Front Page Titles (by Subject) I.—: THE RELATION OF FOREIGN AND COLONIAL POLICY TO FISCAL REFORM - Free Trade and Other Fundamental Doctrines of the Manchester School
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I.—: THE RELATION OF FOREIGN AND COLONIAL POLICY TO FISCAL REFORM - Francis W. Hirst, Free Trade and Other Fundamental Doctrines of the Manchester School 
Free Trade and Other Fundamental Doctrines of the Manchester School, set forth in Selections from the Speeches and Writings of its Founders and Followers, ed. with an Introduction by Francis W. Hirst (London: Harper and Brothers, 1903).
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THE RELATION OF FOREIGN AND COLONIAL POLICY TO FISCAL REFORM
The following letter was written by Cobden to Robertson Gladstone (W. E. Gladstone's younger brother), who was then doing admirable work as president of the Financial Reform Association. The letter is dated London, 103, Westbourne Terrace, 18th December, 1848. Within a little more than a generation the whole of Cobden's ‘National Budget’ was adopted.
Dear Sir,—I gathered from the conversation I had with you and the members of the Financial Reform Association in Liverpool, that you have two objects in view. First, the substitution of direct for indirect taxation; and secondly, a diminution of the present amount of Government expenditure. I ventured to offer an opinion, which I now beg to repeat, that it would be far easier to effect a reduction of expenditureSuggestions for a national budget.to the extent of £10,000,000 and apply the whole of that sum to the removal of Excise and Customs duties, than to transfer the same amount from indirect to direct taxation. Excepting in Liverpool and a few of our largest trading towns, there is not, at present, a very great force of public opinion in favour of direct taxation. It has yet to be created and organized. But there is a very general sympathy felt in the proceedings of your body, founded upon a strong desire to have the burthens of taxation lightened; and there is some expectation that you will put forth a plan for effecting that object. My reason for now troubling you is, to suggest whether it might not be advisable to publish a national budget, exhibiting on one side a considerable reduction in the expenditure, and on the other the several Excise and Customs duties which you propose, in the first place, to abolish. I do not mean by this, a perfect financial scheme, such as may be contemplated as the ulterior object of your Association, but a plan which, whilst it went in the direction of your principle of direct taxation, and relieved the mass of consumers from a heavy tax upon their necessaries and comforts, should commit those politicians of all shades who now join in the vague cry for ‘economy and retrenchment’ to some practical measure worth contending for.
I suggest that you take for the basis of your budget the expenditure of 1835. The whole cost of the Government in that year, including interest of debt, was £44,422,000. For the twelve months ending the 5th April last, it amounted to £55,175,000, being an increase of £10,753,000. The interest of the debt was less by £87,000 in the latter than the former year, making the comparison so much the more unfavourable to 1848. The estimated expenditure for the current year ending the 5th April, 1849 (see Lord John Russell's speech 18th February last), is £54,596,000; so that we may take the increase to be, in round numbers, £10,000,000 since 1835. Do you see any good reasons why we should not return to the expenditure of that year? Englishmen love precedents; and they are not easily persuaded that anything is Utopian or impracticable which has been accomplished within the last thirteen years; and this is one reason, though I will find you a better, why you should base your budget upon that of 1835. If we go back a little further, to the time when this nation was still under the rule of the boroughmongers, we shall find a startling argument in favour of this plan. In 1830, the last year of the Wellington-Peel administration, the expenditure for all purposes exclusive of the interest of the debt, was £18,024,000; for the twelve months ending the 5th April of the present year, it amounted to £26,747,000. The Tory Government was overturned the following year, upon the motion of Sir Henry Parnell, in favour of economy, and the House was soon after reformed, merely on the plea of its profligate waste of the people's money; and yet we have now an increase to the expenditure of £8,723,000, or nearly 50 per cent. as the fruits of the Reform Act. We are now actually expending more upon the Army, Navy, and Ordnance alone than was sufficient for the maintenance of the whole civil and military establishments under the Duke of Wellington's Government! When these facts shall be generally known, the country will, I think, be in the humour for responding to your appeal, if you inscribe as the motto upon your banner, ‘The Expenditure of 1835;’ which will be a reduction of £10,000,000 from this year's budget.
