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ART. IV. Twenty Years of Financial Policy; a Summary of the Chief Financial Measures passed between 1842 and 1861, with a Table of Budgets. By SIR STAFFORD NORTHCOTE, M.P. for Stafford. London: Saunders, Otley, and Co.

WE may accept with great satisfaction this addition, by Sir Stafford Northcote, to the history of our country. Few things, as he truly observes in the commencement of the volume, are more difficult than the study of the times which are just past, of which the history is yet unwritten. They are still too near our own days to be judged impartially. The thoughtful historian turns from them, feeling, like Hallam, 'content with 'compiling and selecting the records of the past, to shun the dif'ficult and ambitious office of judging the present, or of lating upon the future.' The task thus avoided by those who only could do justice to it, is either left unperformed, or too frequently assumed by the mere partisan.

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Sir Stafford Northcote's book rises, however, far above the position of a mere party-pamphlet: it is broad and statesmanlike in tone and really interesting reading; although it might almost have been called, A History of the Rise, Progress, and Continuance of the Income Tax. The author says that it has been his intention to avoid controversy, and he has performed his self-imposed task with fewer deviations from the strict rule of impartiality, than could have been expected from one who was himself a main actor in many of the events which he chronicles. Allowance is also claimed for the natural repugnance of human nature to a mere 'reproduction of defunct budgets,' a labour so wearisome that Sir Stafford Northcote says he could not have got through his task without stepping a little aside, from time to time, to touch upon questions of principle, or even of party, arising out of the narrative.'

Not that the undertaking itself, the endeavour to estimate the course of taxation during the last twenty years-years which have probably witnessed far deeper changes among us than any equal period which ever preceded-is in any way unworthy the attention of a distinguished party-leader and expectant statesman. 'It is no baseness,' are the words of one of the deepest essays in the English language, 'for the greatest to descend and look into their own estate. Some forbear it, not upon negligence alone, but doubting to bring themselves into melancholy, in respect they shall find it broken. But wounds cannot be 'cured without searching.' And truly, if Sir Stafford North

cote has not in his pages put forth a remedy for the evils he describes, he has, at all events, constructed a most useful work of reference for those who desire to perform the same kind office for the State, which, it is to be hoped, they undertake in the management of their own affairs.

The period reviewed is that commencing with Sir Robert Peel's imposition of the Income Tax in 1842, and extending to the repeal of the Paper Duties in 1861. The fortunes of the Income Tax, its origin, the change which has taken place in its character, and the work which has been done by its aid, give a kind of dramatic unity to this period, which would alone be sufficient to make the study of it interesting; but, in addition to this, we have in the course of these twenty years, seen our financial system exhibited in all its bearings; and examples have been given of almost every kind of financial problem. We have seen how large surpluses have been applied, and how large deficits have been met; we have had peace taxation and war taxation; loans of various kinds, contracted upon different principles; successful and unsuccessful operations upon the interest of the debt; we have repealed an enormous mass of taxation with one hand, and have laid on a still larger amount with the other; we have revised our commercial policy, and to some extent, our monetary policy also.'

The curtain draws up on a period of financial chaos, the result of piecemeal legislation. A deficiency of nearly two millions and a half was only one of a numerous family of such disturbers of the official repose of a Chancellor of the Exchequer ;-the total deficiency of the preceding four years rising to nearly seven millions and a half, while this last deficit was particularly harassing, as it followed an increase in taxation, and appeared to indicate an exhaustion of the resources of the people. Nothing at this time appeared to benefit the Exchequer. In 1840 Mr. Baring had attempted to restore equilibrium by increasing, in 1841 he proposed the same result by diminishing, taxation; but both remedies failed.

Bewildered and exhausted, the nation placed implicit and well-deserved confidence in the measures of his successor, Sir Robert Peel. The speech with which he introduced the budget was a masterpiece of his style of argument. In the first place, he made it clear that no temporary expedients, no disguised loans, no issue of exchequer-bills, would meet the difficulties of the case. The experiments of his predecessor had proved, only too plainly, that the limits of taxation on articles of consumption had been reached: the taxes that had been abandoned could not be revived-those that had been lowered could not be raised. Nor could immediately increased revenue be sought for by reducing duties, in the expectation that enlarged consumption would supply the deficiency. Only one resource remained: property and income must bear their share of the burden. The income-tax-that powerful engine of taxation,

disused for more than a quarter of a century-must be reinstated that, and that only, could restore a surplus.

Meanwhile, protected by this auxiliary, the duties on timber, coffee, and about 750 various articles in the tariff, could be reduced. In due time increased consumption would fill the void thus caused; and then the income-tax, a useful prop to support the tottering structure of finance till a more dependable support could be constructed, was to be laid aside, no longer needed. Nothing can be more plain than that, at this time, Sir Robert Peel did not intend to rely on the assistance of the income-tax for more than a short period. It was to be a temporary measure; as such, its inequalities were palliated when they could not be defended. 'The Government,' said Lord Ripon, did not intend to entrap the country into a permanent income-tax,' For a period of three years, subject to a renewal for two or three more, it was to be endured; at the end of that time the reinvigorated financial authorities were to depose the friendly Dictator they had set up. The next two years proved the general soundness of Sir Robert's plan, and the successful conversion of the three-and-a-half per cent. stock in 1844 strengthened the financial position of the country. The next year was to witness the close of the first term of the income-tax; the three years of probation were ended; the ordinary revenue nearly equalled the ordinary expenditure; what had been expected was practically realized; and it might have been thought possible, by a financier who looked only to the present, to dispense with the extraordinary aid.

