important feature of Anglo-Irish finance, I return to the findings of the Royal Commission of 1894-1896. The figures supplied to them were as shown on the opposite page.

It will be noticed that the average “true "revenue of Ireland was stationary at a little over five millions from 1820 to 1850, rose with a bound to seven and a half millions with the equalization of taxes in the decade 1850-1860, and remained stationary

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* A referendum taken on April 13, 1910, defeated the new proposals. See · Report of Premiers' Conference held at Brisbane, May, 1907" (Commonwealth Parliamentary Sessional Paper, No. 13, 1907), and for a clear statement of the whole subject, the “Year-Book (1911) of the Commonwealth of Australia. (The relevant clauses of the Constitutional Act are Nos. 88 to 93.) The reasons for the failure of the system were summarized as follows:

“1. The trouble and expense which the necessary record entails.

2. The practical impossibility of ensuring that in every case a consuming State will be duly credited with revenue collected on its behalf in a distributing State.

"3. The difficulty involved in equitably determining the amount to be debited to the several States in respect of general Commonwealth expenses.

4. The uncertainty on the part of the State Governments as to the amount which will become available.

"5. The impossibility of securing independent State and Commonwealth finance.”

See also pp. 295-299.

† See Proceedings of the Conference of Provincial Premiers, 1906, at Ottawa (Canadian Sessional Papers, vol. xl.), especially McBride's Memorandum for British Columbia. Numerous other grounds for special treatment were alleged-e.g., abnormal cost of civil government, due to vast extent of Province.

at that figure for the remaining thirty-four years. Expenditure in Ireland quadrupled in the whole sixty-four years ; and the net contribution to Imperial services, after rising from three and a half millions (in round numbers) in 1820 to five and a half millions in 1860, fell automatically, as the expenditure rose, and had stood at two millions from 1890 afterwards. Population had fallen by two millions, but the "true” revenue raised per head of population rose from 158. 5d. in 1819 to £1 13s. 5d. in 1894, while the local expenditure rose from 48. 7d. per head in 1820 to £1 5s. in 1894.

STATEMENT SHOWING THE ESTIMATED LOCAL EXPENDITURE INCURRED IN

IRELAND, AND THE BALANCE OF TRUE REVENUE WHICH IS AVAILABLE
FOR IMPERIAL SERVICES AFTER SUCH EXPENDITURE HAS BEEN MET :

Revenue as Adjustment
collected (+) or -).

Estimated

True
Revenue.

Estimated

Local
Expendi-

ture.

Balance available

for Imperial Services.

Popula. tion:

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£
£

£
5,253,909 + 2,655 5,256,564 1,564,880 3,691,684 6,801,000
4,461,217 + 1,040,908 5,502,125 1,345,549 4,156,576 7,767,401
4,574,150 + 841,739 5,415,889 1,789,567 3,626,322 8,175,124
4,338,091 + 523,374 4,861, 465 2,247,687 2,613,778 6,574,278
7,097,994 + 602,430 7,700,334 2,304,334 5,396,000 5,798,967
7,331,058 + 95,2747,426,332 2,938,122 | 4,488,210 5,412,377
7,831,316 550,520 7,280,856 4,054,549 3,226,307 5,174,836
9,005,932 1,271,254 7,734,678 5,057,708 2,676,970 4,704,750

Annual figures.

1890-91 1891-92 1892-93 1893-94

9,301,463
9,639,331
9,425,177
9,650,649

1,506,988 7,794,475 5,723,399 2,071,076
1,671,226 7,968,105 6,021,810 1,946,295
1,986,780 7,438,397 5,540,508 1,897,889
2,082,000 7,568,649 5,602,555 1,966,094 4,638,000

(estimated)

In 1893-94, the last year under review, Ireland, in round figures, was producing a net revenue of seven and a half millions, was costing five and a half millions, and was, therefore, contributing to Imperial services a surplus of two millions. In the same year, while contributing her two millions, she was overtaxed, according to the lowest estimate of the Commissioners, by two and three-quarter millions.

But the significance of these figures cannot be discerned without an examination of their counterparts on the British side of the account. In the whole period Great Britain's “true” revenue had risen from £51,445,764 to £89,286,978; her local expenditure from £4,439,333 to £30,618,586, and her net contribution to Imperial services from £47,006,431 to

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