I would not advise you to complicate your plan by proposing any new imposts to rouse the antagonism of interested parties, or any modifications or substitutions of existing taxes, to destroy that simplicity of object which, above all things, is necessary to the success of a public agitation. But there is one tax from which the dominant class in this country has exempted itself for half a century, which exemption it would be disgraceful to the character of the British people any longer to tolerate—I mean the probate and legacy duty. In the last year upwards of two millions was paid into the exchequer by the heirs to personal property, consisting mainly of the hard-earned accumulations of our merchants, manufacturers, professional men, traders, and mechanics; whilst the ducal domain, or the estate of the great landed proprietor, passed untaxed from the dead to the living. This year will be memorable for having witnessed the destruction of the last remaining powers of feudalism in all the countries of the Continent, excepting Russia. But I know of no privilege which the nobles of Prussia, Gallicia, or Hungary have been compelled to surrender, as a tribute to the enlightenment of this age, more unjust in principle than that which is conferred upon our landed proprietors in the statute passed by themselves, imposing duties exclusively upon the inheritance of personal property. Let us not boast of English freedom, or of equality before the law, whilst this injustice remains. In what form could aristocratic privilege assume a more offensive and costly aspect than in that of a bold and palpable exemption from taxation? I do not think that great resistance will be offered to the equitable adjustment of this tax, provided the people speak out as becomes them. No living proprietor will be affected by the change; and the landowners are as conscious as you or I that these are not times for transmitting such a class privilege to posterity. I assume that the probate and legacy duty upon real estate, entailed and unentailed, will yield, at a moderate estimate, £1,500,000. By the above plan you would have a disposable surplus revenue of £11,500,000—viz. ten millions from the reduction of expenditure, and a million and a half from the increased produce of the probate and legacy duty.
I will now trouble you with my views as to the disposal of that amount; premising that I have not felt quite free to choose in every instance those items of the Customs and Excise duties, which I should myself have preferred to abolish or reduce, but have been partly influenced by the desire to enlist the sympathy and support of every class and interest in the community, whose co-operation will be abundantly requisite to force the adoption of the plan upon the Government.
To begin with the Customs duties. The present duty of 2s. 2d. a pound upon tea, whether viewed as a tax upon the most harmless stimulant enjoyed by the people, or as an impediment to the operations of our merchants trading with China, is one of the most indefensible in the tariff. I would reduce the duty to 1s. a pound, or an ad-valorem duty yielding the same amount of revenue, by which, according to the estimate of the Chancellor of the Exchequer, in his speech on Mr. Cardwell's motion, there would be a loss for the first year of £2,000,000. The duty on timber and wood must be wholly abolished. This is a necessary consequence, if not an accompaniment of the repeal of the navigation laws. The amount is £945,000. (I have taken this and all the following items from the finance accounts for the year ending January 5th, 1848, deducting the expense of collection.) I propose, also, to take the duty off butter, cheese, and upwards of one hundred items of the Customs duties, yielding altogether £516,000; and leaving only about twenty articles in the tariff paying duty.
These three sums amount to £3,461,000.
Next, with reference to the Excise. It may be laid down as a rule, that whenever you touch an Excise duty at all, it should be totally abolished; because the great objection to such taxes—the interference of the exciseman with the process of production—applies equally whether the duty be great or small. This should be borne in mind if you deal with the malt tax; and you must deal with it, if you would enlist the sympathy of the county constituencies in your movement. To a man, the farmers are in favour of the repeal of the malt tax; and this not merely because it would add to the contentment of the peasantry, by cheapening a beverageExcisewhich they universally consume, and also relieve their employers from a heavy tax upon the beer which they give to their labourers at certain seasons, but the best agriculturists loudly protest against the duty, on the plea that it denies them the free application of their capital to the fattening of cattle upon malt, and thus prevents the profitable growth of barley upon stiff clay lands. Upon this subject Mr. Lattimore, speaking for an influential deputation of landlords and farmers, which had an interview with Lord John Russell in February last, said, ‘The malt tax disarranged the best modes of cultivation, enhanced the price of artificial food for stock and cattle, whereby the fertility of the soil was deteriorated, the demand for labour lessened, the supply of bread-corn and animal food considerably decreased, and the comforts of the people and the wealth of the country were also greatly impaired.’ Your ‘National Budget’ would, therefore, be undeserving the name if it did not include the total repeal of the malt tax, amounting to £4,260,000.
