HC Deb 11 February 1861 vol 161 cc274-82

Resolution, "That a Supply be granted to Her Majesty" reported.

MR. H. BAILLIE

Sir, I wish to take this opportunity to ask a Question of the right hon. Gentleman the Secretary for India, and in so doing, it is necessary that I should advert very briefly to a state-men the made to the House the other evening, with respect to the present state and condition of Indian Finance. The right hon. Gentleman on that occasion informed the House that he was about to raise a loan for the service of the Indian Government, but he cautioned the House not to suppose that this loan was about to be raised for the purpose of meeting any deficiency in the revenue of India. He said that this loan was about to be raised for the purpose of enabling the Government of India to meet the payments on behalf of the Indian railways. Now, that statement may be perfectly accurate, but at the same time standing by itself, and without any explanation, it is very much calculated to mislead the public. The case of the Indian railways is this. The money for the Indian railways is subscribed by the public in this country. As soon as the money is raised it is paid into the hands of the Indian Government, and the Indian Government make use of that money—it goes into the general treasury, and they make use of that money for their own purposes, and whether it is spent in England or whether it is spent in India is a matter of no importance whatever. But the Government, of course, become liable to pay the instalments to the contractors of the railways in India whenever they become due, on account of the works in India. Now, Sir, there appears to be some doubt —several people whom I have spoken to entertain considerable doubt—as to the meaning of the Secretary of State. If, as I believe, the Indian Government have received this money, and have used the money, and now find that the calls upon them will be greater than they anticipated —if that be the case, then it is clearly and obviously a deficit of £3,000,000 in the Indian treasury. But if, on the other hand, these people have not paid the money into the hands of the Government, and if the Government are about to raise a loan because the shareholders in the Indian railways decline to pay up their shares at the present time when the rate of interest is 8 per cent; then if the Go- vernment raise a loan for the purpose of paying those shares for them, it is nothing more or less than a bonus to the shareholders not to pay their money until the rate of interest shall fall from its present high rate to 3½ or 3 per cent, and when they may do so with greater facility. Now, I am at a loss to understand which of these two cases is the real one that we are to take, because no explanation whatever was given by the Secretary of State at the time; but if the first supposition is the correct one, namely, that the Government have received the money, but that they had a deficit in the Exchequer, and are unable to pay it, then clearly the Indian deficit this year, instead of being £6,000,000, as stated by the Governor General, will be £9,000,000. Now, let us just take a glance at the present state of the Indian Revenue. Among the papers which have lately been sent to this country by the authority of the Governor General, is the Report of the Financial Secretary of the Government, in which it is stated that the deficit for the year 1860 61, will, on the 30th of April, which is the end of the financial year, amount to upwards of £6,000,000. Now, the question is, how is that money to be provided? If the first supposition is correct, than the deficit is £9,000,000, of course, £3,000,000 will be provided by the loan, and £6,000,000 will, as I understand, be provided out of the balances in the Indian Treasury. That may be, of course, one mode of meeting the difficulty, but at the same time we must bear in mind that the Indian Government, under the circumstances, will commence their financial career in 1861–62, with the balances in the Exchequer reduced by the sum of no less than £6,000,000. The right hon. Secretary of State then proceeded to give the House some rather loose calculations with respect to the future prospects of the Indian Government. He told the House that the Indian Government had been able to