CHAPTER XII THE PRESENT FINANCIAL SITUATION I. ANGLO-IRISH FINANCE TO-DAY. THE finances of Ireland since the Union, when reviewed by the Royal Commission in 1894-1896, exhibited five principal features: 1. A declining population. 2. An estimated true taxable capacity falling as compared with that of Great Britain, and standing in 1893-94 at a maximum of 1 to 19. 3. A revenue stationary for thirty-four years, and showing in 1893-94 a ratio of 1 to 12 with that of Great Britain. 4. A growing local expenditure (though stationary for the last four years). 5. A dwindling net contribution to Imperial services (though stationary for the last four years). · If we review the subsequent seventeen years, we find : 1. A population still declining, though at a slower rate. 2. An estimated true taxable capacity still falling as compared with that of Great Britain, and now standing at a maximum of 1 to 24.* That is, Ireland ought strictly to be paying no more than one-twenty-fifth of the United Kingdom revenue. 3. A revenue rising, but very slowly and inelastically as compared with that of Great Britain, and now showing a ratio of 1 to 15; so that the "over-taxation" of Ireland, as reckoned * I.e., on the generally accepted basis of (1) assessment to death duties, (2) assessment to income-tax. With regard to (1), in the last report of the Inland Revenue Commissioners, the figure for the United Kingdom was £371,808,534; for Ireland, £15,872,302, or 4. With regard to (2), the figure for the United Kingdom was 1009 9 millions; for Ireland, 39.7 millions, or Deduct a small allowance for the difference between resources and taxable capacity, and the result approximately is one-twenty-fifth. 2 on the Royal Commission's principles, is still at least three millions.* 4. A local expenditure growing rapidly and disproportionately to Irish revenue; now just double the expenditure of 1893-94. 5. A net contribution to Imperial services automatically diminishing with the growth of Irish expenditure, disappearing altogether in 1909-10, and now converted into an adverse balance against Ireland of £1,312,500. In Great Britain during the same seventeen years, population, taxable capacity, revenue, expenditure, and net contribution to Imperial services have all grown steadily, and, what is more important, in healthy proportions to one another. On the next page will be found the comparative figures for Ireland and Great Britain of revenue, expenditure, and contribution for 1893-94 and 1910-11. Let me remark at the outset (a) that they and other official figures given in this chapter are taken from the annual Treasury returns alluded to at p. 242, "Revenue and Expenditure (England, Scotland, and Ireland)" and "Imperial Revenue (Collection and Expenditure) (Great Britain and Ireland)." For the current year 1910-11 the official numbers of these Returns are 220 and 221, and the latter of the two is virtually a continuation of the original return, No. 313 of 1894; (b) that the non-collection of a large part of the revenue of 1909-10, owing to the delay in passing the Budget, makes the revenue figures of the last two years, regarded in isolation, misleading, those of the first year being abnormally low, those of the last abnormally high. I therefore give the mean figures of the two years. Expenditure is, of course, unaffected. (c) That * Total revenue (including non-tax revenue) of United ... Actual "true" revenue contributed by Ireland (mean "Over-taxation" ... £6,605,900 £10,032,000 £3,426,100 If only the tax-revenue be taken, the over-taxation amounts to £3,109,800 (total revenue for United Kingdom, £140,680,000; one-twenty-fifth£5,627,200; actual Irish revenue, £8,737,000). Some members of the Royal Commission made certain allowances for education grants, etc., which it would be useless to parallel now. the Irish revenue shown as "true" is reduced by heavy deductions from the revenue as actually collected in Ireland. At p. 244 I explained that this adjustment can be regarded only as approximately correct, owing to the admittedly unreliable methods adopted by the Treasury. (d) That the revenue shown includes non-tax as well as tax revenue. Irish expenditure has been rapidly overtaking Irish revenue during the last three years. In 1907-08 there was a balance available for Imperial services of £1,811,000; in 1908-09, of only £583,000; and in 1910-11, on the basis of a mean of that and the previous year, the deficit shown above of £1,312,500. The principal cause is the Old Age Pensions Vote, which began in 1908. If all the elements of the problem be considered together, it will be seen that the fiscal partnership is as ill-matched as ever, and has produced results increasingly anomalous. Each of the partners and their united interests suffer. Ireland is still more heavily taxed relatively to Great Britain, yet Ireland's contribution to Imperial services has been converted into a minus quantity. Why? Because Irish expenditure, paid out of the common purse, has doubled, while Irish revenue has increased by less than a third. Let me give the final survey of Anglo-Irish finance since the Union, in the tabular form shown by Professor Oldham at the meeting of the British Association in September, 1911: Net Balances paid by Ireland to Great Britain, 1809-1911 329,780,970 What has become of Sir David Barbour's argument in favour of the existing fiscal system? He admitted that Ireland was overtaxed by two millions and three-quarters. But he showed, it will be remembered, that if not only the revenue, but the expenditure and contribution to Imperial services had all been in proportion to Ireland's real taxable capacity of one-twentieth, she would have been a loser by a million.* Ireland, therefore, he argued, had certainly no grievance, while Great Britain received the substantial, though not strictly sufficient, sum of two millions as Ireland's contribution to Imperial expenses. Let us apply the same reasoning to the present situation. * See pp. 248-249. Ireland, by hypothesis, is "overtaxed " by three millions,* but if not only the revenue, but the expenditure and contribution to Imperial services of Ireland were all in proportion to her real taxable capacity, which we may estimate now at onetwenty-fifth, we find that she would be a loser by five millions. Her" true revenue from all sources ought on this supposi tion to be £6,605,900; it is £10,032,000. Her local expenditure ought to be £2,875,540; it is £11,344,500. Her contribution to Imperial services ought to be £3,730,360; it is a minus quantity of £1,312,500. Sir David Barbour's reasoning, then, leads us to this astounding paradox, that Ireland, while overtaxed by three millions, gains five millions by the arrangement. Moreover, whether we accept Sir David Barbour's reasoning or not, it is a fact that to-day Ireland, which contributed to Imperial services five and a half millions in 1860, and two millions in 1894, now, so far from contributing anything, costs a million and a quarter more than she brings in. This, certainly, was not a result he either anticipated or would have approved of. On the contrary, he anticipated a reduction in Irish civil expenditure, to be saved for Irish purposes, without prejudice to the Imperial contribution. It makes the brain dizzy to compare his anticipation with the reality. How, on the other hand, stands the argument of Lord Farrer and Mr. Currie? They prophesied a great increase in Irish expenditure and the disappearance of the contribution to Imperial services. That has come true. Lord Welby (and indeed the majority of the Commission) was with them in declining to regard excessive local expenditure as a set-off to excessive and unsuitable taxation, and in condemning root and branch the system of grants, aids, and doles as wasteful in itself and as sapping the self-reliance of Irishmen. There again they were right. They were at one with all their colleagues in holding that under the Union it was impossible to differentiate between the taxation of Ireland and Great Britain, and they prescribed, as the only sound remedy, Home Rule. Once more they were right. The figures of to-day constitute the reductio ad absurdum of the Union. For over a century in Ireland we have defied the laws of political economy, but they have conquered us * See p. 259, footnote. |