In Kent, Sussex, and two or three other counties, there is an active agitation against the hop duty. The expense of collecting this tax is alone sufficient to condemn it. Nothing could so well exemplify the wasteful and costly process of collecting revenue by means of excise duties as the spectacle exhibited, for a month or six weeks every autumn, of a little army of excisemen dispersing themselves over half a score of counties, to levy a tax in the fields and gardens of the hopplanters. I question if anything more barbarous could be met with in Turkey, or any uncivilized country, where political economy had never been heard of even by name. I propose, therefore, the abolition of the hop duty, amounting to £416,000. By including the malt and hop duties you will insure the co-operation of the farmers, who, now that free trade is the settled principle of our legislation, have a common interest with the inhabitants of the towns. The landlords, too (at least such of them as are not merely professional politicians), will henceforth be found in the front ranks of those who advocate economy and retrenchment in the national expenditure. Already they have begun to ask, and with good reason—Why should we not have cheap government as well as cheap corn?
Next is the article of soap. What a satire upon our sanitary acts, and all the pompous agitations in favour of baths and wash-houses, is this tax upon the necessary elements of cleanliness! Not a word need be said upon it. The duty, amounting to £850,000, must come off, if it be only to cleanse us from the stain of national hypocrisy. That which soap is to the skin, literature is to the healthy action of the mind, and yet we raise £720,000 a year from a heavy duty upon paper. By including this in your budget, you will promote the religious, moral, and intellectual advancement of the people, in a manner acceptable to all parties, whatever may be their views upon the subject of national education. The last two items will draw towards you the sympathies of the Scotch Excise Reformers.
These four sums amount to £6,246,000.c
Lastly, I come to taxes, properly so called. There is the window tax, which, although it does not, like the Excise duties, operate as a direct impediment to productive industry, is open to the fearful objection, that it ‘obstructs the light of heaven;’ and, in these brief words, we may read its inevitable doom. London, Bath, and other large cities are pressing the abolition of this tax annually upon the House, through Lord Duncan, and you must not think of excluding it from your ‘National Budget.’ It yields £1,610,000. My ‘way and means’ are so nearly exhausted, that I can only add the advertisement duty, amounting to £160,000.
These two sums amount to £1,770,000. The total loss of revenue by the reduction of the above duties and taxes is £11,477,000, or £23,000 less than the £11,500,000 of surplus which I propose to create, by the diminution of expenditure, and the equalization of the probate and legacy duty. I subjoin a summary of the foregoing, in a concise tabular form:—
I repeat that I do not propose this as a complete financial scheme. Many articles are omitted which I should not wish to be considered to have willingly excluded, or be thought to have overlooked. I have gone again and again through the dismal catalogue of our fiscal burdens, and if there be any item of the Customs or Excise duties which you are sorry to miss from the above table, be assured that the omission has caused me equal regret. Bricks ought especially to stand one of the first on the list for a prospective budget. Tobacco is a very strong case, but it involves so large an amount of revenue that I could not include it. The wine duties also call for a revision; not to name others. Then there are some duties and taxes, the modification of which does not necessarily involve a loss of revenue, and which may be dealt with independently of the present plan. The duties on foreign and colonial coffee ought to be forth-with equalized; the property and income tax should be revised, and a just discrimination made between fixed and precarious incomes. For the stamp upon newspapers, a stamped envelope might be substituted, bearing upon those only which are transmitted by post; and the stamp duties, generally, call loudly for an equitable revision. I mention these examples to show, that, by adopting the proposed ‘National Budget,’ you would not be precluded from effecting other financial reforms. On the contrary, I believe if the industry of the country were further disburthened to the extent I have named, there would be an accruing surplus revenue from the remaining sources of taxation, which would afford the means of continually making further modifications and reductions of duties. This would have been the case in times past, notwithstanding all the restrictions upon our commerce, if the increasing income had not been swallowed up by Government extravagance. For instance—had not the expenditure been increased since the time of the Duke of Wellington's administration, in 1830, then, notwithstanding the very large amount of taxes and duties since remitted, there would now have been a surplus revenue without the income tax.