reduce the expenditure during the last year by no less than £3,300,000, and that if the increase of taxation and reduction of expenditure next year should be equal to what they were last, then there would be an equilibrium and balance between the revenue and expenditure. Now, that Statement also is rather difficult to understand. We know that the deficit is £6,000,000, and the right hon. Gentleman says if that £3,300,000 of the expenditure be reduced that would not of course meet the deficit, but he adds £2,700,000, I suppose for what he means by an increase of taxation to be obtained. Then, in that case, the equilibrium will be established. This, of course, is a proposition very easily to be understood. But what has struck me as very peculiar in that statement is the great discrepancy between his view and that of the Governor General of India. Now, Sir, I have already referred to the documents which have been furnished by the Governor General of India, and I will read to the House an extract from those documents, in order that they may see how very different the view of the Governor General is from that expressed by the Secretary of State. This is the statement of the Financial Secretary, Mr. Lushington, dated the 19th of November, and published by authority of the Governor General. He says,— That although he has made every possible effort to effect a reduction of the public expenditure, although he has deferred not only necessary and public works of all kinds, but works calculated directly to improve the revenue (to the execution of which Government is more or less pledged, and on some of which large sums have been expended) are suspended to such an extent, that an outlay of no less than £8,000,000 sterling would be required to complete them; and although he has made an appeal to all his subordinates to cut down their departmental estimates to the lowest possible figure, yet the deficit for 1860–61, exceeds £8,000,000 sterling, being equal to more than 16 per cent on the total expected income from all sources. I will leave the House to decide whether that is the statement of one who thinks he will be able to make a similar reduction next year, and at the same time to augment the taxation of the country by the amount of £2,700,000. In fact, I do not understand how the taxation can be increased by that amount, for surely the right hon. Gentleman could not expect the income tax to produce anything like that amount. The fact is, that the whole statement of the right hon. Baronet rested on two important "ifs;" and I will venture to add a third, and that is, if the Government maintains the European Army in India at its present amount, namely, 100,000 men, no such result as that he anticipates can possibly occur. Now, Sir, we may perhaps excuse this little flourish of the Secretary of State, when we consider the peculiar time at which the statement was made, The statement was made in this House on the eve of raising the loan. A question was very conveniently put to the Secretary of State by the hon. Member for London (Mr. Crawford). No doubt the Secretary of State was very glad to "make things look pleasant;" and, no doubt, the hon. Member for London (Mr. Crawford), when he was told by the Secretary of State that there was no loss of interest on Indian securities, was very glad also to make things pleasant; and, no doubt, between them they concocted the question put to the Secretary of State. Now, I do not mean to say that the folks in the City of London are caught with chaff, but this I do say, that the speech of the Secretary of State did produce a great effect in the City of London, so that the loan, when it came out next morning, rose suddenly no less than 3 per cent, and that at all events is a proof of the great confidence which they entertain in the statement of the right hon. Gentleman the Secretary of State, as well as of great confidence with regard to the security of our Indiam empire. That, at least, must be a very gratifying reflection for the Secretary of State. Sir, having made these observations, I ask the right hon. Gentleman if he has any objection to lay on the table of the House all the financial correspondence which may have taken place between himself and the Governor General of India since the last Session of Parliament?