Sir Robert Peel, however, thought otherwise in 1845; an increase in the naval estimates was recommended; but other reasons for retaining the income-tax were not far behind.

In chronicling these we are able to note the change which had come over Sir Robert Peel's mind in the course of the three years since the tax was first imposed. Then it was a dreaded necessity; now it was a friendly ally. Then he stood almost in awe of the creature he was moulding; now he was proud of his successful child. Imperfections there were doubtless in the lovely creature; but he had grown

'To her faults a little blind,

To her virtues very kind.'

A bright vision passed before his mind-a future when lowered taxation should allow free play to every effort of the manufacturer; when cheapness of living, unaccompanied (in consequence of the fresh impetus given to industry) by low wages, should brighten the poorest home in the land. The duties on cotton-wool, and on glass were to terminate; all

export duties, including those on coal, were also removed; while an immediate increase in the comfort of the people was caused by a remission of the sugar-duties, amounting to £1,300,000. Again, Lord John Russell opposed the incometax with all his weight; again he urged its inequality, its vexatious character, and the many objections against the measure; though we find him admitting he might even have supported it, had it formed the basis of a system opposed to monopoly and commercial restriction. Sir Robert Peel and Mr. Goulburn met these arguments with the plea, that the tax was only temporary-the best answer, but yet one which could not have much weight, considering that the possibility of a further renewal had been at least hinted at. Again the tax was voted; again the revenue prospered, and the excise and customs nearly recovered the remissions made from them. Who could wonder if, in 1846, further reductions in duties were proposed,-but this time of a bolder character? The duties on timber and tallow were reduced, and the protective duties on cotton, woollen, linen, and silk manufactures, with many others of a similar character diminished; while the duties on meat and on live animals were abolished, and a sliding scale of corn-duties proposed, to terminate in three years, with a duty of one shilling a quarter.

Of all the budgets brought forward by Sir Robert Peel, this perhaps is the one most distinctly stamped with all the marked features of his policy.

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By its working, manufactures were encouraged by the reduction or remission of duties on raw materials, production assisted by lowering duties on food, commerce generally stimulated by a lowering of protective duties.

The measure itself was introduced in the House of Commons, with a speech of great interest, by Mr. Goulburn; who, as if urged by some foreboding feeling that it would be the last time when he should address that assembly as Chancellor of the Exchequer to that Ministry, gave an admirable summary of the financial results of the five years of their administration.

As we look over the long list of achievements-the balance in hand of five millions, the average amount of deficiency bills diminished by four millions, the capital of the National Debt diminished by seven millions, the annual charge by one million and a half, with a prospect of a further reduction of £600,000 in a few years' time, and all this done, 'Not only without adding to the burdens of the people, but concurrently with a great diminution of them; for that, while new taxes to the ' amount of £5,624,000 a year had been imposed, taxes to the ' amount of £8,206,000 had been remitted, we may well feel,

that had Sir Robert Peel done no more than this, he would have deserved a high place as a financier in the grateful remembrance of his country.

A few weeks more, and all this glory was in the dust. The Government, defeated on the Irish Life Protection Bill, left office; and Lord John Russell's Administration took their places, and, in the main, carried on their measures. The next year was marked by a commercial panic and the Irish Famine, which necessitated a loan of eight millions.

1848, the year when the Income Tax expired for the second time, opened gloomily indeed. Doubt and distress seemed to fill the atmosphere. The effects of the commercial panic were still bitterly felt in England; Ireland was still prostrate; the West Indian Islands sent over a cry of trouble, while a fear of the possibility of an invasion added to the general feeling of instability. The Budget announced a deficiency, partly caused by a falling-off in the Revenue, partly by increased expenditure enhanced by the invasion panic; and the times, though rendering any increased burdens difficult, caused any remission of taxation to be even more doubtful. Lord John Russell found himself obliged to provide for a deficit of £3,346,000. To do this he proposed to re-enact the Income Tax Act, but with this change-it was to be in force for five years; the first two at one shilling in the pound, instead of sevenpence. This being very unpopular, and opposed by Joseph Hume, although unsuccessfully, the Government did not press the first part of the measure, but only sought for a renewal for three years at the old rate. A diminution in the expenditure was likewise found practicable;-the revenue turned out not quite so bad as was expected, and the deficiency was provided for by issuing exchequer-bills and the sale of stock.

The military estimates for this year amounted, including the charge for the Kaffir War, to £18,745,000; while in 1842, even with the expense of the Chinese Expedition, they had only risen to £16,115,000, and in 1835 to no more than £11,657,000. This great and what was worse-progressive increase, attracted considerable attention; and the financial campaign of 1849 opened with a motion of Mr. Cobden's for reducing the expenditure by ten millions. This rough-and-ready plan was rejected; but the hint was not lost on the Government, and a reduction of two millions and a quarter was actually made; a diminution which, though far from what Mr. Cobden had desired, probably was not far from equalling the economical anticipations of the financial reformer.

A considerable surplus, larger than had been calculated on, agreeably surprised the Government; who, in the following