A word or two as to the mode by which I would reduce our expenditure to the amount of 1835. The great increase,Military expenditure.since that year, has been upon the army, navy, and ordnance. In the year 1835 our armaments cost us £11,657,000; for the twelve months ended on the 5th day of April last, they reached, including £1,100,000 for the Kaffir war, £19,341,000; and I expect that the charge for the present year will not be much less. For the same time, the total expenditure of the Government, exclusive of the interest of the debt, was £26,747,000, and deducting £19,341,000, the cost of our warlike establishments, it leaves only £7,406,000 to cover the whole of the civil expenses of the Government. It will be self-evident, then, that if any material retrenchment be effected, it must be mainly upon our armaments, the cost of which has been increased £7,000,000; and this during a period of profound peace, and in the absence of all revolutionary convulsions, and while each successive speech from the Throne assured the assembled Parliament of the pacific disposition of all foreign powers. But if we take into calculation the present reduced value of commodities, it will be found that £10,000,000 expended upon our armaments now will go much further than £11,657,000 did in 1835; and I suggest that you propose the former sum as the maximum expenditure for the army, navy, and ordnance, by which you will gain about £8,500,000 of the proposed saving of £10,000,000. I by no means, however, wish to committ your Association to ten millions, as the minimum cost of our armaments, for I have a strong belief that you will live to see the waste reduced to less than half that sum. The above-named amount will be three times as great as that of the United States; greater than that incurred for the same purpose by Russia, Austria, or Prussia; and, judging by her promised reductions, nearly, if not quite, as large as that of France.
The remaining £1,500,000, to complete the proposed reduction of £10,000,000, you will have little difficulty in saving from all the other heads of expenditure, including the cost of collecting the revenue, and the management of the Crown lands.
I repeat, emphatically, all hope of any material relief from taxation hinges upon the question of a large reduction in the cost of our army, navy, and ordnance. If it be objected that I do not specify the particular regiments or ships which I propose to reduce, my answer is, that the only way in which the public can restrict the Government at all, in its warlike expenditure at a time of peace, is by limiting the amount of money. Disband a regiment, or pay off a ship to-day, and the amount saved may be spent to-morrow upon steambasins, or for fresh fortifications at Gibraltar, Labuan, or Hong Kong. This was the view entertained by Sir Henry Parnell, a great Whig authority, who, in his work upon Financial Reform, written when the Duke of Wellington was at the head of affairs, whilst arguing for a reduction in the expenditure of our military department, says: ‘Fix upon a much smaller sum, and tell them that they must make it answer.’ There is another good reason for this course. Some influential persons, who are opposed to any diminution of the strength of our armaments, yet contend that the present force may be kept up at a very reduced cost. In their eyes, your maximum sum represents a much larger force than you contemplate. These parties, probably, would be as willing as myself to put an end to the crimes and cruelties imported into the slave trade by the interference of our costly fleet of cruisers upon the African coast; or there may be other savings contemplated by them; so that, perhaps, in their opinion, with an expenditure of ten millions, nearly as large an effective force as at present may be maintained.