SIR CHARLES WOOD

said, that there was one insinuation contained in the speech of his hon. Friend which he thought had hardly been intended—namely, that he was induced to make a statement which was not true in order to raise the probable price of the loan which was contracted next day. [Mr. BAILLIE: "No, no!"] That the effect of the statement which he made was to raise the opinion of the public as to the state of the Indian Finances and of Indian credit he had not the slightest doubt, because for some weeks there had, to his knowledge, prevailed most unjust and unfounded opinions upon those subjects, and under those circumstances he had only done his duty in making that statement. He should have grievously erred if he had asserted anything but what he believed to be strictly accurate, but he could assure his hon. Friend that the statement which he made was entirely borne out by the despatches from India. His hon. Friend had fallen into the mistake of confounding balances with the actual income and expenditure of the State, and if the House would permit him he would shortly restate what he said upon a previous occasion. He then distinctly stated that he was going to raise a loan not for the service of India, but to make good an excess of expenditure in India, and a deficiency of payments in this country on railroad account. His hon. Friend had stated correctly that all the money required for the construction of railroads in India was raised by subscription in this country and paid into the Home Treasury; but it was by no means a matter of indifference whether the expenditure for which it was to provide was to take place in India or in England, If the expenditure was in England the money was paid in and then drawn out in England to pay the contractors or others to whom it might be due. If the expenditure occurred in India the money, instead of being remitted to India, as it naturally would be if there was no connection with the Government, was applied to Government purposes in England; and the money which the Indian Government would naturally have remitted to England to provide for those expenses was retained in India and applied to the construction of the railroads there. This was merely a cash transaction rendering unnecessary a remittance either way, but it had nothing to do with the income or expenditure of India. At the end of last Session he stated that he expected payments on account of railroads from this country, amounting to £7,000,000, and an expenditure in this country of £2,500.000, and in India of £4,750,000, £250,000 of this latter sum being provided by a reduction of the railway balances. If that had been the only amount drawn from the Indian Treasury for railway payments in that country he should have received from that country a remittance of about £1,250,000, for the purpose of defraying expenditure on Indian account in England. Circumstances, however, had been such that the expenditure on railway account in India would probably amount to £6,000,000, thus exactly absorbing the sum which he expected to receive from that country, and he was, therefore, obliged to borrow in this country in order to make good the deficiency. Up to this time the payments on account of railroads in this country amounted to £4,500,000; and he anticipated that by the 30th of April he might possibly receive £1,000,000 more. This would make five millions and a half instead of seven. The balance of £1,500,000 for which he was thus obliged to provide, added to the million and a quarter of which he had already spoken, made £2,750,000, which approached as closely as possible to the three millions he had been obliged to borrow to put the finances right at the end of the year. His hon. Friend would see that this had nothing to do with the income and expenditure of India; it was merely a cash transaction. Last year he had stated in detail to the House the prospects of Indian finance. He bad told them that there would be a deficiency in 1860–61 of more than seven millions. To meet this he hoped, before the 30th of April, there would be receipts from income-tax to the extent of one million; while a reduction would take place, not on the whole expenditure, for in the Civil Department there would be some increase, but the military expenditure would be diminished by £800,000, more than he had anticipated. According to the last Estimate from India, the deficit at the end of this year would be £5,574,000. The statement put forward in India was erroneous to this extent—that it included in the disbursements upwards of £700,000 on account of compensations for losses sustained during the mutiny, which formed no portion of the annual expenditure, but, being taken from the Treasury, reduced the balance accordingly. The deficit, on what he might fairly call the income and charge of India for the present year, was £5,574,000, or, in round numbers, £5,500,000. This was very much better than he had anticipated when making his statement in August last. He now came to next year, as to which his hon. Friend said he did not understand on what grounds he had arrived at the conclusion that expenditure and income would about balance each other. The deficiency of £5,500,000 in the course of the present year would be partially met by the anticipated produce of £3,500,000 from the new taxes. Of this £1,000,000, as he had said, would be received in the course of the present year; but deducting the balance of £2,500,000 from the deficit of £5,500,000, it left £3,000,000 to be provided for. He had every reason to hope that the reduction of military expenditure was proceeding at such a rate in India that next year they would be able still further to reduce it by £3,000,000. In 1859–60 the Military Estimates had been reduced by £3,500,000; £3,300,000 had been struck off in 1860–61; and in 1861–62 they hoped to reduce the amount by a further sum of £3,000,000. If, therefore, an increase of £2,500,000 was obtained, and at the same time a reduction of expenditure to the extent of £3,000,000 took place, his hon. Friend would see that an equilibrium of income and expenditure would be established. He hoped he had succeeded in rendering his statement intelligible to the House, but in order further to elucidate his meaning, and to put hon. Members in possession of all the information which he himself had received, he was ready to lay on the table all the despatches which had passed between his department and the Governor General of India since the close of last Session.

MR. CRAWFORD

said, he had no wish to prolong a rather irregular discussion on Indian finances, but he was unwilling that an erroneous impression should be created by the remarks of the hon. Member for Inverness shire, who had stated that shave-holders in several Indian companies declined to pay up their subscriptions.

MR. BAILLIE

denied that he had made a statement to that effect.

MR. CRAWFORD

I took down the hon. Gentleman's words.

MR. BAILLIE

Then you took them down wrong.

MR. CRAWFORD

I understood the hon. Gentleman to say that the shareholders were declining to pay up their subscriptions under the contract they had entered into.

MR. BAILLIE

No, I did not say so.

MR. CRAWFORD

said, he merely wished to observe that the money had been advanced by the shareholders on the security of the Government guarantee, and not on the prospects of the railways themselves. He thought the right hon. Gentleman the Secretary of State for India had taken the proper course in coming to the public himself as a borrower of money for the purposes of the railways, rather than, by raising the rate of the guarantee, still further to have depreciated the value of railway stock.