But I am prepared to contend for changes in our foreign, colonial, and domestic policy (though I will not attempt to do so at length now), calculated to facilitate a reductionNon-interference. in the amount of our armaments. First and foremost, we must insist that the principle of non-interference in the affairs of foreign countries, so loudly professed by politicians of all parties, shall be carried into practice in the policy of our Government. During the whole of last year, a fleet, as formidable as that required by the Americans to watch over their commerce in all parts of the globe, was maintained in the Tagus, out of the taxes of the British people, for the service of the Court and Government of Portugal. At this moment we have as large a fleet in the Straits of Messina, engaged in an armed interference between the King of Naples and his Sicilian subjects, with no more interest or right on our part than the Government of the United States would have to send a squadron off Holyhead, and assume the character of an armed mediator between England and Ireland. For three or four years we have had a fleet in the River Plate, interfering in the endless and inexplicable squabbles of the Monte Videans and Buenos Ayreans, and it has at last ended in a ridiculous failure. I would wish to see our Government spare the people this useless expense, by simply following the rule observed by individuals, of leaving other nations to settle their quarrels, and minding its own business better.
I am also aware, that any great reduction in our military establishments must depend upon a complete change in ourThe colonies.colonial system; and I consider such a change to be the necessary consequence of our recent commercial policy. I am prepared to carry out, logically, the principle of free trade in our future relationship with our colonies. Nay, more. I always contemplated that the practical application of that principle would so simplify the question, that it would not be possible afterwards to continue the ruinous colonial expenditure which we have hitherto sustained. So long as protection was our ruling policy, the nation believed that the exclusive trade with our colonies compensated us for the expense of governing and guarding them. I did not, of course, share in that opinion, but there was consistency, if not wisdom, in those who did. But we have now declared that, for all commercial purposes, they shall in future stand in precisely the same relationship towards us as foreign countries. For seventy years we have denied ourselves the right, by statute, to tax them for imperial purposes. Under these altered circumstances, will anybody be found, even amongst the Protectionists, ay, even Lord Stanhope himself, who is prepared to maintain that henceforth the only exclusive connexion we are to preserve with our colonies is the monopoly of the expense of governing and garrisoning them? Once let them see that free trade is the irrevocable policy of the country, and the Protectionists themselves will join with me in demanding an exemption from the expense of the thirty or forty little armies, which (exclusive of the troops in the merely military fortresses of Gibraltar, etc.) are maintained at the cost of this country in all parts of the globe; together with the little army always afloat, for the purpose, incredible as such folly may hereafter appear, of transporting reliefs of soldiers from England to serve as policemen for Englishmen at the antipodes! We have only to give to the colonists that which is their birthright—the control over their expenditure, and the administration of their own local affairs, and they will be willing, as they are perfectly able, to bear all the cost of their own civil and military establishments.
And, finally, I contend that we must endeavour to act at home more in accordance with the good old constitutional principle of governing by the civil and not the military power. We are, I fear, tending towards too great a reliance upon soldiers, and too little on measures calculated to insure the contentment of the great body of the people. It were madness indeed to think of relying upon bayonets for the permanent support of our institutions, after the warning examples afforded by so many countries on the Continent, where, so lately, we saw military despotism crumbling beneath the weight of its own intolerable costliness: and even if armed authority have everywhere resumed its sway, has that solved the problem of their financial embarrassments? On the contrary, they have only entered again upon the more vicious circle, where enormous armaments lead to increased expenditure, to be met with augmented taxes, which will be followed by groaning discontent, and end, as before, in convulsion.
I cannot conclude without tendering you and your fellow-labourers my best thanks. By your efforts to mitigate the pressure of unjust taxation, to remove all obstacles from the path of industry, and to widen the channels of foreign commerce, you are doing that which, more than armed regiments, will contribute to the stability of our institutions and the peace and prosperity of the country. It will be gratifying to me if, in this too long letter, I have succeeded in rendering the slightest service to the cause in which you are embarked. My sole object has been to give a practical aim to your valuable efforts, so that at every step you take you may find yourselves nearer to a defined object, the attainment of which shall be some recompense for the labours of an agitation which I trust will become national.
I remain, dear sir, faithfully yours,