SIR HENRY WILLOUGHBY

said, he wished to know whether certain railway companies, not having funds of their own, had not come to the Government for advances. In putting that question he was referring in particular to the Madras Railway Company and the Bombay and Baroda Railway Company. He understood that the resources of those companies had become exhausted, and that they had applied to the Government for money to enable them to complete their undertakings. This, if true, was a most important circumstance, because the funds to be dealt with would in that case be raised, not by the share- holders, but from the Indian Exchequer. The State would, moreover, run the risk of advancing money upon lines which were not under Government control. That would be a fatal blot, and one that must entirely change the character of the railway system. He could not help thinking that the right hon. Gentleman had made rather a prosperity speech, with regard to the prospects of Indian Finance. In a statement put forward by the Governor General, the income for the year 1860–61 was calculated at thirty-nine millions and a fraction; while the expenditure was taken at forty-five millions and a fraction—thereby leaving a formidable deficit. In the contrary opinion just expressed by the right hon. Gentleman, he wished to know whether he had taken into account the famine with which a large tract of Indian territory, particularly in the North-Western Provinces, was afflicted? It was difficult to overlook such a misfortune as that; but the right hon. Gentleman had not even alluded to it in asking the House to believe in his pleasant dream of a financial equilibrium in 1861–62. For his part, he did not in any way join in such sanguine expectations. The Governor General in his statement alluded to the home charges, amounting to £6,983,000. Such an extraordinary sum required explanation; and he therefore wished to know whether the right hon. Gentleman would place on the table of the House a document, showing in detail the expenditure of these charges. It would also be desirable to know what amount had been spent on the passage of officers and troops between India and this country, as he was informed that this item amounted to half a million, one third of which charge, he believed, was paid in this country, and the other two-thirds by the Indian Government. He was glad that the right hon. Baronet had volunteered to produce the official correspondence necessary to place the matter rightly before the House, because, sooner or later, he feared the United Kingdom would be called on to make good the financial position of India.

COLONEL SYKES

said, he was glad the right hon. Gentleman was enabled to confirm the statement made last year that there was a prospect of revenue and expenditure becoming equalised in India. Nineteen months ago he had published a pamphlet (and he had gone over the figures with his right hon. Friend), in which he showed that, if the Secretary of State would only exercise the power he possessed, he could have compelled a readjustment of Indian Finance even before the period at which it was now thought that desirable event might take place. Under the old system every member of the Court of Directors had the power of introducing any subject and putting it to the vote of the Court. Unhappily, that was not the case now, otherwise more extensive reductions might have already taken place; but he had no doubt whatever of the correctness of his light hon. Friend's anticipation—namely, that the finances could be brought to a state of equilibrium, provided that the necessary reductions took place. In 1857 the revenues were £31,000,000, and then there was a balance of two to four lacs of rupees in favour of the Government. At present they were £39,000,000, independently of the income tax; but he believed there were now 100,000 European troops in India to do that which less than 50,000 did in 1857, when the mutiny was crushed; the Bengal Native Army of 100,000 men annihilated, and our power maintained, and now we had neither a Bengal Native Army nor a Native prince to oppose us, and the maintenance of 100,000 European Troops was a waste of the finances of India. He wished to observe that there was now in India a latent feeling the existence of which was dangerous. It existed in the Native mind, and was owing to the manner in which the income tax was levied. He had letters from various parts of the country—letters which spoke of the sentiments of the people from one end of India to the other—stating that the agents employed in levying the income tax did so, in many instances, under distraint, and exercised their powers in a very tyrannical manner. He regretted extremely that that dangerous tax had ever been introduced into that empire, for it might have been done without. He thought that the system under which the railway companies paid in money here, and payments were made for them by the Government in India, was one which afforded great convenience and effected a considerable saving. A somewhat similar arrangement was formerly made, before the introduction of railways, with the mercantile community, who received bills drawn on India for money paid here. Indeed, such a thing as sending home bullion from India had for many years been almost unknown.

Resolution agreed to, Nemine Contra-dicente.

Committee appointed for Wednesday,